The Problem: State leaders and national leaders lack politically acceptable mechanisms for management of landscapes for preservation and development.
The Solution: The Right-of-First-Refusal mechanism (RFR) is a politically acceptable mechanism for management of landscapes for preservation and development:
* The RFR is flexible for adaptation in many cultures.
* It is a permanent, transparent and responsive to public policy leadership of government.
* The legislature sets the policies for the RFR mechanism and can adjust these policies with changes in public discussion.
* The right-of-first-refusal is a traditional property right - the purchased right to purchase land at the market price at the time that the seller voluntarily offers to sell the land.
* The property owner chooses to exchange the right-of-first-refusal for the waiver of a certain amount of current property taxes as determined by the legislature.
* This exchange is available to all eligible property owners at the owner's initiative.
* When received by local government, the right-of-first-refusal is transferred to the state in exchange for the waived property taxes.
* In turn, the right-of-first-refusal is transferred to a nonprofit corporation, which is supervised by a board of diverse leaders to administer consistent with legislative policies that include development and preservation goals.
* When the property is offered for sale, the nonprofit corporation exercises its option to purchase consistent within their land preservation and development goals.
* When purchased, the nonprofit corporation places whatever development restrictions are appropriate and promptly returns the property to the market for sale.
Elements of the RFR Mechanism are described as follows for your review:
* For an Overview Summary of the RFR Mechanism entitled, "PRESERVING AGRICULTURAL LANDS - A MARKET-BASED STRATEGY FOR WESTERN STATES," see below.
* To request a full RFR mechanism proposal article entitled, "Protecting Rural Lands: A market-based, efficient and culturally appropriate strategy using rights of first refusal and the nonprofit sector," 8 Hastings West Northwest J. of Envtl. L. & Pol'y 235 (2002), click here.
* To request a draft implementing legislation for the RFR mechanism, click here.
* To requst a supplemental process diagram of the RFR mechanism, click here.
For further information and assistance in adapting the Right-of-First-Refusal mechanism, click here or contact:
15160 Sundown Drive
Bismarck, North Dakota 58503-9206
PRESERVING AGRICULTURAL LANDS - A MARKET-BASED STRATEGY FOR WESTERN STATES
Rural western states face a common problem: loss of agricultural land and open space due to subdivision and development. The West is the country's fastest growing region, with the five fastest growing states (Nevada, Arizona, Colorado, Utah, and Idaho) all west of the 100th meridian. Between 1990 and 1998, U.S. Bureau of the Census data indicate that the population of the West's cities grew by 25 percent and its rural areas by 18 percent. Most western landowners want to preserve the rural character of their landscapes, but they are wary of schemes that even hint of surrendering any property rights.
Conservation easements, land trusts, and land-use mediation have shown promise, but, to date, nothing has completely relieved the landowners' complaints against limits on their property rights. A recent proposal out of North Dakota, however, promises to solve the problem in a rather elegant way.
In 1998, Larry Spears, executive director of The Consensus Council in Bismarck, received a Bush Leadership Fellowship (from the Bush Foundation in St. Paul, Minnesota) to explore the future direction of the nonprofit sector in rural states. Spears took the opportunity to study at Stanford University, the University of Pennsylvania, and the University of Wyoming, where his proposal gradually took shape.
The heart of Spears' idea is a practical mechanism to enable eligible rural landowners to voluntarily grant a right of first refusal (RFR) in exchange for a waiver of their property taxes. A right of first refusal gives the holder an exclusive option to purchase the property at the fair market price when the landowner decides to sell the property. Under Spears' proposal, the RFR would be transferred by the state to a nonprofit organization established for this purpose and acting on behalf of the state. The RFR would not be exercised until the landowner sells the property. The nonprofit would then acquire the property, apply easements or other land-use restrictions under guidelines enacted by the state legislature, and resubmit the property for sale on the open market at market price. In most cases, private landowners would purchase the property, although properties with special conservation values would likely be attractive to other buyers, including commercial and residential developers and land trusts or other conservation organizations. Any new owner, however, would be required to abide by any easements or restrictions placed on the property.
