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ABOUT SMADC: The Tobacco Buyout

The Tobacco Buyout component was a voluntary program started in 2000. It was initiated with funds from the “Master Settlement Agreement” with the major tobacco companies in 1998. Maryland put its 25-year, $4.5 - $9 billion share of the settlement into a “Cigarette Restitution Fund,” of which five percent goes to support Southern Maryland’s Regional Strategy for Agriculture, with an emphasis on finding alternatives to tobacco.

The Tobacco Buyout provided funds to a) support all eligible Maryland tobacco growers who choose to give up tobacco production forever while remaining in agricultural production, and b) restrict the land from tobacco production for ten years should the land transfer into new ownership.

Eighty six percent of the 1998 eligible tobacco was taken out of production forever for human consumption as 877 growers took Maryland's Tobacco Buyout by 2005. This represented 7.80 million pounds of tobacco and 94% of the producers.


Program Eligibility

  • Eligibility was based on tobacco production in the 1998 crop year.
  • Eligibility also included verified tobacco production in 1998 that never made it to market as a result of losses due to natural occurrences, or medical data that indicated a grower produced tobacco before and after 1998, and, but for extenuating circumstances, was not able to produce in 1998*.
  • Verification of eligibility for Phase II payments or verifiable tobacco warehouse receipts

Program Payments

  • Participating growers were paid $1.00 per pound for ten years.
  • Payments were based on the growers' average verified tobacco production in crop years 1996, 1997, and 1998 as documented in sales records.
  • Payment determination also included verifiable losses due to natural occurrences at the sole discretion of the Southern Maryland Agricultural Development Commission.
  • Payments were based on pounds of tobacco produced and recorded/sold, not on acres planted.

Program Terms

  • Program was voluntary.
  • Program sign-up occurred over a five-year period from 2000 - 2004 for Buyout contracts effective 2001 - 2015
  • Once enrolled, a grower agreed to permanently cease production of tobacco for cigarette manufacturing and similar personal consumption.
  • Program terms/conditions applied to individual producers.
  • Corporate farms and partnerships were required to bind the business entity, and all shareholders, officers, and partners to the terms of the buy-out.
  • Grower was required to remain in agricultural production for ten years.
  • Non-commercial property carried a deed restriction for the duration of the growers lifetime, or for the ten-year duration of the contract should the property be transferred to new ownership, prohibiting the production of tobacco for purposes of cigarette manufacturing and similar personal consumption unless otherwise approved at the discretion of the Southern Maryland Agricultural Development Commission*.

Application Process

  • Applications were accepted from November through January for the following year. Applications included:
    • Names of producers of record affiliated with the farming operation to include corporations, corporate offices, partners, and others
    • Producer's social security number
    • Copies of all non-commercial property deed held in the State of Maryland, or signature affirming grower does not own property
    • Birth-date and co-signature of parent or legal guardian is grower is a minor ( Minors and their parent or legal guardians are required to sign a memo attached to the contract stipulating that the minor must reaffirm the terms of the contract once they become 18 years of age, or they will forfeit all future payments, and the co-signing adult may be liable to repay all payments made, plus interest and any other associated fees.)
    • Other appropriate information.

Program Compliance

  • Annual affidavit that stated parties to the contract are not producing tobacco
  • Annual affidavit that stated how the producer stayed in agriculture
  • Allowable exceptions included verifiable medical conditions, or other extenuating circumstances at the discretion of the Southern Maryland Agricultural Development Commission*

Monitoring of land-use

  • Annual random inspections of 5% of program participants
  • Random inspections of program participants including an audit of warehouse records
  • Investigation into complaints

Contract Stipulations

  • Civil penalties clearly stated on contract
  • If land use changed, participants forfeited all remaining payments
  • Breach of contract required forfeiture of all program proceeds received to date, future payments, plus a to-be-determined penalty payment.

Incentives

  • Enrolled farms, in good standing, qualified for a 10% increase in easement valuation (County and State programs)

* Special Requests or Exemptions

  • All special requests or cases were thoroughly reviewed. All requests were initially heard by a Tobacco Review Committee and/or the full Southern Maryland Agricultural Development Commission. Final decision authority rested with the Southern Maryland Agricultural Development Commission.
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