Since my recent article in the Florida Land Development News about property taxation and potential exemptions, I have received numerous questions about the treatment of conservation lands for ad valorem taxation. I first ran into this issue some time ago, and had the pleasure of working with George Wheeler with the Florida Department of Revenue to determine the best option for the landowner in that case. For this blog post, I imposed on George again and he was kind enough to chat with me about this rather  misunderstood area of property taxation.

Our conversation started with George's gentle reminder that this is very parcel specific, and the terms of each conservation easement must be carefully reviewed to know how the property should be classified. There are two avenues for conservation lands under Florida law: an exemption and an assessment. The conservation exemption is found in F.S. 196.26 and provides a full or partial exemption for conservation lands depending on the terms of the conservation easement. In a nutshell, to qualify for the exemption you must: 

• have a recorded instrument dedicating the land in perpetuity for conservation purposes;
• ensure the land area subject to the instrument (most commonly a conservation easement) is at least 40 contiguous acres or you must obtain approval from the state's Acquisition and Restoration Council; and
• disclose whether the recorded instrument allows for any agricultural activities on the property.

If bona fide agricultural purposes are permitted, you may qualify for a partial, but not a full, exemption.

The second avenue is a conservation assessment. This is provided for under F.S. 193.501 and grants a reduced assessment to lands subject to an instrument limiting the property for conservation purposes. This could be a conservation easement, but could also be designated by the local government as environmentally endangered lands, or have a conservation future land use designation, or be used for an outdoor recreational park purpose.

It is possible to seek multiple exemptions or assessment classifications on the same parcel if areas of the property are used for different purposes. For example, you may qualify for both an agricultural exemption and a conservation exemption on the same parcel if the conservation easement allows agricultural uses.

George's first comment to me during our conversation about this being a very parcel specific evaluation is worth repeating. I cannot say how much I enjoyed speaking with him about this, his passion and knowledge of conservation and agricultural lands in this state is nothing short of amazing!

An agricultural classification can save a property owner tens of thousands of dollars in property tax owed to the local government, and according to the Lee County Property Appraiser's Agricultural Division, agricultural classification denials for Lee County were mailed on or about June 27, 2011. Typically, the rationale for denial is that the property is not being "used primarily for bona fide agricultural purposes" as required by F.S. 193.461(3)(b). Any appeal of this determination must be timely filed, and evidence and testimony must be presented at a hearing to support the contention that a bona fide agricultural use existed on the property as of January 1, 2011. The statute sets forth 7 factors to be considered in determining whether a "good faith commercial use of the land" was in place:

1. The length of time the land has been so used.
2. Whether the use has been continuous.
3. The purchase price paid.
4. Size, as it relates to specific agricultural use, but a minimum acreage may not be required for agricultural assessment.
5. Whether an indicated effort has been made to care sufficiently and adequately for the land in accordance with accepted commercial agricultural practices, including, without limitation, fertilizing, liming, tilling, mowing, reforesting, and other accepted agricultural practices.
6. Whether the land is under lease and, if so, the effective length, terms, and conditions of the lease.
7. Such other factors as may become applicable.

These appeals can become extremely complicated, and without the presentation of competent, relevant evidence and testimony, a property owner's chances of success can be very low. So, if you tossed that denial letter in a "to-do" pile, dig it out and consider whether you would like to appeal the denial. The filing fee to appeal the denial is as low as $15, however waiting too long to address the issue can be quite costly.

Current laws allow for an agricultural tax classification for bona fide, commercial, agricultural use of land. Over the years, Florida courts have been called on to determine the balance between the tax benefit provided to agricultural landowners and the need for cities and counties to accurately assess non-agricultural lands and collect the taxes for municipal services. Today, it is not uncommon for a county and a landowner to disagree regarding the bona fide nature of a use, or the extent of that use on the property. For example, a property appraiser may deny the classification on a property because he feels that there are too few cows grazing on the land, or not enough has been done to properly care for the land.

So what can a landowner do to ensure that his or her agricultural classification is granted?

• Know the commercially-accepted practices for the type of agriculture you are engaged in. For example, if all cattle ranchers mow and seed their pastures annually, following these practices may support the contention that a property should be granted the classification.
• Ensure that there is documentation regarding the improvements or activities that are part of the agricultural operation, including any lease agreements. Some owners hire professional property managers to ensure that the agricultural use is managed properly.  
• Communicate with the property appraiser's office before a determination regarding the classification is made can be beneficial, as well, so that a property owner may provide additional documentation or information that will be persuasive.

