City Slickers

How farm subsidy checks end up in big cities

Wednesday, March 1, 1995

City Slickers

How farm subsidy checks end up in big cities

American taxpayers are sending hundreds of millions of dollars in Federal farm subsidy checks every year to a handful of absentee owners, corporations and other "farmers" who live smack in the middle of the country's biggest cities. Over the past decade, taxpayers wrote 1.6 million agriculture subsidy checks worth more than $1.3 billion to "city slickers" whose permanent mailing address is in the heart of one of the 50 most populous urban areas in the United States. For a variety of reasons, even this substantial sum probably underestimates farm subsidy payments made to recipients in major U.S. cities.

An Environmental Working Group (EWG) analysis of 110 million U.S. Department of Agriculture (USDA) computer records of $106 billion-worth of farm subsidy payments made since 1985 found over 74,000 recipients whose current mailing address for agriculture department checks is in downtown New York City, Los Angeles, Chicago, Houston, Phoenix, Miami, St. Louis, Detroit, Dallas or another top U.S. city. When EWG analyzed major suburbs and satellite cities and towns in the greater metropolitan areas of just 28 of the 50 biggest cities, total payments increased by $528 million, bringing the total payments to $1.8 billion. From Beverly Hills to Key West, EWG research shows that it is the rare, well-heeled suburb, urban enclave or resort spot in the United States that does not have at least one Federal farm subsidy recipient in residence.

In every major U.S. city, farm subsidy checks pour in from farms located in dozens of states. Farms in 42 states pump government subsidies into New York City, 38 states send Federal farm dollars to Los Angeles, 37 states have farm program recipients in Chicago, and 41 states are sending agricultural assistance to "farmers" in Houston. In many big cities--New York City, Los Angeles, Chicago, and Tucson, for example--half or more of the subsidies come from farms located out of state.

In big cities as in the countryside, a small number of individuals, partnerships, trusts and corporations collects the lion's share of Federal farm subsidies. Just 862 big city subsidy recipients (1 percent) collected $388 million, nearly 30 percent of the total payments to the postal areas of the top 50 cities. A general partnership in Dallas, Texas, for instance, received 157 checks over 6 of the last 10 years totaling more than $1.8 million. From Beverly Hills to Key West, EWG research shows that it is the rare, well-heeled suburb, urban enclave or resort spot in the United States that does not have at least one Federal farm subsidy recipient in residence.

At the other end of the spectrum are thousands of urban farm subsidy recipients who received very small amounts of money over the past 10 years. Overall, about 57 percent of the subsidy recipients received less than $5,000, totaling just 5 percent of the payments. Many recipients received just a few, small subsidy checks, in which case the program benefits may have been less than USDA's processing costs for the payments. Payments that went to cities were made under literally dozens of Federal programs that subsidize farmers, including commodity supports, conservation and disaster programs.

More than 63 percent ($825 million) of the total farm subsidies paid to big-city recipients went to individuals, who on average received $13,000 over the 10-year period. General partnerships brought in 12 percent ($150 million), averaging $72,000. Corporations with stockholders collected 11 percent of total big city subsidy payments ($138 million), averaging $58,000, and joint ventures collected $74 million (5.7 percent of the payments), but averaged over $200,000 each over the 10-year period. Subsidy payments also went to churches; county, state and city governments; public schools and other recipients with big city mailing addresses, including the Federal government itself.

Policy Implications

For several reasons, this analysis captures only a portion of the total Federal farm subsidy payments sent to big city recipients over the past decade. First, many recipients did not have a mailing address zip code in the USDA computer files we used for this analysis, making it impossible to track the destination of their payments. Second, EWG analyzed the postal areas of only the 50 top cities, plus the surrounding urban areas and satellite towns for only 28 of those cities. Payments to smaller urban and suburban areas would add billions of dollars to the payment total, though some of those cities are situated in farming regions. Third, at the time this report was prepared, EWG was unable to track payments made to urban and suburban residents or other absentee interests if the subsidy payments went directly to a corporation, trust or other entity at an address outside the 50 top cities, and the entity then disbursed a share of those payments to others with an interest in the farm. Such arrangements are commonplace and if accounted for would have substantially boosted our tally for city slickers. It should also be noted that this analysis focuses on only one manifestation of the phenomenon of farm subsidies paid to absentee interests--payments to cities. Payments to absentee owners who live in small towns or rural areas are even more common.

Massive and widespread cash payments to absentee interests in cities are just one of many indications that America's Federal farm subsidy programs are out of date--and badly out of control.

This study underscores just one of the fundamental problems with America's Depression-era farm programs: they mostly reward the ownership of land, not the farming of it, and reward most those who own the most, not those most in need.

Absentee landowners, distant corporations and farflung investors are able to draw substantial government agriculture subsidies, though they may reside in a big city hundreds or even thousands of miles from the farm and never set foot on that farm for years on end. As a practical matter, almost anyone can qualify for Federal agriculture subsidies. You don't have to farm the land, you don't have to live anywhere near the land, you don't even have to visit from time to time. You don't have to be related to the farmer or to anyone else who has an interest in the farm. And wealthy, absentee farm owners who are most likely to run afoul of payment limits or other rules have ready access to legal advice that can help them maximize their government payments--advice provided by the government itself.

Policy Recommendations

The fact that Federal farm programs transfer massive government subsidy payments to recipients in big cities, as we document in City Slickers, is just one more compelling reason why the 1995 Farm Bill must not result in business as usual. Three broad objectives should guide Congress as it begins the 1995 Farm Bill debate.

