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Conservation Easements Put Money In The Wrong Pockets by Dave Skinner 6/12/02 Alamogordo, NM (PFNS) Like most people, I am concerned with the gradual, and sometimes not so gradual replacement of our wide-open spaces with housing. I've seen more than a few of my favorite hunting and fishing spots, and my favorite neighbors, disappear forever. It's a bad situation, made worse by conservation easements. To explain, I must get into agricultural reality a little. I recently attended a "conservation festival" put on by the local enviros, complete with group howls and off-key singing about the "wild Montana sky." But one of the less-silly items on the agenda was a lecture by Dave Heine, a high school classmate of mine who went into farming after college. The economics were such that he's now a real estate broker, a very good one, specializing in agricultural properties. Dave told festival attendees that from a purely agricultural standpoint, grazing ground is worth $65 per acre. Cropland is worth up to $165 for row-crop irrigated ground. Good timberland runs $200 per acre. That dovetails pretty closely to the sick fact that ag producers are lucky if they can pull down a 2 percent return on investment. Most checking accounts pay more, and they don't ask you to slave 24/7 either. Trouble is, the value of these same lands as residential properties is far greater. Farmland goes locally for a minimum of $10,000 per acre for house lots, while wooded parcels go for $20,000, even more if there's a great view. It seems like a no-brainer for farmers to sell out, but I know firsthand that ag producers put their hearts into what they do, and there's the rub. The brain says: "Prices stink, thanks to market concentration and terrible federal ag policies, exacerbated by a consumer base that thinks food comes prepackaged from Safeway." The brain also says: "Costs are terrible, with expensive equipment, fuel, taxes, and all the rest???never mind the weather." The brain knows others control ag producers' costs and revenues, a situation, which, over the long run, is a guaranteed loser. So the brain says: "Sell for what you can get." But the heart answers: "Look at those beautiful, sleek cattle and run your hands through that tall grain. Smell the rain! The dirt! Sell the family place? Never!" Into this battle between the brain and the heart comes the nice, clean-cut land conservancy agent. The agent offers 30 percent on what a developer will pay and says "You get to farm some more, but we call the development shots." The farmer signs on the dotted line, gets a cash payment and a tax break, and everyone's happy. Right? Wrong! The fundamental problem of high costs and low prices still hasn't been addressed. After thirty more years of crappy prices, the operating trust is spent down. Broke again, the farmer or heirs want to sell, but they already sold the development rights to the trust. The trust lawyers can then argue the conservation easement (CE) payment was the purchase of a share in the property, as in: "At 6 percent compounded daily, our interest in the development rights is now eighty gazillion dollars. You can't sell them, and if you try, we will sue you for our interest, leaving you nothing. But if you donate us clear title to us, we'll tell the Internal Revenue Service to give you a nice write-off. After all, we're a 'nonprofit'." And once the trust has clear title, what happens? Will the trust operate the farm and pay taxes on it? No! For example, The Nature Conservancy (TNC) is not operating the Baca Ranch, and never will. The Baca is to be sold to the federal government once the funding is appropriated. The Greenland Ranch out by Monument is to be partly transferred to the state, while a "conservation buyer" takes the rest in a deal brokered by The Conservation Fund. While the Greenland was bought at a high price, the biggest advocates of the deal ? the land trusts ? didn't actually pay for what they got. That's not the point. The Trust for Public Land (TPL) is quite straightforward about its mission. Its 2000 tax form says it spent $70 million on "acquisition and conveyance of open space and recreational land to public agencies." But TPL only conveyed $34 million worth of land that year, at a net gain of $97,844, while cashing in $29 million in securities. Also, of TPL's $231 million in 2000 assets, only $3.2 million was "land, buildings, and equipment." It seems to me that if trusts were truly altruistically interested in buying land and saving it, either privately or for the public, they would pay full price to the private landowner and then donate the land. But they don't, not when they can gain control through below-market, irrevocable conservation easements, or broker deals bankrolled by others, i.e., the public. How do I think our open spaces should be preserved? Not the way they are now, with discounted, irrevocable conservation easements. Ag producers who take a discounted CE are merely delaying the inevitable. They will, in most cases, wind up losing their land anyway because it is just too valuable for non-ag purposes. Even worse, the "discount" inherent in most conservation easement deals comes out of ag producers' already empty pockets, to the advantage of wealthy land trusts and second-home owners who live nearby and want wide-open spaces surrounding them. That's fundamentally unfair, and there's really only one way to correct this unfair situation: Land trusts, like all other buyers and sellers, should always pay full present value to farmers or ranchers for their land. In short, buy it outright. That's what "fair market value" is. If the trusts are really concerned about keeping producers producing, they should be happy to grant sellers first rights to an irrevocable option of continuing to work the parcel. Then the sale proceeds (controlled by the seller) can become an operating trust, to be used to buy another farm or ranch, or applied to the securities market, or put into the kids' education, or spent on one heck of a condo in Monaco. Properly done, a full-value deal can serve the landscape and the people who made it into what it is. If that's the entire point of land conservation, then why isn't that the way land trusts now operate? PFNS is a public service of the Paragon Foundation, Alamogordo, NM 1-877-847-3443 In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]
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