Farmland and forestland protection provides a wide range of economic benefits, mostly through indirect pathways. As a result, state and local governments often find that it makes good fiscal sense to encourage, incentivize, and directly fund land-preservation efforts. This publication reviews findings that aim to quantify these economic benefits and identifies geographic contexts in which they have the most impacts (urban, suburban, or rural settings).

While there are many economic benefits to be gained from preserving farmland and forestland in your local community, this does not mean that communities should oppose all conversions of such land to development. Development projects can provide beneficial growth; most rural areas have plenty of undeveloped land to spare; and farmers sometimes need to sell their land so they can afford to retire. Economic growth—residential, commercial, and industrial—can be a net positive to the community. Still, growth often comes with drawbacks, and residents and local leaders should understand the benefits and the costs before making decisions that impact their future.

Preserving farmland and forestland provides a long list of economically valuable benefits, including:

• Cost of government services provided relative to revenue generated (tax revenue exceeding service costs).

• Effects of aesthetics and character on increasing nearby property values.

• Attracting more small businesses to nearby locations.

• Provision of wildlife habitat.

• Value people place on local food and the economic impacts on ancillary farmers markets.

• Gains in conserving water quality and avoiding treatment costs.

• Stormwater management and avoided costs, such as from protection during hurricanes.

• Air quality improvements and cooling effects ("avoidance" of health care costs and benefits to public health and comfort).

• Opportunities for hunting and fishing on preserved land.

These benefits can be grouped into categories. Some benefits are evident in the local government budget (for example, tax revenues exceeding the cost of services received; increased property values for nearby properties; and businesses attracted to the community that provide new tax revenues). Other benefits are not as obvious, as they don’t show up as a line item in a local government’s budget, but they provide economic benefits just as surely as additional revenue. For example, some benefits allow local governments to avoid costs (such as by reducing stormwater management needs, reducing the costs of cooling buildings, and keeping public health costs lower due to cleaner air and water). Finally, there are economic benefits that residents would be willing to pay for (but receive for free or in exchange for targeted tax breaks), which are realized only indirectly in local government budgets. The provision of wildlife habitat, availability of local food, opportunities for nearby hunting and fishing, and jobs created by farming and forestry operations may all indirectly produce tax revenue or attract new residents who then create tax revenue for the local government.

Cost of Services Relative to Revenue

The most common revenue model in American local government finance is a combination of property tax, sales tax, and fees for services. In general, residential land uses generate more sales tax revenue (because businesses don’t pay sales tax on most of their purchases), whereas residential and commercial properties generate much more in property tax revenue than do farm and forest properties. However, different types of land uses impose very different costs on local governments. Farmland and forestland require almost no service expenditures, whereas commercial land uses require costs due to roads and infrastructure needs, water and sewer provision, fire protection, and often a fair amount of law enforcement time (especially for retail businesses). Residential land uses demand the most in local government services; in particular, they receive the entire benefit of the public school system expenditures, which is typically the largest budget category for county governments.

Considerable research (Farmland Information Center 2016) has shown that residential land uses do not pay enough taxes and fees to local governments to cover the costs of the services they receive; they typically provide on the order of 80 cents in revenue for every dollar in service expenditures. Businesses, conversely, typically pay $2 to $3 in revenue for every dollar received in local government services. Farmland and forestland generally also produce a fiscal surplus for local government budgets, although the dollar figures are small on both sides of the ledger, so the exact ratio is of little importance.

The fiscal surplus provided by businesses originates from those businesses charging their customers, so it can be argued that in the end, given a balanced local government budget, people pay in one dollar for every dollar they get back. However, people may spend money with businesses outside their county of residence; thus, if farmland is converted to houses but the local government does not simultaneously attract and approve new businesses, the fiscal surplus collected from businesses could accrue to another county (particularly in cases where residents commute across county lines, which is very common in North Carolina). There is nothing wrong, per se, with running a fiscal deficit on residential land use and a fiscal surplus on commercial uses and farmland or forestland. But if farmland is converted to residential uses with no accompanying attraction of new businesses, the new residents will not pay enough in taxes to cover the costs of the services they receive, necessitating a tax increase on all local taxpayers. If farmland is converted to a business use, it may produce a fiscal surplus for the local government, which can lead to beneficial tax cuts for all local taxpayers, although it depends somewhat on the type of commercial use. For example, offices and most retail businesses create only small surpluses, whereas industrial, research and development, and medical uses typically produce large surpluses for local governments.