  • Congress should directly and firmly address the issue of taxpayer support for large "paper" farms, corporate producers, and absentee owners who can and do earn much of their living elsewhere. If taxpayers are expected to maintain an income safety net for agriculture, assistance should be limited to reasonable levels that would help a small family business, not enrich big agribusiness.
  • Congress should fundamentally change priorities for taxpayer investments in agriculture and rural communities, so that spending reflects contemporary needs, not the needs of 1933. The 1995 Farm Bill presents an unprecedented opportunity for taxpayers to invest in programs that get pesticides out of their food and tapwater and protect rivers, lakes, land, and wildlife. Instead of voting to weaken environmental safeguards, Congress should provide farmers assistance to meet or exceed environmental standards, and protect their land at the same time.
  • If Congress adopts a broad risk-assessment bill with cost-benefit provisions that override public health or environmental laws, the same rigorous procedures should be strictly applied to all agricultural assistance programs. No farm, export, or crop insurance subsidies should be provided until the environmental and economic risks of those subsidies have been clearly identified, and least-cost alternatives, such as block granting farm program funds to the states, have been thoroughly considered. Similarly, if Congress enacts broad "takings" legislation that will result in compensation to farmland owners whose property values are in any way diminished by Federal environmental laws, Congress should protect taxpayers from paying twice. Federal law should eliminate Federal farm subsidy payments that inflate the price of farmland and thus boost the potential taxpayer exposure from "takings" compensation claims.

Foreword

What's wrong with a city dweller owning a bit of land in the country? Absolutely nothing, as far as we're concerned. Why, we wouldn't mind owning a little farmland ourselves. Nor do we have a problem with urbanites investing time, money or both in a farm operation, even if it's not their main livelihood and even if the farm is thousands of miles away.

But why on earth should taxpayers be involved in the arrangement? And as this report documents, we are involved.

Chapter 1.  About City Slickers

The City Slickers reports are the first in a series of Environmental Working Group studies on Federal agriculture subsidy programs. The national summary study and the 50 city-specific reports focus on the phenomenon of payments made to recipients whose permanent mailing address on file with the U.S. Department of Agriculture (USDA), as of the Fall of 1994, is in one of the nation's 50 biggest urban centers. Future studies will examine payments made to other cities and to states, congressional districts, and small towns; the structure of farm entities receiving payments and the amounts received, with special emphasis on recipients of large payments; trends in payments since 1985; and other characteristics of Federal farm subsidy recipients. The EWG database will also be used to analyze a wide range of policy proposals during the debate over the 1995 Farm Bill, including payment limits and budget reductions.

Data Sources, Methodology, and Database Development

Most of the studies in the series are based on original EWG analyses of more than 110 million computer records--a record of every check written to every recipient, for every Agricultural Stabilization and Conservation Service (ASCS, now known as the Consolidated Farm Service Agency, or CFSA) program, in every year since 1985. The records were obtained in two steps.

Beginning in 1992, EWG filed a series of information requests with USDA under the Federal Freedom of Information Act (FOIA). Among the initial requests, we asked for most of the manuals that USDA personnel utilize in implementing all major farm, disaster and conservation assistance programs. After reviewing the manuals, EWG identified and requested dozens of datasets in computerized form, mostly from ASCS, now known as CFSA. The department's computer center in Kansas City fulfilled initial requests by providing data from the Producer Payment Recording System (PPRS) on about forty, 9-track computer tapes, which contained records of payments according to the county from which the payment originated. More recently, data have been provided on high density 4 mm DAT storage tapes. In addition, EWG has obtained another 17 gigabytes of raw data that pertain to subsidy recipients, conservation payments by practice, and characteristics of program farms.

Once received, EWG transfers the raw data files onto our Power Macintosh computers for further processing, compilation, quality control and analysis. The data presented in City Slickers, for example, is generated from a customized, point-and-click database application developed by EWG's computer programmers that can access and analyze 24 gigabytes of data.

EWG requested and USDA developed an algorithm or "code" that scrambled the identifying numbers of recipients, so that payments and other information could be tracked and analyzed by recipient over all years and all programs. The recipient data were then compiled to obtain program-by-program totals for each individual, corporation or other entity receiving farm subsidies in any year from 1985 through 1994. Data were also aggregated to obtain total, per-program, per-year and per-recipient payments for the nation, as well as for each county, state, and congressional district in the country. The database used for City Slickers includes more than $106 billion-worth of farm subsidy payments issued by USDA between January 1, 1985 and September 30, 1994. Future studies will reflect the billions of dollars of additional farm subsidy payments made in the three-month period between October and December 31, 1994. As noted above, databases recently received under FOIA will also permit more detailed analysis of the composition of farm entities and the payments they received from 1985 to 1994.

In preparing City Slickers, producer-level payment data from the PPRS system were matched against the most current, permanent mailing addresses on file with USDA for all official communication, including payment of farm subsidy checks. USDA provided partial addresses--city, state, and zip code. This list itself comprised over 8 million address records contained on seven 9-track computer tapes.

