Conservation Easements

jumpshooter

Member
Joined
Aug 11, 2015
Messages
36
Randy,

You had a recent discussion about Conservation Easements on your podcast and I was hoping to further that discussion some. First, let me say that I have worked with and helped negotiate several Conservation Easements and I know the subject rather well. Also that landowners rights are right there with moving the needle for me with gun control.

Your discussion of CE's left me somewhat frustrated and feeling that only one side of the equation was discussed. You discussed the fact that CE's offer landowners a way to keep properties in the family in cases where there are generational passing on's of property and as way to ease the burden of property taxes and income taxes. However there are some serious issues with Conservation Easements. Most of the ones which are economically worth doing encumber the property in perpetuity. The ones which last 30 or 40 years do not pay enough to make it worth a landowners time (at least the ones which I have seen).

These CE's generally speaking combine all the parcels in to one or a few parcels. This is a way to extinguish future development rights. Furthermore, they generally limit where buildings can be built, were farming and other land use practices can occur, what items can be extracted (gas, oil, timber, rock, and many other resources). (By the way, do you know that the term resource in Latin means to "rise again"?)

Part of the issue with CE's that I have is that they are short sided and really ignore the real issue, that the cost of owning land is continuing to increase and that owning land in the future is going to be more difficult and more expensive. My college forestry economist professor made the most accurate assessment of CE's that I have ever heard. He said that Conservation Easements are a short-term solution to a long-term problem. We aren't going to eliminate landowners ability to do anything else and by stripping the value off of the land, we are only prolonging the bleeding.

What we should be doing is using these dollars to help put small parcels into larger blocks so that these working lands can continue to be working lands and make a scale of economy which works for the landowners.

Furthermore, a lot of these CE's are destroying any future market which could come about. In the last 10 years we have seen new market come about which have never been opportunities in the past and because some landowners have placed restrictive easements on their lands, they can't react to these lands. For example, carbon sequestration and carbon sales are now a possibility and this isn't something which some landowners are able to work with (due to needing at least 5,000 acres of homogeneous vegetation) because their CE's didn't address this market, or it is a right which was sold. While 5,000 acres isn't necessarily a small landowner, it could be seen as a viable piece of property in some states with some land uses.

My point with this is that most CE's are very shortsighted in their ability to predict future markets and future uses and if you are already struggling to hold on, you may be shooting yourself in the foot. From a conservation standpoint, our organizations which are purchasing easements should be taking small pieces (or even larger pieces) and putting them into larger working lands. Land Trusts, Open Space Districts, and groups like the RMEF even hold these easements. We should be putting pressure on these groups to look at other options. One option, while it is controversial is something like the APR. While I understand that there are issues with prices being driven up and other affects on existing landowners, the idea of taking lands which are willing sellers and combining them with other properties to make more viable lands seems to me like a real possibility.

Anyway, just wanted to further this discussion some more.
 

Ben Long

Active member
Joined
Aug 8, 2011
Messages
984
Location
Kalispell, MT
Isn't it wrapped up in property rights? I mean, if a landowner has the right to bust a farm into 5 acres lots and pave it for housing development, doesn't that same landowner have a right to conserve it? Either is a big decision with consequences, but isn't that the jist of it? I'm not trying to be argumentative, just clarifying my thinking. Tell me if I'm wrong.
 

neffa3

Well-known member
Joined
Apr 17, 2015
Messages
2,104
Location
Wenatchee
Wait, you value property owners rights, except when the property owner is being "short sighted"? CE aren't about markets or parcel size they're about property owners rights. Now depending on what the land owner is trying to accomplish they may be the wrong tool, but as a property owner they have all the RIGHT in the world to make that decision.
 

Big Fin

Administrator
Staff member
Joined
Dec 27, 2000
Messages
13,748
Location
Bozeman, MT
I'm open to discussion.

I have been involved in dozens of CEs from the landowner perspective and probably just as many from the non-profit perspective. CEs are not shortsighted, rather long-term plans to influence the use of the land and development of the landscapes. They are planned with long-term vision and desired outcomes. CEs work for some landowners and not for others. The point of bringing them up on the podcast is to express my belief that legislators have no business telling landowners what they can or cannot do with their lands or any of the underlying property rights associated with those lands.

