June 6, 2019
How Are Water Regulations Affecting Your Land’s Value?
As you’ve probably noticed in the news, water is reshaping the agricultural landscape — literally. According to the 2019 Trends in Agricultural Land & Lease Values report, the biggest variable affecting land values in the Central Valley is access to water. Other factors such as location, soil quality, and demand come into play, as well, and could have long-term consequences for the region’s farmers.
“Lenders and farmers are in a position where they can’t simply rely on the property’s historical access to water,” says Manager and CPA Stephanie Banuelos.
This access remains a certain risk with the establishment of the Sustainable Groundwater Management Act and the adoption of the Bay Delta Conservation Plan. Time is of the essence: the Public Policy Institute of California estimates that approximately 500,000 acres of current San Joaquin Valley irrigated farmland will need to end production by 2040 to conserve resources.
“Farmers need to look at the expectations for future access to water based on this current legislation and other to-be-defined plans,” Stephanie says.
If you’re in a district where you potentially may not have enough access to water to farm, there are a few additional non-traditional uses for Ag land:
- Develop a solar farm
- Lease the land to the Habitat Reserve Conservation Program
- Find out if it is zoned for other operations
Keep in mind that if your land is regulated under the Williamson Act, it must be used for agricultural purposes and there are restrictions on how it can be repurposed for non-ag uses.
You can further protect yourself from the risk of declining and values by diversifying your portfolio. Our ag team can help you weigh options such as:
- Purchasing land in a variety of water districts to protect you from having all your assets in one
- Making traditional investments such as 401k or IRA accounts, or a life insurance policy
There is also plenty of good news that comes from the report:
- For land with access to surface water the average predicted value increase is approximately 8%.
- For land with a developed nut crop, the values since the prior year have been stable to increasing. This is even the case for walnut orchards, even though walnuts have seen a decline in commodity prices.
You can count on us to keep you in the loop on the final effects of the coming water legislation on your business. Talk with a member of our ag team, or contact Stephanie at email@example.com or 209-527-4220 to discuss this topic further.
For an in-depth look at these trends, purchase the 2019 Trends in Agricultural Land & Lease Values report here.