Limitations of this Study

Potential Overcounting of City Slickers

As noted above, the Environmental Working Group checked USDA's most recent mailing list for any recipient who had received payments since 1985. USDA maintains a current list of addresses, but if a mailing address is changed the department does not consistently maintain the old address. In this analysis, EWG presents payments made to farm program recipients whose current address is in one of the country's top 50 cities. These data limitations necessitate an EWG assumption that program recipients have received all payments recorded since 1985 at the current address on file with USDA. Obviously, some unknown number of recipients may have received payments at previous addresses over the 10-year period, including farm addresses, that are no longer maintained by USDA. This assumption therefore has the potential to overestimate (or possibly underestimate) the number of program recipients in big cities--or for that matter at any mailing address on file with USDA. On the other hand, under law and USDA rules and regulations, any recipient could have lived in a big city, or anywhere else, over the entire 10-year period and still would have been able legally to receive Federal farm subsidy checks--from an eligible farm anywhere.

Potential Undercounting of City Slickers

For a number of reasons, and notwithstanding the potential overcounting problem described previously, this study almost certainly underestimates the number of urban recipients of farm program payments. We believe the underestimation is substantial.

Many recipients did not have a mailing address zip code. We checked every USDA recipient that had received even a single payment since 1989 (3.2 million recipients total) against the list of more than 8.2 million mailing addresses on file with USDA as of September, 1994. After completing the match of the two files, we found that we did not have a city, state or zip code listing for nearly 365,000 recipients that had received 4.9 million checks totaling $4.099 billion since 1985. In addition, for 5,372 recipients who had listings on file, we could not reconcile the city, state, and zip code information against a recent U.S. Postal Service-certified directory of zip codes (available on CD-ROM). These recipients--for whom a known mailing address was not found--received over 94,000 checks totaling more than $100 million. Thus, EWG was unable to determine an address for about $4.2 billion-worth of Federal farm subsidy payments (4 percent of the total) made to some 370,000 recipients since 1985. Some of the recipients for which addresses were not found may reside in one of the top 50 cities.

We did not examine all cities and suburbs. In this report, EWG analysis is limited to recipients whose current mailing address for USDA checks is in the postal area of one of the 50 most populous cities in America. Obviously, the inclusion of additional cities would have increased the number of urban recipients, checks and payments, though many smaller cities are in closer proximity to agriculture, and more of the payments would be expected to originate within the state. In addition, in many cities--Los Angeles, San Francisco, New York and Chicago are good examples--postal areas encompass a fairly small portion of the greater metropolitan area. We analyze and present separately in the report several tabulations for suburbs and satellite cities and towns for 28 major urban areas, but not for all 50 cities considered in this report. Inclusion of suburbs often resulted in a significant increase in the number of recipients, checks and payments reported as urban residents.

Farm subsidies disbursed through corporations, trusts and other entities or transferred between individuals, could not be traced with available data. At the time this report was prepared, the EWG database could only track payments made directly to recipients whose scrambled identifying numbers were matched to a verifiable city, state or zip code. We were unable to track the "indirect" payments made to urban and suburban residents or other absentee interests. USDA payments can be sent directly to a corporation, trust or other entity at one address, and then disbursed to others with an interest in the farm. For example, farm subsidy checks might be sent to a revocable trust, the mailing address of which is a small town near the farm that has participated in a subsidy program for many years and has received substantial funds. The trust might then divide and disburse payments to trustees living anywhere, including distant cities. The EWG database cannot (at this stage) trace such transactions, but USDA experts and other agriculture program specialists inform us that such arrangements are very common. This inability to trace indirect farm payment transfers has almost certainly resulted in a significant underestimate of subsidy payments to city residents. 1

1 One anecdotal bit of evidence of such indirect payments came to light as we were preparing this study. A number of journalists visited the EWG computer center to learn about our farm subsidy database. Of the first eight reporters who visited, one of our analysts noted, two remarked that they had received farm program payments via the families of their spouses. They did not know what programs the payments were made under, nor even were they certain of the location of the farm beyond what state it was in. Nor was it clear that they had ever actually visited the farms. But every so often a check appeared, they said, representing the spouse's share of a farm program payment that had been disbursed from a trust or other entity located hundreds of miles from their current place of residence. This is precisely the type of transaction that EWG was unable to track in City Slickers.

Chapter 2.  How Do Farm Subsidy Checks End Up in Big Cities?

There is a long answer and a short answer to the question posed by this chapter.

For the long answer, the reader is referred to A Lawyer's Guide To Payment Limitations, a 189-page publication in the "Practice Guide Series for Federal Farm Programs," which is published by the American Bar Association and the National Center for Agricultural Law Research and Information at the University of Arkansas. Developed with funds provided by the government itself (USDA), the guide is aimed at the hundreds of attorneys nationwide who practice the art of ensuring that clients who want Federal farm subsidies can comply with USDA payment rules pertaining to eligibility and payment limitations.

The short answer is, it's easy to qualify for farm subsidies if you live in a big city. And it's perfectly legal.

Almost anyone who owns qualifying farmland, or who has a stake in a corporation, partnership or trust involved in farming can be eligible for Federal farm subsidy payments. USDA's byzantine rules require substantial paperwork, particularly for larger farms with complex business structures that bring in big subsidy payments. But beneath all the forms, procedures and bureaucratese is an underlying set of requirements that are not very tough to meet. You don't have to farm to get farm payments. You don't have to live on the farm, near the farm, in the county or in the state in which the farm is located. You don't even have to live in the United States to qualify for subsidies.

You do however have to be a "person" in the eyes of USDA in order to be eligible. But as it happens, "A 'person' may be many things," according to USDA. A "person" may be:

"...an individual farmer, an individual who is a member of a joint operation, a corporation (including Subchapter S corporations), a joint stock company, an association, a limited partnership, a trust, an estate, or a charitable organization."