Increased Property Values

Research has shown that property located near farmland and forestland or green space (such as parks) appraises at a higher value. In general, properties located within a quarter of a mile of such natural areas or parks are worth 10 percent more, bringing additional property tax revenue to the local government. These higher values arise because people value the aesthetics of being able to view the farms and forests and also value the rural character of living near such properties (Bergstrom et al. 1985; Bergstrom and Ready 2006; Irwin 2002; Halstead 1984; and Ready et al. 1997). (Reasons for this extra property tax revenue generation are discussed later as separate economic benefits of farmland preservation.) These higher property values produce additional revenue for any local government that levies a property tax. Thus, the extent to which local governments benefit from farmland and forestland preservation depends on how many houses and businesses are nearby. The additional tax revenue collected from development near farmland and forestland is most important in counties becoming less rural and more suburban because more development is likely to be located within the quarter-mile radius.

Business Attraction

Surveys have consistently shown that business owners, especially small business owners, prefer to locate their businesses near green space, farmland, or forestland (CoreNet Global 2011). This value of farmland preservation shows up only indirectly in the local government’s budget, as business attraction leads to more businesses producing more tax revenues for the local government (through property tax, sales tax, and business license fees) and the previously mentioned higher property values for nearby properties. There may be no straightforward way to track these benefits, but they will exist nevertheless (Gies 2009).

Stormwater Management

Farmland and forestland have pervious surfaces that allow rain to soak into the soil, thereby reducing the need for local governments to spend money on stormwater management. This economic benefit is considered an "avoided" cost—it does not show up in the local government budget, but the costs for stormwater management will be lower than if that land was developed and much of it became covered with impervious surface. The value of these avoided costs is highest in more urban localities because in more rural areas there is plenty of other undeveloped land to soak up rainfall. The stormwater management benefit is also greater in the mountains and other areas of the state that are more prone to flooding.

In magnitude of savings, a study found that in Metro Atlanta, a single acre of trees could save the city $6,000 per year in avoided stormwater management costs (Hallauer and Kuehler 2020). This figure is a high-end estimate that would be applicable in downtown and denser urban settings. However, even in more suburban areas, a reasonable estimate is that each acre of farmland or forestland, particularly if near developed properties, can help a local government avoid $400 per year (McPherson et al. 2005).

Cooling Costs

Preserving farmland and forestland reduces the urban "heat island effect" and thus reduces cooling costs for every building owner in the area. This benefit mostly accrues to residents and business owners, not local governments, but government buildings do realize small savings on their own utility bills. This benefit is hard to quantify, but some information can be found in Brodbeck and Jean-Phillippe (2019).

Public Health

Similar to the cooling cost savings benefits, farmland and forestland preservation results in cleaner air, which leads to better health and less spending on health care. Most of these benefits accrue to residents, not the local government, but local governments would likely capture marginal savings in the cost of the health benefits they provide to their employees.

Wildlife Habitat

Studies have repeatedly shown that people are willing to pay for the existence of wildlife habitat, particularly if it is nearby. Most of the benefits here would be realized by residents, but some of that willingness-to-pay will be capitalized into higher property values, resulting in additional tax collections by local governments that levy a property tax. Halstead (1984) estimated that each household would be willing to pay $132 per acre in suburban locales and $366 per acre in urban settings (figures converted to 2024 dollars) to preserve nearby farmland. Given that Kline and Wichelns (1998) found that wildlife habitat is one of the higher-ranked reasons people want to preserve farmland, it seems reasonable to estimate the value of preserving wildlife habitat at about $30 per household per year in the suburbs and $60 per household in more urban settings.