To imply, or worse yet, to legislate, that a landowner cannot exercise their property rights, either for term certain or in perpetuity, is a strange position to take in a country that holds property rights under the 5th Amendment to be paramount. I am amazed at the recent legislative uprising against the rights of a property owner to do what they want with their property, whether for a period of time or in perpetuity. It seems to be driven by ideological beliefs completely counter to the tenets that support the 5th Amendment, yet is often promoted by folks who claim to be supporters of the 5th Amendment. In the podcast I provided examples of legislative efforts to infringe on the rights of landowners, all because some "Counterfeit Constitutionalist" in a state legislature has an ideological bias against anything with the connotation of "conservation." I think it is worth pointing out the hypocrisy so obvious when rural state legislators run on property rights principles, but have no problem restricting property rights if it achieves some ideological belief they hold.

To your points, saying that entering into a CE is short-sighted does not reflect any of the CEs I've been a part of. Every landowner I know who has entered into a CE, whether donated or sold, knows the ramifications and they do so with eyes wide open. If they don't then shame on them and their advisors. If there are a few who did so for short-term benefit, the plight of those few seems a poor justification for legislating the ability of other landowners to act as they see fit with their property rights.

The anti-perpetuity issues is also hard to follow. That implies that landowners cannot comprehend the actions of their decisions and quantify the cost-benefits of such decision. It parallels the "we know what's best for you" or "this is to keep you from hurting yourself" mindset.

Easements, no matter the term or the rights encumbered, are not entered into as a function of "cost to own the land." The goal of CEs are not intended to strip the value off the land, though heavy encumbrance may result in such. They are entered into for purposes of protecting the land in the manner the current owner desires, either in term certain or in perpetuity, lightly or heavily encumbering some or many of the underlying property rights. Some easements can be structured to derive current income tax or future estate tax benefits, though not all are structured that way. Some are term certain and some are in perpetuity. Some have very minimal encumbrance and some have stronger encumbrance.

The beauty of CEs is that the landowner is in control. The landowner decides what they want to encumber and for what period of time, without a legislature telling them what they can and cannot do.

I don't follow this notion... "From a conservation standpoint, our organizations which are purchasing easements should be taking small pieces (or even larger pieces) and putting them into larger working lands. Land Trusts, Open Space Districts, and groups like the RMEF even hold these easements. We should be putting pressure on these groups to look at other options." These groups are not purchasing the land. They are taking ownership of some of the underlying property rights, either through purchase or donation. Not sure how they could "put them into larger working lands" when they don't own the lands.
 

jumpshooter

Member
Joined
Aug 11, 2015
Messages
36
Randy,

Thanks for the reply and I guess I should point out that I live and work in CA. Our landowners are under development pressures unlike anywhere else that I have read or seen. Our lands have been developed so much that parcel sizes have gone from hundreds of acres down to 40 acres and less in most areas. The county I live in has a parcel size of less than 10 acres for the average forested parcel (and I live in a county which produces large amounts of timber).

The CE's that I have seen are being conducted by different groups; some counties have special districts, other states have similar trusts, there are conservation organizations like The Conservation Fund and The Nature Conservancy, and then there are conservation organizations which hold easements or buy land and then put them in easements (strip all the rights off) and then turn around and sell the lands (now encumbered), and then there are groups like DU, RMEF, and other conservation groups which sometimes buy easements and other times buy land and put easements on them (to make them more affordable to buy). There are lots of groups out there which do all kinds of different things with these easements. I know of one company which buys cut over timberland, puts easements on the land and then sells it for profit later on. The easements range from putting buffers around wildlife species which are sensitive (which I think we can all agree are important), to selling the rights of managing lands which may be detrimental to wildlife species in the long-run (ie, putting large buffers around streams which may ultimately make them dense dark riparian areas which go against most science which says you need a mix of shade and light to have healthy streams. These easements limit any future management of these riparian areas, which makes them much more likely to burn up in the long-run rather than be managed for healthy fisheries. Because most of these CE's are highly confidential in nature, that I can share specifics.