Even a "State and all of its political subdivisions and agencies" can be considered a "person" and therefore eligible. A public school can be a "person," and receive payments, and so apparently can other Federal agencies. A husband and wife can be considered a "person" together, or if it benefits them they can figure out how each of them can be a "separate person" for purposes of qualifying. Even a minor child can qualify in combination with the parent or parents who have custody of the child.

"...unless the minor child has a farming operation in which the parent(s) has no interest and the minor child has established and maintained a separate household from the minor's parent(s), as well as personally conducting farming activities, including a separate accounting of such activities and operation...."

If you, your spouse, your corporation, your trust, your partnership, your state, your city, your school, or your minor child happen to be a "person" in USDA's expansive sense, you must then meet another test that is just as "rigorous." You must be "actively engaged" in farming.

"Actively Engaged in Farming"

According to USDA, "for programs where a 'person' is required to be 'actively engaged in farming' before any payments may be issued, producers applying for payments must provide information to their local County ASC committee [now CFSA committees] to substantiate their active engagement in farming. The County [CFSA] committee will use this information to determine the producer's contribution to the farming operation and confirm eligibility for payment."

The committees referenced here are composed of local farmers, elected by local farmers, who serve on a part-time basis for 3-year terms. In fact, only local farmers can serve on the committees, and only farms can elect the farmers who serve. Locally based USDA officials also have a formal role on the committees. Several potential problems arise with this system. First, farmers who themselves often receive farm program payments play a key and often uncomfortable role in determining if their neighbors are eligible for payments, and for how much. Second, and perhaps more important, the committees have very limited resources with which to investigate the quality and validity of information a program applicant provides to substantiate active engagement in farming. The committee's initial determination must be made within 60 days of when the applicant provides the information--and the information required is anything but straightforward.

According to USDA: "Generally, in order to be determined 'actively engaged in farming' a 'person' has to make a significant contribution of capital, land, and/or equipment to their farming operation, as well as a significant contribution of active personal labor and/or active personal management. Capital also includes the rental value of livestock." [Emphasis in original]

The term "significant contribution" is further defined by USDA as follows:

"If a 'person' provides only capital, or only land, or only equipment, a significant contribution of capital, land, or equipment is defined as 50% of the 'person's' commensurate share of the total capital, land, or equipment necessary in the farming operation.

"If a 'person' provides a combination of capital, land, or equipment, a significant contribution is defined as 30% of the 'person's' commensurate share of all of the capital, land, and equipment necessary in the farming operation.

"A significant contribution of active personal labor is when a 'person' personally provides the smaller of 1000 hours of personal labor or 50% of the 'person's' commensurate share of the total labor necessary in the farming operation.

"Local County ASC committees will be making determinations on whether a 'person' has made a significant contribution of management by looking at the type of management input a 'person' is personally providing in a farming operation and deciding whether or not the inputs provided are critical to the profitability of the farming operation." [All emphasis in original.]

Verifying such information with any confidence would be exceedingly difficult for the simplest farming arrangements. The true complexity--impossibility may be a better word--of the farmer committee's watchdog duties, as they "look at the type of management input," becomes evident when one recalls that, to USDA, "a 'person' may be a many things."

As it happens, these complex determinations are rendered unnecessary in many cases by "exceptions" in the regulations that often are the rule for determining who can receive Federal farm subsidies. For example, if a 'person' (i.e., corporation, partnership, etc.) is simply a landowner, the 'person' need not provide contributions of active personal labor or active personal management to the farming operation to be determined 'actively engaged' in the farming operation. This exception alone provides enormous latitude for absentee interests to collect farm subsidies, wherever they may live. In another "exception," if an "adult family member" somehow meets the "active personal labor" or (even less tangible) "active personal management" criteria in a joint operation comprised mainly of family members, that "adult family member" is considered "actively engaged in farming."

From even this brief summary of the rules of the game, it can hardly be surprising that hundreds of thousands of 'persons' in cities and suburbs can qualify for government farm subsidies--persons who in common sense terms have little to do with the farms that bring them the payments. The rules and regulations that USDA has developed to determine who is eligible for Federal farm subsidies may seem absurd or extraordinarily permissive to outsiders, particularly when the concepts embodied in those rules are applied to circumstances of other occupations or businesses, including farming enterprises for which no direct Federal subsidies are provided. But USDA's rules make perfect sense in the context of policies and laws that by purpose, design and function, link agricultural income transfers first and foremost to land and land ownership.

How do big city residents get farm subsidies? It is as if, in 1933, American taxpayers agreed to place a pile of money on any and all qualifying farmland and to perpetually replenish it. And then we allowed anyone who came to own that land thereafter the full right to those dollars, too. Farm subsidies are distinctly like the water rights that convey with land ownership in many parts of the western United States, except of course that taxpayers--not mother nature--are the source behind the steady stream of income subsidies. If you own eligible farmland you're entitled to draw all or part of whatever farm subsidy payments U.S. taxpayers are obligated by law to provide. And the more land you own, the more subsidy you can get, whether or not you ever set foot on the farm itself.

Chapter 3.  Findings

Beverly Hills, 90210

That's what we typed into the computer one evening in late November, 1994. And after months of computer tabulations and compilations, we were stunned to find that a "person" who is "actively engaged in farming," with a current mailing address in that most famous of zip codes, has received Federal farm subsidies 9 out of the past 10 years--68 checks totaling $412,666 dollars--from a farm in the Texas Panhandle. And this "farmer" was not alone.

