Conservation easements contain pitfalls, agent says
By Bob Schober
Ranchers beware: Conservation easements offer tax benefits but can severely reduce property values and restrict property rights, a University of New Mexico extension agent told members of the La Plata/Archuleta County Farm Bureau on Saturday.
The pitfalls lie in the fine print of the contract, said Ric Frost, a UNM agriculture policy analyst.
"You need to understand that once you sign away title to the easement, you lose control of that easement forever," he said.
Frost suggested landowners instead consider incorporating or creating a limited liability company to tackle tax concerns.
Frost presented a 1Ĺ-hour slide presentation detailing what he called the pitfalls of conservation easements to about 75 members of the farm bureau, who attended the groupís annual meeting held in the Florida Mesa Elementary School cafeteria. The bureau has about 1,700 members, president Doug Davis said.
Conservation easements were introduced 25 years ago and are legal agreements entered into between a property owner and a government agency or conservation organization. The easement contains permanent restrictions on the use or development of land in order to protect its conservation value, according to Colorado Partners for Fish and Wildlife.
Currently, 575 landowners in the state participate in a program to protect wetlands, stream banks and other areas.
The use of the property is determined by the agreement the landowner makes with the holder of the easement.
The main advantage of an easement, Frost said, is in estate and federal income tax savings. Donating the land in the easement is treated as a charitable gift of the development rights, which becomes a deduction on the landownerís federal and state income tax returns.
But the problems offset the tax advantages, he said. Legal complications of the agreement could force landowners to sellout at reduced prices.
First, selling the easement forever forfeits control of the property in the easement.
Second, an easement splits the title of the property between the landowner and the holder of the easement. And the easement holder can, depending on the agreement, sell the easement to another group or agency.
"You could end up with a property use you didnít intend," Frost said.
And third, the landowner is liable for all legal fees and court costs if the easement holder decides the property owner is not managing the property properly for conservation and sues.
The upshot of it, Frost said, is that many landowners, unable or unwilling to pay the thousands of dollars in legal fees to fight out the issues in court, sell out and leave.
"Thatís not a willing seller, thatís a compromised seller," he said.
Tony Ganzerla, an Animas Valley rancher, attended the meeting. Afterwards, he said he has considered creating a conservation easement on his 140 acre-property, on which he has raised cattle since the 1970s.
But he hasnít decided yet.
"My attorney raised several of the same issues (Frost) raised," Ganzerla said. "The tax advantage and keeping open space are important, but I want to keep doing what I do. But itís not worthwhile to set it up and give it up in the end."
The Colorado Cattlemenís Association has studied the conservation easement issue. The association about seven years ago established the Colorado Cattlemenís Agricultural Land Trust for just such a purpose.
"The No. 1 emphasis was to assist families," said Tom Compton, past president of the association and the land trustís first chairman. "The second priority was to keep land in agricultural production. Keeping open space was a side issue."
Compton said Frost "nailed a lot of the issues" but said many association members see conservation easements as a "possible tool."
"It helps with taxes, which were killing some families," he said. "Our easements restrict development, but we negotiate whatever the property owner wants to do."
Representatives of the trust inspect the easement once a year, he said, "to make sure thereís no Wal-Mart in a hay meadow."
State Sen. Jim Isgar, D-Hesperus, also attended the meeting and afterward said his family has also considered establishing a conservation easement. The Isgars own between 3,000 and 4,000 acres near Breen, of which about 1,500 acres are farmed.
"Iím just not as concerned as (Frost is) about conservation easements, but we do want to be careful about how theyíre set up," Isgar said.
Frost took a dim view of votersí approval Nov. 6 to allow Great Outdoors Colorado to issue $115 million in bonds to buy land and conservation easements.
The effort will only put more stress on already financially struggling rural economies, he said.
"I donít encourage communities to put more land in the hands of government because it leaves the tax base," he said.