Your question about my statement about taking small pieces and building larger working lands is complicated. Like I mentioned above, there are some organizations which not only buy an easement, but also the land in some cases. I would like to see these groups buy smaller working lands (from willing sellers) to build larger working lands. This to me is a much more reasonable solution than encumbering a property. In other places there are conservation organizations which bring groups of landowners together for a common purpose, put a conservation easement together for all the lands and make them function as a larger entity so that they have a scale of economy which can help with costs and expenses, but also functions like a co-op. As you well know, a scale of economy needs to increase along with our economy to keep viable. This is why many a small family farm has fallen by the way-side, they just simply can't keep up with the ever rising costs and regulations.

I work primarily for small landowners and one of their biggest issues is how to pay for these continuing costs (which always seem to increase). One of the ways they deal with this is buy selling certain rights through a CE. Things like development rights (additional houses or buildings) can be sold through a CE, future markets like mineral resources, oil, gas and timber can be sold through a CE. Then other kinds of rights can also be sold, often times in an easement there will be multiple parcels and those parcels can be combine to extinguish future subdivisions and other rights.

Here is what some of your listeners may not realize or understand. When a CE is sold, it changes the tax value for a property. This reduces the taxable income to a county. These property taxes are used to fix roads and goes towards funding schools. Our rural communities are crumbling and these easements are helping to do so.

I mentioned that these are short-term solutions in my previous post. These easements can be 20 or 30 years in length, 100 years or in perpetuity. So, some offer long-term ideals and often require long-term management plans. What they get in short-term gains are often payouts of cash which help now, tax breaks which help now. Hopefully they make wise investments with that money which lasts far into the future, because the restrictions don't ever come off the land. The problem is in a lot of instances these easements only address the here and now. What happens in 50 years when that money is gone paying for various things? Then your only solution is to sell because that is your only option......

I agree that often landowners do get into CE's with full knowledge and that is great, however in a fair transaction, there is one issue which I see time and time again, the issue of duress. In a transaction one is not suppose to make an assumption about duress, yet it is so often the issue of why they are encumbering the property with an easement. You don't need to have an easement to be a great steward of the land.

Hope this helps some, but am very open to discussing more.
 

Big Fin

Administrator
Staff member
Joined
Dec 27, 2000
Messages
13,748
Location
Bozeman, MT
Here is what some of your listeners may not realize or understand. When a CE is sold, it changes the tax value for a property. This reduces the taxable income to a county. These property taxes are used to fix roads and goes towards funding schools. Our rural communities are crumbling and these easements are helping to do so.
That maybe the case in areas of California or other metro/urbanized locales. In most of the Rocky Mountain states where the greatest amount of CE acreage exists, such is not the case.

Most Rocky Mountain states already have extremely low classification for rural/ag properties and the property is appraised for County tax rolls based on "current use," not "highest and best use" as the IRS requires for estate/gift tax purposes. Qualified Ag land, a designation easy to obtain in most of these states, is not adjusted for the presence/absence of a CE in the county appraisal process that the assessor uses. Thus, placing an easement on the property does NOT impact county tax revenues in these states that follow this path for "current use," especially when the current use allows them to be considered Qualified Ag Lands.

As an example, my neighbor has 100+ acres of farm ground across the road from me. It is prime development ground. I pay more in taxes on my house with 1.5 acres than is paid on that Qualified Ag Land. If a CE was placed on that prime development land just south of Bozeman, it would not change the assessed taxes so long as he keeps it in the current use.

I agree that often landowners do get into CE's with full knowledge and that is great, however in a fair transaction, there is one issue which I see time and time again, the issue of duress. In a transaction one is not suppose to make an assumption about duress, yet it is so often the issue of why they are encumbering the property with an easement.
Of the many CEs I've been a part of, I've never had a client enter into the transaction under duress. If they have advisers sending them down that path in response to a situation of duress, those advisers should get extra malpractice insurance. A CE is a tool with the primary objective to manage the long-term direction of a property. If it is used to solve short-term cash flow or as a primary short-term tax realization, that is going to result in some bad outcomes; "seller's remorse" as I call it. If the latter is the primary objective, any bad outcome is not because CEs are the problem, rather the problem is bad professional advice or other underlying financial problems.

You don't need to have an easement to be a great steward of the land.
Completely agree. I know a lot of great private land stewards and only a small percentage have any lands in a CE.
 