It turns out that 47 Federal farm subsidy recipients--individuals, partnerships, corporations, joint ventures, and trusts--who have received a total of $1.27 million in payments since 1985, list Beverly Hills zip codes as their permanent mailing address at USDA. And their subsidy checks are earned by farms in 16 states in addition to California. Someone whose USDA mailing address is in Beverly Hills actually got a Federal farm subsidy check for five bucks for a farm in Louisiana.

American taxpayers are sending hundreds of millions of dollars in Federal farm subsidy checks every year to a handful of absentee owners, corporations and other "farmers" who live smack in the middle of the country's biggest cities. From Beverly Hills to Key West, EWG research shows that it is the rare, well-heeled suburb, urban enclave or resort spot in the United States that does not have at least one Federal farm subsidy recipient in residence.

Over a million checks to big city recipients

Over the past decade, taxpayers wrote 1.6 million agriculture subsidy checks worth more than $1.3 billion to "city slickers" whose permanent mailing address is in the heart of one of the 50 most populous urban areas in the United States. For a variety of reasons, even this substantial sum probably underestimates farm subsidy payments made to recipients in major U.S. cities.

An Environmental Working Group (EWG) analysis of 110 million USDA computer records of $106 billion-worth of farm subsidy payments made since 1985, found over 74,00 recipients whose current mailing address for agriculture department checks is in downtown New York City, Los Angeles, Chicago, Houston, Phoenix, Miami, St. Louis, Detroit, Dallas or other top U.S. cities (Table 1). When EWG analyzed major suburbs and satellite cities and towns in the greater metropolitan areas of just 28 of the 50 biggest cities, the number of "farmers" increased by 93 percent and total payments increased by $528 million to $1.8 million (Table 2)

Table 1: Summary of Federal farm subsidies for America's big cities.

Table showing federal farm subsidies by city

 

Source: Environmental Working Group. Compiled from USDA data.

Table 2: Suburbs of the top 50 cities receive significant Federal farm subsidies.

Table showing suburbs of the top 50 cities receive significant farm subsidies

 

Source: Environmental Working Group. Compiled from USDA data.

Payments flow in from dozens of states

In every major U.S. city, farm subsidy checks pour in from farms located in dozens of states. Farms in 42 states pump government subsidies into New York City, 38 states send Federal farm dollars to Los Angeles, 37 states have farm program recipients in Chicago, and 41 states are sending agricultural assistance to "farmers" in Houston. In many big cities--New York City, Los Angeles, Chicago, and Tucson, for example--half or more of the subsidies come from farms located out of state.

Just a few city slickers get most of the subsidy payments

In big cities as in the countryside, a small number of individuals, partnerships, trusts and corporations collects the lion's share of Federal farm subsidies. Just 862 big-city subsidy recipients (1 percent) collected $388 million, nearly 30 percent of the total payments to the postal areas of the top 50 cities. The top recipients in the 50 biggest cities received 6,585 checks for $88.6 million (Table 3). At the other end of the spectrum are thousands of farm subsidy recipients who received very small amounts of money over the past 10 years. Overall, about 57 percent of the subsidy recipients received less than $5,000, totaling just 5 percent of the payments. Many recipients received just a few, small subsidy checks, in which case the program benefits may have been less than USDA's processing costs for the payments. Payments that went to cities were made under literally dozens of Federal programs that subsidize farmers, including commodity supports, conservation and disaster programs.

Table 3: The top recipients in the 50 biggest cities received 6,585 checks for $88.6 million in Federal farm subsidies.

Table showing the top recipients Table showing top cities for farm subsidies

Source: Environmental Working Group. Compiled from USDA data.

Here in brief is the city slicker story for some of those top cities.

New York City

A total of 574 recipients with current USDA mailing addresses in New York City cashed 9,135 USDA checks, totaling more than $7 million. One resident of Manhattan zip code 10003 received 37 checks worth $558,225. Checks came every year since 1985, for a farm in Nebraska. The concentration of payments is dramatic: more than 92 percent of the cash ($6.4 million) went to just 208, or 36.2 percent, of recipients. Based on the source of payments, "farmers" from 42 states live among the largest urban populace in the nation, and they received 93.5 percent of their government payments for out-of-state farms.

Los Angeles

Between 1985 and 1994, 735 Federal farm subsidy recipients who currently have Los Angeles mailing addresses received 15,332 USDA checks, totaling more than $10.7 million. The top recipient in Los Angeles is a general partnership in zip code 90024 that received 22 checks over 7 of the last 10 years, worth more than $837,000. Checks sent to Los Angeles recipients came from farms in 38 states; 57 percent of payments were for farms not in California. Less than half of the L.A. recipients received nearly all of the payments--$10.1 million or 94.8 percent.

Chicago

A total of 1,524 "farmers" whose current mailing address with USDA is in the Chicago postal area received a total of 27,663 USDA checks worth $23.9 million. The most farm subsidy payments in Chicago went to an individual in zip code 60614, who collected 77 checks over 9 of the last 10 years, worth more than $822,000. Chicago ranks 20th among the 50 largest American cities for farm program payments. Although Illinois is a farming state, Chicago recipients drew Federal payments for farms in 37 states; 43 percent of payments were for out-of-state farms. Similar to the concentration in Los Angeles, 41.3 percent of recipients (630 residents) received $22.8 million (95.2 percent of payments).

Honolulu

Over the last 10 years, 2,412 USDA checks worth more than $2 million were sent to 177 farm program participants in Honolulu. The top-ranked recipient in Honolulu is a corporation with stockholders in zip code 96809. This corporation received 32 checks worth $459,649 in 6 of the last 10 years for a farm in California. Farms from 31 states generated Federal subsidy payments to recipients whose current address is Honolulu. A mere 14.9 percent of Federal farm subsidy payments sent to Honolulu were for Hawaiian farms.

