The Lease Concept

Havens for Threatened & Endangered Species

The Lease Concept

DEVELOPING A
PRIVATE HABITAT CONSERVATION LEASE

Proposals for Consideration & Discussion

Participants in the "walk about" portion of the May 1998 workshop were given three colors of post-it flags, and asked to use a consensus model to guide their "voting" on each lease concept, as follows:

1. Green flag: This is good; I agree

2. Yellow flag: I may not agree 100%, but I can live with it

3. Orange flag: I cannot agree; this needs major work

Responses are noted below for each concept. Responses also are segregated according to the interest represented by the person doing the voting -- Landowner, representative of Government agency or Conservation organization, or Other interest (University of Florida, for example). Suggestions for edits and changes that were made at the workshop have been incorporated. For a description of the discussions that took place regarding these concepts, please click on Workshop Report: May 1998. Please note: all participants did not vote on every concept. Also, some flags were brushed against and fell off during the workshop, so were not included in the totals below.

Lease Concepts

1. The "Private Habitat Conservation Lease" can be written in two ways: (1) as a long-term service contract that will provide for the management of specific natural resources on private lands. With this approach, any government agency that has authority to enter into contracts would be able to negotiate a "Private Habitat Conservation Lease" with a private landowner and use any existing funds that are available for contracts, services, management or conservation to pay for the lease.

As an alternative, the lease can be written: (2) as a term conservation easement where the lease becomes a legal restriction on the landowner's non-agricultural development rights for a specified amount of time. Because the term easement will represent an interest in land, only organizations and agencies with authority to purchase interests in land would be able to negotiate leases, and only funds that are earmarked for land protection, land acquisition and/or less-than-fee acquisitions would be available to be used to pay for the leases. Also, because many existing land protection/land acquisition programs require that interests in land be "perpetual," changes in law may be necessary before existing land protection funds and programs can be used to pay for leases.

There's another difference between the two approaches as well. As a service contract, payments to the landowner can be based on the value of the service rendered. For example, if government agencies with landholdings in southwest Florida pay an average of $11 per acre per year -- not including administrative costs -- to manage these lands (see economic analysis conducted by Florida Stewardship Foundation), then a payment in the same amount to a private contractor or landowner for the same services can be justified. As additional services are provided (such as access to private lands for research), an additional payment can be made for this service.

Responses prior to edits:

Green: 9 -- 6 landowner, 2 government, 1 conservation

Yellow: 4 -- 2 landowner, 2 government

Orange: 1 -- 1 government

Comments Offered:

Orange flag (government): Both state and federal agencies currently lease lands from private landowners and NGO's [non-governmental organizations] operating in the private sector can also lease lands [Note: an edit was made at the workshop to satisfy this comment.] Two other comments also were offered:

Where will the funding for the program come from?

In the current climate of regulatory reform and emphasis on property rights, could the proposed Draft Lease affect the ability of the government to administer the Endangered Species Act, Clean Water Act or other environmental regulations?

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2. If both parties agree, a Contingent Value (or CV) analysis also can be conducted to determine the value of the resource that is being maintained -- and how much its value would increase if a landowner took actions to improve its ecological functions. CV analyses have been used to measure how much people are willing to pay for clean air, clean water, wetlands, open space and other natural resources and, thus, provide a representative dollar measure of the value placed on these resources by a statistically valid sample of the public for the purpose of comparing these values with the values of traditional market activities (such as building houses or expanding a manufacturing plant) in the economy.

A lease based on a term easement would derive its value from an appraisal that would be conducted to determine the actual property value that is "given up" by the landowner during the term of the lease. In areas where term easements previously have been used (New Jersey and Pennsylvania, for example), the rental payment is based on the difference between the land's agricultural value and its full market value, with landowners receiving interest on the difference between them. These payments usually are made on an annual basis. Also, every 10 years, the property is reappraised, and a new base rental figure is determined. Nevertheless, the amounts paid usually are quite low, and may not provide enough incentive for many landowners to want to enter into lease agreements.

Leases based on the service contract approach would have much more flexibility in terms of the number of agencies that can execute them, the number of existing funding sources that can be used to pay for them, and the ways in which annual payments to landowners could be calculated. For these reasons, it is recommended that the "Private Habitat Conservation Leases" be based on the service contract approach.

Responses:

Green: 36 -- 14 landowner, 10 government, 2 landowner/conservation, 1 conservation, 9 other

Yellow: 21 -- 2 landowner, 11 government, 2 landowner/government, 1 landowner/conservation, 2 conservation, 3 other

Orange: none

Comments Offered:

CV is Contingent Value. It is used to measure goods not traded in the market place.