Ultimately, if a property owner cannot convince the local property appraiser that a property should receive an agricultural classification - and a drastically lowered tax bill - the owner must seek appeal to the Value Adjustment Board. This appeal process generally hinges on the evidence and testimony related to the agricultural use, making it even more important to keep documentation regarding activities and expenditures related to the agricultural use. 

Before the implementation of this rule, Florida water quality rules were based on a narrative standard that used descriptive language to identify polluted bodies of water. The rule also creates restoration standards for water bodies that are designated as “impaired.” Impaired waters may be waters that are deemed to be polluted to the point where they no longer are suitable for their intended use. The new rule only applies to fresh water, however a similar NNC rule for coastal waters and estuaries is slated for consideration in 2011. These new water quality standards will have significant economic and operational effects on municipalities, agricultural operations, utilities, and future development.

Officially titled “Water Quality Standards for the State of Florida’s Lakes and Flowing Waters,” the rule is the result of a 2008 lawsuit filed against the EPA by Earthjustice, an organization representing the Florida Wildlife Federation, the Conservancy of Southwest Florida, the Environmental Confederation of Southwest Florida, St. John’s Riverkeeper, and the Sierra Club.  In the lawsuit, Earthjustice alleged that Florida’s narrative water quality standards failed to address a growing problem with impaired waters and violated the Federal Clean Water Act. In January 2009, the EPA issued a “determination letter” to the Florida Department of Environmental Protection (DEP) requiring that it adopt numeric standards for fresh water by October 2010 and numeric standards for coastal waters and estuaries the next year.

Numeric Nutrient Criteria

The new rule proposes specific numeric limits on the concentrations of nitrogen and phosphorous levels within lakes and streams. Elevated nutrient levels can cause excessive algal growth which reduces the amount of light reaching a lake bottom, damaging aquatic vegetation and fish habitat. The new criteria are intended to foster a balanced natural population of plants and wildlife in lakes and flowing waters, while also ensuring the attainment and maintenance of the water quality standards for downstream waters. What this means is that the numeric criteria for a water body must be determined based on the requirement of the stream itself, plus the requirement of any water body into which the stream flows. Because Florida contains many diverse habitats, it will be difficult to implement the same numeric limitations state-wide because higher, naturally occurring levels of nutrients do not impair certain regional water bodies.

As a response to regional concerns, the rule allows for the implementation of “site-specific alternative criteria” which is a different water quality standard that meets the requirement of protecting a water body, but it accounts for specific local conditions. Certain areas like the Tampa Bay region that have been successful with the existing state Total Maximum Daily Load (TMDL) standard will likely be allowed to continue using existing standards as a site-specific alternative criteria.

Impact of the Rule

Every industry, agency, or enterprise that manages and or discharges water may be affected by this rule. This includes agriculture, landscaping, power plants, mining, development, municipal operations and Florida’s tourism industry. Agricultural stakeholders have warned that the new rule could drive away agricultural operations in certain areas because the new standards would require the implementation of expensive “best management practices” (BMPs) to limit nutrients from fertilizer from reaching nearby water bodies. Agricultural producers fear they will no longer be able to compete in the marketplace after passing the additional costs of BMPs on to consumers. 

Many municipalities discharge stormwater runoff into surface waters via a “Municipal Separate Stormwater Systems” permit, known as a MS4 permit. The new rule may require stricter water quality standards for a city’s MS4 permit receiving water, which would require the city to implement additional treatment and management measures, usually at a significant cost to the city’s ratepayers. Some have indicated that unintended consequences may result when historically healthy waters do not meet the NNC rule and face unnecessary and potentially harmful restoration and compliance requirements. Additionally, while the rule is quite specific regarding the nutrient concentration limits, it lacks definitive provisions regarding the regulation of the rule, and the use of variances and other tools to implement the rule.       

Conclusion

Most acknowledge that the control of nutrient levels in our waters is of vital importance, however the NNC rule will likely create short term regulatory uncertainty with some unintended adverse environmental consequences. While some procedures will require clarification, one thing is certain: the new EPA regulations will present significant, long-term financial challenges as well as operational challenges for residents, municipalities, and businesses in Florida.