Leveraging community financing for farm and farmland protection

Project Overview

CNE08-056
Project Type: Sustainable Community Innovation
Funds awarded in 2008: $10,000.00
Projected End Date: 12/31/2010
Region: Northeast
State: Maryland
Project Leader:
Dr. Lynda Brushett
Cooperative Development I
Co-Leaders:
Michael Speltz
Society for Protection of

Annual Reports

Commodities

  • Additional Plants: ornamentals

Practices

  • Education and Training: decision support system, networking, workshop
  • Farm Business Management: risk management, whole farm planning

    Proposal abstract:

    I: This project will give farmers, agricultural educators and service providers, farm and conservation organizations, legislators, community leaders municipalities, land trusts and other easement holding and easement funding organizations (stakeholders) the option to use Installment Purchase Agreements (IPAs) to preserve agricultural land in New Hampshire. At the end of the project 1) regulatory, funding, financial and other stakeholder concerns will be known and a plan will be operational for overcoming any barriers; 2) stakeholders will understand IPAs, how they work for all stakeholders, benefits and drawbacks to towns and farmers; 3) all issues associated with using zero coupon bonds to fund IPAs will be noted and solved; and 4) At least one farmer and one town will be working together to implement NH’s first IPA. To achieve these outcomes, the project will engage stakeholders in the exploring IPAs, discussing pros and cons, identifying and overcoming any regulatory barriers, and making comparisons to existing easement financing methods in place in New Hampshire. The project will develop consensus for IPA program development and administration including the design of a decision-making tool for farmers to weigh the IPA option per family circumstances and with other alternatives. This concept has not been used north of Pennsylvania. Since acquiring development rights is particularly expensive in this region and since the northern New England states have limited funds with which to purchase conservation easements, IPAs will provide a significant means of leveraging precious financial resources for farm and farmland protection for the mutual benefit of farmers and communities. The project will provide a model for the other New England states to adopt for their farm viability programs.

    Project objectives from proposal:

    Farmers, agricultural educators and service providers, farm and conservation organizations, legislators, community leaders, municipalities, land trusts and other easement holding and easement funding organizations (stakeholders) will explore the use of Installment Purchase Agreements (IPAs) funded through Zero Coupon Bonds as an additional purchasing mechanism and a way to stretch public land conservation dollars. As summarized by the American Farmland Trust: * An installment purchase agreement (IPA) is an innovative payment plan that spreads out payments so that landowners receive semi-annual, tax-exempt interest over a term of years (typically 20 to 30). The principal is due at the end of the contract term. Landowners can sell or securitize IPA contracts to realize the outstanding principal. * Jurisdictions can purchase zero-coupon bonds to cover the final balloon payments. “Zeroes” do not generate regular interest income. Instead, they yield a lump sum when the bond matures. Because zero coupon bonds cost a fraction of their face value, the public entity is able to stretch available funds to cover more purchases. “Zeroes” with a face value equal to the purchase price are usually purchased the day before settlement. Because acquiring development rights is expensive in New Hampshire, because state and local communities have limited funds with which to purchase conservation easements, and because the mechanism can provide tax and financial benefits to farmers, IPAs have the potential to provide a significant means of leveraging precious financial resources for farm and farmland protection for the mutual benefit of farmers and communities. At the end of the project 1) regulatory, funding, financial and other stakeholder concerns will be known and a plan will be operational for overcoming any barriers; 2) stakeholders will understand IPAs, how they work for all stakeholders, as well as benefits and drawbacks; 3) all issues associated with using zero coupon bonds to fund IPAs will be noted and solved; and 4) at least one farmer and one town will be working together to implement NH’s first IPA; 5) the project will provide a model for the other New England states to adopt for their farm viability programs.  

    Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.