Conservation easements: are they for you?

The easement idea gives landowners a flexible way to preserve their land without giving it away. Here's how it works.

Driving into the narrow roadway, I feel the solitude and silence envelop me. Towering maples and basswoods arch overhead, forming a natural cathedral. Filtered sunlight plays on the understory of shrubs and wildflowers. Eighty acres of wilderness and a mile of lakeshore in northern Minnesota are preserved for posterity, remaining forever wild.

Sisters Jeanne Rice and Mary Boltuck, both retired teachers, agree that conservation easements like theirs aren't for everyone, but the idea appeals to them and their husbands. The couples gave up 90 percent of the value of their land in one of the first "forever wild" conservation easements in Minnesota. Mary and Charlie Boltuck were clinical psychologists who turned to college teaching some 30 years ago. They have long owned a cottage just down the road from the easement on Sugar Lake, and they introduced Jeanne and Howard to the area. The 80-acre property, which includes more than a mile of shoreline, is forested primarily with hardwoods such as maple, basswood, and oak.

"More and more people are putting more and more pressure on the lakeshore--with homes, boats, water skiing--and there's less and less room for wildlife," says Howard Rice, a retired Proctor and Gamble engineer who, with Jeanne, spends summers on the Sugar Lake easement. "Unless we take steps to protect shoreline through conservation easements, we won't have the loons, ospreys, eagles, and fish we have now. We can't continually impact the shoreline and the water and expect it to remain the same forever."

A bald-eagle family served as stimulus for the sisters' gift to the Minnesota Department of Natural Resources (DNR). Six years ago, Jack Mooty, a biologist with the DNR's non-game wildlife program, wrote the Rices to alert them to the bald eagles living near their land, and asked them not to disturb the nest. After receiving inquiries about developing the land, Jeanne Rice and her sister decided that "we wanted one small place on the lake left the way nature made it." They approached Jack Mooty for a way to realize their dream.

"The day he came out to see the land, Jack inadvertently scuffed up a small maple seedling," Mary says. "When he bent down and carefully replanted that tree, we knew we had found the right person to help us." Five years later, thanks to Jack Mooty and Jane Prohaska, regional counsel for the Minnesota chapter of The Nature Conservancy, the sisters reached their goal.

A conservation easement is a legal agreement by which a landowner voluntarily restricts or limits the type and amount of development that may take place on his or her property. Each easement's restrictions are tailored to the particular piece of property, the interests of the individual owner, and the resource being protected. These restrictions legally bind the present and future owners of the property.

The first American conservation easements were written in the late 1880s to protect parkways in and around Boston, according to a history of easements published by the Land Trust Alliance in 1985. The most extensive early use of easements was by the National Park Service in the 1930s along the Blue Ridge and Natchez Trace Parkways. Another early federal use in the same era was the creation of "refuge and flowage" easements in the Prairie Pothole region of Minnesota and the Dakotas by the U.S. Fish and Wildlife Service. The first historic preservation easements sprang up in the 1970s. An increasing number of states began passing conservation easement laws--a 1984 report by the National Trust for Historic Preservation listed 44 states with such legislation. More have since been added.

In setting up the Sugar Lake easement, the sisters and Jack Mooty spent five years finding just the right fit for the land. Mary and Jeanne did not want the land open to hunters, as it would have been if it were given to the DNR for wildlife management. Jane Prohaska helped draft a conservation easement to create a natural sanctuary that will be forever wild and establishes a protected environment for native plant and animal life.

Prohaska indicates four categories that the Internal Revenue Code specifically identifies as qualified purposes for easements:

* The preservation of land for public outdoor recreation or education;

* The protection of relatively natural habitats of fish, wildlife, or plants;

* The preservation of open space--including farm and forest land--for scenic enjoyment or pursuant to an adopted governmental conservation policy; and

* The preservation of historically important land or buildings.

The rights the owner relinquishes are transferred to another entity, such as a legally qualified conservation organization like The Nature Conservancy, or a government agency such as the Minnesota DNR or the U.S. Forest Service, by means of a legal document called a conservation easement. The Sugar Lake easement holder is the Minnesota DNR's Wildlife Section. It is the agency responsible for monitoring the land to make sure the terms of the easement are observed. "All that's required, because of the restrictive nature of the easement, is to periodically make sure no one is doing anything counter to the easement," Mooty says. "We go out once or twice a year. Right now, the Rices and Boltucks are there quite a bit, so we rely upon them. Eventually the DNR will have to assume more responsibility."