Local Food

Another hard-to-quantify benefit from farmland preservation is the economic activity attached to locally grown food. Residents place value on being able to purchase local foods at outlets such as farmers markets. Local governments collect tax revenues associated with those business activities, including sales taxes (on value-added products not subject to the producer-seller sales tax exemption), business licenses, and all the taxes on related indirect economic activity, for example, when people go out to lunch afterward, buy local crafts at the market, or even fill up their gas tank in town. In addition to these revenues, local farmers typically purchase inputs such as seed and chemicals locally, generating more tax revenue and employment for the local economy through those input-supplying businesses.

Hunting and Fishing Opportunities

Researchers at North Carolina State University's College of Natural Resources found that hunting and fishing generate about $140 million per year in North Carolina (Casola et al. 2022). Given that about 2 million acres are used for hunting and fishing statewide, each acre of conserved land could produce on average $70 in the value of hunting and fishing opportunities. Although state and local governments do not capture these dollars directly, the state will collect income tax on the money landowners collect from hunting and fishing leases; in addition, a variety of taxes are paid on purchases of items used in hunting and fishing (for example, clothing and ammunition). Finally, in some cases, the researchers found that properties situated near hunting and fishing lands had higher property values on the order of $1,000 per acre, which would likely yield an average of $10 per acre in additional property taxes for the local government (Casola et al. 2022).

The amount of value created by hunting and fishing opportunities resulting from preserving farmland and forestland depends on the land’s characteristics (is it suitable for wildlife to live and for people to hunt and fish?) and also on the nearby supply of other hunting and fishing opportunities. The scarcer the competing options, the higher the economic value that a particular piece of land might have for hunting and fishing.

Not all of the economic benefits described previously can be easily translated into a single number for the dollar per acre value of preserved farmland and forestland. Some studies are very site-specific. Also, some benefits are reported in units such as dollars per household, which do not translate into a convenient estimate for drawing certain conclusions, as the populations of communities and counties vary tremendously. However, for some of the benefits, it was possible to convert reported estimates into somewhat standardized values or ranges worth including in this publication (Table 1).

Though some benefits are not represented in Table 1, the included ones are likely to be the dominant values in most communities. Economic values for benefits such as public health and wildlife habitat should be expected to reach economic significance only in situations where farms, forestland, and green spaces are in very short supply. The economic benefits summarized in Table 1, however, occur in virtually all suburban and urban settings as well as in more rural communities just beginning to feel development pressure.

Note: Values are in 2024 dollars.

While there will always be exceptions, and local circumstances are important, the benefits that are usually the largest in different settings can be estimated. This section describes which benefits are likely to be the most important outcomes from farmland and forestland preservation within urban, suburban, and rural settings.

Table 2 summarizes the different benefits farmland and forestland preservation can bring to a community. In Table 2, the more pluses shown in a column, the more that particular benefit applies in that setting. In urban areas, stormwater management and cooling cost savings benefits are larger because so much of the land area is already paved that any pockets of soil and plants can make an enormous difference (therefore, stormwater management is allotted three pluses). In suburban settings, the budget savings from avoiding service costs resulting from residential development is likely to be the largest economic benefit of farmland preservation, but wildlife habitat, stormwater management, and cooling cost savings can still be significant. In rural areas, most of the environmental benefits are fairly small because there is an abundance of undeveloped land and so those benefits will be there with or without a marginal parcel of farmland being preserved; however, the budgetary savings from avoided costs of services are likely to be extremely large, particularly because in rural settings, additional residential development does not bring with it proportional increases in commercial land uses (which relay budgetary benefits to the local governments).

In many communities across North Carolina, the pressure caused by growth and development has become a big local issue. Many long-time residents fear that an influx of residential development will change the character of their community and cause economic and environmental damages. On the other hand, some residents and many politicians believe economic growth is a positive force and that successful and desirable communities should be growing.

This publication seeks to quantify the types of economic benefits that communities can expect if they preserve farmland and forestland in their communities. The publication provides a fairly comprehensive list and description of possible benefits, reporting ranges of dollar values for at least some of these economic benefits and delineating in which communities different values are likely to be the dominant ones, depending on the relative urbanity or rurality. It is hoped that this information will be useful to citizens and local leaders in North Carolina who are faced with decisions over how much growth to support in their communities.

