Scott Rall: Laws painted with a big, fat brush
I have heard of the law of unintended consequences but this law is now being put into action in our back yard.
It all started with a forest paper company called UPM Blandin asking for a reduction in their property taxes. This was after they sold a conservation easement on 187,000 acres of forest land in northern Minnesota. The conservation easement was purchased with funds from the Outdoor Heritage Fund to protect from development and fragmentation a large track of forest land in the northern forest zone.
The conservation easement prevents the company from building any new roads, erecting buildings or houses and other activities that are named in the easement. This, for all practical purposes, kills these areas from being developed into housing developments or commercializing the lakes and streams that are contained in the affected area.
Forest wildlife is threatened by what’s called fragmentation. This is where large tracts of land are broken into small parcels — say 30 acres — and each gets it own road and house. It is this parcelization that creates the daily interruption across thousands of acres of forests that makes it hard for all wildlife to thrive.
All wildlife is affected. From large mammals like moose to the small turtles that get killed off by high vehicle traffic in areas where cars and trucks have never traveled before.
What the conservation easement in question did not do was prevent UPM Blandin from operating these 187,000 acres as a working forest. This means that they could continue in the normal manners to harvest wood products for the paper production that their business is involved in. A conservation easement trades some landowner rights for a check. The easement did reduce the some development potential but in this case the easement did not inhibit the company from continuing to make a profit from the property as they always have.
They went to the county and asked for the property tax valuation to be dramatically reduced, and the county and the state balked. A farmland easement in southwest Minnesota is very different. Most of these easements take place on lands that are or were under active crop or forage production.
In exchange for the easement check the land owner gives over any and all rights to ever make a profit from the land again. The land owner has to meet and maintain the requirements of the easement. They do retain control, access and the responsibility to pay the taxes and control noxious weeds.
Here is where the big differences come to light. If I the land owner sells a conservation easement that allows them to keep making money (like a working forest easement) versus one that eliminates the possibility of all future income (like a farmland easement) the value of the property after the easement deal is completed is very different. The residual value of the land for property tax valuations is higher if I can keep making money and almost nothing if all I can never make a profit again.
All of the entities involved figured that the forest land post-easement value would be close to what it was before the easement was completed. UPM Blandin thought different. In the farmland zones it is common for the property tax values post-easement to drop to the category of recreational land values.
This would be like the value of hunting lands that cannot be farmed at all. This is because the land can never generate a profit again.
The Legislature last session passed a law in the 11th hour with no public debate to prohibit a reduction in property tax values of an easement if placed on the property.
This was in theory to limit the northern forest counties from the loss of property tax revenues from working lands forest easements. But the brush stroke was way too wide. By doing so, they also covered easement of all kinds (like farmland easements), even those that eliminate all future profits from the land.
Most forest land easements do not interrupt the owner’s ability to keep making a profit from normal business operations. I think in the forest zone the values go down a little, but not very much. The farmland easement is very different.
I would give you this example to demonstrate what I mean. I have a lot and a building worth a million dollars and the building burns down. I then take the insurance money and reinvest the million dollars into a different lot and building. The value of the lot with the burned down building is now worth only what the value of the lot is.
Compare that to a farmland owner who sells an easement on one piece of land and then invests the easement proceeds in a different piece of land located in a different county. Under the new law the farmland owner would now have two properties both valued as productive farmland of which only one can be farmed for profit.
These two farmland properties have two very different monetary values, but the new law prohibits assessors from differentiating these vastly differing values for property tax purposes. Under current law the farmland owner would be taxed on two properties valued at $2 million ($1 million each) and the building owner is taxed on two properties valued at $1 million and the value of the bare lot, say $1 million one hundred thousand total for both.
Under current state law, properties are to be valued at the highest and best use. Farmland that is under production is valued at the current land values in the township/county where it is located. The new law would take a farm with a conservation easement on it that is no longer farm-able and no longer able to make a profit and require it to be valued the same as working farmland, and this makes no sense at all.
There are a few easements that are exempt from the law and they are easements that are considered water buffers. This interpretation is yet to be vetted, and many different organizations have differing opinions on what would and would not qualify for the exemption. As I stated in the beginning, I was of the understanding that this new law was designed to keep paper companies with working forest land easements from diving out of their property tax obligations in the forest zone. But others have a differing view.
Some think the less visible undercurrent of this law is designed to dramatically limit or actually reduce the amount of land that has conservation practices on it across the entire state. If the law stays in tact, that is exactly what effect it will have. No farmer, forester, or any other land owner for that matter, will enroll in easement contracts that restrict or eliminate their ability to make a profit in all future years without some form of offset to make that trade-off viable. This is really sad because almost all of the easements in the farmland zone are done to protect water resources and reduce chemical run-off into drinking water supplies.
Everyone should care about clean water and wildlife, and this new law is very bad for both. There is some activity taking place even before the current legislative session starts to repeal this law and rework it into something that gets the desired end result without killing all conservation easements which would most likely happen under the current set-up.
You can go to the website moveon.org and sign a petition to repeal MN statute 273.117. At the very least you should read up on what you can and make your opinions know to those in a position to do something about it. This is a very serious issue and the next few months will have a great impact on the prairie/grassland landscapes in Minnesota. Stay tuned.