Presentation on theme: "John Bell – Senior Planner, Department of Planning and Zoning, Fairfax County Whit Field – Vice President and General Counsel, Northern Virginia Conservation."— Presentation transcript:
John Bell – Senior Planner, Department of Planning and Zoning, Fairfax County Whit Field – Vice President and General Counsel, Northern Virginia Conservation Trust
As local governments examine innovative ways of preserving open space and expanding their conservation efforts, one overlooked model is the establishment of a private/public partnership between local governments and land trusts. Pioneered by Fairfax County and Northern Virginia Conservation Trust (“NVCT”), the private/public partnership has become a key tool in the protection of environmentally sensitive and historic properties in rapidly developing Northern Virginia. Initially Memorialized in a Memorandum of Understanding (“MOU”), the private/public partnership offers the local land trust access to a stream of income while providing the local governments an outsourced means of implementing their open space master plans. This Presentation will examine the advantages of such relationships, the tools for preservation (principally the Conservation Easement), and how to structure the public/private partnership.
Why Would Local Jurisdictions Commit Public Money to Preserve Land? Opportunism: provides mechanism to take advantage of federal and state tax benefits Capacity: increases matching grants/donations Fairness: “levels the playing field” because public money is already used to encourage development Outsourcing: implements jurisdiction’s open space master plan cheaper than doing it in-house Volunteerism: encourages volunteers Regionalism: improves image in region
Land Protection Toolbox Fee Simple Donation Donation with Life Estate Donation by Will Outright Purchase Bargain Sale Conservation-Minded Development Planning Conservation Easement Riparian Buffer Easement
Conservation Easement A legal document restricting the uses of the Property A legal document restricting the uses of the Property Examples of common restrictions: Subdivision into smaller parcels Subdivision into smaller parcels Cutting of woodlands Cutting of woodlands Number of buildings/structures Number of buildings/structures Construction of roads Construction of roads Changing topography Changing topography Altering or polluting streams Altering or polluting streams Disposing of wastes Disposing of wastes Owner still owns and manages the property and can still sell or convey the property Owner still owns and manages the property and can still sell or convey the property Can be tailored to meet the needs of the landowner and the Trust Can be tailored to meet the needs of the landowner and the Trust Does not allow public access unless landowner wants to Does not allow public access unless landowner wants to Must be “forever” to be tax-deductible Must be “forever” to be tax-deductible
Benefits of Conservation Easements Public Benefits: Conservation of important natural and historic resources in perpetuity, such as air quality, water quality, wildlife habitat, and scenic vistas for less money than fee acquisition. Private Benefits: Continued ownership of land plus tax incentives, such as income, property, and estate tax benefits.
Income Tax Deduction. Value of donated easement considered a Charitable Gift and can be deducted from donor’s federal and state income taxes. Deduction Limited to 50% of the landowner’s adjusted gross income (AGI) in the year that the donation is given. Unused portion may be carried forward for an additional fifteen years subject to AGI limitation.
(cont.) What Are The Tax Benefits? Property Tax Savings. Property assessed at “Use Valuation” rates. In those areas without use valuation, local assessors required by Virginia Conservation Easement Act to take easement into account in determining the Fair Market Value of the Property. Virginia Code Section 10.1-1011.
Estate Tax Savings. The easement value is excluded from the taxable value of the estate under section 2055(f) of the IRC. Section 2031(c) of the Code provides an additional benefit to easement donors, which can further reduce the taxable value of an estate by up to $500,000. Section 2031(c) also provides heirs the opportunity to make a post-mortem donation of a conservation easement.
(Cont.) What Are The Tax Benefits? Virginia Land Preservation Tax Credit. 40% of the easement value can be taken as a tax credit against Virginia Income Tax owed. Limited to $100,000 in any single year; can use in year of easement donation plus 10 consecutive years. Can sell unused Credits to other taxpayers; can transfer privately or using facilitators/brokers; available market currently 80 cents/dollar of credit. Non-profits/Cash poor.
Valuation of Easement Valuation Methods: Comparable Sales Method (using government purchases of easements; few comparisons); Subdivision Method of Analysis (danger of inflated appraisals); and Before and After Method (most common). Difference between Fair Market Value (FMV) of unrestricted property and the FMV of restricted property. Treas. Reg. Section 1.170A-14(h)(3)(i)
(cont.) Valuation Issues Timing: appraisal must be completed no more than 60 days before recordation and no later than tax filing date. One Year Rule. (FMV=purchase price) Enhancement Issues. Easement value lessened if it enhances value of nearby lands owned by donor or related parties. Bargain Sale. Donor’s deduction must be reduced by amount of any financial or economic benefit received.
