Two state laws designed to stop sprawl and preserve farmland have become tools for developers and residential landowners to legally escape millions of dollars in property taxes, a Pittsburgh Tribune-Review survey of Allegheny County records has found.
The Trib's analysis of 1,834 properties designated as farmland by county assessors, combined with 696 recipients of Clean & Green property tax write-offs, reveals that nearly a quarter of the county's agricultural parcels are owned by developers, real estate agents, mines or construction companies who collectively saved $5.6 million in county, municipal and school property taxes last year after receiving the special agricultural discounts.
Other "farms" surrounded mansions owned by a who's who of Western Pennsylvania's movers and shakers, including Traco window manufacturer Robert Randall, former Mellon Bank CEO Frank Cahouet, Shenango Furnace heir William P. Snyder III and reputed Mafia boss Michael Anthony Genovese.
A 10-building Fox Chapel compound owned by Teresa Heinz Kerry, which includes a Colonial mansion assessed at $658,000 and a handful of steers and chickens, is listed on tax rolls as an 88-acre farm. Her husband, Sen. John F. Kerry -- the Democratic Party's presumptive nominee for president -- affectionately calls her "the lady of the farm."
A spokeswoman for Heinz Kerry declined to comment on the assessment.
Properties received the tax break in one of two ways: Either assessors eyeballed the properties and labeled the land as farmland during the most recent reassessment, or property owners applied for the Clean & Green exemption. Neither discount gives tax breaks to buildings; the preferential assessments apply only to land.
While the amount of actual farmland in the county continues to dwindle -- down 21 percent since 1987 to 33,788 acres of farm and forest, according to the U.S. Department of Agriculture -- more than 75,000 acres remain on the county's tax rolls.
Research by Penn State University listed 105 commercial farms in Allegheny County in 2001, a number that includes all timber, livestock, horse, grain, dairy, vegetable and flower operations. The county tax rolls, however, show 19 times as many "farmers" -- 2,014 companies and individuals that receive discounted agriculture assessments.
The result: Fewer than 6 percent of all the parcels labeled as farm or forest for tax purposes are owned by farmers. Non-farm properties cost the taxing bodies up to $19 million in lost property tax income, according to county records.
The Trib also found:
Developers, mines and construction firms own 18,000 acres of "farm" property spread across 594 parcels. The Trib inspected 151 of the sites, finding a strip mine, two junkyards, 41 properties undergoing construction and 40 more already built, including dozens of mansions in Sewickley Hills, Bell Acres and other swank suburbs. State law forbids assessors from increasing the tax value of a property designated as farmland until it is subdivided for sale, so a developer can legally cut down every tree and pave over fields without incurring a tax penalty.
Doctors and lawyers own nearly twice as many farm parcels as farmers -- 295 to 148. The Trib found farmers finishing spring tilling in Collier, West Deer and Forward. No farms, however, were seen at the homes of medical and legal professionals in Sewickley Heights, Pine, Fox Chapel and other suburbs.
The Quaker Valley School District -- which includes tony Bell Acres, Sewickley Heights and Sewickley Hills -- loses an estimated $1.08 million in annual revenue from the 183 farms on its rolls, including land owned by Shenango heir Snyder, Mellon's Cahouet and former Bayer CEO Helge Wehmeier.
Although commercial agriculture has largely disappeared from the North Hills, the county lists 168 farms in the Fox Chapel School District, 288 in North Allegheny and 197 in Pine-Richland. North Allegheny alone has as many farms on paper as West Allegheny, South Fayette and Plum combined.
Inaccurate surveys
County assessors blame the bulk of the farmland mix-up on inaccurate property surveys dating to the controversial 2001-02 reassessment, shoddy data entry and state tax loopholes they can't control. Most of these errors -- worth an estimated $12 million in annual lost revenue -- were made by canvassers from two Ohio companies, Sabre Systems & Service Inc. and Cole Layer Trumble, who turned large Sewickley lawns into "general farms" and tree-lined driveways into "forests."
"We have no control over that," said Vincent Casciato, a 27-year veteran of the Office of Property Assessments who was recently tasked with ferreting out waste and abuse. "There's a lot out there that's coded as farmland that shouldn't be."
