Executive Summary

A month after taking office, Gov. Jennifer Granholm appointed a 26-member Land Use Leadership Council to promote smart growth in Michigan. Four of her immediate predecessors likewise launched land-use initiatives. But as much as the governor intends to accomplish, the greater achievement would be to dismantle the ineffective programs and detrimental policies already in place.

Among them is the state’s principal farmland preservation program, which the land-use council is proposing to expand, and which is the subject of this study. Based on an examination of program data as well as consultations with experts and a review of the academic literature, we conclude that the program has failed to achieve its fundamental policy objectives.

Under the preservation program, tax credits totaling nearly $800 million have been granted to owners of 45 percent of farmland statewide in return for maintaining agricultural production and resisting development. But according to our analysis, the bulk of credits granted between 1982 and 2001 have been applied to farmland distant from development pressures.

Simply put, these preservation tax credits have had little effect on stemming the conversion of farmland to other uses. Instead, the program mostly benefits the farmers already least likely to develop their land.

Moreover, the state awards tax credits without distinguishing the relative environmental values of farmland or whether the farmland is likely to be developed.

Additionally, more of these conservation covenants have expired than have been renewed in the past six years. The enrollment incentives offered by the state are insufficient.

This program failure casts doubt on the notion that government can improve the environment effectively through so-called market-based mechanisms.

If policy-makers remain convinced that state action is justified, better results could be achieved by allowing private trusts to assume responsibility for the program. Hundreds of private trusts now operate across the nation. Most are better equipped than state workers to assess the environmental value of various properties and to oversee covenant compliance.

In conducting the study, the following questions were posed:

  1. What is the extent of development in Michigan?

  2. What values underlie our land-use patterns?

  3. What state preservation initiatives are currently in place?

  4. Has the state’s farmland preservation program achieved its goals?

  5. To the extent state farmland preservation programs are favored, how can they be improved?

Each question is addressed in subsequent sections of this report.

No assessment of the farmland preservation program has been undertaken by the Michigan Department of Agriculture, which administers the program, or by any other state agency. Further research is needed to likewise determine whether other state land-use initiatives are beneficial.