Changes have been made to the Vermont Use Value Appraisal Program (Current Use) that guides the taxation of land and buildings used for agriculture, forestry and conservation.
Click this link for a resource sheet that explains the new changes: Changes in VT Current Use Tax Program _July 2015
Key changes include:
- A new calculation for the Land Use Change Tax (LUCT) (beginning Oct. 2, 2015)
- A temporary “easy-out” period in which landowners can remove a parcel, or portion of a parcel, without paying the full LUCT liability (between July 1 and Oct. 1, 2015).
- A new annual requirement for owners of agricultural lands and buildings to certify in writing on or before September 1 of every year that all enrolled agricultural land and buildings meet the requirements for enrollment at the time of the certification (form will be available in August).
- Authority given to Agency of Agriculture, Food and Markets to direct the Vermont Department of Taxes to remove agricultural land and farm buildings from the Current Use Program when the land or buildings are used by a person who has violated water quality requirements (beginning July 1, 2015).
In June I attended the National Farm and Ranch Business Management Educators annual conference in Rochester NY. Steve Richards, manager at Casa Larga Vineyards and Winery (Fairport, NY), shared his expertise on managing a winery. Steve also worked for many years at Farm Credit East and the Winery Benchmarks Program: https://www.farmcrediteast.com/winerybenchmarks
New York State Wine Overview
• Influence of international trade: when Australia grape/juice prices go down, wineries will increase usage of this supply up to the allowable thresholds under current regulations
• 60% of wine volume produced is non-varietal sweeter wines
• Riesling is the top NYS varietal, about 10-15% of overall wine volume produced
• A good way to forecast wholesale wine sales is to research the general restaurant sales forecast for the upcoming periods.
Keys to Financial Success:
• Inventory Turnover: a typical winery will to have 1.5- 3 years max of annual sales in inventory. Larger inventory is less favorable and wineries must work to increase the number of inventory turns per year to over 1. Successful wineries move inventory faster and bottle final product as close to sales date as possible (accounting for any bottling/conditioning factors influencing final quality). Aging inventories over 3 years old is less desirable.
• Labor Efficiency: Wineries track cases per worker and this is a key focus of scaling the business. The biggest cost factor as a winery grows is the overhead costs of marketing and regulatory compliance. There are labor efficiency sweet spots at different scales
- 500-2,500 cases is a good place to be. Labor efficiency ranges from 6k-10k cases per full time worker.
- At ~5,000 cases the retail only establishment has maxxed out on sales. The winery begins to wholesale product. This creates an increased administrative burden to serve these new markets.
- 5,000 – 10,000 cases tends to be poor scale for labor efficiency, possibly down to 4k cases per worker
- At around 15,000 cases the labor efficiency curve begins to get better.
Labor efficiency peaks at the scale of ~35,000 cases per year, with the labor benchmark approaching 10,000 cases per full time worker.