Appraisals of the Current Market Value of Development Easements
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1 AGRICULTURE STATE AGRICULTURE DEVELOPMENT COMMITTEE Appraisals of the Current Market Value of Development Easements Proposed Amendment: N.J.A.C. 2: Authorized By: State Agriculture Development Committee, Susan E. Craft, Executive Director. Authority: N.J.S.A. 4:1C-5f. Calendar Reference: See Summary below for explanation of exception to calendar requirement. Proposal Number: PRN Submit comments by March 6, 2009 to: Susan E. Craft, Executive Director State Agriculture Development Committee PO Box 330 Trenton, NJ The agency proposal follows: Summary The State Agriculture Development Committee (SADC) proposes to amend its rules at N.J.A.C. 2: to address the SADC s certification of appraisals reflecting current market value of a development easement for applications for the sale of a development easement in the 2009 county planning incentive grant (PIG) program. The proposed amendment will promote a smooth and efficient transition from counties participating in the 2008 county easement purchase program (N.J.A.C. 2:76-6) to the new county planning incentive grant program (N.J.A.C. 2:76-17) by recognizing, in appropriate circumstances, appraisals conducted after the 2008 county easement purchase program but prior to the receipt of SADC approval of an application for the sale of a development easement under the new county PIG program. The 2008 county easement purchase round was the last opportunity for counties to submit applications to the SADC for a cost share grant for farmland preservation purposes. County participants were required to submit property appraisals utilizing a valuation date of August 1, In July 2007, the SADC adopted significant changes to agency rules that recognized a new planning incentive grant 1
2 funding mechanism effective in fiscal year 2009 (N.J.A.C. 2:76-17). These changes would allow counties, after receiving SADC approvals, to be eligible for base and competitive grants with which to purchase development easements on farmland. The establishment of the new county PIG rules was a long and tedious process that took in excess of two years to complete. Counties were patient with the development of the rules and continued to process applications for the purchase of development easements to satisfy landowner demands and maintain program momentum. Due to the agency s transition from the traditional county easement purchase program to the new county PIG program, a significant lapse in time occurred during which counties were barred from submitting appraisals to the SADC for consideration. As such, between August 1, 2006 (the valuation date for appraisals submitted by counties under the fiscal year 2008 traditional county easement purchase program) and May 22, 2008 (the date the SADC granted preliminary approval to all county PIG plan submissions, enabling the approval of applications under the fiscal year 2009 county PIG program), no new county appraisals were received for funding consideration under the SADC s new PIG program. During that nearly two-year time period, participating counties continued to accept and process applications with the expectation that SADC cost-share funding would be available from 2009 PIG program funds. The two-year hiatus and the resultant increasing age of some county appraisals necessitates a rule accommodating both the local farmland preservation efforts and the SADC s statutory mandate to provide cost share grants based on the current value of the development easement. Similarly, the proposed rule harmonizes the statutory requirement that SADC cost share grants be based on a current value appraisal with the ability of a county to preacquire easements (pursuant N.J.A.C. 2:76-6.5(g)) and fee simple interests in land (pursuant to N.J.A.C. 2: ) within three years of its grant application to the agency. The amended rules establish criteria for SADC acceptance of current value appraisals from counties applying for an SADC cost share grant from fiscal year 2009 funds. N.J.A.C. 2: (b)1 provides that, in cases where the county has not yet acquired fee simple title to, or a development easement interest in, real property, the SADC will recognize an appraisal conducted or relied upon by a county which contains a valuation date of August 1, 2006 or thereafter. N.J.A.C. 2: (b)2 addresses situations in which the county preacquires fee simple title for farmland 2
3 preservation purposes and seeks a cost share grant from the SADC for the purchase of a development easement as a partial interest in the fee simple title. The county must apply for the cost share grant within three years of preacquiring title. If a county files a cost share grant application with the SADC in a timely manner, then the agency will recognize the county s appraisal if it contains a valuation date of August 1, 2006 or thereafter, or a valuation date no more than 18 months prior to the county s preacquisition of fee simple title (N.J.A.C. 2: (b)2i), so long as the county did not pay an amount greater than the highest appraised value of the fee simple interest at the time of preacquisition (N.J.A.C. 2: (b)2ii). In cases where the county preacquired a development easement and seeks a cost share grant, the county must apply for the cost share grant within three years of preacquiring the easement. If a county files the grant application in a timely manner, then the agency will recognize the county s appraisal if it contains a valuation date of August 1, 2006 or thereafter, or a valuation date no more than 18 months prior to the county s preacquisition of the development easement (N.J.A.C. 2: (b)3i), so long as the county did not pay an amount greater than the highest appraised value of the easement at the time of preacquisition (N.J.A.C. 2: (b)3ii). In order to accommodate situations in which a county conducted only a before (unrestricted) value appraisal in connection with the preacquisition of fee simple title, N.J.A.C. 2: (c) requires the SADC to accept, upon request of the county, entirely new appraisals containing before (unrestricted) and after (restricted) values based on the valuation date of the prior appraisal. This remedial provision is available so long as the valuation date of the before (unrestricted) appraisal was August 1, 2006 or thereafter, or the valuation date of the before (unrestricted) appraisal was no more than 18 months prior to the county s preacquisition of fee simple title. Finally, the rule proposed amendments define preacquisition based on the customary expectation of parties to a real estate transaction that an interest in land effectively passes from grantor to grantee on the closing or settlement date when the deed of conveyance and the consideration are normally exchanged. A 60-day comment period is provided in this notice of proposal and, therefore, pursuant to N.J.A.C. 1:30-3.3(a)5, the notice is excepted from the provisions of N.J.A.C. 1: and 3.2 governing rulemaking calendars. Social Impact 3