Hired canvassers found "farms" atop Nine Mile Run in Squirrel Hill and in Crafton. There's a "farm" running along Neville Island's smoky back channel, and six "farms" in Wilmerding, McKeesport and Fawn that are railroads. Even part of the South Side Works was tagged a "vegetable farm."
Sabre Systems and CLT referred comment to Allegheny County officials.
With a reassessment looming in 2006, the county and CLT have agreed to send the next crop of canvassers to special training so they don't make the same mistakes.
"I was a big critic of Sabre," said County Councilman Wayne Fontana, a Brookline Democrat who works as a Realtor. "They went out and looked at it, and only by looking at it did they determine that it was 'farmland,' without looking at who owned it."
Fontana believes that few landowners receiving farmland discounts bothered to appeal them, and state law bars the county from re-evaluating their tax status until the 2006 reassessment. Then, he and Casciato suspect that at least two-thirds of the county's farmland properties will lose their status.
Deeper state discounts
Aggressive revaluations likely will cost the county even more because 90 percent of farmland parcels qualify for deeper discounts through Clean & Green, a state program overseen by county officials. If the county moves to fix the assessment of 2001-02, taxpayers can shift properties into Clean & Green, saving up to 95 percent on their tax bills.
Developer Francois Bitz, the founder of Fore Systems, contemplates doing just that. He holds 109.5 acres that once comprised several farms in an area of Marshall that's now brimming with upscale homes. He boards a few horses and occasionally cuts timber, but his estate is dominated by a new $1.5 million mansion.
While Bitz's land is assessed at less than $4,800 an acre, some of his neighbors with residential assessments have five times the tax bite.
If Bitz paid those rates, the annual tax bill on his land could rise from $4,628 to $45,077, a burden he's unwilling to shoulder.
"If they want to screw me, I'll go Clean & Green," he said.
Clean & Green is Pennsylvania's 31-year old law designed to fight sprawl while cutting taxes for family farmers. In exchange for deep property tax cuts, owners put their parcels into one of three categories -- Agriculture, Agriculture Reserve and Forest Reserve -- that bind the use of the land for seven years.
The most basic requirement is that a single person or company owns 10 contiguous acres of farm or forest or that it supports at least $2,000 worth of annual agricultural production. Selling, subdividing or changing the use of the land subjects owners to a 6 percent penalty compounded annually for seven years, plus higher future property taxes -- a process assessors term a "rollback."
Program in disarray
Researching the 696 Clean & Green properties enlisted before this year, the Trib found a program in disarray, with 1 in 3 applications inaccurate, outdated or lost, plus:
A fourth of the original applications have disappeared from county files, and no effort has been made to identify the purported use of the property receiving discounts. Last year, the county gave out $522,392 in tax write-offs on 5,614 acres of property, and no one knows why.
More than 1 in 10 parcels failed to meet the program's most basic requirement that the land comprise of 10 contiguous acres or supports $2,000 in annual agricultural production.
For 30 years, assessors have not checked whether 325 Clean & Green properties receiving agriculture discounts actively farm the land, which the law requires. The Trib examined 56 of these parcels, finding swimming pools in place of crops, 12 mansions, 3,635 acres of land owned by 27 developers with no obvious farming going on and a defunct Plum strip mine. On the mine's Clean & Green application, the owners admitted they were enrolling "vacant, useless land," but assessors approved it for agriculture discounts anyway.
The Forest Reserve exemption is handed out even for properties without many trees. The Trib inspected 20 "forest" properties and found a Monroeville condominium complex, five Sewickley Heights mansions and 13 parcels earmarked for construction by developers. One Plum parcel was so overrun with grapevines and poison ivy, no forest will ever grow there, according to a state report stapled to the approved application.
Last year, two golf courses also received Forest Reserve write-offs.
"It's strange, but any kind of woodland appears to qualify," said Thomas J. Fitzgerald, a Pennsylvania Department of Conservation and Natural Resources forester for 40 years. He supports the program but favors tying tax discounts to enrollment in existing forest-stewardship initiatives.
'I don't know if I farm'
Farmers identified by federal and state agriculture agencies own only 10 percent of Clean & Green parcels, according to county files. In their place are properties such as Robert Randall's sprawling Marshall estate. Three visits there by the Trib turned up a 20-room mansion valued at $3.4 million by county assessors and an immaculate lawn surrounded by an upscale housing development -- but no evidence of three years of "active farming," the box checked on Randall's application that saved him $8,574.71 in property taxes last year.
