MICHELLE RANCK
Lancaster Fanning Staff
LANCASTER (Lancaster Co.)
The county’s farmland preser
vation waiting list may soon be
come shorter.
Officials from the State Bu
reau of Farmland preservations
met with approximately 100 pro-
Working together to preserve farmland are, from the
left, presenter Pat O’Connell, Evergreen Capital Advisers,
Princeton, N.J.; June Mengel, director, Lancaster County
Ag Preserve Board; and Raymond Pickering, director, bu
reau of farmland preservation, Harrisburg.
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‘Rate Of Interest ’ In Preserving Farms Grows
ducers from Lancaster County to
discuss the new, voluntary In
stallment Purchase Agreement
(IPA) Program at the Farm and
Home Center Wednesday eve
ning.
Although more than 1,500
farms have been preserved across
the commonwealth, 1,600 are on
the waiting list. Two years ago, a
pilot program was established to
accelerate the rate of farmland
preserved.
“The genesis of this program
came from a realization in the
department of agriculture that
the capital gains tax can claim
almost one quarter of the sale
price when the landowner sells
appreciated property,” said
speaker Pat O’Connell, Ever
green Capital Advisers, Prince
ton, N.J.
“This makes landowners re
luctant to sell their easements if
they wouldn’t get enough money
to make it worth their while.”
The solution, said O’Connell,
is the installment purchase plan.
The new IPA program should
be popular with both parties.
In short, the advantage is that
producers receive more than if
they would get paid cash at clos
ing. On the other hand, counties
could leverage funds to buy more
easements up front rather than
over time when there are less
farms available.
The program offers landown
ers capital-gains tax deferral.
Producers can sell easements
using agreements that defer all
or part of the purchase price for
up to 30 years.
> t
“ s I£FFIER~
The increase comes from the
interest payment made until the
principal is paid.
The second benefit is that the
interest paid is not subject to fed
eral or Pennsylvania state in
come tax.
Lastly, the seller can elect an
installment method for reporting
of capital gain from the sale.
Capital gain from the installment
sale may be deferred until the
seller receives the purchase price.
The agreement is a contract
between the New Garden Gener
al Authority and the property
owner selling development
rights. In the IPA, the Authority
will pay the purchase price for
an easement by the end of a peri
od as long as 30 years. The land
owner will be paid interest on the
outstanding purchase price from
agreement closing until the pur
chase price is paid to the seller.
“Counties could use state
grants to buy acreage on trea
suries to cover the payments due,
and secure many IPAs with the
treasuries. The county saves
money up front, allowing it to
reach a lot deeper into its waiting
list that every county has of
farmers who want to participate
in these agreements,” said
O’Connell.
t.“ 4
k
Lancaster Farming, Saturday, March 24,2001-A29
get more interest from the invest
ment done by the county.
Deferral of payment of the
purchase price for up to 30 years
is expected to allow counties to
make as many as five times more
purchases than could otherwise
be made over the short term.
Once the seller enters into the
sale agreement, that interest rate
is locked in as a minimum inter
est rate. If the rate increase be
tween the time the offer is made
and the day of closing, they will
receive a rate based on the mar
ket immediately prior to closing.
In the deed the owner agrees
to use or maintain the property
for agricultural purposes.
Payment of interest would be
twice a year until the purchase
price is paid. The landowner can
also receive cash as determined
in the agreement.
The IPA has no effect on own
ership of the property. The land
owner is free to sell the property
at any time under the terms of
the deed of easement.
After selling the property the
seller would continue to receive
the interest payments due under
the IPA. The IPA can be sold to
an investor or given away after
one year.
Counties
put aside
The purchase price of the ease
ment is established at the time
that the seller signs the deed of
less up
front, so the
seller can
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