Concentration is as expected: 44.6 percent of recipients (79 residents) got 92.3 percent of the subsidies, or $1.9 million.

Dallas

A general partnership in Dallas, Texas received 157 checks over 6 of the last 10 years totaling more than $1.8 million--from farms in two counties in Mississippi. The partners weren't alone: 4,420 residents of Dallas received more than $71.4 million from farms in 40 states. The payments were disbursed in 126,542 USDA checks between 1985 and 1994. Dallas ranks fifth among the largest 50 cities in the nation receiving Federal farm subsidies. Texas land barons may still reign: 66.5 percent of the payments to Dallas were for Texas farms, and 94 percent of the $71.4 million ($61.1 million) went to 41.8 percent, or 1,848 recipients.

Atlanta

A total of 632 checks were mailed over 9 of the last 10 years to the top recipient in Atlanta--an individual in zip code 30345--for a total of $453,355. In all, from 1985 through 1994, 1,105 residents of Atlanta collected 17,037 USDA checks worth more than $13.2 million. The city is home to "farmers" who receive USDA checks for land in 35 states. More than half of the farm subsidies paid to Atlantans came from farms out-of-state. As in all the cities we studied, concentration of payments is top-heavy: 91.6 percent of the farm subsidy cash ($12.4 million) went to 450 recipients, or 40.7 percent.

Washington, DC

The top "farmer" in Washington, DC received a total of 271 farm subsidy checks from North Dakota in 8 out of the past 10 years, totaling more than $286,000. More than $5.1 million, disbursed in 9,833 USDA checks went to 470 residents of the nation's capital from 1985 to 1994. Only 9 states failed to send Federal farm subsidy checks to recipients in Washington, DC. About 40 percent of Washingtonian recipients (186 residents) received most of the money: $4.7 million, or 92 percent of the payments.

The Biggest Payments Go to Partnerships, Joint Ventures and Corporations.

More than 63 percent ($825 million) of the total farm subsidies paid to big city recipients went to individuals, but on average individuals received just $13,000 per "person" over the entire 10-year period (Table 4). General partnerships brought in 12 percent ($150 million), averaging $72,000 over the 10 years. Corporations with stockholders collected 11 percent of total big-city subsidy payments ($138 million), averaging $58,000, and joint ventures collected $74 million (5.7 percent of the payments), but averaged over $200,000 each over the 10-year period. Subsidy payments also went to churches, county, state and city governments, public schools, and other recipients with big-city mailing addresses, including the Federal government itself.

Table 4: Subsidies by type of entity

Table showing subsidies by entity type

Source: Environmental Working Group. Compiled from USDA data.

On the beach or on the links, in the sun or in the snow, Federal farm subsidies are almost everywhere you go.

Using the EWG City Slickers database, we also briefly analyzed farm subsidy payments to recipients whose permanent mailing address for USDA benefits is in one of 50 assorted high-income residential areas and resort, vacation, or retirement spots (Table 5). Sun City, Arizona, for instance, is the current mailing address of 488 "farmers" who received over 16,000 checks, worth $11.36 million since 1985, from a total of 28 states. Brentwood, California is the permanent mailing address for 76 Federal farm subsidy recipients who collected nearly $3 million from 5 different states. Farm subsidy recipients also list mailing addresses with USDA in the ski resorts of Aspen, Vail, Snowmass and Winter Park, Colorado, and the sun spots of Naples, Boca Raton, Marco Island and Key West, Florida and South Padre Island, Texas.

Table 5: Payments going to high-income areas.

Table showing payments to high-income cities

Source: Environmental Working Group. Compiled from USDA data.

Subsidy payments from states to cities

Among America's fifty biggest cities, Fresno, California ranked first by amount of agriculture subsidies received--more than $103 million was sent to Fresno recipients over the past 10 years. Sacramento, ranked second with $102.7 million in subsidies received, followed by Omaha ($79.8 million), Dallas ($71 million), and Phoenix ($71 million). Boston, Massachusetts ranked last with nearly $800,000 going to subsidy recipients.

Among the states which transferred payments to recipients in the top fifty cities, Texas ranked first with $234 million, followed by California ($223 million), Nebraska ($80 million), Arizona ($64 million), and Kansas ($63 million). Four states--Kansas, Missouri, North Dakota, and Texas--sent some subsidy payments to recipients in each one of the top fifty cities in our analysis. On the other side of the spectrum, Alaska was the only state that did not send subsidy checks to at least one recipient living in one of the fifty largest cities. And Rhode Island sent the least amount to big city recipients: a mere $1,760 went to recipients in Manhattan and Boston.

Chapter 4.  Conclusions and Recommendations

Massive and widespread cash payments to absentee interests in cities are just one of many indications that America's Federal farm subsidy programs are out of date--and badly out of control.

Absentee landowners, distant corporations and farflung investors are able to draw substantial government agriculture subsidies, though they may reside in a big city hundreds or even thousands of miles from the farm and never set foot on that farm for years on end. As a practical matter, almost anyone can qualify for Federal agriculture subsidies. You don't have to farm the land, you don't have to live anywhere near the land, you don't even have to visit from time to time. You don't have to be related to the farmer or to anyone else who has an interest in the farm. And wealthy, absentee farm owners who are most likely to run afoul of payment limits or other rules have ready access to legal advice that can help them maximize their government payments--advice provided by the government itself.