How the RFR Strategy Works
All landowners with 20 acres or more of agricultural or rural land would receive an RFR form with their property tax bills each year. If a landowner does not want to grant a right of first refusal, he or she simply ignores the RFR form and pays the property taxes. Landowners who do choose to submit the RFR form receive a waiver of their local property taxes (and, for mining industries, their ad valorem taxes). The RFR form would be recorded locally by the Register of Deeds and forwarded to the state. The state would immediately reimburse local government for the foregone property taxes.
The state would then forward the RFR form to the designated nonprofit organization, which is governed by a diverse group of leaders in that state. The nonprofit would assess the agricultural, conservation, development, open space and other values of the property and draft a plan for future easements and development restrictions. These restrictions would not be enforced until the property is sold. When the landowner decides to sell the property (which may be years in the future), the nonprofit would purchase it at fair market value. Then, the nonprofit would apply appropriate easements and restrictions to the deed, consistent with policies established by the state legislature. and resubmit the property to the open market.
The nonprofit would promptly resubmit the property to the open market. Depending on the market, the sale price might be higher, the same as, or lower than the original purchase price. Profits or premiums would be used to refund the state for the foregone taxes it paid to local government when the landowner received his or her tax waiver. A portion of profits, as well as private contributions, could also be used to offset any long-term losses.
* The RFR is voluntary. Landowners who do not wish to grant the RFR in exchange for the tax waiver simply pay their customary property and ad valorem taxes.
* The RFR in no way obligates the current landowner to sell the property. Property could be passed down within a family without a sale and without triggering the RFR.
* The current landowner would not be subject to easements or restrictions. The nonprofit organization cannot enforce easements or restrictions until it purchases the property. The RFR takes effect only if and when the landowner decides to sell the property.
* Except for administrative expenses, there need be no net costs to state government because any waived taxes can be reimbursed after final sale of the property. Local governments are promptly reimbursed for waived property taxes when the RFR is executed.
* The nonprofit organization would operate strictly under guidelines and policies established by the state legislature. Any easements or restrictions on land use must comply with legislative policy. The legislative policies would likely evolve to meet public needs.
* The RFR mechanism and tax waiver could become a permanent program, or it could be implemented over a shorter term to meet some legislatively established quota for land conservation. The RFR strategy is adaptable to meet state and community needs as they evolve.
* The RFR program would be governed by legislation that sets: (1) the nature, size, and duration of the tax waiver incentive; (2) the policies for administering the RFR; (3) which state agency oversees the nonprofit organization and the transfer of the RFR and tax reimbursements; (4) custody of easements and restrictions; and (5) enforcement of easements and restrictions.
Implementing the RFR Proposal
The RFR approach is a simple, market-based, voluntary strategy. It is comprehensive, practical, efficient, and inexpensive. It includes mechanisms to ensure that it remains accountable to the public and their elected representatives. In short, it promises to be a culturally appropriate and fiscally responsive strategy for western states.
Spears is actively shopping the RFR proposal to anyone who will listen, including the Western State Planning Leadership Retreat held last spring in Park City, Utah, which was sponsored by the Lincoln Institute and the Western Consensus Council. The response was favorable-Kent Briggs, director of the Council of State Governments-WEST, said it was a "killer idea"-but Spears has yet to find a leader who will step forward to sponsor or implement the RFR strategy. Nevertheless, he's ready to run with the idea. Spears and a colleague, Karen Paige Hunt of the University of South Dakota Law School, are completing an article detailing the strategy for submission to a land-oriented law journal, and he plans to draft model legislation that will enable any state to implement the RFR strategy when the time is ripe.
This mechanism is now published in "Protecting Rural Lands: A market-based, efficient and culturally appropriate strategy using rights of first refusal and the nonprofit sector," 8 Hastings West Northwest J. of Envtl. L. & Pol'y 235 (2002).
Will Harmon is a freelance writer in Helena, Montana, specializing in natural resources, outdoor recreation, and collaborative problem solving. Contact: email@example.com.