Landowner/Lawyer Contacts NVCT Site Visit/Staff Determination of Interest Title Search Negotiation of Conservation Easement: identification of conservation values; drafting language to protect those values; limiting donor’s reserved rights, such as building envelopes; addition of boilerplate provisions for monitoring and enforcement.
Discussion of Stewardship Gift Presentation to NVCT Land Stewardship Baseline Study done by NVCT Final Negotiation of Easement Presentation to NVCT Board of Directors Appraisal Completed Involvement of Broker (if needed) Subordination Agreement (if needed) DCR pre-filing review (if over $1 million credits)
(Cont.) Easement Process Execution and Recordation Forms filed with broker/DCR/Department of Taxation for state tax credits Form 8283 and copy of appraisal given to NVCT Tax Returns filed Appraisal submitted to local jurisdiction for lower real estate assessment
The preservation of land areas for outdoor recreation or education protection of a relatively natural habitat of fish, wildlife, or plants, or similar ecosystem
IRS Cont. preservation of open space preservation of a historically important land area or a certified historic structure
(IRS cont.) Recreation or Education The donation of a qualified real property interest to preserve land areas for the outdoor recreation of the general public or for the education of the general public will meet the conservation purposes test of this section. Thus, conservation purposes would include, for example, the preservation of a water area for the use of the public for boating or fishing, or a nature or hiking trail for the use of the public.
(IRS cont.) Protection of Environmental System The donation of a qualified real property interest to protect a significant relatively natural habitat in which a fish, wildlife, or plant community, or similar ecosystem normally lives will meet the conservation purposes test of this section. The fact that the habitat or environment has been altered to some extent by human activity will not result in a deduction being denied under this section if the fish, wildlife, or plants continue to exist there in a relatively natural state. For example, the preservation of a lake formed by a man-made dam or a salt pond formed by a man-made dike would meet the conservation purposes test if the lake or pond were a nature feeding area for a wildlife community that included rare, endangered, or threatened native species.
Significant habitats and ecosystems include, but are not limited to, habitats for rare, endangered, or threatened species of animal, fish, or plants; natural areas that represent high quality examples of a terrestrial community or aquatic community, such as islands that are undeveloped or not intensely developed where the coastal ecosystem is relatively intact; and natural areas which are included in, or which contribute to, the ecological viability of a local, state, or national park, nature preserve, wildlife refuge, wilderness area, or other similar conservation area.
(IRS cont.) Preservation of 0pen Space The donation of a qualified real property interest to preserve open space (including farmland and forest land) will meet the conservation purposes test of this section if such preservation is-- (A) Pursuant to a clearly delineated Federal, state, or local governmental conservation policy and will yield a significant public benefit, or (B) For the scenic enjoyment of the general public and will yield a significant public benefit. An open space easement donated on or after December 18, 1980, must meet the requirements of section 170(h) in order to be deductible.
For example, the donation of a perpetual conservation restriction to a qualified organization pursuant to a formal resolution or certification by a local governmental agency established under state law specifically identifying the subject property as worthy of protection for conservation purposes will meet the requirement of this paragraph. A program need not be funded to satisfy this requirement, but the program must involve a significant commitment by the government with respect to the conservation project. For example, a governmental program according preferential tax assessment or preferential zoning for certain property deemed worthy of protection for conservation purposes would constitute a significant commitment by the government. (emphasis added) Thus, in Virginia properties accorded property tax reductions/tax credit.
Historic Preservation The term historically important land area includes: (A) An independently significant land area including any related historic resources (for example, an archaeological site or a Civil War battlefield with related monuments, bridges, cannons, or houses) that meets the National Register Criteria for Evaluation in 36 CFR 60.4 (Pub. L. 89-665, 80 Stat. 915); B) Any land area within a registered historic district including any buildings on the land area that can reasonably be considered as contributing to the significance of the district; and (C) Any land area (including related historic resources) adjacent to a property listed individually in the National Register of Historic Places (but not within a registered historic district) in a case where the physical or environmental features of the land area contribute to the historic or cultural integrity of the property. (iii) Certified historic structure. The term certified historic structure, for purposes of this section, means any building, structure or land area which is-- (A) Listed in the National Register, or (B) Located in a registered historic district (as defined in section 48(g)(3)(B)) and is certified by the Secretary of the Interior (pursuant to 36 CFR 67.4) to the Secretary of the Treasury as being of historic significance to the district.
