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Business Observer Friday, Aug. 8, 2008 12 years ago

Gattuso: Marketplace of ideas

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Conservation easements seemed to be a good idea at first. But like so many things, once government got deeply invested, they have become a threat.

Gattuso: Marketplace of ideas

Conservation Easements:

The Good, Bad and Ugly

Conservation easements seemed to be a good idea at first. But like so many things, once government got deeply invested, they have become a threat.

Conservation easements, as we know them today, are a fairly recent approach to land conservation. As government acquisitions and regulatory restrictions on land use have become prohibitively invasive, costly, and ineffective, governments have looked to conservation easements as a potentially effective and less expensive conservation method than government ownership and/or regulation. Use of conservation easements began to gain steam by the 1980s and by the 1990s, exploded on the scene.

Initially, conservation easements - which allow landowners to hold on to and use their property but permanently remove development rights in exchange for tax benefits - seemed to hold some promise as an un-intrusive, effective means of preserving open space while upholding private stewardship, private initiative and the rights of private property owners. Land trusts, the organizations that manage the easements, tended originally to be small, nonpolitical, and independent of government involvement.

Over time, however, as numerous land trusts have grown in size and number, so have their association - and influence - with government. This has been the case particularly with the large, national organizations that obtain enormous sums from federal funding. For many of these land trusts, what used to be a close working relationship with private landowners has been replaced by a closer relationship with government agencies.

Increasingly too, the mission has evolved from protecting open lands through private stewardship to aiding government agencies in acquiring private lands.

In these troubling arrangements, land trusts have operated more like government agents, acquiring easements from private landowners, only to turn around and quietly sell them - sometimes for a profit - to state or federal governments. These methods certainly are not practiced by all land trusts, but nor are they isolated cases.

Given the rapid growth in land trusts and the rising use of conservation easements over the past decade, along with increasing involvement with government in the arrangements, easements could become a far-reaching means for public land acquisition. That is, easements, absent reforms, could evolve into the prevailing method for government to shift lands unobtrusively from private to public control under a pretense of private stewardship.

Other problems, too, have evolved. Federal tax incentives for conservation easements require landowners to encumber their land in perpetuity. While the permanency may hold appeal to those property owners who see value in shielding their land from developers forever, particularly when sweetened with a significant tax deduction, it could prove to be detrimental to the public over the long-term as economic and ecological factors change our definitions of what should be preserved and why.

Because conservation easements essentially are a contract between two people - the grantor and the grantee - one of the promising aspects of easements has always been their flexibility and adaptability, compared to government ownership and regulations. Perpetuity requirements run counter to flexibility and necessary change.

The tax incentives themselves also are problematic, developing into what some critics call a "tax haven" and "tax bonanza" for the wealthy landowner. Although the tax benefits were intended to aid the land-rich, cash-poor farmer or small business, struggling because of exorbitant property and estate taxes to hold on to their land, the federal tax benefits disproportionately favor wealthy landowners.

Reform suggestions

Policy reforms can change conservation easements as we know them today, returning control of land to property owners while removing existing disincentives to land preservation. Among these are:

• Preventing government takeover of land through land trusts' acquisition of conservation easements.

• Phasing out government funding of land trusts.

• Changing the tax code to allow for fixed-term, rather than perpetual, conservation easements.

• Eliminating estate taxes, which encourage property owners to sell their land to developers.

Conclusion

What once showed promise as an effective tool for preserving lands through private ownership and stewardship is increasingly becoming a questionable practice, particularly as land trusts join government in partnerships and, in some cases, use conservation easements to turn private land over to government ownership.

As the conservation easement and land trust movement continues to grow by leaps and bounds, it is imperative that reforms be put into place that return easements to their original intent to protect property through private means.

Requirements that easements encumber land in perpetuity remove one of the arrangement's most significant benefits - flexibility. As the natural state of our environment and scientific discovery evolve, so do society's definitions of what should be preserved and how. Tax policy should not lock future generations into relatively shortsighted visions of what today is considered ecologically-beneficial.

Finally, through manipulations to the tax code, government influences property owners' decisions on land use, promising immediate tax relief to those who forfeit full rights and ownership of property. Were land trusts fully private organizations, free from government association and influence, there could be value.

But given inherent problems with conservation easements, most pointed, the rise in government involvement, influence, and acquisition of lands under easement, a far more effective means would be to eliminate the estate taxes that discourage land preservation in the first place.

Dana Joel Gattuso is a senior fellow on environmental policy at the National Center for Public Policy Research. She also serves as an adjunct scholar at the Competitive Enterprise Institute.

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