Others Graze on Ranch Tax Break : Subsidies: Hollywood stars are among the big landowners benefiting from the Williamson Act, a provision meant to aid agriculture.

On a mountaintop high above the fertile plains that still tenuously link Ventura County to its farming roots, actor Larry Hagman has built a sprawling mansion with a majestic ocean view.

But when county officials calculate the taxes on the land surrounding Hagman’s $2.5-million home, they consider it not so much an exclusive retreat, but grazing land.

In the eyes of the county, nearly all of Hagman’s 30 mountaintop acres are an agricultural preserve. Such parcels are typically valued at $40 an acre--not the thousands that Hagman paid--and are taxed at about 40 cents an acre.

Hagman’s parcel is far too small to qualify for such a break--it would need to be 80 acres to qualify as grazing land. Nor does its rugged terrain seem suited to support 20 animals, as required.

But because Ventura County does not enforce its own strict guidelines meant to implement a 1965 state farmland conservation act, officials acknowledge that Hagman and owners of thousands of other acres countywide receive tax benefits for which they may not qualify.

The result is that Ventura County loses large--but uncalculated--sums each year in questionable tax subsidies to dozens of property owners--including Hollywood stars, an English lord, a television production company, a former U.S. ambassador, a gravel pit operator and wealthy absentee landowners.

Several of these properties are in Hidden Valley west of Thousand Oaks and near billionaire David Murdock’s Sherwood Country Club, in one of the nation’s richest communities.

Murdock himself has part of his 1,000-acre Arabian horse ranch in Williamson Act preserves. But as a breeder of horses and cattle, his ranch qualifies under county regulations as a legitimate livestock operation, officials said.

Aware that many participating owners are not farmers or ranchers, county officials say they are studying a crackdown on tax breaks for landlords who do not engage in bona fide commercial agriculture.

A recent county survey of 18,680 acres subsidized under the California Land Conservation Act of 1965--the so-called Williamson Act--found that 6,300 acres did not qualify for the property tax breaks.

If that 34% disqualification rate stands up countywide, about 51,000 acres--an area the size of Oxnard, Ventura and Simi Valley combined--could be removed from the farmland preservation program.

“Why haven’t we enforced it?” asked county land-use supervisor Nancy Francis, who monitors Williamson Act contracts. “Time and money.”

County government--and its special districts--receive less than half of each property tax dollar in unincorporated areas, so it took the random survey last summer to persuade officials that they could recoup their enforcement costs by cracking down on the undeserving.

County Planning Director Keith Turner now estimates lost property taxes at possibly $1 million a year and says he will probably recommend an enforcement program to the Board of Supervisors within two months, once he figures out more precisely how much the county might gain.

“Government revenues are in short supply and we’ve got to be looking at all opportunities,” Turner said. “And one has to question the wisdom of allowing these people to continue to receive these tax breaks. . . . We think there is a problem out there.”

Frustrated farmers--some of whom helped tighten county Williamson Act guidelines in 1984--say the tax dodges have got to stop, because they sully the image of true farmers and ranchers and erode public support for a good program.

“It makes farming look bad,” county Farm Bureau President Tom Pecht said. “The system that’s been put in place for real farmers shouldn’t be abused.”

John Gamper, director of taxation and land use for the California Farm Bureau, said:

“Our position is that we must protect the integrity of this program. If it is ever seen as just a tax break for real estate speculators or a tax shelter for wealthy homeowners, our program is going to be in jeopardy.”

Concerned that California was paving over some of the world’s best farmland, the Legislature decided in 1965 to allow cities and counties to give tax breaks to farmers and ranchers who agreed to keep their land in agriculture or open space for 10 years.

The law, named for onetime Assemblyman John Williamson, required that farmlands be valued on their production, not on prices speculators pay for comparable parcels. That kept farmers from being taxed off their land as cities pushed toward them.

About half of the state’s crop and grazing lands--15 million acres in 48 counties--is now enrolled in the program. More than one-quarter of all privately owned land in Ventura County--about 151,000 acres--is under Williamson Act contracts.

Supporters say the act has protected farmland from leapfrog development and given local governments time to draft plans for orderly growth. It also acts as a backstop against shifts in the political wind that can override the best-laid community plans.

Critics say the act has failed to accomplish a primary mission--preservation of farmland near cities, which has been lost at a rate of 44,000 acres a year for two decades.

In Ventura County, where officials have formed a separate trust to try to stem the steady loss of farmlands, the Williamson Act was eagerly embraced in the early 1970s. The county recruited owners of farm and ranch lands and open space.