Absentee ownership and interest take many forms.

Not all big-city residents receiving farm subsidy checks are necessarily absentee owners or interests--though they certainly could be, given USDA's permissive programmatic definition of who can be considered a "person" who is "actively engaged" in farming, and the department's very limited oversight of program participants. For example, some city residents no doubt commute with some frequency to nearby farms that they own or operate, especially during peak workload periods. Other recipients may be "actively engaged" in the operation of the farm from afar by making frequent and important management decisions. In those cases, USDA's rules and regulations are being honored in the spirit and letter. But even then the question still begs to be asked: Why are taxpayers involved in this arrangement?

This report does not examine the many manifestations of absentee ownership or interests that are much more common. A small-town doctor, lawyer, accountant, college professor, farm real estate agent or small businessman might inherit eligible farmland, buy it as an investment, or rent it to a farmer in the county. In this manner, non-farmers could receive most or all of the USDA payments while also reaping the longer-term boost those payments give to land values. A group of farmland investors may shop around for land under 10-year Conservation Reserve Program (CRP) contracts and collect the payments. A farmer's widow, brother, daughter or son might move to a small or mid-size town nearby or a few counties distant, and still receive a share of USDA farm, disaster or conservation payments from the farm they've left behind. Or a relative or landowner may actually live part-time or full-time on the farm that he or she owns only in part, but have no physical or managerial involvement with the farming of the land by the renting tenant. Any such individual could meet USDA's test of being "actively engaged" in farming with no difficulty.

Some of the above examples certainly seem more reasonable than others, but all underscore a fundamental problem with America's Depression-era farm programs: they mostly reward the ownership of land, not the farming of it, and reward most those who own the most, not those most in need.

Recommendations

A major overhaul of America's 60-year-old Federal farm subsidy programs is long overdue.

The fact that these programs transfer massive government subsidy payments to recipients in big cities, as we document in City Slickers, is just one more compelling reason why the 1995 Farm Bill must not result in business as usual.

A "bottom up" review of Federal farm programs, of the sort initiated by Senate Agriculture Committee Chairman Richard Lugar, is very much in order. We believe that three broad objectives should guide Congress as it begins the 1995 Farm Bill debate.

  • First, Congress should directly and firmly address the issue of taxpayer support for large "paper" farms, corporate producers, and absentee owners who can and do earn much of their living elsewhere. If taxpayers are expected to maintain an income safety net for agriculture, assistance should be limited to reasonable levels that would help a small family business, not enrich big agribusiness.
  • Second, Congress should fundamentally change priorities for taxpayer investments in agriculture and rural communities, so that spending reflects contemporary needs, not the needs of 1933. The 1995 Farm Bill presents an unprecedented opportunity for taxpayers to invest in programs that get pesticides out of their food and tapwater, that protect rivers, lakes, land, and wildlife. Instead of voting to weaken environmental safeguards, Congress should provide farmers assistance to meet or exceed environmental standards, and protect their land at the same time.
  • Finally, if Congress adopts a broad risk-assessment bill with cost-benefit provisions that override public health or environmental laws, the same rigorous procedures should be strictly applied to all agricultural assistance programs. No farm, export, or crop insurance subsidies should be provided until the environmental and economic risks of those subsidies have been clearly identified, and least-cost alternatives, such as block granting farm program funds to the states, have been thoroughly considered. Similarly, if Congress enacts broad "takings" legislation that will result in compensation to farmland owners whose property values are in any way diminished by Federal environmental laws, Congress should protect taxpayers from paying twice. Federal law should eliminate Federal farm subsidy payments that inflate the price of farmland and thus boost the potential taxpayer exposure to "takings" compensation claims.

Appendix 1.  Background on Federal Farm Subsidy Programs

The following section is excerpted from Geoffrey S. Becker. An Introduction to Farm Commodity Programs. CRS Report for Congress: July 20, 1994.

The U.S. Department of Agriculture's (USDA's) Commodity Credit Corporation (CCC) is required to provide assistance to 20 specified agricultural commodities, to achieve three primary objectives: to support prices, supplement incomes, and manage supplies. Supporters contend that financial help to the farm sector also ensures consumers an abundant supply of reasonably priced food. But critics believe that basic U.S. farm policies, conceived in the 1930s, no longer meet the needs of modern agriculture or society as a whole.

Commodities Supported

Current Law requires the Secretary of Agriculture to support the following commodities: cotton, rice, wheat, peanuts, milk, tobacco, feed grains (corn, barley, oats, sorghum, rye), soybeans and other oilseeds (sunflower seed, canola, rapeseed, safflower, flaxseed, mustard seed), and sugar (sugarcane and sugar beets).

Type and Extent of Support

Congress has devised a variety of techniques, some dating to the 1930s, for the CCC to assist producers. Generally, each was designed to achieve one of three broad policy objectives:

  • To support farm prices of designated commodities. The methods for achieving this goal have included nonrecourse loans, commodity purchases, and farmer-owned grain reserves;
  • To supplement incomes of those who produce them. Methods have included deficiency payments (based on target prices), incentive payments, marketing loans, loan deficiency payments, and disaster payments;
  • To manage supplies of particular commodities. Methods have included acreage reduction programs, paid acreage diversions, acreage allotments, marketing quotas, milk diversion and dairy termination programs, and production and marketing assessments.

Which techniques are used, the levels of aid they provide, and impacts on taxpayers, consumers, and/or other producers, differ among the commodities. Some products are supported by only one program tool; others receive their support through a combination of methods.

