Agenda - 06-28-1994-IX-B - Laserfiche WebLink

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12 Another advantage is that development rights may cost less in these areas than close to urban centers. Based on the values presented in Table 3.1, the average market value per acre would be lower -$1,980 versus$2,826. With an average use value of$422 in these townships, development rights might be expected to cost$1,558 or close to the national average.This would mean more benefit derived for the expenditures made. The purchase of development rights may also occur in these areas because of the presence of active farms and good soils.The presence of a number of farms in close proximity to each other is beneficial from an economic and management perspective. Farm equipment and products can be moved easier and less expensively than in areas where farm lots are scattered. There is also less opportunity for residential development and associated nuisances to occur. 5. How will the purchase of development rights be funded? Nationally,purchase of development rights programs have been funded from a variety of sources: Federal loans and grants, State matching funds, real estate transfer taxes, sales taxes, general tax revenues, and bonds. Federal funds available under the U.S. Department of Agriculture "Farms for the Future" Act have been earmarked almost exclusively for one "pilot" state - Vermont. In North Carolina, State matching funds are not available,and specific legislative authority must be granted to use real estate transfer and sales tax revenues.In the absence of such resources,general tax revenues and bonds appear to be the most likely source of funding. Bond Program: The advantage of a bond program, particularly if the amount is large enough, is immediacy; e.g., more development rights can be acquired in a shorter period of time and at a lower value.To illustrate how bond financing could be used to implement purchase of development rights,a$5.0 million program is analyzed.The amount of the bond package is based on discussions involving the Board of Commissioners and Agricultural Districts Advisory Board. That amount is considered large enough to have an immediate impact in terms of starting such a program but not so large that it would be greeted with displeasure by Orange County citizens. When North Carolina local governments pay for programs and projects through bond financing today, the term of the bond is generally 20 years.The interest rate may vary with the jurisdiction's bond rating, but for Orange County, it is six and one-half percent.To finance a$5.0 million PDR program, the annual debt service payments and long-term cost to the County would be as shown on Table 3.3.The total cost for the bond program would be$ 8,412,500, including principal and interest payments. By selling all bonds in the first year, the debt service payment would be highest initially, then decrease over the term of the bond. The impact on the tax rate would be similar, with an initial increase of$0.01298 per$100 valuation. By the end of the bond term, the tax rate required to finance the debt service payments would have decreased by almost two-thirds to$0.00376 per$100 valuation. Overall, the average cost to the owner of a new home valued at $170,000 in 1993-94 would be approximately$16.55 per year. As shown on Table 3.4, the cost of a$5.0 million bond package may be decreased somewhat by selling the bonds in$1.0 million increments for five years. The overall savings resulting from staggered sales amounts to $19,500 in interest. For the new home owner, however, the term savings ($0.77) are negligible, since the repayment period is extended from 20 to 24 years. The principal advantage of staggered sales is that the impact on the tax rate is gradual, increasing to a peak of$0.01110 per $100 valuation in the fifth year and declining thereafter. In either case, development rights on approximately 1,700 acres of farmland could be purchased, based on an average cost of$2,768 per acre (Table 3.1).