FAIRFAX COUNTY POLICY Protect EQC, RPA and sensitive ecosystems Protect Stream Valleys Buffer Parks Protect Historic sites important to the County Comply with Chesapeake Bay Agreement Goals
Comp. Plan – Specifically amended with NVCT to include open space policy and as specific as possible) that Fairfax County should use easements to help preserve small areas of open space in already developed areas to shape the character of the community; to protect trees and other environmental resources; to provide visual relief; to preserve wildlife habitat; to provide buffering and screening; and to otherwise ensure that suburban and urban neighborhoods may retain open space; and that protection of stream valley corridors through its Environmental Quality Corridor ("EQC") policy is a major objective for the County, and EQC land that remains in private ownership should be protected through appropriate commitments for preservation, including the use of protective easements; and that an environmental objective of Fairfax County is to promote the use of open space/conservation easements as tools to preserve Environmental Quality Corridors, Resource Protection Areas, and other environmentally sensitive areas such as land along the Potomac River.
Comp. Plan Cont. Go to specific sections for policy by area Look to Historic Significance – e.g., listed on Inventory of Historic Sites [T]he Board of Supervisors as a matter of policy encourages the use of open space/conservation easements to implement the County’s goals and objectives for the preservation of natural and heritage resources within the context of Fairfax County's suburban and urbanizing character, in accord with the County’s Comprehensive Plan, and more specifically: (i) maintain a County Inventory of Historic Sites to recognize the value of significant heritage resources for preservation; (ii) once identified, protect significant heritage resources from degradation, or damage and destruction by public or private action; (iii) promote the use of open space/conservation easement to preserve these heritage resources. Encourage property owners to place easements on their properties, working with the County, a local land trust and/or a state or national entity authorized to hold easements for the purpose of heritage resource preservation.
EQC – Preserve, Protect, Enhance steam corridors Not Mapped, Applied during rezoning For ecological resource conservation, identify, protect and restore an Environmental Quality Corridor system (EQC). Lands may be included within the EQC system if they can achieve any of the following purposes: Habitat Quality: The land has a desirable or scarce habitat type, or one could be readily restored, or the land hosts a species of special interest. "Connectedness": This segment of open space could become a part of a corridor to facilitate the movement of wildlife. Aesthetics: This land could become part of a green belt separating land uses, providing passive recreational opportunities to people. Pollution Reduction Capabilities: Preservation of this land would result in significant reductions to nonpoint source water pollution, and/or, micro climate control, and/or reductions in noise. EQC – Technical Specifications: All 100 year flood plains as defined by the Zoning Ordinance; All areas of 15% or greater slopes adjacent to the flood plain, or if no flood plain is present, 15% or greater slopes that begin within 50 feet of the stream channel; All wetlands connected to the stream valleys; and All the land within a corridor defined by a boundary line which is 50 feet plus 4 additional feet for each % slope measured perpendicular to the stream bank. The % slope used in the calculation will be the average slope measured within 110 feet of a stream channel or, if a flood plain is present, between the flood plain boundary and a point fifty feet up slope from the flood plain.
Advantages of Private/Public Partnership Funding : provides steady source of income to hire and maintain professional staff and to pay for acquisition of interests in land and related expenses Capacity : increases ability for matching grants/donations – leverages public dollars Expertise : allows land trust to use expertise of local jurisdiction as “partner.” Publicity : increases profile of land trust and local jurisdiction’s open space program in community Public Support : helps meet the IRS public support test
Term (but subject to annual appropriations) Scope of Work Program Standards/Performance Targets Monitoring Requirements Uses for Public Funds Coordination Termination of MOU Indemnification Miscellaneous Provisions (e.g., Board membership)
Meet all performance targets or explain why you have not done so Use the monitoring requirements to constantly retell the story of the public/private partnership and its successes Local officials participate in easement signings and other public events Helps liaison conservation efforts with local advisory commissions and other environmental/historic preservation groups Use volunteers to clean-up public parks Designate one person as the liaison or contact within each jurisdiction/land trust and keep them posted