4 The proposed amendments will have a positive social impact by fostering coordinated funding efforts by the SADC and county agriculture development boards. The SADC expects a positive reaction to the proposed amendments from county agriculture development boards, many of which ordered and received appraisals in anticipation of participating in the new planning incentive grant program. Economic Impact The proposed amendments will have a positive economic effect on county agriculture development boards, and landowners seeking to preserve their farms, by promoting participation in the 2009 planning incentive grant program using current market value appraisals. The proposed amendments will benefit counties that have already spent substantial sums to acquire farmland property and development easements and have been waiting for state cost share funding in order to replenish existing preservation accounts. Federal Standards Statement A Federal standards analysis is not required because the subject matter of the proposed amendments is not subject to any Federal requirements or standards. Jobs Impact The proposed amendments will neither create, nor cause a loss of, any jobs. Agriculture Industry Impact The proposed amendments will have a positive impact on the State s agriculture industry by expediting the infusion of State cost share grants, which will be used by counties for future farmland preservation transactions. Farmland preservation transactions under the planning incentive grant program will be expedited as a result of the proposed amendments, leading to more acreage from which development rights have been retired and to a more stable land base for the State s agriculture industry. Regulatory Flexibility Statement The proposed amendments will not impose any reporting, recordkeeping or other compliance requirements. The proposed new rules are designed to result in a reduction of paperwork by eliminating the need for counties to order and 4
5 pay for new appraisal reports in support of farmland preservation applications in the 2009 planning incentive program. Smart Growth Impact The SADC does not anticipate any impact upon smart growth or upon implementation of the State Development and Redevelopment Plan as a result of the proposed amendments. Housing Affordability Impact The proposed amendments will have an insignificant impact on affordable housing in New Jersey and there is an extreme unlikelihood that the amendments would evoke a change in the average costs associated with housing because the rules concern appraisals of the current market value of development easements and eliminate the need for new appraisal reports. Smart Growth Development Impact The proposed amendments will have an insignificant impact on smart growth and there is an extreme unlikelihood that the amendments would evoke a change in housing productions in Planning Areas 1 or 2 or within designated centers under the State Development and Redevelopment Plan in New Jersey because the rules concern appraisals of the current market value of development easements and eliminate the need for new appraisal reports. Full text of the proposal follows (additions indicated in boldface thus; deletions indicated in brackets [thus]): SUBCHAPTER 17. COUNTY PLANNING INCENTIVE GRANTS 2: Committee certification of development easement values (a) (No change.) (b) For purposes of funding eligible farms through fiscal year 2009 appropriations only, an appraisal submitted in compliance with the provisions set forth below shall be deemed a current market value appraisal: 1. An appraisal conducted, or relied upon, by counties having a valuation date of August 1, 2006 or thereafter; 5
6 2. In the event that a county has preacquired lands in fee simple title for farmland preservation purposes within three years of filing an application with the Committee for a cost share grant for the purchase of a development easement as a partial interest in the fee simple title, the Committee shall accept the original appraisal conducted in support of the preacquisition, conditioned upon the following: i. The valuation date of the appraisal is August 1, 2006 or thereafter or the valuation date is not more than 18 months prior to the date of the county s preacquisition; and ii. The county did not acquire the fee simple interest for an amount greater than the highest appraised value at the time of preacquisition; or 3. In the event that a county has preacquired a development easement within three years of filing an application with the Committee, the Committee shall accept the original appraisal conducted in support of the preacquisition, conditioned upon the following: i. The valuation date of the appraisal is August 1, 2006 or thereafter or the valuation date is not more than 18 months prior to the date of the county s preacquisition, and ii. The county did not acquire the development easement for an amount greater than the highest appraised value at the time of preacquisition. (c) At the county s request, the Committee shall accept new appraisals which provide before (unrestricted) and after (restricted) values based on the valuation date contained in the original appraisals conducted in support of the preacquisition, subject to (b)2 and 3 above. (d) For the purpose of (b) above, preacquisition shall mean the date of settlement on the county s purchase of fee simple title or a development easement. Recodify existing (b) - (e) as (e) - (h). (No change in text.) 6
7 S:\RULES\PROPOSALS\Current Valuation Determination\FinalproposedruleOALpub0105.doc 7
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