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Protecting Paradise — Land and landscape: A backdrop and a business

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Protecting Paradise — Land and landscape: A backdrop and a business

Tax system is key to preserving farms and vistas

By Tim Carrington — For Foothills Forum

The grain mills have rusted away, the clothing assembly lines are silent, and the apple business has mostly rolled off to North Carolina, Winchester, the Pacific Northwest and China. 

Rappahannock County’s surviving treasure island — land tucked inside sunsets, punctuated by fences and streams, home to calf-and-cow operations, vineyards, fine eateries, art galleries and footpaths. The cows, cooks, artists, tourists and retirees all are here because of the land, whether they gaze at it or graze on it. The county treasury needs it just as badly: real estate taxes this year will bring in $10,668,017, or 70 percent of local revenue, to support the schools and help fund a panoply of services. 

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Mount Vernon Farm has been in Cliff Miller’s family for eight generations.

But ringed by towns and exurbs subject to crowding and commerciality, Rappahannock’s timeless hills command ever higher prices. The average price per acre has soared from just under $1,000 in 1974 to about $7,000 in 2017. In 2020, despite COVID-19 (or maybe because of it), real estate offices and construction firms have never been busier, with building permits rising above pre-pandemic levels. By driving up prices, land buyers threaten the landscapes that enthralled them in the first place, because for farmers, costlier land makes it harder to get started or show a profit after taxes. Should a developer approach, it’s more tempting to cash out.

For the artist, tourist or weekender, the land needs to be a beautiful and evocative backdrop. Not so for most farmers and owners of substantial parcels. For them, the landscape is also an economic asset. It doesn’t only have to be protected; it also needs to generate income.

graphic_changing landscape

The threat of landscape loss extends far beyond Rappahannock County. The American Farmland Trust found that between 2001 and 2016, 11 million acres of U.S, farmland was paved over, chopped up and built on, effectively taking those thousands of pastures out of agriculture forever. Some of the lost farmland still looks something like a farm, though it has effectively become a piece of exurbia. In Virginia, in the same time period, 340,000 acres of farmland, twice the size of Rappahannock County, was developed or threatened with development. 

graphic population

Using one measure of development — population density — Rappahannock County is succeeding in maintaining its open spaces, notwithstanding its 75-mile proximity to a major metropolitan area. In 1930, there were 28.9 “persons” per square mile in the county, and following a decades-long tapering off in population, the latest calculation shows 27.7 per square mile — still below the level 90 years ago. 

The number of farms has been rising, with fluctuations; in 1987, there were 288, and in 2017, there were 439. But the farms are getting smaller, shrinking from an average of 268 acres in 1987 to 160 acres in 2017. 


 Taxes: A tool for conservation

Tax policy has always been a tool for encouraging some activities and discouraging others, and in Rappahannock they’re calibrated to encourage farming, forestry and generally, letting land be. Conservation easements lower tax rates while placing permanent limits on development. But some farmers want a tax break without taking options away from future generations. So in 1982, the county adopted land-use tax deferrals to keep the farmers farming, including weekenders who grow hay that a farmer cuts, bales and takes away. Deferrals also are available for land used for forestry and horticulture (the latter being a tiny proportion of the acreage subject to land use). In some cases, the benefit shrinks the tax bill to about half of what it would be if taxed at fair market value. 

Foothills Forum is an independent, community-supported nonprofit tackling the need for in-depth research and reporting on Rappahannock County issues.

The group has an agreement with Rappahannock Media, owner of the Rappahannock News, to present this series and other award-winning reporting projects. More at foothills-forum.org.

To qualify, residents must have at least five acres dedicated to agriculture or horticulture, or 20 acres in forestry, to gain that land-use deferral. The arrangement — particularly when applied to those whose only crop is hay — can be an irritant to long-time residents whose taxes are based on fair-market value because their holdings are too small to meet the land-use threshold. But by giving the weekend hay farmers an incentive to enter land-use, the tax structure helps cattle farmers avoid buying hay. Easing the financial strains, it keeps farmers farming, and protects the landscape. 

By any measure, land-use is widely used — and popular. Together with conservation easements and public land holdings, it whacks deeply into the revenue that the county might earn from its main asset. Here’s the breakdown: Starting with 170,496 acres, the Commissioner of Revenue Mary Graham must immediately subtract the untaxable Shenandoah National Park as well as various tax-exempt properties, plus highways, roads and rights of ways, leaving 136,581 acres of taxable land. Of that, 33,634.9 acres are under conservation easement and 83,363.8 acres are in land-use. That leaves just 19,582 acres, 14 percent of all taxable land, that is taxed at fair-market value. 