Hunting Wife

Well-known member
Joined
Nov 18, 2014
Messages
1,150
Location
Almost North Dakota, not quite Canada
Randy is spot on.

I’ve also done a fair amount of easement work in Montana and North Dakota. The notion that CE’s preclude agriculture is NOT true of all easement programs. USFWS has easements in thousands of acres in the Great Plains, and the vast majority of this acreage is in cattle or crop production. In fact, one of the largest driving factors we see in landowners choosing to sell an easement is to maintain the land as working land. There are also options for reseeding grass, burning, and other beneficial management actions if warranted. You are painting CE’s with a very broad brush. I would hazard a guess that the options landowners have with regards to easements across the West are much more diverse than what you’ve experienced in CA.
 

jumpshooter

Member
Joined
Aug 11, 2015
Messages
36
Here in California, we have what is called the Williamson Act. https://www.conservation.ca.gov/dlrp/wa

It places different tax designations on different land uses. The same as Montana, someone with a house has a higher tax rate than someone with agg or forestland. The difference is usually paid in use taxes; timber is taxed when it is cut and sold, rock when it is mined, crops when they are harvested.

However as part of the CE, which is recorded on your deed, there is an appraisal of the land before and after the CE. That new appraised value is what the county uses as the basis for taxes.

My comments about duress I have seen too many times unfortunately and I fully understand your comment. Like a lot of landowners today, most are aging. Young people aren't able to afford property today it seems (for the most part). With that aging and compounded with the fact that families often times have issues with the future and generational transferring of land, landowners often times find themselves in duress on their own. One family member wants to sell, while others want to keep it and have to find a way to buy out the other party. Markets change and they aren't able to make it on what they used to. Numerous things make a landowner have to seek other options and one of them is a CE for better or worse. It they are having to seek options, that is considered duress in many instances.
 

jumpshooter

Member
Joined
Aug 11, 2015
Messages
36
I never said that they exclude all agriculture. Most of the reason that I am involved in them is timber and harvesting. I said that some give up those rights. I don't work on those projects as I can't see the point of excluding managing our forests from a working landscape, however there are a lot which do.

I have seen a lot of easements in the northeast, Washington and in New Zealand as well as CA, so I have seen quite a bit. They can be a very good tool, but they can really be a terrible scam as well. There are a lot of organizations out there which are making these deals and they are nothing more than a scam.
 

Straight Arrow

Well-known member
Joined
Jun 10, 2009
Messages
3,018
Location
Gallatin Gateway, MT
They can be a very good tool, but they can really be a terrible scam as well.
'Sorry that your experience has been mostly negative. In Montana and other western states the CE has been a critical tool in enabling landowners with good wildlife habitat to employ a viable solution other than developing or otherwise changing land use adverse to the best interests of wildlife. Probably the most adversely impactful change on the landscape in Montana for the last several decades with respect to habitat is development. It seems that it's been rare ... if at all ... to hear of a landowner regretful of entering in a CE. 'Don't think I've ever heard of the term "scam" associated with an easement in Montana.
 

Big Fin

Administrator
Staff member
Joined
Dec 27, 2000
Messages
13,748
Location
Bozeman, MT
Yes, every part of the tax code is abused. It is Congress' job to close where there is abuse. That is what is happening in your links above. Doesn't mean every conservation easement is a scam, rather like most things in our society, the rare anomaly is reached for as evidence by the critic as reason to enact punitive measures against the 99.999% who are not part of the anomaly.
 

mdhunter

Active member
Joined
Aug 13, 2009
Messages
816
Location
Maryland
I am not an expert but my experience with conservation easements in my neck of the woods is they work. Interestingly a farm (wooded and tillable) with a conservation easement will likely sell for almost as much as a farm without one. This probably stems from the buyer is someone that doesn’t want the land developed to begin with (think farmer or hunter).

Around here we do not have unlimited subdivision of parcels so truely rural land doesn’t have the development potential. If you are a land owner, the incentive to use a conservation easement and protect the land while you can continue to use it is real.
 

COEngineer

Active member
Joined
Jul 6, 2016
Messages
468
I hesitate to even reply to such a poorly worded post. Jumpshooter, if you want people to take your point seriously, think about proofreading your posts...there is a way to edit posts, as well, if you discover your mistakes after the fact.

