FY2015 Payment Schedules 10/23/2014

SCS/NRCS Financial Assistance History

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Financial Assistance Programs Incentive Payments County Average Costs Payment Based on Contract Receipts 1996 – 2007 AA - Actual cost not to exceed average cost AM - Actual cost not to exceed a specified maximum cost AC - Average cost FR - Flat rates are the maximum payment regardless of the actual cost NC - Not cost shared (required in the contract) Payment Based on State Collected Cost Data 2008 – 2011 “State” Payment Schedules Payment Based on National Cost Data Set Present “Regional” Payment Schedules 4

5 Policy “Effective October 1, 2007, payment schedules are used to document all authorized costs and payment rates used to support EQIP, WHIP, and AMA program contracts administered through ProTracts.” Conservation Programs Manual CPM

6 Why Payment Schedules? Comply with international treaties and IRS regulations Based on “incurred costs and forgone income” Standardized agency-wide cost data and program payment methodology Improved communication Save field office time

7 Streamline contracting and payment processes Eliminate uncertainty as to the level of actual payments to producers Describe what NRCS is paying for Pass public scrutiny: Over $1-Billion in FA program payments Conservation partners Watch-dog groups / critics / IRS International trade agreements Why Payment Schedules?

Regional Practice Payment Schedules Fourth year of Regional Practice Payment Schedules –2012: 15 common practices –2013 – 2015: 100%, all practices Southern Mountain Region consisting of 5 state (AZ, NM, CO, UT, NV) 8

FY2015 Practice Payment Schedules Development Arizona NRCS only had issues with about 3% of FY14 Practice scenarios on the Payment Schedule –2013 about 5% Arizona NRCS provided feedback to the regional team on: –Costs variability (too high or low) –Need for additional scenarios –Units changed 9

2015 Payment Schedules Practices reviewed Water Harvesting Catchment Watering Facility Pumping Plant Fence Pond Structure for Water Control Irrigation Ditch Lining Residue & Tillage Management, Mulch Till 10

New Practices / Changes 756 Field Operations Emissions Reduction –Use of multi-pass equipment 670 Lighting Systems Improvement 672 Building Envelope Improvements –Formerly under of 374, Farmstead Energy Improvement 649 Structures for Wildlife –Formerly interim practice 734, Fish and Wildlife Structure 11

2015 Payment Schedules Timeline: –September 15 States begin to prepare State Payment Schedules –October 31 State Payment Schedules finalized and posted 12

Questions? 13

FY2015 Agriculture Conservation Easement Program (ACEP) Contract Compensation October 23, 2014

Background NRCS in consultation with the State Technical Committee (STC) must annually review and update Fair Market Values (FMV) and Geographical Area Rate Caps (GARC) for easements and 30-year contract under the Agriculture Conservation Easement Program (ACEP). 15

Background The basis for the compensation offer for an easement or 30-year contract enrollment will be the lowest of the following: -Fair Market Value (FMV) -Georgaphic Area Rate Cap (GARC) -Landowner offer 16

Determining Fair Market Value (FMV) NRCS must determine whether to use an: 1)Area Wide Market Analysis (AWMA) or 2)Uniform Standards for Professional Appraisal Practices (USPAP) appraisal to determine fair market values. 17

Determining Fair Market Value (FMV) Historically, Arizona NRCS has used Area Wide Market Analysis (AWMA) appraisals in sub-regions across the state Annual cost of market analysis is around $10,000 AWMA have not changed since 2010

Determining Fair Market Value (FMV) Another option for states to determine FMV is using the Uniform Standards for Professional Appraisal Practices (USPAP) appraisal method. -Individual Appraisals -Can only be used in States that have limited WRE enrollment or areas with limited enrollment in the State 19

Determining Fair Market Value (FMV) - USPAP The Pros –Less overall expense for NRCS –Only pay for those appraisals that are needed –More accurate compensation rate The Cons –May take additional time to conduct appraisal, evaluate and close the easement

Geographic Area Rate Cap (GARC) Determination The GARC should reflect fair compensation for the rights being acquired. The GARC will always be less than the fair market value as determined by the AWMA or USPAP appraisal. If USPAP appraisals are used to determine fair market value, the GARC must be set as a percentage of fair market value and must include a not-to-exceed dollar value.

Geographic Area Rate Cap (GARC) Determination Use of USPAP appraisals: –To provide fair compensation 90% of FMV would be set –Dependent on productivity of land and carrying capacity –Not to Exceed $5,000 per acre

Questions? 23