Add to beginning of paragraph: If both parties agree, a CV should be conducted ... [Edit made]

This concept is subject to manipulation by either party.
How were the projects in NJ and PA received? How effective were they? [Information on the New Jersey experience with term easements can be obtained from: Don Applegate, Executive Director, State Ag Development Committee, CN 330, Trenton, NJ 08625 Phone: 609-984-2504. Information on the Pennsylvania experience with term easements can be obtained from: Thomas Daniels, Director, Lancaster County Agricultural Land Preservation Board, 50 North Duke Street, P.O. Box 3480, Lancaster, PA 17608-3480 Phone: 717-299-8355.]

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3. While the overall objective of this program is to ensure the perpetuation of threatened and endangered species, the focus of the leases should be on ensuring the viable function and integrity of natural habitats, which in turn should improve the health and numbers of specific species. While there is still disagreement on this point among some members of the project's Review Committee, there is unanimity among landowners and agreement among many members of the conservation community that the project should focus only on protecting essential habitat. The factors involved with the Florida panthers’ genetics and other factors affecting the species’ health are beyond the control of any single private landowner.

Responses prior to edits:

Green: 24 -- 10 landowner, 9 government, 5 other

Yellow: none

Orange: 2 -- 1 government, 1 conservation

Comments Offered:

Preamble: Habitat as well as species preservation is part of this framework. May be habitat; may be species -- lease specific. [Note: an edit was made at the workshop to satisfy this this comment.]
Public has interest in preserving natural areas besides just those which are essential for conservation of panthers or some other species. It is impossible to determine if conservation value is being maintained as land use changes without monitoring the health, presence and numbers of plant and animal species.

Orange flag (government): Single species and multi-species recovery plans set parameters for population levels (numbers) and viability (health). The lease as a conservation tool must be geared toward species recovery goals.

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4. The best that can be hoped is that, as a result of this project, large numbers of landowners will be willing to commit to long-term management plans that will ensure: (1) essential habitats are not destroyed as a result of ever-encroaching urban development or the need to intensify and expand agricultural operations to keep these operations economically viable; (2) these habitats are well-managed so they maintain their ecological functions in a manner that is at least equal to, if not better than, what is found on these properties today; and (3) that these habitat protection objectives can be incorporated into existing agricultural operations in a manner that is both practical and profitable for ag enterprises.

Responses:

Green: 24 -- 7 landowner, 8 government, 1 landowner/government, 1 landowner/conservation, 1 conservation, 5 other

Yellow: 2 -- 2 government

Orange: none

Comments Offered:

Add to (2): ... and populations that they support ...

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5. The lease document should be designed to appeal to a large number of private landowners. It should be neither coercive or invasive; instead, it should be based on the principle of rewarding private landowners for conservation practices through tax credits and/or annual payments.

Responses:

Green: 25 -- 13 landowner, 6 government, 1 landowner/government, 1 landowner/conservation, 3 other, 1 conservation/other

Yellow: 4 -- 4 government

Orange: none

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6. It should be stressed -- and clearly understood -- that the key benefit of the lease, from a public interest standpoint, is: the lease will provide landowners with a reduction in operating costs and/or a revenue stream for maintaining natural habitat and/or other conservation values on their properties. If the combination of tax credits, annual payments and other forms of compensation provided by the lease are sufficiently attractive to the landowner, they will offset the economic incentives (and temptation) a landowner might have for converting these habitats to other uses.

Responses:

Green: 23 -- 8 landowner, 8 government, 1 landowner/conservation, 5 other, 1 conservation/other

Yellow: 3 -- 1 landowner, 2 government

Orange: none

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7. Some proposed characteristics of the lease are: (1) It would not represent any continuing interest in land. (2) It may be less restrictive than a conservation easement. (3) It would be for a limited term (20, 50 or 100 years). (4) It would automatically renew itself, unless notice to terminate is given within a certain time period prior to its expiration date, in which case a five-year transition period would be mandated in order to allow all parties ample time to determine how the properties subject to this lease would be affected and governed by the land use regulations that will be in effect at the time of termination of the Lease. (5) It would contain incentives for landowners to convert the lease into permanent conservation easements and/or provide government agencies with the right of first refusal when the land is offered for sale. (6) It also would reward landowners for entering into longer term leases (50 or 100 years instead of 20) and for taking actions that will improve habitats on their property so the habitats will support additional species and expanded populations of threatened and endangered species.

Responses prior to edits:

Green: 18 -- 7 landowner, 6 government, 2 landowner/government, 1 landowner/conservation, 2 other

Yellow: 9 -- 3 landowner, 3 government, 1 conservation, 2 other

Orange: 4 -- 1 government, 3 conservation

Comments Offered:

Orange flag (conservation): Term lease not yet functional.

If a landowner will sell a conservation easement, it should be purchased. Why eliminate this option?

Clarification needed: Does not eliminate the easement

Recommendation: Reference exhibit in guidelines to spectrum of options outside this program.

Term Leases: do not offer landowners or agency options better than existing conservation easement program benefits.

Incentives heavily weighted towards long term (50-100 year) agreements should be considered.

Long (50 - 100 year) leases in Florida are not practical. Habitat will change -- not due to owner's management -- but outside forces.

