The Williamson Act, on Life Support

As many agricultural landowners already know, the Williamson Act was created in 1965 to slow down the growing urbanization of agricultural and open space land through the use of voluntary "contracts" between the landowner and the county. Under the Williamson Act (Gov. Code Sections 51200 et seq.), property owners may enter a contractual agreement with a county or city that limits the uses of the property to agricultural, open space and/or other compatible uses, with strict limitations on development of the property, in exchange for a reduction in the property's valuation for property taxes. The contracts have an initial term of 10 years, and are automatically renewed each year on the renewal date (usually the contract's "anniversary date") so that the term remains at a "rolling" 10 years. This automatic renewal stops once a notice of nonrenewal is filed, and the contract winds down during its remaining nine years, as the assessed value of the land under contract slowly rises to its market value (without contract). Nearly 17 million of the state's 29 million acres of farm and ranch land are currently subject to Williamson Act contracts.

One of the problems counties faced in entering into Williamson Act contracts was the loss of property taxes received from contracted properties. Property taxes are an important part of a county's revenue stream each year. In order to assist counties, the state paid money, known as "subventions," to the counties on an annual basis to help make up for the foregone property taxes. Counties generally received $1 for every acre under contact that is "non-prime" agricultural land, and $5 per acre for "prime" agricultural land. Annual state subvention payments to counties a few years ago totaled approximately $39 million.

The first shoe - signaling the Williamson Act's potential demise - fell in August 2008, when the 1st
Appellate District in San Francisco ruled that a Williamson Act contract may be unilaterally and materially
amended by the county that entered into the contract. In County of Humboldt v. McKee (2008) 165
Cal.App.4th 1476, the appellate court created new law by opining that each year, on its renewal date, an
existing Williamson Act contract became automatically subject to any new local Williamson Act regulations
adopted by a local agency, even though the existing contract never envisioned such amendments, such
amendments fundamentally and materially changed the original agreement, and the landowner did not
know of or consent to the amendment.

In McKee, the appellate court determined that Humboldt County Williamson Act guidelines adopted after the contract was executed could and did unilaterally increase the minimum parcel size (size of the lot that could be sold) from 160 to 600 acres, even though the county land use regulations would have allowed sales of 160-acre parcels on the property, and even though McKee's contract only required 160-acre parcels. In other words, if you were in contract in Humboldt County, and your contract called for 160-acre parcels, the county could and did unilaterally raise your minimum parcel size to 600 acres. But if you were not in a Williamson Act contract, you had 160-acre minimums. Although the facts of McKee involved minimum parcel sizes, the effect of the appellate court's decision is much broader, and endorses any unilateral change by a county (e.g., allowed types of agricultural uses, allowed compatible uses, etc.).

Understandably, landowners were angry over a decision that could fundamentally (and unilaterally) change the rules under which they operate their farming and ranching enterprises. Landowners threatened to nonrenew their Williamson Act contracts - no contracts, no Williamson Act program.

The second shoe began to fall a few years ago when the law was changed to reduce by 10 percent annually the subvention payments the state would pay to the counties. However, the shoe came to a clunk on the floor this year when the Governor vetoed essentially the entire annual subvention payment from the state to counties for the 2009-2010 fiscal year (as one of the many efforts to address the state's budget crisis). In reaction, many counties are now considering terminating their existing Williamson Act contracts. These difficult budget times affect all levels of government. One can see how counties would be discouraged from remaining a party to existing Williamson Act contracts, and from entering new contracts, without the subvention payments. But while the removal of these lands from Williamson Act contracts would increase the value of the land and therefore the property taxes received by the counties, without the contracts, many landowners could not afford to keep the land in agricultural use.

Therefore, like the situation that spawned the Williamson Act in 1965, land ultimately would be converted to other urbanized uses for financial reasons, causing a dramatic effect on land uses statewide.

Attempts to resurrect the subventions since the budget signing have been, to date, unsuccessful. In the end, will the conservation of these agricultural and open space lands simply prove too expensive for the state, the counties and the local landowners? Let us hope not. Again, nearly 17 million of the state's 29 million acres of farm and ranch land are currently subject to Williamson Act contracts. Budgetary crises come and go, but once you lose the land and its use, you rarely get it back. These stakeholders — state, county and landowner — must find common ground; a sizable amount of the agricultural and open space uses that help make this state great, hang in the balance.

The authors served as counsel of record for McKee during the trial court and appellate court proceedings.

Michael Patrick Durkee is Vice Chair of Allen Matkins' California Land Use Practice. He is a resident in the firm's Walnut Creek office, where he focuses his practice on land use, elections, and local government law in both administrative and judicial proceedings. He can be reached at mdurkee@allenmatkins.com.  David Blackwell is a partner in Allen Matkins' Walnut Creek office, where he practices real estate law with an emphasis on land use entitlements and litigation. He can be reached at dblackwell@allenmatkins.com.
Thomas Tunny is senior counsel in Allen Matkins' Walnut Creek office, where his practice focuses on litigation and transactions in all aspects of land use and planning law. He can be reached at ttunny@allenmatkins.com.