Magazine article Insight on the News

Q: Are Nonprofit Land Trusts Taking Advantage of the Public's Trust?

Magazine article Insight on the News

Q: Are Nonprofit Land Trusts Taking Advantage of the Public's Trust?

Article excerpt

Yes: Sharp practices belie trusts' lofty agenda.

Between Sierra Club-style lobbyists for costly environmental regulation and property-rights advocates, do land trusts such as The Nature Conservancy, or TNC, offer a compromise "third way" - a means to achieve environmental goals using market-based mechanisms? Too many Republicans and free-market advocates have fooled themselves into believing so. Unfortunately, there is a huge gap between the market-based theory of land trusts and the reality of taxpayer and landowner abuses that occur routinely in land-trust practice.

Land trusts, in theory, have appeal, if one disregards the significant fact that trusts exist to remove property from commerce. Trusts acquire, through donation or purchase, entire properties or certain rights, such as mineral rights or restrictive easements. Conservation easements are similar to those held by local utilities: They are specific rights of use to a property. A typical conservation easement would be one that separates all development rights from underlying farmland, thus preserving an "open-space easement."

In theory, land trusts exist largely to serve as depositories for and enforcers of such easements, as well as managers of land to which they acquire all rights. If Paul Bunyan Timber says it will leave a stand of old-growth redwoods as they are, it someday could renege. But if Bunyan donates the land or timber rights to a land trust, it never will be able to cut the trees - and it might receive substantial tax advantages to boot.

Do trusts, even the biggest abusers of taxpayers and property owners, engage in some worthy activities? Sure. The Nature Conservancy operates some innovative ranches and preserves.

Some land trusts - usually small, local ones - actually perform pretty close to the theory. Such trusts usually have a specific, limited purpose. An example is George Washington's Mt. Vernon estate. Another is a California trust that acquires open-space easements on vineyards, allowing wine growers to gain some tax advantages and, not incidentally, rendering the land useless for anything but growing grapes.

At the state and federal levels, however, land trusts are less about private conservation than about private conservation than about deal making. They act as unaccountable arms of government land agencies, engaging in what is called "preacquisition" - a fancy term for buying land (or, more often, merely an option to buy) for the express purpose of immediate sale to a government agency. It is not at all unusual for a "preacquisition" and subsequent sale to the government to occur within a frame of a few minutes - yes, minutes - during which time a trust may rake off a profit of thousands of dollars. Even when a transaction does not occur simultaneously, a trust may reap a straight commission or markup of 10 percent or more. In addition, agencies will pay interest to a trust for carrying costs.

In one typical land transaction, the National Audubon Society sold a 777-acre tract for inclusion in the San Joaquin River National Wildlife Refuge in California for $1 million. Its appraised value was only $700,000.

Make no mistake: This is big business. The Nature Conservancy alone reaped $76.3 million from government sales during fiscal year 1992-93. The conservancy and other land trusts, of course, maintain that they don't make money off these transactions. In some cases that's true. But an internal TNC memorandum reveals how the nation's biggest land trust arrives upon paper losses: It charges itself "imputed interest costs" for money spent on land later sold to the government. This isn't money TNC actually had to borrow; it already had been raised as tax-deductible donations or had come from proceeds of government sales.

Yet critics who focus on the profit angle of land-trust transactions are missing a more fundamental issue regarding trusts: accountability. Trusts and government-land managers are remarkably frank about the major reason an agency would use a trust as a middleman instead of buying land itself- Trusts can operate in ways a government agency cannot. …

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