In exclusive Hidden Valley, there was wide participation by wealthy landowners. But even then there were questions about “whether we were creating a tax dodge for the rich,” recalled Chief Deputy Assessor Bruce W. Gray. “In the end, the answer was that we’ll do whatever is best . . . in the interest of preserving open space.”

By the early 1980s, however, local farmers had grown increasingly concerned that the Williamson Act, aimed primarily at saving farmland, was being misused. Statewide, it was not uncommon for owners of suburban ranchettes, golf courses and recreational equestrian centers to receive tax breaks under the act.

“We thought, ‘(farmers and ranchers) are the people that are paying the freight, and that’s where the benefits ought to be,’ ” said Ventura rancher J. Link Leavens, then a member of the county’s agricultural advisory committee.

In response, the Board of Supervisors approved a strict new set of regulations in 1984, a precursor to a state crackdown a year later.

The specific intent of the new county guidelines was to “preserve and promote bona fide commercial agricultural operations,” the board’s resolution stated. It defined legitimate farm and ranch operations by land size and production. And the supervisors promised to ensure compliance “by diligently employing all legal means available.”

Then the new guidelines were generally forgotten. When a landowner sought county permission to subdivide land or build structures on it, Williamson Act compliance would sometimes be checked, officials said.

Turner, the planning chief, said the guidelines were rarely enforced partly because planners continued to see the benefits of preserving open space through Williamson Act contracts.

“But quite frankly, it just hadn’t gotten up to a priority area where we would commit staff to it,” he said. Only in recent months, after the random survey by county Williamson Act manager Milada Allen showed widespread noncompliance, did Turner begin to think an enforcement program might not only pay for itself but yield a surplus for the county general fund.

Allen found that one-third of the acres surveyed did not meet county guidelines, mostly because the parcels were too small to be viable farms and ranches.

If the survey findings hold true for all 975 Williamson Act contracts, the county could eventually recoup from several hundred thousand dollars to $1 million a year in taxes if undeserving property owners were forced from the program, Turner said.

“When you boil it down to this magnitude of dollars, it starts to be more real,” he said. “And that’s what’s happening now.”

If supervisors decide to expel unqualified landowners, the taxable values on their parcels would begin to increase the next year. But it would take nine years for the owners to pay taxes on full property values, Turner said.

The Larry Hagman case illustrates how old Williamson Act contracts have been routinely transferred from one owner to another for 20 years, with little inquiry about whether agricultural activity is still taking place.

In the years after Hagman and his wife, Maj, bought their 30 acres off Sulphur Mountain Road in late 1987, the county took a close look at the couple’s request for a 44-foot tower, helipad and caretaker’s quarters as part of their new 22,000-square-foot retreat, planner Francis said.

But Francis said little attention was paid to whether the Hagmans could meet minimum county guidelines for a pre-existing Williamson Act grazing and livestock contract on their acreage.

Their parcel was far too small to meet the minimum parcel size of 80 acres set by the county for grazing, or the 40-acre minimum for livestock production.

And there was little evidence that the steeply sloped parcel could sustain 20 “animal units,” which is the minimum required under both types of contracts. (A cow is one animal unit, a horse is 1.25 animal units, a sheep is 0.20 animal unit and a chicken is 0.1 animal unit.)

“We had no enforcement program,” said Francis, who analyzed the Hagmans’ construction request. “Lacking an enforcement program, (compliance) was not an issue.”

Maj Hagman insisted in interviews that she has done her best to meet Williamson Act guidelines for agricultural preserves. “I am trying to do everything legal here,” she said.

First she raised some chickens, but bears and coyotes got them, she said. And over the last year her caretakers have planted 200 fruit and nut trees that will begin producing fruit within two years, she said.

“One of our reasons for moving up here was to be able to raise clean food, for ourselves and eventually to sell,” she said. “We’re going to sell. I mean we can’t eat the fruit off all that.”

County officials say it is possible that the Hagmans might qualify for another type of Williamson Act contract--one that includes parcels as small as 10 irrigated acres for citrus growers and row crop farmers.

If the Hagmans plant 65% of their acreage in fruit trees and sell enough fruit and nuts, they could qualify as farmers, the county’s Allen said.

In any case, Maj Hagman said her Williamson Act tax break of about $2,500 is tiny compared to the taxes the Hagmans paid last year on their estate. Those totaled $18,212 for 1992-93 and will increase because of continued improvements, according to the tax collector.

Apart from the Hagman situation, county planners said their recent survey found most problems with grazing contracts. In many cases parcels failed to meet the 80-acre minimum to qualify for tax breaks.

Even though they must file sworn declarations with the county assessor each year stating the extent of their agricultural activity, some owners have acknowledged that they run no livestock on their Williamson Act property, Turner said.

