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 Partners in Conserving America's Resources |
THE FLORIDA PANTHER & PRIVATE LANDS, AN ECONOMIC ANALYSIS:
The Cost of the
Landowners' "Conceptual Plan"
Compared to Other Conservation Alternatives
Project Director &
Editor: Craig Evans
Researcher/Analyst: Jean McGuire
©1997, Florida Stewardship Foundation, Inc. All Rights Reserved.
Scroll down or click on your choice:
| Background | Methodology | Methods Useds for Each Element of the Conceptual Plan | Review Process | Calculations |
You also may view other sections of the study (in another part of this web site) by clicking on:
| Acknowledgments | Introduction | Executive Summary | Findings | Other Methods of Valuing Habitat | Recommendations | Order Full Report |
The Full Report includes the Endnotes, where all sources of information for the study are cited, and the Spreadsheets where the calculations used in the study are shown in detail.
The Florida panther has been virtually eliminated from most of its range in the southeastern United States, leaving a population of only 30 to 50 adults. The continuing loss of habitat is the main reason for the vanishing population of panthers, and the loss of habitat is primarily due to development. According to The Florida Panther Habitat Preservation Plan: South Florida Population:
The rapid and extensive loss of native habitat is a result of Florida’s burgeoning human population. Florida ranked 33rd (1900), 10th (1960) and 4th (1990) in total population in the United States... The population..., now over 13 million, has doubled every 20 years since 1830...The density statewide has increased from 0.10 persons per square mile (1990) to 240 persons per square mile (1990).
Only 5 percent of the state’s residents lived in the counties encompassing the south Florida study area in 1900. Today 50 percent live there.
Florida had nine of the ten fastest growing metropolitan areas in the nation according to the 1990 census. Five of them — Punta Gorda, Naples, Fort Pierce, Fort Myers and West Palm Beach — are located in the study area.
There were 781 square miles of urban land in the six counties which comprise the Southwest Florida Regional Planning Council in 1987...Regional planners project that a doubling of the population in the next 20 years will create a need for another 292 square miles of urban land (based on 1990 zoning densities).
About 27 percent of the state’s vacant residential and commercial property is in the southwest region... Ownership is mostly absentee. There are 1.1 million platted lots in or around occupied panther range. The ratio of residents per lot in southwest Florida is 0.86, statewide the ratio is 1.8. A surplus of lots suggests a combination of high potential growth and unbridled land speculation.
The goals of this economic analysis and how each was achieved is summarized below. A more detailed summary of the methods used to cost each element of the conceptual plan follows. The actual spreadsheets used are presented in the Full Report.
The goals and how each was achieved follows:
Conduct an extensive economic analysis to:
This involved identifying which elements of the conceptual plan were measurable in terms of dollars, and which were more nebulous. In order to make valid comparisons, it is important to use units of measurement which are consistent and which can be understood and utilized by other researchers, economists, appraisers and land managers when looking at specific pieces of land. Thus the unit of measurement chosen was cost to the government per acre of each type of alternative preservation program.
Develop guidelines for valuing compensation levels in the "conceptual plan" for measures to protect, maintain and restore habitat
It is our desire to have the results of this analysis be useful to others who are looking at the costs of specific areas of land, and thus, as mentioned above, the per acre unit of measurement was used. However, it should be cautioned that although the results of this analysis are good indicators of costs, they should not be used to replace site specific appraisals. Each parcel of land, even a specific area within a parcel, has its own unique features and uses. Hence, using the results of this analysis at the site specific level would not be appropriate since these results are based on overall statistics for the three counties. Although they are predictive of costs in general, they are not valid substitutes for professional appraisals.
The primary effect on local governments involves the impact on local taxes -- to counties, districts and schools. If these lands were to be purchased by either the state or federal government, they would come off the tax rolls. The resulting loss of tax revenues would be offset by "payments in lieu" of taxes. The state and federal rules regarding under what circumstances these payments would be made and in what amount, varies among the various agencies.
The Payments in Lieu of Taxes (PILT) Act makes payments to local governments for lands managed by various agencies including the National Park Service, the National Forest System, the Bureau of Land Management, National Wildlife Reserve Areas withdrawn from the public domain, and certain military-related sites. Payments are computed under PILT as follows:
Section 6902 payments are the greater of:
- the lower of $1.36 per acre less deductions for other payment laws in the previous fiscal year or a ceiling amount based upon the county population, or
- the lower of $ .17 per acre but not less any deductions or a ceiling amount based upon the county population.
Section 6902 also has "Additional Payments" for lands which are acquired for the National Park System or for the National Forest Wilderness Areas. These payments are:
- Limited to five years,
- 1% of the fair market value but not to exceed the real property taxes
Then the payments are reduced on a pro-rata basis if insufficient funds have been appropriated. This year’s payments are only 53.33% of the full amount.
