BARRHEAD - If a County of Barrhead farmer wants to continue to work a 100-acre parcel at the municipality's Kiel Industrial Park, they will have to open up their wallets a little wider.
After a more than 20-minute debate, County of Barrhead councillors voted during their Oct. 3 meeting to offer a three-year contract renewal to Bryan and Michael Morrow at $104 an acre on a motion by Coun. Paul Properzi. Voting in favour was reeve Doug Drozd, deputy reeve Marvin Schatz, Coun. Walter Preugschas and Properzi. Voting against were Coun. Bill Lane and Ron Kleinfeldt. Coun. Jared Stoik was absent.
This followed two other unsuccessful motions by Preugschas and Kleinfeldt for three years at $100 and $85 per acre respectively.
In a separate motion, councillors unanimously amended the contract to remove a clause to go to arbitration if the two parties could not agree on the land rental price.
If the Morrows opt not to renew the contract, the county will put the contract up for tender.
The soon-to-expire contract was at $60 per acre for a three-year term.
The municipality purchased the property in 2012 as part of the quarter section of land located at NE 27-59-3-W5, immediately south of the Northplex plant on Range Road 32, for $575,000 from the Kiel family. The land is zoned direct control.
County manager Debbie Oyarzun said the Morrows are the second tenant of the property, which at one time was 149 acres, becoming the lessor in 2014 and have expressed interest in renewing the lease. Since 2012, the county has rented out the parcel for $60 an acre.
"When renting land, we want to look at market value and be as close as possible to it," she said.
To help determine what the fair market value is for the land, Oyarzun said they have used the annual Farm Credit Canada (FCC) report.
She added that the market value for agricultural land has been steadily increasing since 2012.
She said in the FCSS report that the value of agricultural lands in the northern region (which Barrhead is part of) increased by roughly 11.5 per cent, with the average sale per acre at $4,000, but range anywhere from $1,700 to $7,600 per acre.
To ensure their data isn't skewed, the FCC excludes the top and bottom five per cent of sales.
Oyarzun added that the municipality purchased a property at $5,000 per acre for road construction projects.
"Again, that was to ensure fair market value, and while it is higher than the average, it still falls comfortably in that range," she said.
As for rental rates, Oyarzun said they are trying to follow the FCC average rent-to-price ratio, which ranges from a minimum of 1.2 per cent to a maximum of 5.40 per cent, with the median rate of 2.6 per cent, adding the southern and central regions, with higher agricultural land values skewed the average.
"We thought we would use $5,000 per acre that the county has been using as a base and then apply the [FCC percentages, low, median and high] and come up with some potential rates," she said.
Schatz said they should bump up the rate, adding that the Morrows have been getting "quite a deal"; adding market value is anything someone is willing to pay, suggesting they should put the lease up for tender.
Properzi agreed, saying that $60 was well below the going rate, even when they signed the first agreement, suggesting something like $125 was in order.
Oyarzun replied the county could only do it once the Morrows declined the next agreement, as a condition of the current deal is the right to first refusal.
Preugschas added that land value isn't the only factor that impacts ag land rental rates, saying the term and size of the property are as important, saying 100 acres is a relatively small property to farm.
He added that most people would be looking at a longer term.
Drozd interjected, saying the county should use the FCC average per-acre land value of $4,000.
"We pay a little higher rate because of the nuisance factor because we often purchase 0.7 of an acre," he said. "That is why we tend to pay more to make it more palatable."
Lane and Kleinfeldt argued for a lower rate, saying an increase to $100 an acre would be too much of a jump.
Kleinfeldt hesitantly suggested $80 an acre but thought that was too high.
Oyarzun jumped in, saying using the FCC percentages with either $4,000 or $5,000 per acre land value for 2020 and 2021, the average per acre would have been closer to $110.
Properzi agreed, saying the municipality offered a very good agricultural land parcel.
Barry Kerton, TownandCountryToday.com
