Conservation easements: Monopoly game or community trust?

In February, a conservation-easement deal was splashed over the front page of the Cortez Journal. The story mentioned $862,000 to help preserve a Montezuma County ranch. Could conservation easements be the next get-rich- quick scheme? A way to keep the farm and get development-sized dollars too? Could they be even better than the Conservation Reserve Program (CRP) where farmers ostensibly get paid not to farm?

Well, just like the CRP, there’s more to conservation easements than a headline can explain. A closer look reveals why the Bar TV ranch — the one that prompted the front-page article — was carefully selected as one of five easement purchases planned by the Montezuma Land Conservancy using one-time grant funds from lottery money.

What may have been lost in the publicity over that easement is the generous gift of open space that many other Montezuma and Dolores County landowners have donated to the community with their conservation easements. These unsung heroes are the leading the effort to conserve the scenic views and agricultural landscapes that many residents list as the top reasons they live here.

The ABCs of easements

The concept of conservation easements has prompted some suspicion among citizens who worry that it implies a government take-over of land. But these easements are voluntary agreements entered into by willing landowners who want to make sure that their tract of property is protected in some fashion from radical changes.

“A conservation easement is a way for landowners to secure their future vision for the land,” said Nina Williams, co-director of MLC.

Conservation easements, like utility easements and other property encumbrances, are an agreement between a landowner and an agency, in this case an agency or organization qualified to hold conservation easements. In our area, this agency is the non-profit Montezuma Land Conservancy.

The conservancy, now seven years old, has helped 22 landowners with voluntary conservation easementsthat protect more than 6,815 acres in Montezuma and Dolores counties. According to the Colorado Conservation Land Trust, “A conservation easement is a tool used to preserve important lands and water features on a given property. It is a voluntary, recorded agreement between a landowner and a ‘holder’ of the easement. A conservation easement identifies important historic, scenic, natural or agricultural characteristics of the property which benefit the general public (collectively known as the ‘conservation values’) and then establishes a set of restrictions on use of that property which will ensure that those conservation values are protected.”

Conservation easements usually protect open space in some form, but one easement in Montezuma County protects ancestral Puebloan ruins. In 2001, an agreement between landowner Don Dove and the MLC preserved 110 acres of artifact-rich land just south of Cortez. It was the first such easement in Colorado.

When a landowner signs a conservation easement, he or she grants the easement-holder the right to enforce the restrictions. The restrictions can vary depending on the landowner’s wishes, MLC’s goals, and the characteristics of the property.

Since the land stays in private ownership, landowners typically reserve the right to maintain a residence, reserve future home sites, continue to farm or ranch, and use the property for limited recreation.

Some typical restrictions include limitations on subdivision or development of the property for commercial, industrial or mining uses. Basically, landowners voluntarily give up the right to develop their property. In the Dolores River Valley, where Transferable Development Rights (TDRs) have been established, the landowner would be giving their TDRs to the land conservancy.

Dave Nichols, the other co-director of MLC, is quick to point out the MLC is not sitting on a pile of TDRs or their equivalent. “We extinguish the development rights so that they are not available for development now or in the future.” Conservation easements are an agreement in perpetuity, which means that the terms must withstand future purchases and land-use needs.

“You have to think ahead several generations and what it might take to keep the property productive,” said Tom Colbert, former owner of the Bar TV ranch. “You don’t want to create restrictions that will make it impossible keep it a working ranch in the future.”

Monopoly or community trust?

In return for giving up their development rights, landowners receive some state and federal tax benefits depending on whether they donate or sell their conservation easement. In Colorado, there are additional state tax incentives for landowners that donate conservations easements.

Why would Colorado want to encourage conservation easements? One reason is that donated easements are an affordable source of open space. Secondly, since the property is owned privately, it stays on the tax rolls and continues to generate income for state and local government. Why would landowners consider signing on to a conservation easement?

First, it is a way to ensure that their beloved property will stay the way they would like: as a working ranch or farm, open meadow or wetland, or as habitat for wildlife for perpetuity.

Secondly, as Williams points out, “Conservation easements are a way to generate income from a property without having to develop it.” Conservation easements have value. The value of the easement, like any other form of property, is determined by an appraiser who assesses the development value of the property.