Wheat, feed grains, cotton, and rice producers have access to the most extensive set of program tools. Not coincidentally, these crops represented nearly $100 billion, or about 70 percent, of the approximately $142 billion in total CCC program outlays between fiscal years 1983 and 1992. Each year, USDA announces a program" for each of these crops. If farmers choose to enroll, they agree to abide by certain planting and other requirements in exchange for a variety of potential benefits. The enrollment usually takes place by early spring, prior to planting time, at county offices.

One primary benefit for wheat and feed grains producers is a CCC nonrecourse loan at harvest time. To qualify, a farmer pledges his crop as collateral and agrees to store it, usually for 9 months; he can later choose either to repay the loan or to forfeit his crop to the CCC to satisfy repayment. The loan is based on a per-bushel (or per-pound) rate; it serves as the lowest price a participating farmer will have to take for his crop. In some years, wheat and feed grains producers are permitted to, in effect, extend their loans by keeping their crops in longer storage under the farmer-owned reserve program.

Rice and cotton program participants have been using a variation of the nonrecourse loan known as the marketing loan, which requires them to repay their original CCC loan but permits redemption at less than the original rate of borrowing. The producer essentially pockets the difference as a subsidy.

Wheat, feed grains, cotton, and rice program participants also may benefit from deficiency payments, income supplements that are based upon a per-bushel (or per-pound) "target" price set by Congress for each crop. The subsidy is the difference between: (1) the average market price or CCC loan rate for the crop, whichever is higher and (2) the target price (which is set above the CCC loan rate).

In exchange for CCC loans and payments, enrolled producers must agree to participate in any acreage reduction program (ARP) announced for that year's crop. An ARP requires them to remove a designated percentage of their land from production and to devote it to conserving uses. One reason the Government uses the ARP feature is to limit potentially large, price-depressing surpluses. In some years, the ARP may be supplemented by a paid acreage diversion--either voluntary or as a further condition of eligibility--that offers an added financial incentive to take even more acres out of production

Legislative Authority

Some standing authority for CCC programs is provided by three permanent laws: the Agricultural Adjustment Act of 1938 (P.L. 75-430), the Agricultural Act of 1949 (P.L. 81-439), and the Commodity Credit Corporation Charter Act of 1948 (P.L. 80-806). However, while the programs retain many of the features of these laws, Congress has frequently altered them, usually through omnibus, multi-year farm bills. The most recent omnibus farm law, which is now guiding program operations through 1995, is the Food, Agriculture, Conservation, and Trade Act of 1990 (P.L. 101-624). The programs also must meet certain cost-saving requirements outlined in the Omnibus Budget Reconciliation Acts of 1990 and 1993 (P.L. 101-508 and P.L. 103-66, respectively).

USDA's Land Conservation Programs

The following section was prepared by the Environmental Working Group

In addition to Federal commodity support programs, the USDA administers a number of conservation programs that provide direct payments to farmers for a variety of land retirement, management and conservation treatment activities.

The lion's share of federal land conservation spending has come through the Conservation Reserve Program (CRP) which transfers nearly $1.8 billion per year in the form of annual rental payments to farmers who have taken marginal lands out of production, planting them to grass or trees. By the time all 375,000 existing CRP contracts expire, the program will have paid over $19 billion to farmers. Over half of those payments, which began in 1986, had been made by the end of 1994. In addition, USDA provides roughly $200 million annually in cost-share funds to producers for conservation improvements on their land. These cost-share programs include the Agricultural Conservation Program (ACP), the Forestry Incentives Program (FIP), the Water Quality Incentives Program (WQIP) and others. Payments for these and other programs are captured in the database used to prepare City Slickers.

Disaster Programs

In most years for which this study presents data, USDA made substantial payments to farmers for a wide range of disasters. So-called ad hoc disaster bills funneled billions of dollars in payments to farmers for damages incurred from floods, droughts, hurricanes, hail, early frost, and other natural calamities. In 1994, ad hoc disaster assistance was in theory replaced by comprehensive federal crop insurance. All disaster payments made to farmers through ASCS between 1985 and 1994 are captured in the database used to prepare City Slickers.

Acknowledgements

Environmental Working Group

Environmental Working Group is a nonprofit environmental research organization based in Washington, D.C. The Environmental Working Group is a project of the Tides Foundation, a California Public Benefit Corporation based in San Francisco that provides administrative and program support services to nonprofit programs and projects.

Kenneth A. Cook, President
Richard Wiles, Vice President for Research
Mark B. Childress, Vice President for Policy

Principal Authors Kenneth A. Cook Andrew B. Art

Analysts Christopher Campbell * Frank Schima * Clark Williams

Acknowledgments

We wish to thank the staff of the Consolidated Farm Service Agency (formerly the Agricultural Stabilization and Conservation Service) at USDA's computer service center in Kansas City for their assistance and for responding so professionally to our data requests. Molly Evans designed and produced City Slickers on paper and the World Wide Web. Thanks to Eileen Gannon for assistance with desktop publishing, and proofreading.

City Slickers was made possible by grants from the Joyce Foundation, the Nathan Cummings Foundation, the Wallace Genetic Foundation, The Ford Foundation, Working Assets Funding Service, and the Apple Computer Corporation.

Environmental Working Group is solely responsible for this report and its content.

Copyright © March 1995 by the Environmental Working Group/The Tides Foundation. All rights reserved. In memory of Ward Sinclair.

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