From what I can gather, your point is that if a landowner willing sells rights to develop and then the potential value of the land (or resources on the land) go up, then the easement purchaser should feel bad? Correct me if I'm wrong, but it sounds like you want landowners to have it both ways. They should be able to sell their rights and then take them back if the value goes up in the future? I don't think that's how an economy works.
 

jumpshooter

Member
Joined
Aug 11, 2015
Messages
36
I had several, but the main one was that CE's are short sided. If you encumber a property with an easement, hopefully you are doing it for the right reasons. If you are in trouble now and looking for CE's to save your property, you are probably barking up the wrong tree. It is only going to get more expensive to own land in the future. Taxes go up, maintenance issues will continue to increase in cost, and more and more laws will be put on the books which restrict what you can do on them. If you are hoping that CE's will solve your problems, then you are already in trouble and really only passing on the same issues to your family (or successors). As my college economics professor put it, they are a short term solution to a long term problem.

Another issues is that you can't predict the future. What sounded like a good idea at the time of the easement may be crippling down the way. You never know when new things are going to come around. For example, the sales of carbon credits. A landowner can get paid for planting more trees in the future to help with carbon sequestration. However this is still a very new thing and if you have a CE that is say 5 year old or older, this wasn't an option. Selling carbon credits would not go hand in hand with the goals of most conservation easements, however because this wasn't something which a lot of people were aware of 5 to 10 years ago, they now can't capitalize on something which they are already doing. This could have been a market that they could have utilized, but now not possible. You never know what some of the future opportunities might be. If for example, your only revenue off the land is timber harvesting and down the road, timber harvesting becomes illegal (or is regulated to the point where it isn't feasible) and that was the only way to pay for the property, you have shot yourself in the foot.
 

Straight Arrow

Well-known member
Joined
Jun 10, 2009
Messages
3,018
Location
Gallatin Gateway, MT
I had several, but the main one was that CE's are short sided. If you encumber a property with an easement, hopefully you are doing it for the right reasons. If you are in trouble now and looking for CE's to save your property, you are probably barking up the wrong tree. It is only going to get more expensive to own land in the future. Taxes go up, maintenance issues will continue to increase in cost, and more and more laws will be put on the books which restrict what you can do on them. If you are hoping that CE's will solve your problems, then you are already in trouble and really only passing on the same issues to your family (or successors). As my college economics professor put it, they are a short term solution to a long term problem.

Another issues is that you can't predict the future. What sounded like a good idea at the time of the easement may be crippling down the way. You never know when new things are going to come around. For example, the sales of carbon credits. A landowner can get paid for planting more trees in the future to help with carbon sequestration. However this is still a very new thing and if you have a CE that is say 5 year old or older, this wasn't an option. Selling carbon credits would not go hand in hand with the goals of most conservation easements, however because this wasn't something which a lot of people were aware of 5 to 10 years ago, they now can't capitalize on something which they are already doing. This could have been a market that they could have utilized, but now not possible. You never know what some of the future opportunities might be. If for example, your only revenue off the land is timber harvesting and down the road, timber harvesting becomes illegal (or is regulated to the point where it isn't feasible) and that was the only way to pay for the property, you have shot yourself in the foot.
Unsure what has motivated the negativity regarding conservation easements, but with respect to the above it seems reasonable to point out that when making any decision you consider information and conditions available at the time. To worry about unknown future changes, wring your hands in pessimistic speculation, and therefore make no decision at all, seems unreasonable and even more short sighted.

Personally in retrospect, what has been crippling to my decisions has been unwillingness to make a decision based on good information and take the chance that now is clear I should have ... as it would have proven beneficial. 'Seems it all boils down to one's attitude ... pessimism versus optimism, worry versus hope.
 

wytex

Well-known member
Joined
May 17, 2016
Messages
1,733
Location
Wyoming
Our family is right in the middle of getting a CE established on over 1,000 acres of their 3,000 in Texas. Looking forward to it as now that part of the ranch can not be developed.
Nothing is changing in the way they will work the ranch, run cattle or sell hunts. We are entering into it for the very propose of ensuring the "younger generation" will not sell out and develop the land. No doubt the land prices will continue to skyrocket there so getting the land set aside was very important to the family.
 
Top