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Resources : Gaining Ground
The following discussion of land tenure and financing for Community
Supported Agriculture (CSA) was adapted from a chapter prepared
by Chuck Matthei of the Equity Trust
for Farms of Tomorrow Revisited, edited by Trauger
Groh and Steven McFadden (Biodynamic Farming and Gardening Association,
1997). While the article specifically addresses the needs of CSA
farms - whose consumers are enrolled as members, purchasing annual
'shares" in the farms' production - much of the information
it provides will be relevant to other farms as well. For more information,
contact Equity Trust.
Jump to a section:
Gaining Ground:
How CSAs Can Acquire, Hold, and Pass On Land
While the first decade of Community Supported Agriculture (CSA)
in the United States has been impressive and future prospects look
bright, the majority of CSA farmers are still on shaky ground. Many
are working borrowed or rented land, without long-term leases; some
are trying to purchase land, at market prices far higher than farm
income can support; and even those who own land are trying to figure
out how to provide for their retirement and their heirs, yet insure
the continuation of fanning in future generations.
Secure land tenure and reliable sources of financing are essential
for a viable farm operation. Without them, existing farmers face
constant uncertainty and have a difficult time making necessary
improvements; prospective farmers may not begin at all. Yet the
reality is that most CSA farmers will not be able to obtain sufficient
financing from conventional sources, and many will need substantial
discounts or subsidies in any event
The key to assembling the necessary resources lies in distinguishing
the essential personal interests in farm properties from the inherent
public interests. Defining and protecting the public interests legitimizes
the application of charitable and public funds to a land purchase,
thereby assuring affordable access to the farmer. In most cases,
this is achieved by establishing a relationship and dividing the
property interests between a farmer and a nonprofit land trust,
with the land trust serving as steward of the public interest.
The current land tenure problems can be solved, by mobilizing the
unique community that Community Supported Agriculture has created.
If you are a CSA farmer or member, this article is written especially
for you. Working together and reaching out to friends and neighbors,
local institutions, land trusts, and even local governments, you
can secure your own position and prepare the ground for other farmers
as well.
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Finding Your Place
Most CSA fanners begin as apprentices and then, in your first years
as independent producers, many of you use someone else's land. But
eventually each of you will need a secure site in which to invest
many years of labor and a substantial amount of capital.
Choose your land carefully, keeping long-term concerns in mind
from the outset. Pay more attention to productivity than panoramic
views. Learn from the experiences of other farmers, and be realistic
about size, soil quality, availability of water, and the various
improvements that a successful farm will require. And compare the
terms on which various properties are offered to you.
If you are borrowing or renting land, make sure that you have a
clearly written and detailed lease agreement. Consider the term
or time commitment of a proposed lease, permitted land uses, and
the possibility of credit for improvements you might make. Be mindful
of the market value of the property and the level of support you
might find in that community if you later have to purchase the land
to secure your tenure. Whenever you enter into a lease, ask for
a right-of-refusal or purchase option in the event that the owner
puts the land put up for sale. A right-of-refusal will give you
the chance to match the bid of any prospective buyer; an option
will actually fix the price (or price formula), and perhaps define
the period of time in which you have the right to buy.
If you want to explore the possibility of purchasing rather than
leasing, be aware that there are many ways to acquire land at below-market
prices. Look for motivated sellers who may be willing to take less
than market value to insure that the land they love remains a working
farm. Some elderly landowners may respond if you will let them remain
in their homes, and perhaps provide some personal services, after
the land transfer. Other landowners may be attracted by the tax
benefits that come with a 'bargain sale' to a nonprofit land trust
organization. (These are usually landowners whose property values
have appreciated substantially and who have significant personal
income. The difference between the bargain sale price and the fair
market value will be considered a charitable gift, and the resulting
tax deduction may be spread over several years; the capital gains
tax liability will be reduced as well.)
Local clergy, attorneys and investment advisors, sympathetic realtors,
and some of your own CSA members may be in a position to know which
landowners fit this description. Land trust directors and town officials
may also know-and sometimes the land trust, local government, or
other institutions may own land themselves that can be made available
to you. It is never too soon to meet them and acquaint them with
your program. The community-building aspect of Community Supported
Agriculture is not limited to the recruitment of members; it involves
relationships and credibility throughout the community.
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Forming a Relationship with a Land Trust
There are two families of land trusts in this country - conservation
land trusts and community land trusts - with significant similarities
and differences between them. Typically, they are nonprofit corporations
(not legal trusts), locally based and democratically structured.