“What we’ve started to find is that people would enter into these grazing contracts with little or no intent to graze cattle, or they would quit running them,” Turner said.

For example, Allen said she recently asked the owners of three Williamson Act parcels near the Hagmans’ on Sulphur Mountain Road not to renew their grazing contracts either because there was no agricultural activity or because the parcels were illegal. The problems came to her attention, Allen said, because one owner asked the Planning Department to make a lot legal.

“I see this as an extreme test of the whole land conservation thing really,” Deputy Assessor Gray said. “As everyone knows, while grazing is still quite common up on places like Sulphur Mountain, it’s definitely not economic. And the development pattern up there is country estates, truly, because more density is not really possible.”

In another case involving a grazing contract, Turner said he expects to ask the owners of the old Blue Star Ready Mix sand and gravel quarry near Moorpark to give up their Williamson Act tax break as a condition for receiving a new operating permit.

Much of the 460 acres has been mined or would be under the new permit, Turner said. The property is valued at only $40 an acre because of its purported use as pasture, and total taxes on it last year were $913, records show.

James Sandoval, who sold the quarry last month, said he hadn’t run cattle on the land for years.

“Basically we were doing nothing with the property,” he said. “There is a questionnaire required by the county to keep your taxes low. . . . I’m buying property because it has mineral reserves and other than me getting permits from the county, I was never concerned.”

He said no one had ever told him he needed to graze at least 20 head of cattle to qualify for his tax break.

“Never,” he said. “We did run cows out there the first seven years, but we ran out of feed and we couldn’t justify the cattle.”

The subtle beauty of Hidden Valley--its towering oak trees, white-fenced pastures and mountain backdrops--has beckoned the rich and famous of Southern California since at least World War II.

Murdock, whose country club at Lake Sherwood hosts top professional golf and tennis exhibitions, breeds Arabian horses and Santa Gertrudis cattle at his sprawling Ventura Farms.

Along one short stretch of Potrero and Hidden Valley roads, actors Richard Widmark, Robert Wagner, Tom Selleck and Sophia Loren all have homes. Sylvester Stallone trained polo ponies on a nearby ranch until he sold it last year.

Properties sell for up to $10 million, and those on the market now begin at $3.1 million.

The owners of at least a dozen ranches and estates--including Widmark and the Asian businessman who bought Stallone’s small ranch--have Williamson Act contracts. Because the true market values of their lands are so great, their tax breaks are often extraordinary. And some apparently do not qualify under county guidelines for those benefits.

Just recently, county officials said they asked Lord Gordon White of Hull, chairman of the U.S. arm of a British conglomerate, not to renew his livestock contract after he acknowledged while applying for a construction permit that he had no horses on his 27-acre Potrero Road estate, The Chateau.

White’s tax break has been substantial. Records show he paid $4.75 million for his estate in 1991 but paid taxes last year on less than half that value, saving him about $25,000 in one year. The property is now for sale for $6.9 million.

Even if White once had horses it is doubtful that he could qualify as a livestock operator because his lot is smaller than 40 acres. Real estate agents say White’s estate has only a 12-stall stable, while a minimum of 16 horses are required by the county. And they must be part of a commercial operation.

White’s next-door neighbor, Robert Nesen, a Thousand Oaks auto dealer who was former President Ronald Reagan’s ambassador to Australia, also holds a Williamson livestock contract but says he keeps only his family’s six riding horses on his 60-acre ranch.

“I had a breeding operation at one time,” he said. “But that became not feasible because of tax law changes.” So he phased it out in the late 1980s, he said.

“What is the requirement?” he asked. “I don’t know. They’ve never said anything about it, and I fill out the report every year. I don’t think (neighbors) would want 20 head of cattle here.”

Nesen said he paid $675,000 for his property in 1978 and nearly all the value was in the land, not in an old house he has since replaced with a new red-brick home that is the colonial centerpiece of his “Kentwood” estate.

The assessed value of Nesen’s land is just $86,639, about one-seventh its market value in 1978.

Nesen said he’s not bothered by what appears to be a multi-thousand-dollar annual tax break from the Williamson Act.

“Maybe they’d rather have me subdivide it,” he said. “That’s what somebody will do. If they keep fooling around with this, they’ll have it subdivided. Somebody will fight and subdivide it.”

Robert Werner, a property owner and real estate agent in Hidden Valley, said current owners cannot be blamed for not knowing about the county’s guidelines.

A number of 20- to 25-acre parcels along Hidden Valley Road may be too small to warrant livestock contracts under today’s criteria, he said, but they were all welcomed into the Williamson Act in the 1970s.