In a perfect world, there would be no easement violations. Monitoring puts muscle into an easement program. Its importance is sometimes overlooked by easement-program planners. Paul Hartmann, realty officer with the U.S. Fish and Wildlife Service, warns, "It is very easy to underestimate the importance of this aspect, but it all needs to come together when you first plan your easement program. Don't allow easement enforcement to be an afterthought. If you catch yourselves or others saying, 'We'll worry about that later,' STOP! You're making a big mistake."

"Generally," adds Jane Prohaska, "the problems in enforcement don't show up in easements until the landowners who have given the easement have either sold the property or passed it on to their children." Prohaska hasn't had any enforcement issues in the Midwest, but problems are starting to appear in the East because easements there are older and are under greater development pressure. "That's when you see the issues show up--when they're on competing land uses, so it begins to pay to challenge the easement. That's why drafting the easement is so important, and needs to be so carefully tailored to the situation," Prohaska cautions.

Routine monitoring costs money. Defending easements against legal challenges carries an even bigger price tag. In accepting an easement, agencies or organizations assume a perpetual financial liability. The Conservation Easement Stewardship Guide, a joint publication of the Trust for New Hampshire Lands and the Land Trust Alliance, recommends that easement holders set up a "Stewardship Fund" that is segregated from their operating budget.

"You should try to 'deposit' an appropriate amount to the fund each time you acquire an easement," the guide advises. "Stewardship can be expensive: Many private land trusts try to deposit amounts ranging from $1,000 to $7,000 per easement. The most common way for private land trusts to build their stewardship funds is to ask for a tax-deductible cash donation from the grantor of each easement." Despite the fact that a donor has just contributed the land, he or she is the most logical person to make such a donation. Who cares more about seeing the property protected in perpetuity?

To calculate the contribution, the regional Maine Coast Heritage Trust estimates that monitoring costs the Trust an average of $175 per easement per year. The Trust requests a donation of $3,500 per easement, which at an interest rate of 5 percent generates $175 per year. Income from the fund in excess of 5 percent is returned to the fund to keep the principal's value even with inflation. The donation of a conservation easement is a tax-deductible charitable gift provided that the easement is perpetual and is donated "exclusively for conservation purposes" to a qualified agency or organization. To determine the value of the easement donation, the owner has the property appraised in two ways--at its fair-market value both with and without the easement restrictions. The difference between these two appraised values is the easement value. For example, if a tract of land is valued at $100,000 without restrictions and at $40,000 after the conservation easement has been given, the value of the conservation easement (and the amount of the tax deduction) is $60,000. Detailed federal regulations govern these appraisals. A conservation easement can often reduce estate taxes as well.

Property-tax assessment also is affected by a conservation easement. Property taxes are based on the property's market value, which reflects its development potential. If a conservation easement reduces the development potential, as it's almost certain to do, it may reduce the level of assessment and the amount of the owner's property taxes. In the case of the Sugar Lake easement, the sisters eventually received what amounts to a 70 percent reduction in property taxes. People set up conservation easements for many reasons. Some donors are motivated by altruism, some strongly believe in stewardship of the land, and some are moved by a sense of heritage or love of the land. Whatever the reason, there are several advantages to setting aside land in perpetuity. Easements provide permanent protection, yet the property remains in private ownership. Easements can be tailored to circumstances. And, if you need the help, easements can yield significant tax benefits.

Jeanne Rice and Mary Boltuck speak of an assessor who said, "About all you can do on that property is sit and look at the trees." They readily agreed, "Yes, that's really nice."

Spending summers in their small motorhome in the midst of the forest, Howard and Jeanne Rice are surrounded by hardwoods, white pine, black spruce, cedar, poplar, and birch. They do look out at the trees, content to soak up the serenity. With a screened tent as their guest house and a deer trail their path to the lakeshore, the Rices take everything with them when they depart each fall. Their motorhome leaves a small footprint on the land that disappears over the winter.