Randall's day job is president and CEO of Three Rivers Aluminum Co. -- better known as Traco, a global manufacturer of windows, sidings and skylights, with 2,000 workers at factories in Cranberry, Tennessee, Florida, Iowa and Wuhan, China.
When asked if he farmed, Randall said: "I don't know if I farm. You'll have to call my attorney. He handled all that."
His attorney, William Bresnahan, defended the preferential assessment, while conceding his client didn't farm.
"The state statute talks in terms of capabilities. Mr. Randall's land is certainly capable of producing agricultural products, regardless of whether he is doing that now," said Bresnahan, who added that he didn't file his client's original application but will amend it if assessors ask.
A shift into Agriculture Reserve or Forest Reserve status will give Randall even deeper property tax discounts -- a loophole that's not lost on Casciato, the county assessment official.
"Unfortunately, we never had an extensive review of Clean & Green," Casciato said. "This year is the first year that we'll probably do this, that we'll go out and take a look at this."
Boon to developers
He will see a lot of Clean & Green property owned by developers such as Oxford Development. The company, in partnership with L & M Associates, has been building a commercial complex on 132 acres of former farm and forest behind the Oxford Athletic Club in Pine. The project has proceeded in fits and starts since the 1970s, when it was conceived as a mall.
Without Clean & Green, the property would carry a $2 million assessment. By squirreling away the parcels in the program, however, Oxford received a $42,200 assessment, which saves the company $48,054 in annual property taxes until the land is fully developed, according to county worksheets.
"If a developer is buying agriculture or forest property, and they're not developing it yet, they should take advantage of (Clean & Green)," said Brian Albert, the company's in-house counsel. He said Oxford saves no money while in the program.
"If you're a for-profit corporation, you're not going to put your property normally into a program that won't let you develop it without a tax penalty. I don't look at it as saving money. I look at it as postponing development."
Critics disagree. They say that because developers own more Clean & Green parcels in Allegheny County than farmers, the program is flawed.
"The original idea was to help the family farmer keep the land open," said Elam M. Herr, assistant executive director of the Pennsylvania State Association of Township Supervisors. "A few properties in Clean & Green doesn't hurt a taxing body too much. But collectively, a lot of properties hurts the taxing bodies."
'A subsidy for developers'
Nonfarmers saved $1.6 million last year on their property taxes by enrolling in Clean & Green, according to county documents. As a remedy, Herr and other lobbyists for schools, municipalities and county governments want the state to reimburse them for lost revenues; significantly raise the number of acres necessary to enroll to match other states' requirements; and start the long political process of dismantling an "a la carte" tax system that allows land owners to pick and choose which write-off they want while farmland disappears.
"It's different in other states," said Stamford Lembeck, a Penn State farm economist. "There has been a move in other states toward equalizing the tax burden. Purely and simply, what we're seeing here is a subsidy for developers."
The powerful farm lobby, including groups such as the Pennsylvania Farm Bureau and the Pennsylvania Grange, fear that any radical changes to the program will end up hurting farmers. But Gov. Ed Rendell sees a solution. The first-term Democrat wants to lower property taxes for every landowner statewide while sealing off loopholes benefiting developers and the wealthy more than farmers.
Rendell's successful bid to bring slot machines to Pennsylvania is touted as an engine for "property tax relief." But his push to expand a different farmland preservation effort -- nicknamed "Growing Greener II," after a similar effort funded largely by the tobacco litigation settlement -- fizzled before the Legislature's summer recess. He hopes to bring it back in the fall. Unlike Clean & Green, this bill would offer farmers money for permanent development rights to their land.
In the short term, however, Rendell says Clean & Green and Allegheny County's property tax collection efforts might need some tweaks.
He recently shifted $2.7 million in state funds to the Allegheny County Office of Property Assessments to search for data and valuation errors stemming from the 2001-02 survey. He's also looked to New York's revamped farm legislation that requires proof of farming income before cultivators receive deep tax cuts, a process called means testing.
"I think we'll eventually go back and look at means testing," Rendell said. "The original goal was to help the family farmer preserve his or her farm for the future. That's something we should be looking to do."