OFA case studies illustrate economic and environmental benefits of farmland

Urban sprawl continues to negatively impact the viability and productivity of Ontario’s agriculture industry. The rapid expansion of development on farmland may have consequences such as increased energy consumption and pollution, as well as the ability for our farmers to continue producing food, fibre and fuel for the province.

The Ontario Federation of Agriculture (OFA) believes that we need to work together with policymakers and land use planners at all three levels of government to ensure land capable of supporting agricultural activity is strategically protected and preserved. In regard to growth and development, it’s important that long-term responsible land use planning policies are supported and implemented in a way benefits economic growth and prosperity within the municipality while also respecting agricultural land.

OFA has started conducting Cost of Community Services (COCS) case studies that can be used as a tool to examine the fiscal impact of different land uses. COCS studies categorize a municipality into different land use classes: residential, commercial/industrial and farmland/forests. Each land base is assessed and examined to determine the amount of revenue the municipality is receiving from each section, compared to the expenditure of municipal services they use.

COCS studies have been described as “snapshots in time” of each land use’s financial impact on a municipality in a particular year. Multiple studies have been completed in a variety of townships, hamlets, and rural communities across the United States. It is evident that COCS studies have been found to be most effective in rural municipalities.

Oftentimes, many studies show that despite paying lower rates in taxes on farmland, agriculture is showing to be a net positive for municipal budgets due to decreased use or limited access to municipal services. OFA believes it’s important for councillors and land use planners to consider both the financial and environmental contributions farmland provides to the local economy and community.

Besides food production, farmland provides an expansive list of environmental benefits including oxygen production, carbon sequestration, climate regulation, biodiversity, pollination services, soil erosion control, water and nutrient cycling, and habitat for wildlife and endangered species.

A common misconception that leads to sprawl is the belief that development will always have a positive impact on municipal budgets. While it is true that developing agricultural land has the potential to lead to increased revenue collected by municipalities, focusing exclusively on revenue is only looking at half the picture.

When using COCS studies to analyze the fiscal impact of the residential property tax class, many have shown that, although this land use class provides high rates of taxation revenue, the costs of providing community services for this class exceed the revenue collected. This creates a fiscal deficit for the municipality. When faced with a deficit, a common response has been to support further residential growth assuming that the increased revenue will produce a balanced budget. Unfortunately, ignoring the costs associated with servicing this new growth leads to further deficits.

In OFA’s 2014 study done on the Municipality of Bayham, we found that farms only demanded $0.50 cents worth of municipal services for every dollar of revenue brought in, compared to $1.08 worth of services for every dollar brought in by residential. In OFA’s 2020 report, completed in the Township of Mulmur, we found that farmland was again a net positive on the budget as it only demanded $0.60 cents worth of services for every dollar of revenue brought in. Farmland not only provides strong economic and environmental benefits but also fiscal advantages to many rural municipalities.

OFA believes it’s important for local leaders and citizens to understand that with sound strategic planning, our province and rural communities can stimulate economic growth while preserving and protecting Ontario’s finite resources. OFA is willing to work with the provincial and municipal governments to help develop strategies by which economic recovery can occur and farmland be protected.

When a municipality converts farmland to urban residential development, it will likely experience an increase in revenue collected from residential property tax. However, municipalities often neglect to take into account that the ongoing cost of servicing the new residential class will in all likelihood exceed the revenue collected from it.

There needs to be a proactive strategy to encourage municipalities to support COCS studies that will allow them to carefully analyze the revenue derived from residential and farm tax classes as well as the costs associated with providing ongoing community services and infrastructure to each.

Should this analysis indicate that the conversion of farmland to residential use will be financially costly, the municipality needs to weigh the merits of allowing future residential growth and/or find ways to pay for the increased costs associated with residential development.

COCS studies will continue to be conducted in rural communities throughout 2021-2022. OFA supports the need for economic growth but urges municipal leaders to look inward and upward at strategic growth rather than building outward and paving over farmland. Once it’s paved over, it’s gone forever.

Source: OFA