When Governor Arnold Schwarzenegger gutted $34.7 million in funding for Williamson Act open space preservation, he pulled the noose tighter around rural counties.

The California Land Conservation Act of 1965, known as the Williamson Act, bases property tax rates for agricultural land on its income-producing capability as open space rather than its Prop 13 value for owners who promise to keep the land undeveloped for at least 10 years.

This reduces the tax burden and is the only way 2/3 of the farmers who work the 16 million acres currently enrolled in the program can continue, according to California State Association of Counties (CSAC) statistics.

“The Williamson Act is our most cost effective incentive-based farm and ranch land conservation tool,” read a CSAC report.

For the last 38 years, the state has reimbursed counties for the lost property tax revenue at a rate of $1 per acre for what is considered non-prime agricultural land and $5 an acre prime agricultural land. This subvention allowed counties to preserve large swaths of open space in the face of development pressure.

These free-range dollars caught the eye of legislators looking for fat and a showdown in the Assembly resulted in a 20 percent cut of Williamson Act subvention funding, leaving a total of $27.7 million in the program. However, the governor, left with a $1.1 billion deficit and no reserve, used his blue line-item veto pen to slash all but a 1,000 placeholder from the reimbursement pot for the 2009-2010 budget year.

That leaves counties to pay the bill for contracts that benefit all Californians.

“Counties still have to honor Williamson Act contracts,” said CSAC spokeswoman Sarah Jimenez. “Counties just will not receive the backfill the state has provided them for the agreements with property owners.”

Generally, Williamson Act subventions go toward a county’s general fund purposes.

Senator Lois Wolk (D-Davis), who tried to tighten controls on Williamson Act contracts to fend off critics during the regular session, called the subventions “essential.”

“This measure really is critical to agriculture in California. Keeping land in agricultural use has been very difficult and very costly for us,” Wolk said in a statement.

Assemblyman Jim Nielsen (R-Gerber), who represents Sutter County, said in a statement after the signing he was “disappointed that the governor decided to blue pencil funding for the Williamson Act. The 20 percent reduction in Williamson Act subventions was a hard wrought compromise that enjoyed broad bi-partisan support.”

“This was a poor decision,” said Sutter County Administrator Larry Combs. “This significantly impacts our ability to preserve farmland.”

The agricultural county is only 3 percent developed and includes 42 contracts covering 64,511 acres for a total of $269,902.66 each year.

Combs said that if the state continues to cut funding for the program he would recommend to the Board of Supervisors that they cancel all Williamson Act contracts.

“Sutter County borders urban Sacramento and is under significant development pressure,” Combs said. “With increased regulations and taxes, it would be difficult to continue farming here.”

Cutting their losses may not be that easy.

“Counties can cancel contracts, but contract cancellation has a 10-year winding down period with property owners paying property tax incrementally year-by-year,” said Jimenez.

That leaves rural counties saddled with the cost for preserving open space, at least this year.

JT Long can be reached at jtlongandco@publicceo.com