Farmers say that without today’s land-use tax breaks, for-sale signs would proliferate and Rappahannock’s beloved landscape would begin to mutate. According to Mike Kane, the Piedmont Environmental Council’s land conservation director, studies show that land-use tax deferrals, by easing the burden on farmers, help preserve the landscapes that visitors and homeowners prize, generating more economic gains for the county than they cost in lower tax receipts. He adds, “You can’t find a study that doesn’t support the notion that agricultural and open spaces generate more revenue than they demand in services.” 

Given its commitment to protect farms and farmers, the county counts on construction of new houses to generate new tax revenue. There are 171 homes that the assessors designate to be “mansions,” old and new. Amassing to a total assessed value of $202 million, the mansions account for 12.7 percent of the taxable value for the county. Says Al Henry, a member of the county’s Planning Commission: “That’s where the increases in our taxes is going to come from — people building houses.” 

Of course, there can be too much of any good thing: Build too many over-large, showy houses in visible locations, and the county loses its rural ambiance. So far this year, there are 20 building permits for new homes, up from 17 a year earlier. The 20 new structures covered by this year’s building permits will provide a boost in the county’s tax revenues, but, depending on location and design, some may encroach on a cherished landscape.

For the time being, there is no groundswell to raise taxes on land that’s farmed, forested or protected under easements. In fact, the one idea that gets some attention is an additional land-use category for “open space.” The State of Virginia allows this tax break, and a number of neighboring counties, such as Madison and Fauquier, have adopted it. The open-space tax break was initially understood as a way to encourage golf courses and other private recreation spaces. But experts point out that the participating county can attach a variety of conditions to qualify, such as cultivating native plants, providing habitat or encouraging pollination. And to avoid competing with the farming tax deferral, the county could set the tax reduction for open space below that for agriculture.

Here’s a hypothetical situation where an open-space tax break could help preserve the landscape. A large farm cuts back, opting for a family farm, or smaller, more specialized commercial operation. The land taken out of active farming would lose its agricultural land-use advantage, immediately bouncing into a higher-tax category. The owner might decide to carve the old farm into parcels to sell to home-builders. An open-space land-use deferral would allow the farmer to retain the agricultural land-use deferral for the new, smaller farm, applying the open-space tax advantage for the rest. The formerly farmed land would be tended according to healthy land-use practices, encouraging native plants and pollinators, which would benefit neighboring orchards and vineyards. As a result of careful environmental management, if the land were to transition back to active farming, it would be in healthier condition. It’s not known how many Rappahannock land-owners would claim the open-space tax deferral if it were available, but PEC analysts say it has worked well in Fauquier and Madison Counties, without resulting in a significant loss of tax revenue. 


Land as business

Farmers and conservationists see landscape preservation as a three-legged stool: conservation easements to remove land permanently from development; land-use tax deferrals to lighten the tax burden on land under management; and third, business strategies for generating enough income from land to reduce the temptation to sell.

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Addy Hausler of Castleton digs into an apple crate at Thornton River Orchard, which has found success selling directly to consumers. Overall, orchards occupied 1,378 acres in 1992, but by 2017 covered just 211 acres in the county.

The strategies don’t follow a single rule other than a willingness on the part of landowners to rethink and reinvent. A look at two defining agricultural mainstays for Rappahannock — cows and apples — underscores how much, and how quickly, rural economies can shift. The cattle population, which stood at 17,548 in 2002, dropped to 12,997 in 2017. The prospective sale of the 7,000-acre Eldon Farms would bring the numbers down further. Apples, once an economic engine, show an even starker decline; orchards occupied 1,378 acres in 1992, but by 2017 covered just 211 acres in the county. 

U.S. agriculture is increasingly concentrated, dominated by a handful of processors and distributors, with prices set by sweeping market forces well outside the control of the producers. “The large commodity-type markets aren’t friendly to agriculture on the scale that is practiced in Rappahannock County,” says one land-use expert in the region. But because cows need large swaths of land for grazing, the calf-and-cow businesses are uniquely valuable in keeping Rappahannock’s landscape looking as it does now.

For comparison, a major vineyard adds beauty, diversity and income to the county, but it requires no more than about 25 acres. A comparably positioned cattle farm needs ownership of, or access to, hundreds of acres. Once the land is in place, these businesses can generate profits, though not at the level that alternative sectors might offer in today’s economy. The proposition shifts when farmers have to acquire the land. But if the land is already in the family, or can be economically leased, many believe that beef cattle can become a solid business.


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Farm by farm, landscape by landscape

While the tax policies for easements and land-use are stable. But business strategies, the third leg of the stool, are constantly in flux, and likely to remain so. And other than repeatedly, and calmly, asking, “What now?,” there’s no single template for success. 