“Anyone who had 100 acres was allowed into the Williamson Act,” Werner said. “And those contiguous to the 100 acres were also allowed in even if they had only 20 acres.”

Two of those smaller parcels are now owned by a television producer and the president of a property investment firm, whose ranches carry the names of Garrison Ranch and Baccarat Farms. Horses are raised and trained at both, though owners would not discuss their operations.

Neighbors said that several Williamson Act owners in Hidden Valley train their horses for a type of precise exhibition riding called dressage.

Werner said the tax breaks on these multimillion-dollar horse ranches are often a good selling point to potential buyers.

“Most of them would like to come out here and have an estate ranch operation, and not something that has to be labor intensive,” Werner said. “They want to enjoy the benefits of having animals.”

An example of the benefit of having animals under the Williamson Act can be seen in the side-by-side ranches of Richard Widmark and Robert Wagner.

Widmark, a longtime owner and Williamson Act contractor, owns a 54-acre parcel valued for tax purposes at $61,000. Wagner, who bought in the mid-1980s and has no tax break, owns 40 acres valued at $1.57 million.

After structural improvements are included in overall values, Widmark paid about $1,000 in taxes last year on his parcel, while Wagner’s tax bill was about $24,600.

County officials said Widmark is a longtime rancher whose taxes would be low even without the Williamson Act, because Proposition 13 virtually froze his values at 1975 levels.

And Werner said the actor, who owns about 78 acres in all, raises oats and barley for his horses and cattle.

“He’s probably the most serious farmer in the valley,” Werner said.

While abuses of the Williamson Act have been a sore point statewide for years, support for the act apparently remains strong.

Farmland preservation advocates are quick to spot abuses of the act, but still say that it has served its purpose well. Several state officials and academicians who have studied it also think it has been valuable to both farmers and government planners.

Farmers praise it, and not only for its tax advantages.

“It makes people stop and think,” said Santa Paula rancher Robert Pinkerton. “It stops the spur-of-the-moment decisions.”

Ventura rancher Leavens said the Williamson Act “has allowed us to stay in agriculture. It’s slowed the rampant development that’s taken place in Southern California. It’s given the policy folks a chance to think about where they want growth and where they don’t.”

The act has been of such value to farmers that the California Farm Bureau, fearing damage to the program’s reputation, sponsored legislation this year to limit incompatible uses some counties have permitted on farm preserves.

To make its case, the Farm Bureau cited an open-pit mine, a trucking business and a private sewage plant approved on preserves by three central and Northern California counties. It also listed as problems uses such as a concrete plant, a proposed motor speedway and a raft of proposed or existing golf courses.

The bill was vetoed by Gov. Pete Wilson. But the Farm Bureau’s Gamper said the fight continues against questionable uses and undeserved tax breaks.

“There should be a demarcation between hobby ranches and commercial horse facilities,” Gamper said. “There are also a fair number of rural ranchettes on 40 acres. These are now simply martini farms for equity-rich refugees from the city. Whether these estates should get Williamson Act protection, I don’t think so.”

The Williamson Act has been controversial since its inception, partly because it cut the holding costs of real estate speculators, who could afford to warehouse farmland against future demand due to low taxes.

“That’s a common complaint around the state,” said Alvin D. Sokolow, a public policy specialist at UC Davis and author of a lengthy 1989 study of the Williamson Act.

“There are some folks who say there’s nothing wrong with that,” he added. “And others say maybe the way to deal with that is to gain some of their windfall profits when they develop and turn that back into a land conservation program.”

Ken Trott, who runs the statewide Williamson Act program for the California Department of Conservation, said he disagrees with persistent complaints that “the Williamson Act is nothing more than a tax shelter for land developers.”

It’s perfectly reasonable for county planners to use the Williamson Act to hold farmland in rural uses until counties are ready for development, Trott said.

In Ventura County, some of the biggest participants in the program are development companies with low-tax grazing contracts.

The Newhall Land & Farming Co., which built Valencia, has more than 12,000 acres near Piru in the program. Messenger Investment Co. of Irvine owns about 3,900 Williamson Act acres north of Moorpark. Both are opting out to widen their options with the land.

Giant home-builder Watt Industries of Santa Monica is the general partner in the Big Sky Ranch Co. and Alamos Canyon Co., which own nearly 6,000 acres of Williamson Act grazing land north of Simi Valley.

All 2,700 acres in Simi Valley’s city-approved Whiteface development had been part of the Big Sky Ranch. And now Whiteface’s 1,460 luxury homes and two golf courses will bump up to the ranch--increasing its long-range chances of development.

