By STAN MADDUX

Indiana Correspondent

MICHIGAN CITY, Ind. — Cities annexing land used to produce food can be a blessing not just for communities wanting to grow but to farmers positioned to reap a significant financial harvest.

Michigan City, for example, has taken steps to annex 500 acres targeted for new residential and warehouse development. The Indiana community of about 30,000 people along the Lake Michigan shoreline has entered into an agreement with two of the six property owners to incorporate the land for extending water and sewer lines to the site along U.S. Highway 20 near Interstate 94.

The vision is for warehousing to go on about half of the ground currently used for growing corn and soybeans. New homes would go up on the wooded portion of the land that has a creek running through it.

Clarence Hulse, executive director of the city’s Economic Development Corp., said the remaining landowners are on board and should officially be added to the annexation contract early next year.

One of the stipulations is that the land, once water and sewer connections are made, be offered at no more than $45,000 per acre to keep the cost affordable for buyers so that development occurs rapidly.

Hulse said talks have already taken place with several developers, including those wanting product coming in and out of the site on a rail spur that would have to be added to the existing South Shore Railroad freight tracks adjacent to the site. Trucks hauling product would also have easy access, with I-94 and U.S. 20 close by.

“That’s key for any large industrial development,” he said.

Chris Hurt, an agricultural economist at Purdue University, said the financial incentive for farmers with property targeted for industrial and residential development is great, considering the per-acre price for strictly cropland in that part of the state now stands at less than $7,000.

The downside is when farmers are torn, especially when ground has been in the family for generations and selling must occur if property and other taxes associated with the land go up substantially.

“The good side of these things is if you’re forced to sell out, it’s better to sell out at a very high price,” he said.

Hurt also said farmers who sell can use the proceeds to purchase considerably more farmland if they want to continue producing food and avoid the federal taxes that would be levied right away if they simply banked the profits. He explained farmers don’t have to pay federal taxes on the sale of ground as long as money derived from the sale is used to purchase similar ground within six months.

“They essentially can sell it with no income taxes paid,” he said.

He added most farm families dedicated to what they do usually acquire other ground despite the major disruption of relocating, but others – depending on the situation – use the proceeds to retire or enter another line of work.

“The good news of the story, I think, is you’re inconvenienced but, ‘I get compensated for that.’ Well-compensated, generally, in these kind of issues,” said Hurt.

He also noted farmers should make sure what’s offered for their land is more per acre than the new ground they plan on purchasing if they want to stay in the business.

“This is very common. This goes on all of the time. Just think about any place that you have kind of the urban sprawl, and all of these issues that had to be worked out with families. That land was generally in farms at one point,” said Hurt.