The following trio of snapshots offer three currently successful approaches. They are wildly divergent, suggesting that Rappahannock’s future will be more of a quilt than a monochrome blanket. But for all their differences, the three management approaches have these elements in common:

  • All three take advantage of Rappahannock’s proximity to the large customer base in the Washington metropolitan area. 

  • All three engage the fresh thinking and continuity brought by younger generations.

  • All three focus on the future more than the past, listening closely to today’s customers. 


Mount Vernon Farm: Renting beauty 

With 840 acres, eight generations of family owners and 193 years of farming, Mount Vernon Farm rises from the eastern edge of Sperryville, an icon of Rappahannock County history and beauty. At one time, 115 cows were milked twice a day in the 235-foot barn that stretches along the lowland section of the farm, down the hill from the graceful brick farmhouse John Miller Sr. bought in 1827 from Francis Thornton and later expanded. At other times, grass-fed beef cattle, pigs, lambs and chickens were rotated through the pastures, with llamas parading to scare away coyotes and other visiting predators. 

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“We’ve got the perspective of 200 years,” Cliff Miller III says. “We’ve seen a lot of things that worked well at one time, but stopped working well.”

Today, the animals are gone. The barn, emptied of cows, caters to brides and grooms, celebrating their vows with family and friends, flanked by tables heaped with offerings from the county’s best cooks. The Miller family no longer sleeps in the farmhouse, which, newly renovated, is The Inn at Mount Vernon Farm, with rooms starting at $250 a night. The grazing pastures are filled with wildflowers, native grasses, and in the summer and early fall, hundreds of butterflies darting across miles of grassy trails where guests walk and enjoy breathtaking views. 

It’s a new business, and the product is beauty. Young couples, stressed city-dwellers, environmentalists and fishing enthusiasts flock to the place. Cliff Miller III notes that his immediate ancestors would be reeling if they saw the changes, but he applauds the vision brought by his son, Cliff Miller IV, who arrived in 2010 after trading NASDAQ stocks on the West Coast. His idea was to turn the farm into an eco-refuge and hospitality business. The reengineering includes a nine-hole golf course along Route 211, tied to the Headmaster’s Pub, which anchors the old Schoolhouse structure, which the Miller family also owns. Since the pandemic hit, Headmaster’s put its menu online, and business picked up smartly. Golf activity — benefitting nationally as an apparently safe pastime — has doubled in recent months. Active farming is part of the picture only through the successful adjacent vegetable and flower mainstay, Waterpenny Farm, which leases acreage from Mount Vernon Farm. 

“We’ve got the perspective of 200 years,” Cliff Miller III says. “We’ve seen a lot of things that worked well at one time, but stopped working well.” For Miller, the environment evolved from a parallel preoccupation to the central focus. In the late 1990s, he worked to eliminate toxic fertilizers and pesticides, cleaned up the stretch of the Thornton River that traverses the property and used federal subsidies to help cover the necessary green investments. He stopped cutting hay, concluding that it took nutrients away from the land. Six hundred and four acres went into conservation easement. 

Mount Vernon has migrated from being a farm inside a landscape to being a landscape that remembers farming. Visitors share the Millers’ passionate appreciation of the local environment, and the hospitality business so far is working out. Reflecting on past and present, Cliff Miller III prefers the current incarnation of their Mount Vernon. “I’m not here because my family owned the land,” he says. “I’m here because of the beauty of the place.”


Bean Hollow Grassfed: A carnivore’s dream

In contrast to Mount Vernon, animals are the center of life at Bean Hollow Grassfed near Flint Hill. Soon after Bill and Linda Dietel bought the 200-acre Over Jordan Farm in 1980, sheep arrived. Linda Dietel set up a meat and wool business she managed for 20 years. After her retirement, a neighboring cattle farmer leased part of the land for grazing and haying. In 2012, the Dietels’ daughter Betsy and her husband Mike Sands moved in, and after giving the land a few years to rejuvenate, launched Bean Hollow Grassfed on 105 acres of the original farm. Sands, a long-time consultant on community-based agriculture and animal science, preferred sheep to cows, because they’re less expensive, mature faster and are smaller (“If all else fails, I could push a sheep where I want it,” he explains.) 

Pigs came next, but in modest numbers initially. They’re now the second-highest contributor to farm revenue, with about 25 on the farm. Today, in addition to the pigs, there are 21 beef cattle, 98 ewes, five mature rams and 65 lambs.