A smile of satisfaction crosses her face when Mary Boltuck says, "Each time we walk in the woods, we're absolutely convinced this is the right thing to do. The idea that when we're gone--and 150 years from now--this place will still be the same way is a fantastic thing to think about."

As the only large undeveloped parcel of land on Sugar Lake, the easement is a gift much appreciated by other lake residents. It is also a perfect example of a way to protect wilderness without having a government agency purchase it. Many people are surprised to learn that most of California's Big Sur Coast is privately owned. The Big Sur Land Trust, to encourage private land stewardship for the public benefit, seeks and holds conservation easements on scenic properties in that area.

Jean Howker, executive director of the Land Trust Alliance in Washington, DC, cites other national examples of conservation easements: Islands along the Maine coast are held by the Maine Coast Heritage Trust, properties adjacent to Grand Teton National Park are held by the Jackson Hole Land Trust, parts of the Brandywine Valley in Pennsylvania are held by the Brandywine Conservancy, and more than 100,000 acres of ranchlands in Montana, including Ted Turner's ranch, are held by the Montana Land Alliance. Howker says statistics on the number of acres protected by easements nationwide are not available because, to her knowledge, no one has done a compilation of them all. According to The Conservation Easement Handbook, published by the Land Trust Alliance and Trust for Public Land, conservation easements occupy an appealing niche in the array of land-protection techniques--halfway between outright public or nonprofit ownership at one extreme and government land-use regulation at the other. They keep property in private hands and on the tax rolls, and can carry a lower initial price tag than outright acquisition. Their flexibility and applicability to a wide variety of situations are the beauty of conservation easements.

"People are going to look back on the Rices and the Boltucks and see them as very enlightened, farsighted, gracious, and generous people," says Jack Mooty. "In terms of preserving the wildlife on Sugar Lake--the eagles, the loons, the fish, and the blue herons--this piece of land will be of extreme value in the future."

MORE INFORMATION

The Forest Legacy Program

Created as part of the 1990 Farm Bill, the Forest Legacy Program identifies and protects environmentally important private forestlands threatened with conversion to nonforest uses such as residential or commercial development. To help maintain the integrity and traditional uses of private forestlands, the Forest Legacy Program promotes the use of conservation easements.

More than 70 percent of the productive forestland in the U.S. today--347 million acres--is privately owned. Several economic forces threaten to change the uses of these lands. To maintain traditional uses--such as forest management for outdoor recreation, timber harvesting, and wildlife habitat--state and local governments are taking action through local planning and land-use controls, tax policies, incentives, and regulations. Private conservation organizations, such as land trusts, are acquiring and protecting private forestlands. And landowners themselves are continuing to manage their lands as forests. Now the federal government is responding in a way that strengthens and complements these private, local, and state efforts.

The Forest Legacy Program authorizes the U.S. Forest Service to acquire permanent conservation easements in private forestlands at risk of being converted to nonforest uses. Priority is to be given to lands that can be effectively protected and managed, and that have important scenic, cultural, and recreational resources; fish and wildlife habitat; riparian areas; and other ecological values. The federal share of Forest Legacy Program costs may not exceed 75 percent.

Initially, Congress directed the Forest Service to establish Forest Legacy programs in New York, New Hampshire, Vermont, Maine, and Washington. Other states--Connecticut and Massachusetts--have since been added, and at least nine others are working toward federal program approval. Senator Patrick Leahy of Vermont, author of The Forest Legacy Program, says, "The Forest Legacy Program helps private landowners protect their forests for future generations while ensuring that their property rights are secure."

For Further Information on Conservation Easements, Contact These Groups

Land Trust Alliance 900 Seventeenth St., NW, Suite 410 Washington, DC 20006-2501 202/785-1410

The Nature Conservancy 1815 North Lynn St. Arlington, VA 22209 703/247-3724

American Farmland Trust 1920 N St., NW, Suite 400 Washington, DC 20036 202/659-5170

National Trust for Historic Preservation 1785 Massachusetts Ave., NW Washington, DC 20036 202/673-4000

U.S. Forest Service P.O. Box 2417 Washington, DC 20013 202/447-3957