Should Virginia wineries get agricultural tax breaks if they’re not growing grapes?

Trump Winery’s billionaire owner has hinted the estate could one day be home to a resort or golf course as well as a vineyard. As wineries become more commercialized, there’s a greater chance of clashes over rural land use. Photo: Lindsey Henry Trump Winery’s billionaire owner has hinted the estate could one day be home to a resort or golf course as well as a vineyard. As wineries become more commercialized, there’s a greater chance of clashes over rural land use. Photo: Lindsey Henry

Governor Bob McDonnell’s declaration of 2012 as the year of “Virginia wine’s emergence on the international stage” was meant to mark an anniversary: It’s been 250 years since a Commonwealth wine first won accolades in Europe. But there’s no question viticulture matters here at home. Virginia’s 200-plus wineries now contribute an estimated $747 million to the state’s economy and support 4,800 jobs. But as the industry grows, so do the number of vineyards claiming agricultural tax credits, and a blurry line between winemaking and tourism could mean more fights over land use in rural Virginia.

To qualify for a “Class B” Virginia farm winery or cidery designation, owners have to ensure that 75 percent of the fruit they use comes from Commonwealth vineyards —not necessarily their own. And in 2007, the legislature expanded the farm wineries’ privilege and banned local governments from regulating winery activities whose “purpose is to promote, market, sell, or educate guests about the wine produced.” As a result, some Virginia wineries that operate primarily as event venues are bypassing local zoning rules, and taking advantage of perks and a 40 percent land use tax credit meant to encourage agriculture, despite the fact that they’re doing very little growing.

Since the state passed the 2007 law, there have been a number of battles over wineries’ land use. Fauquier County winemakers are suing over an ordinance that restricts their business hours and the kind of events they can host. Albemarle aligned its rules with the state’s more permissive language in 2010, but last year, the county saw a bitter fight between Keswick Vineyards and neighboring residents over how to regulate event noise.

Mitzi Batterson is president of the Virginia Wineries Association, and owns and operates James River Cellars in Henrico County with her husband, James. Their 5,000-case-per-year winery is in an area that was already zoned commercial, so they haven’t had to worry about jumping through zoning hoops, but she said aggressive efforts by local governments to restrict the way wineries operate feels like an attack on everybody in the business.

“We’re still regulated,” she said. “I just don’t know any other industry where people are knocking on their doors, saying ‘You can only have these hours.’”

Virginia wineries have diverse business models, Batterson said, but the thing everybody has in common is big start-up costs. Every little bit of support helps. “That’s the idea, to minimize the amount of regulation so you can get up and running,” she said.

The Keswick battle aside, there have been few flaps over wineries’ land use in Albemarle. Credit that to the terroir. The Monticello American Viticulture Area, which includes nearly the entire county, has one of the highest concentrations of vineyards in the state for a reason: This is a great place to grow wine grapes. There are fewer wineries-in-name-only, and that seems to have inspired a more peaceful coexistence.

Former Augusta Medical Center ER doctor Rich Evans and his wife Lynn Davis, an anatomy Ph.D. and dean of the Echols Scholar Program at UVA, planted their first vines in Nelson County in 2000. For several years, they sold their grapes to other wineries, but in 2005, they put the Flying Fox Vineyard label on their first bottles. Now they run a small tasting room off Route 151 in Nelson County.

“We were losing money growing grapes,” Evans said. “We lose a little less money growing wine.”

The pair are purists, and at about 2,000 cases a year, they’re small-time. They’re in the industry for the joy of the craft, and they don’t host events. As Evans puts it: “No weddings, just wine.” But he readily acknowledges that not everybody has that luxury.

“This is not a business that we can live on,” he said. Even more than other agricultural operations, Virginia wineries are at the mercy of mother nature, and Evans said he doesn’t think it’s possible to turn a profit while relying on only one’s own acreage.

If you want to make wine and make money, “not growing grapes is probably a better business decision than growing grapes,” he said.

And the wine industry here continues to grow and commercialize. Consider the case of Trump Winery, nee Kluge Estate. The entire property, including the massive manor house, is now in the hands of the billionaire, and there’s talk of a resort and a world-class golf course to complement the vineyard. And while big operations like Trump’s require lots of startup cash, wealthy winery owners can also take advantage of millions of dollars worth of tax credits.

Will locals put up with the Trumpification of Virginia wine in Jefferson’s backyard? Evans says there’s a lot to be said for the economic boost that comes from long lines of cars winding their way down Route 151 in Nelson. And he doesn’t see a need to draw lines between wineries based on their business model. It comes down to the pour.

“The only distinction I’d make is if you like the wine, or you don’t,” he said.

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