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Mike Sands feed pigs at Bean Hollow Grassfed

Initially, Sands recalls, “it was a very simple market.” The farm sold animals to three buyers, who then handled slaughterhouse bookings, processing and marketing. But one of the main buyers moved, and Bean Hollow ventured into retail sales. The sticking point was the cost of staffing the farm store. A Midwestern farmer persuaded Sands to operate the farm store on a self-service basis. “People thought I was nuts,” he says, but it’s worked. The only irregularities result from customers paying too much, either by accident or as a gesture of good will. 

The COVID-19 crisis brought a surge in demand, and a challenge to meet it. People associated large grocery stores with empty shelves and infection risks. Nightmare stories of COVID surges at huge meat processing plants added to the aversion. The result: Bean Hollow’s customer base quintupled, and the challenge to keep up was intense, particularly when local processing facilities began to get overburdened. 

Once the pandemic subsides, Sands hopes to retain half the new customers, selling them meat at the farm store and the farmers’ market in Sperryville. Staffing includes his son and daughter-in-law, plus a younger-generation hire, Amanda Frye, who has managed pasture quality, the health and growth of the animals, and more recently, integration and marketing. When her responsibilities expanded, Bean Hollow extended her salary with in-kind payments in livestock. She’s now off on a paid maternity leave.

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“If trends continue for local and grass-fed, you could see some real benefits for the county,” says Mike Sands.

Sands says the team, and the customers, are happy with the focus on animals. The farm provides recipes and tips on grilling the meat. Customers want to reserve their favorite cuts and return. He says financial strains would ease if the county showed more flexibility by allowing farms like Bean Hollow to supplement their revenue through occasional events like weddings and weekends for agro-tourists. “What you’re really looking for is to grow the revenue base without further burdens on the land base,” he says. 

Sands says he’s optimistic. “If trends continue for local and grass-fed, you could see some real benefits for the county,” he says, “not in the sense of a boom, but you’d see a healthier landscape, higher returns through higher management of the pastures and more opportunities for young farmers.”


Thornton River Orchard: Back to a Rappahannock mainstay, with a twist

When he was a year old, Allan Clark moved from Fairfax to the base of Old Rag Mountain, and he has been fastened to the Rappahannock landscape ever since. After school, he mixed carpentry work and small-time farming, turning in 2015 to the county’s one-time economic mainstay — apples. Leasing land from the Jenkins family, he planted apple and pear trees, including lesser-known varieties like Evercrisps, Pink Ladies and Arkansas Blacks. Tall deer fencing went up to protect the newly planted trees. 

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“You’ve got to diversify and sell directly to the customer,” says Thornton River Orchard owner Allan Clark.

Strategically located between Sperryville and the national park entrance, the 30-acre orchard is positioned to intercept hikers and foliage watchers as they come off the mountain. But more customers were waiting in the city, so Thornton River sets up at two Washington area farmers markets every week. 

As Clark sees it, the orchards of old were ensnarled in a complex business of juicing, processing and distributing fruit through a chain of intermediate businesses. Contracts were complicated and regulations could be heavy. Direct sales to customers are simpler, cleaner and more profitable. The younger-generation component comes through the Clarks’ 27-year-old daughter, Megan, who studied business and agriculture in college. Four workers help from August through December.

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 Luis Barrios picks some of the orchard’s last Pink Lady apples of the season.

“You’ve got to diversify,” Clark says, “and sell directly to the customer.” Alongside the fruit and vegetables, the Clarks churn out a stream of value-added products: Bloody Mary mix with horseradish, Vidalia onion peach sauce, hard cider, and in the latest innovation, apple cider slushies. 

Like other Rappahannock farms, Thornton River found that the pandemic expanded business. The two farmers markets led to direct customer deliveries. In the late spring, Thornton brought in as many as 50 boxes of fruit and other products for individual customers to pick up. For one Chevy Chase, Md., customer who was wary of crowded markets, Clark delivered the produce box to her door. “We show people we’re loyal to them and they show us they’re loyal back,” he says.

A natural optimist, Clark expects problems, but also solutions. Stinkbugs damage the apple trees, but Samurai wasps are beginning to punish the notorious pest. Berries involve a lot of work, but Thornton might draw people to the farm with a pick-your-own arrangement. Apples were left spotted by the surprising Mothers’ Day freeze last May, but they recovered their flavor. 

Although he leases the land his orchard occupies, land-use tax policy is important because it helps the owner keep the leasing costs down. “Land-use to Rappahannock County and to rural land is the only way you’re going to keep people doing this,” says Clark. “We don’t want to be the next Prince William or Fairfax County.”

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Tommy Starts atop a straw horse at the front of the Thornton River Orchard store in Sperryville, Va.