Generally, this is determined by estimating the fair market value of the property if the landowner were to sell it without placing an easement on it and subtracting the fair market value of the property with a conservation easement on it. The value of a conservation easement is the difference. It can range from about 30 to 60 percent of the fair market value of the property.

A landowner can sell or donate the easement to a qualified agency. If a landowner donates his or her conservation easement, he gets the federal tax benefits related to making a donation to the community as well as state tax credits. The tax benefits of a conservation- easement donation can amount to significant dollars. Colorado allows landowners to sell their unused state tax credits for additional income possibilities.

MLC currently holds about 5,000 acres of donated conservation easements in Montezuma and Dolores counties. What are the circumstances that prompt MLC to purchase an easement, such as the Bar TV Ranch?

Conservation emergency

While a proposed golf-course development at Stoner (now in limbo) woke up the greater community to the large scale of development possible in the Dolores River Valley, MLC had been quietly monitoring land use in Dolores and Montezuma counties and anticipating potential development since 1998.

Area residents are lucky to live near two of the last undeveloped river corridors in Colorado: the Dolores and Mancos river valleys. By considering the scale of development in other riparian areas in the state such as the Eagle River or Roaring Fork river valleys, MLC could envision future development scenarios – and the proposed golf course at Stoner was just a start.

Even more alarming, key pieces of property with significant conservation value were rumored to be coming on the market soon. Unfortunately, the same characteristics (large parcels with access to unique riparian habitat, irrigation rights, and valley views bordering public lands) that give these properties conservation value also make them highly desirable for development. If these properties sold to developers, the pastoral valley views and open space would be lost forever.

GoCo to the rescue

In response to those concerns, MLC sent out grant proposals to Great Outdoors Colorado (GoCo) and other foundations to help fund the purchase of conservation easements on key properties in the Dolores and Mancos river valleys. Great Outdoors Colorado gets all of its funding from proceeds from the Colorado Lottery. GoCo money is used to fund projects “that preserve, protect, and enhance Colorado’s wildlife, parks, rivers, trails, and open spaces.”

MLC was spectacularly successful with its grant appeal; it received $4.5 million from GoCo to acquire conservation easements. This was the first time GoCo had awarded grant money specifically for conservation easements. But MLC’s work is not done – it must raise an additional $1.4 million in matching funds as well as work with the landowners to negotiate a bargain price for the conservation easement.

The 640-acre Bar TV ranch was the first of these key property deals to close. The general terms of conservationeasement purchases look something like this: About one-third of the purchase is paid by MLC with GoCo and matching funds. Another third may come from another party such as the Natural Resource Conservation Service, and the last third or more is donated by the landowner. This arrangement allows MLC to stretch the GOCO dollars across as many acres as possible.

Colbert, owner of the Bar TV ranch when the conservation easement was purchased, said that if people want the benefit of conservation easements they must be willing to pay for it.

“This is a good use of lottery money,” Colbert said. “No tax dollars were spent on this deal.”

Regarding the Colberts’ easement donation, he said, “We wanted to give something back to the Mancos Valley community which has helped us so much over the years.”

So far, about 1,200 acres in the Mancos Valley have been protected through easements.

Not for everybody

While Colbert pointed out that conservation easements “are not for everybody,” he also said that living with an easement is not troublesome or constraining. He worked with a buyer who purchased the Bar TV Ranch with the conservation easement in place. Colbert said that it “wasn’t easy to find a buyer for the property with the easement on it” but it was important to the Colbert family that the ranch they had worked so hard to create “didn’t get chopped up and covered with houses.”

Ray Coulon, who has had an easement on his 207 acres in the Arriola area for seven years, notes that there is “nothing in an easement that you don’t agree to.” He suggests that landowners come up with the restrictions and land uses that they are willing to live with and work with MLC to see if it will be enough to protect the conservation values.

“If MLC can’t agree to the terms, there won’t be an easement. Otherwise, it can work for everybody involved,” he said.

Chuck and M.B. McAfee, who have an easement on their family farm in the Arriola area, have found MLC’s annual monitoring visits helpful. “It gives us a new perspective on the health of our land,” Chuck said.

“MLC is professional in setting up and conducting the monitoring visit. We enjoy the process.”

So is a conservation easement a good idea? For landowners who want to preserve and protect the agricultural or wildlife values of their property, it can be. For the community, it provides a gift of open space as well as a way to keep the agricultural foundation of our economy viable.

From August 2006.