I have a concern about any long leases for specific habitats: The quality of the habitat may diminish naturally over the long period and leases of 50 to 100 years could be detrimental.

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8. Many animal rights advocates and biologists from wildlife agencies have expressed the desire to ensure that the leases will include the opportunity for biologists to conduct research on private lands enrolled under the leases to study how Florida panthers and other species use private lands, determine if the health of the species using these lands improves or deteriorates and whether the populations of wildlife species on these lands increases, decreases or remains the same.

The basic lease document would include provisions for monitoring to ensure compliance with the agreement. It also would provide flexibility and the opportunity to negotiate arrangements with individual landowners to conduct research on one or more species — in return for additional compensation over and above that contained in the basic lease agreement.

Responses prior to edits:

Green: 11 -- 5 landowner, 4 government, 2 other

Yellow: 10 -- 4 landowner, 4 government, 1 landowner/government, 1 landowner/conservation

Orange: 5 -- 1 landowner, 2 government, 1 conservation, 1 other

Comments Offered:

Monitoring on a limited, non-invasive basis for lease compliance should be included to ensure compliance with the terms of the lease [Note: an edit was made at workshop to incorporate this comment.]

Agree: limited monitoring for compliance.

If the Lease is for species conservation, then there is a need for monitoring to be sure the species are surviving and thriving.

Basic lease document would not include provisions for data gathering.

Orange flag (landowner): Any monitoring should be conducted by a non-biased independent party agreeable to both Lessee and Lessor.

Too much opportunity for open door [without monitoring].

Since monitoring is a measure of success, it needs to be included in base lease to be negotiated.

In order to manage for ecological function, monitoring must be done. How else can ecological function be measured? Monitoring should be done by independent ecologists, not agencies.

Some biological inventory could provide a means to prioritize areas for conservation leases. Periodic inspection to ensure management programs are being conducted, as agreed are necessary.

Yellow flag (government): Nationwide state and federal agencies have been quite successful at working cooperatively with landowners on conservation issues and research ... and willingly. What is it about South Florida that supposed conservation-minded landowners must be paid to exhibit conservation-minded behavior?.

"Compensation" for access. In the case of university studies, or private wildlife studies/monitoring, there may not be a financial resource for compensation. Do landowners have to be financially compensated each time?

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9. For this reason, a sliding scale payment option is being proposed for inclusion in the lease, to accommodate the desires of all interests concerned with threatened and endangered species, land management and the way in which public funds are expended, while providing landowners with the right to peaceably and quietly enjoy all the rights of private ownership, so long as no action is taken on the part of the landowner that will interfere or conflict with the intent of maintaining the ecological function of essential habitat for the Florida panther and other species. The payment options that can be added, one to the other, as the landowner agrees to provide additional services are described in Paragraph 3.04 of the Lease. The Sliding Scale Proposal, which can be used to determine the level of compensation for lands of differing conservation value, is also described under Paragraph 3.04. As a result, each agency will have the flexibility to enter into agreements with payment options acceptable to both parties, including a lump sum payment.

Responses prior to addition of last sentence:

Green: 22 -- 9 landowner, 7 government, 1 landowner/government, 1 landowner/conservation, 3 other, 1 conservation/other

Yellow: 4 -- 1 landowner, 2 government, 1 conservation

Orange: 2 -- 1 government, 1 conservation

Comments Offered:

Orange flag (government): The cost of all facets of the lease should be included in a lump sum ... up front. [Note: an edit was made at workshop, by adding last sentence, to help satisfy this comment.]
Term Leases not yet functional: (1) no estate planning advantages, (2) no federal tax advantages, (3) agency programs need single pay-out, not year-to-year program cost.

Additional payments should not be added later to lease. All contingencies should be presented at beginning.

The sliding scale must be kept simple (non-agricultural, agricultural, restore) and should not include periodic monitoring and management programs as additional costs. These should be standard requirements.
Costs to do some of these improvement will change over time. How will you include this in the lease for the future?

Need some form of monitoring to assure added services are being performed. To take it at face value is not good business practice.

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10. As Ernie Caldwell, Vice President of Government and Environmental Affairs for Berry Holding Corporation and an original member of the Landowner Working Group, observes:

"The lease document is something most landowners and producers should be willing to accept, even want to accept, because of the way it is written and because it will pay them carry out the type of management practices that will benefit both the environment and their operations. I know of producers who don't carry out some management practices now, even though they could, because the expense is too great and there is no way of passing on any of these costs to the consumer. In fact, the only way to cover these costs is to take them out of the bottom line. The way the bottom line is in ag these days, there simply is no room for any expense or requirement that doesn't pay its way."

Responses:

Green: 21 -- 8 landowner, 8 government, 1 landowner/conservation, 3 other

Yellow: 1 -- 1 conservation

Orange: none

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A draft of the lease document can be seen by clicking on: Lease Overview