The same legal and financial tools are available to both. They are
capable of a variety of tenure arrangements, but each may have customary
practices and may be unfamiliar with other models.
Conservation trusts currently number about 1500, with a membership
that is primarily middle and upper class. Traditionally, they have
been devoted simply to open space preservation and wildlife conservation,
but a growing minority now express an interest in active farm and
forest lands and a few, like the Vermont Land Trust and the Marin
Agricultural Land Trust in California, actually specialize in working
lands. Conservation trusts usually hold an easement, or restriction,
on farmland, leaving the "fee" interest, or title, in
the name of the farmer. The conservation easements are designed
to preserve the environmental integrity of the land by limiting
development and protecting its critical natural features.
In contrast, there are only 120 community land trusts, and they
are primarily located in lower income communities. Most have been
established to provide the essential benefits of ownership to those
who are excluded from the conventional real estate market. Many
are in urban areas and few have farm holdings, but they should be
receptive to a CSA proposal.
Community land trusts usually retain title to the land and offer
the residents a lifetime, inheritable lease. Lessees may own the
improvements on the property, and build equity by their personal
investment of capital and labor; however, the lease includes a purchase
option and price formula, giving the land trust the right to buy
the improvements from a departing farmer and transfer them at a
fair price to the next. In this way, community land trusts address
the social and economic challenges of conservation as well, keeping
farms available and affordable for farmers.
The difference between an individual holding title and a land trust
doing so may appear to be quite significant, but in fact may not
be as important as it seems. The character of the land tenure relationship-'the
distribution of rights and responsibilities between the fanner and
the land trust-is actually determined by the details of the land
use agreements, more than the placement of the title and the types
of legal instruments used.
Despite the growing interest in farmland preservation between both
kinds of land trusts, many still have limited experience and the
negotiation of terms will be a learning experience for all concerned.
The relationship between a fanner and a land trust is a very important
and long-lasting one; it may take time and patience to develop.
Look at your local land trust's stated purposes and history of program
activity, its board of directors and membership, its legal and financial
condition and its management systems. Make sure that it is a sincere,
competent, active organization-and then make the effort to build
an effective working relationship, turning to others for examples
and assistance along the way.
It is usually much better to persevere with an existing trust than
to try to create a new one for a single purpose or property. The
requirements of organizational development and management are often
underestimated and, unless the new entity has a sufficiently broad
and capable membership, it will have a difficult time fulfilling
the responsibilities of genuine land stewardship. If there is no
local land trust in your area, or it is simply not possible to work
with the existing group at this time, you might utilize a regional
or national organization with similar purposes as an interim steward.
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Balancing Individual and Community Interests
Most of us are accustomed to regarding property as a legal formulation
or a market calculation, but it is more helpful to envision it as
a web of relationships. The leases, easements, and other documents
used to secure land for CSA farms should carefully define and equitably
balance the legitimate interests of all of the involved or affected
parties.
There is no single 'right way' to do this, and the law is quite
flexible. In most cases, you can strike whatever balance seems fairest
to you and your partners. A simple exercise might be useful in making
this determination. Do it alone, with your core group of farm members,
and with your land trust partner. Don't be intimidated by the legal
or financial implications of the exercise; rather, treat it as a
creative educational and social experience.
Thinking of the land that you hope to acquire - its natural features,
potential uses, and carrying capacities - make a grid. (See figure
below.) On one side, list all of the interested parties. They may
have different kinds of interests and different levels of interest,
but they have some legitimate interest in that land, You will find
that they can be grouped into four categories; one or more individuals
who personally use the land for residence, farming, or some other
purposes; the community in the form of abutting neighbors, local
government, and the CSA membership; the land itself, and the plants
and animals with which you will share it; and the next generation.
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Environmental |
Social |
Economic |
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| Community |
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| Land & Wildlife |
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| Next Generation |
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The other set of coordinates will be the three dimensions of property:
environmental, social, and economic. How should the specific rights
and responsibilities in each of these dimensions be distributed
among the various interested parties? What land uses should be permitted,
required, or prohibited for each? Who should have access, exclusive
or shared—and who should participate in governance, in the
different kinds of decisions that will be made regarding the land?
Who contributes to property value over time, and how should equity
be allocated? In all of these areas, think about what you hope to
achieve and what else might occur, making provisions for unexpected
or even unwelcome contingencies.
