HD93 - Report of the Agriculture Enterprise Act of 2005


Executive Summary:
House Bill No. 1947 – The Agricultural Enterprise Act of 2005 – establishes agricultural enterprise zone districts to promote and support the development of agricultural and farm businesses in designated areas of the Commonwealth. The Act would allow “qualified agricultural businesses” and “qualified farm businesses” that are located within agricultural enterprise zones to apply to the Virginia Department of Agriculture and Consumer Services (VDACS) for assistance in developing business plans and grant funding for implementation of the business plans, varying from 50 percent of the investment cost up to a maximum of $500,000. “Qualified agricultural businesses” are any agricultural businesses that establish a new business operation or expand and improve an existing operation within a designated agricultural enterprise district. “Qualified farm businesses” are businesses that establish a new agricultural or forestal production operation or expand such an operation within an agricultural enterprise district.

VDACS would also have the following additional duties and responsibilities in administering this bill:

1. Establishing the criteria for what areas qualify as agricultural enterprise districts, and which criteria shall be the minimum required for implementation of the purposes of the bill

2. Monitoring the implementation and operation of the program

3. Conducting an ongoing evaluation of agricultural enterprise districts

4. Assisting localities in the designation of agricultural enterprise districts and in developing appropriate local policies and incentives to qualify

5. The administration and enforcement of regulations promulgated for the agricultural enterprise district program.

The second enactment clause of the Bill states that the provisions of the first enactment shall become effective January 1, 2007 contingent upon funding in the appropriations act of 2006-2008.

The third enactment clause requires a study and report by the Secretary of Agriculture and Forestry on the initial program development to address the responsibilities and requirements of the Act.

This report focuses on two major areas of study: A technical review of Agricultural Enterprise Zone programs developed in other states and an overview of a possible Virginia Agricultural Enterprise Zone Program based upon the traditional guidelines for the existing Virginia Enterprise Zone program for industrial development.

The study reviewed the Agriculture Enterprise Zone or Farm Enhancement programs that have been developed in Massachusetts, Michigan, Minnesota, Colorado and Wisconsin. Key points on these programs are as follows:

• Agricultural Enterprise Zone programs in Michigan, Minnesota and Colorado are specifically geared to agricultural processing and manufacturing activities that would seek to add value to raw agricultural products.

• The Massachusetts program is directed specifically to agricultural (farm) production.

• Wisconsin has the broadest program, allowing that qualifying activities include farm production, processing operations, and activities in distribution, marketing and retail sales.

• Three of these states’ agriculture enterprise programs employ a tax-based incentive in the form of exemptions based upon employment creation or retention with the level ranging from $500 - $8,000 per job.

• Michigan’s program provides a standard exemption from all state and local taxes for up to 15 years to expanding or new agricultural processing businesses.

• The Massachusetts program is structured more along the lines of a farmland preservation incentive program, providing cash payments ranging from $20,000 - $60,000 to put the land resources into 5-10 year agricultural covenant. This incentive program does not have any job creation or investment qualifiers.

The proposed Virginia Agricultural Enterprise Zone program would be based largely upon investment and job creation or enhancement incentives as these are the basic economic development drivers. It would be targeted toward agricultural processing businesses that would add value to raw agricultural products, thereby providing additional income potential to the farmers producing these raw agricultural products. The exception would include marketing, distribution or retail ventures that can demonstrate a value-added economic benefit.

At the outset, it is important to note that adequate funding for the VDACS Office of Farmland Preservation is paramount to the development and implementation of the Agricultural Enterprise Zone Program. Funding for this function is also critical to state-wide farm viability and enhancement efforts that might be achieved through a state Purchase of Development Rights program. Currently, there is no funding for the Office of Farmland Preservation.

Summary of Recommendations

The following recommendations are presented in order to move forward in the development of a Virginia Agriculture Enterprise Development Zone program:

1. Implement an Agricultural Enterprise Zone program as resources allow

2. Target the Virginia Agriculture Enterprise Development Zone program to value-added agribusiness manufacturing, processing or packaging.

3. Use the existing Industrial Enterprise Zone as a model template for Agricultural Enterprise Zones.

4. Make use of existing public and private sector business planning and development resources in program development and implementation.

5. Utilize a state Purchase of Development Rights (PDR) Program to support agriculture production and resource protection.