Bergstrom, J. C., B. L. Dillman, and J. R. Stoll. 1985. "Public Environmental Amenity Benefits of Private Lands: The Case of Prime Agricultural Land." Southern Journal of Agricultural Economics 17 (1): 139–49. ↲

Bergstrom, J. C., and R. C. Ready. 2006. "What Have We Learned from over 20 Years of Farmland Amenity Valuation Research in North America?" Review of Agricultural Economics 31 (1): 21–49. ↲

Brodbeck, B., and S. Jean-Phillippe. 2019. “Tree Planting for Lower Power Bills.” Trees for Energy Conservation online. ↲

Casola, W. R., M. N. Peterson, E. O. Sills, K. Pacifici, and C. E. Moorman. 2022. "Economic Contributions of Wildlife Management Areas in North Carolina." Forest Policy and Economics 140. ↲

CoreNet Global. “Green Space, Please.” 2011. International Journal of Productivity and Performance Management 60 (5). ↲

Farmland Information Center. 2016. Cost of Community Services Studies. ↲

Gies, E. Conservation: An Investment that Pays. 2009. The Trust for Public Land. ↲

Hallauer, A. M., and E. Kuehler. 2020. "Evaluating Stormwater Benefits of Atlanta's Urban Forest." Stormwater, The Journal for Surface Water Quality Professionals (January): 10–16. ↲

Halstead, J. M. 1984. "Measuring the Nonmarket Value of Massachusetts Agricultural Land: A Case Study." Journal of the Northeastern Agricultural Economics Council 13 (1): 12–19. ↲

Highstead. 2020. Protecting New England's Forests. ↲

Irwin, E. G. 2002. "The Effects of Open Space on Residential Property Values." Land Economics 78 (4): 465–80. ↲

Kenny, A. 2006. "Ecosystem Services in the New York City Watershed." Ecosystem Marketplace: A Forest Trends Initiative. ↲

Kline, J., and D. Wichelns. 1998. “Measuring Heterogeneous Preferences for Preserving Farmland and Open Space.” Ecological Economics 26 (2): 211–24. ↲

McPherson, E. G., J. R. Simpson, P. J. Peper, S. E. Maco, and Q. Xiao. 2005. "Municipal Forest Benefits and Costs in Five US Cities." Journal of Forestry 103 (8): 411–16. ↲

Ready, R. C., M. C. Berger, and G. Blomquist. 1997. "Measuring Amenity Benefits from Farmland: Hedonic Pricing vs. Contingent Valuation." Growth and Change 28 (4): 438–58. ↲

The Trust for Public Land. 2021. The Economic Benefits of Conserved Lands, Trails, and Parks on the North Olympic Peninsula.

General

Connecticut Land Conservation Council. n.d. Economic Benefits of Land Conservation.

Land Trust Alliance. 2011. Fact Sheet. The Economic and Tax-Base Benefits of Land Conservation.

Lynch, L., and J. M. Duke. 2007. Economic Benefits of Farmland Preservation: Evidence from the United States. University of Maryland Department of Agricultural and Resource Economics.

Stawarz, S. “The Economic Benefits of Land Conservation.” 2020. The Conservation Foundation.

WeConservePA. Economic Benefits of Conservation. Web Resources.

Property Values

Economy League of Greater Philadelphia. 2011. The Economic Value of Protected Open Space in Southeastern Pennsylvania.

Kline, J., M. J. Mazzotta, and T. M. Patterson. 2009. “Toward a Rational Exuberance for Ecosystem Services Markets.” Journal of Forestry 107 (4): 204–212.

Public Health Benefits (Cooling)

United States Environmental Protection Agency. Website. Using Trees and Vegetation to Reduce Heat Islands.

Water Quality

Land Trust Alliance and U.S. Fish & Wildlife Service Coastal Program. 2016. Investing In Nature: The Economic Benefits of Protecting Our Lands and Waters.