With the completed matrix in hand, you will be ready to begin drafting
the necessary legal agreements. The resulting documents, in part,
will define:
- WHO: the parties to the agreement, including the farmer(s),
spouse(s), the land trust, and possibly others;
- WHAT: the land and resources being allocated to or withheld
from each party, including boundary lines) timber, mineral and
water rights, and specifications for private use, shared use)
and perhaps even some public access;
- FOR WHAT PURPOSES: permitted and restricted land uses (residential,
agricultural, educational, commercial, etc.) and specific practices;
- AT WHAT PRICE: the amount of the lease fee or purchase price,
an< the responsibilities for taxes, insurance, maintenance
and monitoring;
- OWNERSHIP AND IMPROVEMENT: ownership of the land and ownership
of the improvements; the right to make additional investments
and improvements; and permitted mortgaging;
- TRANSFER: occupancy requirements; subleasing; provisions for
inheritance; and the land trust's option upon sale;
- ARBITRATION: conflict resolution in the event of disagreements
between the parties...and more.
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Financing the Purchase
The structure of ownership and distribution of property rights
will affect the financing possibilities. Remember that charitable
or government resources may be used for the acquisition and maintenance
of public interests in property, but private property interests
must be paid for with private funds.
If you will own the land and a land trust will hold a conservation
easement, you will each have to pay your proportionate share of
the property value as determined by appraisal. You will pay the
restricted "farm value" of the land subject to the terms
of the easement; the land trust will pay for the easement. An easement
is a real property interest, with a value that is equivalent to
the difference between the restricted value and the unrestricted
"fair market value" of a property.
On the other hand, if the land will be owned by a land trust and
leased to you, it may be acquired by the land trust as a tax-deductible
charitable gift, or purchased entirely with gift funds (which you,
your farm members, and friends may help the land trust to raise).
You will not have to use your personal resources to purchase the
property, but you will pay a reasonable lease fee to the land trust
for the use of the land over time.
Some CSA farmers have considered restructuring their farms as charitable
organizations and a few CSA farms, like Quail Hill Community Farm
in Amagansett, NY, are currently operating as programs of nonprofit
corporations, with the farmers as employees. But this approach may
only be feasible when the organization has a broader array of charitable,
educational, or conservation activities. The Internal Revenue Service
does not recognize farming, as such) as an exempt activity. In most
cases, it will be more appropriate for the CSA program to remain
a private enterprise, owned by the farmer or, conceivably, by the
members, with the rote of a nonprofit partner limited to stewardship
of the public interests in the land.
Before seeking financing for land acquisition, you must formulate
a realistic, multi-year business plan that details projected income
and expenses, anticipates growth) provides for contingencies, and
identifies the amount remaining for debt service. On this basis,
you may be able to approach conventional lending institutions for
a portion of the purchase price. They will require a down payment
They may also ask for co-signers or guarantors of the loan, a role
that family and friends may be willing to play (perhaps sharing
the risk by limiting the amounts of their individual guaranties).
Some states and municipalities have provided loans or grants to
land trusts for farm acquisitions, through established programs
or special appropriations. Many towns now realize that the cost
of preservation is often less than the cost of servicing the development
that otherwise occurs. Local foundations, other institutions, and
even businesses have also contributed. It's useful to acquaint yourself
with these institutions and programs well in advance of your need
for funds. Typically, a financing package comes from multiple sources
and includes a combination of gifts and loans (and perhaps even
proceeds from the sale of partial interests or portions of the land
to other parties).
Institutions are not the only potential source of financing for
CSA farms. The members themselves—and their friends end associates'—may
be your most important financial resource. They are already interested
and involved. Presented with a realistic proposal, they may be quite
willing to make charitable gifts and socially responsible investments
to secure the farm for future generations and to preserve the character
and quality of life of the surrounding community.
Charitable gifts from members and friends can go directly to the
land trust. If loan capital is sought, however, many investors may
prefer to make their loans through a qualified intermediary such
as a community development loan fund. The Equity Trust, Inc., a
nonprofit organization with an innovative national program of land
reform and community development finance, has established The Fund
for Community Supported Agriculture for just this purpose. Such
intermediaries receive loans and gifts from multiple investors and
donors. They aggregate the resources, and provide financing for
a variety of projects. Investors benefit because the intermediary
assumes the responsibilities of analysis, administration, and monitoring,
and offers the greater security of its diversified portfolio, loss
reserves, and net worth. Borrowers benefit because they are able
to deal with a single lender, one with experience, technical assistance
capabilities, and additional capital if needed.
