Are nonprofit land trusts taking advantage of the public's trust?

By Tom Holt
from Insight Magazine

7/9/02 - 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 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. Trusts are "flexible" - essentially free of oversight and procedural regulations.

"Land trusts can operate with less public scrutiny than a government agency," according to the Alachua Conservation Trust of Gainesville, Fla. Trusts don't have to give public notice or hold hearings on their actions. They also can withhold required appraisals from a seller until after a deal is signed.

Using the Freedom of Information Act, I have reviewed the financial records, appraisals and other documents associated with numerous state and federal land acquisitions. With depressing regularity, I have found all of the abuses previously noted. What's more, there is a serious question of whether land-acquisition priorities are being set in the public interest or in furtherance of land trusts' private interests.

Here are examples:

*In Illinois, a conservancy official threatened to recommend foreclosure action against a landowner unless he cooperated in the group's efforts to acquire land for the Cypress Creek National Wildlife Refuge. The Nature Conservancy issued an apology - after the correspondence came to the attention of a local congressman.

*In New Hampshire and Massachusetts, the National Park Service gave tens of thousands of dollars to a conservation group for mounting, by outside appearances, a purportedly spontaneous lobbying campaign for a wild and scenic river designation that would lead to the establishment of a riverside greenway. The project fell apart after a revealing memo leaked and was publicized by a local property-rights group. *In North Carolina, the U.S. Fish and Wildlife Service paid The Nature Conservancy $3.5 million in 1988 for a 10,000-acre addition to the Alligator River National Wildlife Refuge. The sale took place without a properly documented appraisal of the property, according to the Interior Department's Office of the Inspector General.

Land-trust acquisitions also have become an important tool of de facto regional land-use planning. Trusts can acquire strategically located land or development rights and therefore channel roads, housing and industrial development. A California landtrust official described, on tape, how his organization stopped a major development: "We had coopted the local government when we established a conservancy years ago by having the mayor of the local town and the supervisors on our board, and by me personally helping the board of supervisors of the county set up an agricultural land trust to protect irrigated agricultural land. To the point where people in the government said, `Come talk with the land conservancy, because, in effect, off the record we're telling you, you're not going to work it out without the conservancy.'"

Individuals can get caught in the middle of land trusts' grand acquisition plans too. A landowner surrounded by trust holdings near a park or wildlife refuge can, if the trust land is flipped to the government, suddenly become an "inholder," with greatly diminished property rights - and perhaps newfound status as a "priority" government land-acquisition target.

Several investigations of trust transactions with federal agencies, conducted by both the Interior Department's inspector general and the General Accounting Office, have uncovered numerous irregularities. Investigators have found suspiciously adjusted appraisals, land bought for no apparent purpose other than to serve trusts' bottom lines and unseemly profits. Yet no serious reforms have occurred.

Trusts enjoy support from a weird political coalition of green absolutists, country-club Republicans and even some free-market advocates who have deluded themselves into believing land trusts represent "reasonable" environmentalism. Republican National Committee Chairman Haley Barbour was set to host a TNC fundraiser at the GOP Capitol Hill Club last summer - until property-rights activists threatened to make a spectacle of it.

Land trusts may bill themselves as private-sector alternatives for conservation and their essential function may be based on the vigorous acquisition and defense of particular kinds of property rights such as open-space easements. Yet, as a movement, land trusts are extremely hostile to property rights and many of them are nothing more than extensions of land agencies.

Trusts have provided key support to lobbying campaigns against property-rights legislation at the state and federal levels. Most such legislation - including bills pending in Congress - would compensate landowners for "regulatory takings" - that is, when a government regulation reduces the market value of a property. Yet the reaction of Jean Hocker, president of the Land Trust Alliance (an association for land trusts), is typical of the attitude of the land-trust movement. Hocker told a land-trust convention in 1993 that such legislation "ignores what the public good is" and characterized the political movement behind the legislation as an "insidious effort" to undermine conservation. In a speech, Hocker said people who advocate protections of private-property rights are "so far out on the edge of things that nobody takes them seriously."

Some land trusts even have expressed outright alarm at the advent of the Maine Conservation Rights Institute, or MCRI, a small land trust founded in 1993 by property-rights activists. MCRI forthrightly states that it will not voluntarily transfer any of its land or easements to a government agency, thus providing its donors with the assurance that a donation will not contribute to the expansion of government holdings. As an organization determined to operate entirely within the private sector, MCRI would seem to appear to live up to the ideal mode of a land trust. Yet, when Jay Espy of the Maine Coast Heritage Trust spoke at the same convention as Hocker, he called MCRI "a scary thing" because "its purpose is to protect private-property rights."

If land trusts are so pro-market, why are their executives so distrustful of groups advocating property-rights protections? Because, with few exceptions, land trusts aren't really pro-market. They exist to remove land or land rights from the ordinary marketplace. Land trusters simply don't trust private-property owners to take care of their land.

Those who think there can be a lasting accommodation between real property-rights protection and the land-trust movement are dreaming. While many foot soldiers of the land-trust movement are decent people engaged in worthy, strictly local projects, its commanders and senior lieutenants mainly are true greenies with good suits and haircuts, ever looking, as a Trust for Public Lands newsletter puts it, "where the money trees grow."

Holt is a public-affairs consultant in Beaverton, Ore., a former newspaper editorial writer and author of a forth-coming book on land trusts.

In accordance with Title 17 U.S.C. Section 107, any copyrighted work in this message is distributed under fair use without profit or payment for non-profit research and educational purposes only. [Ref. http://www.law.cornell.edu/uscode/17/107.shtml]