“It’s an interesting situation for Ventura County because they have their ag land (preservation) policies,” Messenger Vice President Gary Austin said. “But the question is, What is ag land? Is it the good, flat cropland or is it this marginal (hillside) stuff that can’t pay its taxes because it’s so non-productive?”

County officials long ago decided that saving the fertile Santa Clara and Las Posas valleys, and especially the Oxnard Plain, is the key to preserving the farming industry’s viability here. But now a Williamson Act farm contractor in the heart of the Oxnard Plain is opting out of the program so it can ponder future development options.

The Japanese-owned Sony-Columbia Land Corp. began to take more than 800 acres out of a preserve in 1988.

Veteran rancher John V. Newman, once part owner of the Sony holdings and who still manages its lemon groves, said he recommended removing the Williamson restrictions--but not without mixed emotions.

“I just think it’s a crime to see good farmland covered with concrete and housing,” said Newman, 83. “This is some of the best farmland in the world. “

But if a farmer wants to sell for a profit, so be it, Newman said. It shouldn’t be the farmer’s responsibility to provide scenery for city dwellers, he said.

As for long-term efforts to save farmland: “It’s a wonderful dream,” Newman said. “But it still takes money.”

The Williamson Act: USE AND ABUSE OF AGRICULTURAL LAND PROTECTION LAW

The state Land Conservation Act--commonly known as the Williamson Act--was approved by the Legislature in 1965 to keep agricultural lands in agricultural use. It gives property tax breaks to farmers and ranchers who agree not to develop their lands for at least 10 years. Now enrolled are about half of the state’s crop and grazing lands--15 million acres in 48 counties. Supporters say the act has protected farmland from leapfrog development, particularly in rural areas. Critics say the act has failed to accomplish its primary mission--preservation of farmland near cities, which has been lost at a rate of 44,000 acres a year. In Ventura County, new enrollments peaked in the mid-1970s and total acres have fallen from 167,982 in 1986 151,043 today. Ventura County owners--many anticipating the next building boom--are in the process of removing 30,679 acres from the program. Most of those acres are on the urban fringe.

Top Users in Ventura County

Landowners with most property under Williamson Act

Type Address Acres Newhall Land and Farming Co. developer/farmer Valencia 12,255 R.H. Smith Family rancher Ventura 6,888 Shull Bonsall rancher Ventura 6,475 Watt Industries* developer Santa Monica 5,843 Sloan Ranches rancher Santa Paula 5,050 Cynthia Wood rancher Santa Barbara 4,939 Messenger Investment Co.** developer Irvine 3,871 Limoneira Associates farming Santa Paula 3,850 Elizabeth Broome Miller farming Santa Barbara 3,552 North Foothill Co. rancher Ventura 2,840

* General partner in Alamos Canyon Co. and Big Sky Ranch Co.

** Operating as Strathearn Ventura Partners

Some Notable Properties

These properties reflect the low taxable value of farm and ranch land enrolled in the Williamson Act program

1. Blue Star Ready Mix near Moorpark. Parcel: 460 acres at the rock and quarry site are considered grazing land and valued at about $40 an acre. Recently sold to Transit Mix Concrete Co.

2. Lord Gordon White of Hull, estate in Hidden Valley. Parcel: 27 acres, most considered a livestock operation generally valued at about $2,700 an acre.

3. Actor Larry Hagman’s estate on Sulphur Mountain Road. Parcel: 30 acres, nearly all considered grazing land, generally valued at about $40 an acre.

4. Robert Nesen estate in Hidden Valley. Parcel: 60 acres, most considered a livestock operation; generally valued at about $2,700 an acre.

5. Watt Industries’ Big Sky Ranch Co. near Simi Valley. Parcel: 2,994 acres, nearly all considered grazing land and valued at $40 an acre.

6. Sony and Columbia Land Corp near Oxnard. Parcel: 832 acres, most acres are in orchards and crops valued at about $7,700 an acre.

7. Massey Survivors Trust in Santa Rosa Valley. Parcel: 10-acre ranchette is considered grazing land and valued at about $40 an acre.

Percent of Protected Land

Acres under the Williamson Act represent: Of all land in Ventura County: 12.6% Of all private land in Ventura County: 27.4% Of all agricultural land in the county: 46% Act at a Glance 151,043 acres under contract 1,571 parcels under contract 975 total contracts 120 contracts are being phased out in a 9-year process Williamson Act Acreage Total acres in Ventura County (in thousands): 1969: 10,542 1993: 151,043 Source: Ventura County Assessor, Tax Collector and Planning Department

Research by DARYL KELLEY / Los Angeles Times