Case Studies: Models for Using Tax Policy for Access

Overview

Federal Excise Tax Models

The Federal Aid in Sport Fish Restoration Act (the Dingell-Johnson Act, amended by the Wallop-Breaux Act in 1984) may provide a model for coastal access and working waterfronts. This Act provides for the direction of funds derived from excise taxes on rods and reels and sport-fishing boats to the Department of the Interior to channel to qualifying state programs oriented towards fisheries restoration. Likewise, federal legislation known as the Pittman-Robertson Wildlife Restoration Act calls for state and federal collaboration to direct funds from excise taxes on guns and bullets and other hunting gear towards state-sponsored wildlife restoration programs. This approach may provide a model for funding working waterfront conservation land banks at either a federal or state level.

Maine Voluntary Municipal Farm Support Program

This Maine state program became effective in 2010 and may provide a coastal access and working waterfront model. The Voluntary Municipal Farm Support Program (VMFSP) is designed to protect more Maine farmland from increasing development pressures and tax burdens. Under the VMFSP, municipalities can voluntarily elect to arrange for a funding mechanism that would cover all or part of the property tax costs of qualifying farmland in exchange for an agricultural conservation easement on that land. Interested municipalities are required to develop the qualifying criteria for applicants, the process for application and approval, the mechanisms for property tax payment or deduction, and a model agricultural conservation easement. The farm support program is new at the time of this writing (2010), but if it proves successful, a similar statute might hold promise for working waterfront lands as well.

Real Estate Transfer Taxes and Land Banks

The Nantucket Islands Land Bank was created to acquire, hold and manage important open space resources and endangered landscapes of Nantucket Island for the use and enjoyment of the public. The program was adopted by the voters of Nantucket and established by a special act of the Massachusetts Legislature in 1983. Land Bank revenue is derived from a two percent real estate transfer tax, which is levied against most real estate transfers on the island. The Land Bank competes in the open market to acquire land that provides the public a wide range of opportunities. The Land Bank currently holds beaches, wetlands, aquifer recharge areas, moorlands, heathlands, rare species habitat, ocean, pond and harbor frontage, and properties for passive and active recreation.

Similarly, a dedicated real estate transfer tax (RETT) of two percent of the purchase price has been successfully used by elected officials to purchase waterfront lands on the open market in Washington’s San Juan Islands.

The Maine legislature could similarly dedicate either a fixed amount or a percentage of real estate transfer tax revenues to support coastal access and working waterfront protection (whether to support repayment of a bond issue, or to directly fund the purchase of working waterfront land or development rights). If the success of other New England land banks is any indicator, the current Maine transfer tax rate (which is less than one-half of one percent) presumably could be increased without significant negative impact, and increased revenues could be dedicated to local or regional land banks for the purchase and protection of working waterfront or coastal access in general. As a caveat, however, the spread of such land banking programs in Massachusetts eventually met with strong resistance from real estate developers. Although the authority to impose a local transfer tax was initially sought by towns and approved by the state legislature, development interests soon challenged that grant of authority. In the end, the question was ultimately put back to town voters and rejected in every town except for those on Nantucket and Martha’s Vineyard.

In Maine, the majority of the RETT revenues collected are allocated to the state’s general fund, but notably, legislation passed in the 1980s directs a percentage of those funds to the HOME Fund for affordable housing, and may serve as a model. The HOME Fund was authorized in 1982, and beginning in 1984 was funded through allocations from the state's RETT. The statute designates RETT funds to be allocated 45% to the state general fund, 45% to the HOME Fund, and 10% to the counties. Actual allocations to the HOME fund tracked since 2000 indicate that the percentage to the HOME Fund has varied from a high of 45% in the earlier years, to as little as 7% in 2009. Attempts to increase the Maine state RETT rate (less than one-half of one percent) have repeatedly failed.

Rather than seeking to increase the RETT rate, an alternative approach to consider for applying this tool in Maine would involve pursuing reallocation of existing Maine state transfer tax dollars to allot a percentage to coastal lands and/or working waterfront preservation. Maine currently has no enabling legislation for municipalities to levy this tax at the local level and several attempts to pass such legislation have failed.

Functionally, the Land For Maine’s Future Program (which funds the Working Waterfront Access Pilot Program/WWAPP) serves as a version of a land banking program, with two noteworthy distinctions between the model in Maine and that in Nantucket. The first is that Maine’s WWAPP operates primarily to secure restrictive covenants to limit the use and development of applicable lands, while Nantucket’s land bank more typically holds outright title to its lands. The second crucial difference is the source of funding, which is also where tax-based strategies enter into consideration. The funding for the Land for Maine’s Future Program requires the periodic issuance of bonds, each in turn requiring approval by state voters, whereas the Nantucket land bank is funded on an ongoing basis by RETT revenues.

Though authorization for such a model could be sought and applied at municipal, county, or state levels, securing both municipal and state approval seems optimal, given the prior history in Massachusetts. Depending on which state is reviewed for lessons, further exploration of the impacts stemming from traditions of “home rule” may be advisable. According to the Federation of Tax Administrators, real estate transfer taxes vary from 0.01% in Colorado to 4% in Pennsylvania; finding the appropriate amount for any particular state or municipality would likely require a weighing of the funding needs and market impact.

Bay County, Florida, Impact Fees Program

Florida’s Bay County charges several different types of impact fees on new development projects. For example, new residential developments are charged the Park and Recreational Facilities Impact Fee, which is based on the assumption that new residential development will increase the need for park facilities, including beach access sites. Revenue from the fees is then used to help purchase land and create new parks, in proportion to the increased use projected by the development.

Tremont, Maine Bond Financing

A potential source of funding for land banking is bond financing. Bonds are long-term promissory notes issued and backed by the government, for funding at the state or local level. An example of successful bond financing is found in the Town of Tremont, Maine. Tremont is a small coastal village on Mount Desert Island. In 1992, the Town purchased .94 acres of working waterfront from a private seller at foreclosure. The voters of Tremont authorized the Town to finance the purchase with a loan from a local bank. In Maine, bond financing has proven more feasible politically than increasing the real estate transfer tax.