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Setting an Example
A growing number of CSA farmers are following the paths outlined
above, breaking new ground and enlarging the opportunities for others
as they go. Stephen and Gloria Decater had been farming for nearly
twenty years—initially as market gardeners and then as Live
Power Community Farm, California's oldest continuously operating
example of CSA—when they realized in 1991 that they had to
purchase the land. Throughout this period, it had generously been
made available to them by Richard Wilson, a sympathetic landowner
and rancher, who is now also the Director of the California Department
of Forestry and Fire Protection. But with the need for substantial
investments in the buildings and the eventual prospect of inter-generational
transfers, the Decaters felt that the time had come to formally
secure their place.
They negotiated a purchase agreement. Like most small farmers,
the Decaters couldn’t afford to pay the full market value with
only farm income. So they turned to their core group of members
for assistance and began to explore their options. After two years
of research and interviews with farmland preservation groups around
the country, they decided together that the Decaters would personally
obtain financing for the agricultural value of the property, while
members and others made charitable gifts for the purchase of an
easement by a land trust.
As they discussed their mutual goals, these fanners and members
realized that a conventional conservation easement would not be
good enough. In a newsletter report to the general membership, Stephen
said:
"Socially and ecologically responsible agriculture also requires
socially and economically responsible land ownership. If equity
and stewardship of the land are shared by the community and the
individual farmer, we can ensure that the land will remain in farming
use and permanently affordable to farmers."
With the help of attorneys and other advisors, they crafted an
easement and purchase option for the land trust that not only provides
for environmental protection) but requires that the land be continually
farmed, by resident fanners, using sustainable methods. It also
limits the price, when it transfers from one farmer to the next,
to no more than the productive farm value. On this basis, two appraisals
were made: the fair market value of Live Power Community Farm was
$150,000, but the restricted value of the land, subject to this
easement, was only $69,600.
The unusual provisions of the easement substantially increased
the amount of charitable funds that could be applied to the purchase
of Live Power Community Farm. Covelo, CA, already has large-lot
zoning. A conventional conservation easement, restricting development
but leaving open the possibility of future sales to estate or second-home
buyers, would have had relatively little impact on the appraisal.
But dedicating the property to agriculture and limiting the transfer
price removed all of the speculative element and made the land affordable
for the Decaters and future generations of farmers.
In a remarkable effort, the members and friends of Live Power Community
Farm succeeded in raising $90,000. Of this amount, $81,000, representing
the difference between the full market value and the "farm
value," was applied to the purchase of the easement itself.
The balance was used for legal fees, an environmental baseline'
study, and other transaction costs. Yet another hurdle remained.
The plan required the participation of a nonprofit partner, but
there was no land trust in the immediate area and the nearest one,
though appreciative of the Decaters' intent, was hesitant to take
on the responsibilities this easement entailed.
At this point, the Decaters turned again to the Equity Trust, which
had already been a source of advice. The Equity Trust serves community
land trusts and conservation projects across the country, and agreed
to play a surrogate "land-banking" role by holding the
easement until local stewardship became available.
Finally, in May of 1995, the closing took place. As Richard Wilson
said at the celebration:
"Along the way, we learned some lessons that may be relevant
for others. It takes patience and fortitude. This work is important
social reform and it cuts against the grain of existing expectations
and arrangements in the marketplace- [But] this farm is a working
example of how sustainable agriculture can succeed. It's an important
center of education and training. It's the center of a vibrant community
that links Covelo to the city and provides the city with a vital
contact to the real world of nature and its limits, and it's the
home for a wonderful family who are committed to the land and to
this Round Valley."
Several factors contributed to this achievement. Live Power Community
Farm was well established, and the Decaters' personal dedication
and abilities were well known. The core group included members with
significant legal, financial and fundraising skills, and they were
willing to devote a great deal of time. And half of the farm's 140
member families live in San Francisco, one of the most receptive
and affluent environments for such an appeal.
Other CSA farms may have more or less difficulty in their own land
acquisition and fundraising efforts, but the Live Power experience
is not unique. In Hadley, Massachusetts, the Western Massachusetts
Food Bank paid off the mortgage on its Food Bank Farm fields in
just three years, with charitable gifts. The original price was
reduced by the sale of an easement to the Massachusetts Department
of Food and Agriculture; the compound of buildings was acquired
by a sympathetic philanthropist and leased to the Food Bank and
farmers.
Philadelphia Farm, in Osceola, Wisconsin, was also purchased with
the help of charitable gifts; Fairview Gardens, in Goleta) California,
recently completed its own capital campaign, with the Equity Trust
providing intermediary services. In Caledonia, Illinois, Angelic
Organics has recruited a group of members to form a holding company
and purchase adjoining land, giving the farmer a lease with an option
to purchase when he is ready.
Similar principles can be applied to inter-generational transfers
as an expression of the owners’ dedication, and charitable
gift deductions and estate tax benefits may result. Roxbury Farm,
in Claverack, New York, has been in the same family for several
generations. Two of the current owners' nine children, and one child's
spouse, are involved in the CSA operation. After careful consideration
and a series of family meetings, the parents decided to transfer
the prime agricultural land to the farmers, reserving a small tract
of non-agricultural land for each of the other children to enable
them to return if they choose, and donating a conservation easement
to a local land trust In this way, they met the needs of each family
member and fulfilled their common commitment to the land, the farm,
and the well-being of the wider community. Now they are working
with the land trust, neighboring owners, and prospective farmers
on a broader strategy for land conservation and agricultural revitalization
in the area.
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Seeds for a Future Harvest
CSA farms like these are defining the principles and perfecting
the instruments for a more effective approach to agricultural conservation,
for farms of every kind. The essential element in alt of their stones
is the willingness of fanners to balance their own personal interests
with the common good and to address all three dimensions of property:
environmental) social and economic. While most conservation programs
throughout the country, both public and private, are still using
tools that protect only the land, these CSA farms are setting a
higher standard, as they strive to preserve farmland, family farmers,
and rural communities as well. They have taken to heart the warning
of Aldo Leopold, a half-century ago, that "We abuse land because
we regard it as a commodity belonging to us," and learned to
see it as he described it, "as a community to which we belong."
Along the way, these CSA farmers and members are educating and
inspiring others, discovering allies, and foiling new partnerships.
The Vermont Land Trust, a national leader in the conservation field,
is now experimenting with 'shared equity' models for family farms,
and the Commonwealth of Massachusetts has revised the easements
used in its Agricultural Preservation Restriction program to require
continuing agricultural use. The quasi-public Vermont Housing and
Conservation Board (VHCB) holds a statutory right-of-refusal on
any farm that has received property tax considerations or other
state subsidies, before it can be sold to a non-farmer and removed
from production. VHCB also provides financing to local land trusts
through a fund capitalized by legislative appropriations. In pursuit
of environmental and social goals, CSA farmers and members can join
with a great many others in a combination of individual initiatives,
local organizing and institutional development, and public policy
reforms.
Significantly, the relevance of these efforts goes well beyond
rural America, for land is not only essential to farmers. It is
the foundation for virtually all social and economic activity. Some
of the same market forces that are keeping prospective farmers from
the land affect urban areas as well, where community land trusts
in cities large and small are responding to the needs for affordable
housing) open space, and facilities for small businesses and human
services. In Boston, MA, the Dudley Neighbors CLT is engaged in
an ambitious, integrated program combining urban agriculture with
residential and commercial development. Land has been allocated
for food production and youth employment; a newly created 'neighborhood
commons' hosts a weekly farmers market; and planning is underway
for construction of a large commercial greenhouse.
In communities of every kind, issues of land use and property rights
are fundamental-and they are also controversial. In national, state,
and local arenas, they stand at the center of the political stage
as the focus of highly polarized debates. Unfortunately, public
and private interests are often portrayed as distinct and even antagonistic;
arguments are simplistic, and constructive alternatives are lacking.
Although we define the word "equity" both as a financial
interest in property and as a moral principle of fairness, all too
often it seems that the necessary relationship between the two has
been forgotten.
"Land reform" may be a foreign concept to most Americans,
but our need for it is real and growing. Here and abroad, we are
confronted with expanding populations, resources limited by supply
or the costs and consequences of extraction, and a universal demand
for inclusion. The conclusion is inescapable, even if the path is
still unclear. All human beings need food, shelter, meaningful work,
and recognition of their importance to the community-and all of
these are dependent upon good stewardship and equitable distribution
of the land.
With creativity, commitment) and community participation, the CSA
farmers of today can provide a legacy of secure, productive, and
affordable land for the farmers of tomorrow - and make vital contributions
to the larger process of social and economic reform. The ultimate
success of Community Supported Agriculture depends upon it and many
others will benefit as well. We are facing a formidable challenge,
to be sure, but it is also a remarkable opportunity, a practical
possibility, and even a sacred trust.
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