The U.S. Fish and Wildlife Service (FWS) also makes payments under the Refuge Revenue Sharing Act for lands that are acquired. These lands are not eligible for PILT payments. These payments are the greater of:
FWS’s Refuge Revenue Sharing Act also makes payments for lands that are reserved (lands withdrawn from the public domain). These lands are also eligible for PILT payments. FWS payments for reserved lands are paid on the basis of 25% of net receipts.
FWS payments are also subject to reduction based on whether sufficient funds have been appropriated.
The Florida Department of Environmental Protection, for its CARL program (Conservation and Recreation Lands Trust Fund), states it will provide payments in lieu of taxes to counties 1) with an "ad valorem tax of at least 8.25 mills; or [to counties where] the amount of the tax loss from all completed Preservation 2000 acquisitions in the county exceeds 0.01 percent of the county’s total taxable value, and have a population of 75,000 or less and 2) to counties with a population of less than 100,000 which contain all or a portion of an area of critical state concern designated pursuant to chapter 380." (Florida Statutes, Full Volume 1995, Chapter 259.)
Other than the fact that the land under question is currently privately owned and would thereby be acquired land if purchased by the FWS and would not therefore be eligible for PILT payments, it is not known which government (state or federal) or which agency within that government would purchase and maintain various parts of the priority panther habitat land should that occur. So to stay in line with our intent to not understate costs, it was assumed that the federal government would be the acquiring government and would put the land under a situation which would result in the highest payments -- either the National Park System or the National Forest Wilderness Areas -- thereby involving both the regular PILT payments and the "Additional Payments."
(Due to the variety of laws and their complicated calculation schedules, we felt it would be important to test the degree to which our interpretation of these laws effects the outcome of our analysis on the impact on local taxes and the cost to the government to acquire these lands. Therefore, sensitivity tests were done and it was found that these payments would have to be increased by 800% before there would be no loss to the local government. And this would only increase by 6% the present value per acre of the government to purchase and maintain the land. Since it is unreasonable to ever expect any other combination of payments to be more than 8 times our highest estimate, it is felt that the assumptions and calculations used in this section are a valid estimate of the highest "payments in lieu" of taxes that might be received by the local governments).
It also should be mentioned that local government might experience a bit of a savings, however, if the federal or state government were to purchase and maintain the land since many public services such as road maintenance would no longer be locally provided. However, this savings would be extremely small and would not even come close to replacing the lost tax revenue. As a matter of fact, the savings from reduced public services would be less than 37% of the value of the lost revenue.
According to a study done by Florida Stewardship Foundation in Collier County, for every dollar of revenue generated by agricultural properties in the county, only $0.37 is spent in public services. Other studies done in Florida by this organization as well as studies done by American Farmland Trust and other organizations in counties and towns around the United States have produced similar results. The savings might be less than 37% of the tax revenue loss since although local government might no longer have to pay for roads in that area, the farm owners and workers living on or near the land would still use public services such as schools, parks, police protection, etc.
Additionally, the impact on the regional economy was addressed. The economic impact, or "ripple effect" of agricultural operations in the region was analyzed in the section "Annual Economic Impact of Agricultural Lands in Priority Panther Habitat" (see Full Report). The loss of this economic impact is slightly offset by the economic impact created by the income which might be generated by the land if it is placed in public ownership. This income includes such things as visitor fees, hunting and fishing fees, camping, federal expenditures in the local area and related tourism impact.
The major effects analyzed are on local governments in terms of the impact on local taxes, and on the federal government since most of the incentives in the conceptual plan involved federal tax credits. Any impact on state government would involve administrative costs, if it is decided that the conceptual plan program would be run by a state agency.
The two other habitat protection options which were examined included: 1) The cost for the government to purchase and maintain the land. "Government," as used in this analysis, means either state or federal agencies. (The reason they are looked at as one is because eventually the funding for either comes from the taxpayer. Additionally, if each were examined separately, their varying rules, regulations, funding methods, processes and procedures would make this already detailed analysis much too complicated with an insignificant effect on the bottom line.) 2) The cost of a conservation easement where the non-agricultural development rights are purchased directly in a one-time payment.
Determine if — and where — savings can be made by adopting the landowners’ conceptual plan
Each element of the conceptual plan is costed out in this analysis and then compared to the costs involved in having the government purchase and maintain the land and to the costs of a conservation easement. The results of this comparison are found in the Findings section.
Evaluate the most cost-effective way of paying for wildlife and habitat protection programs
The Findings section shows which of the three alternative preservation methods is the most cost-effective.
METHODS USED FOR EACH ELEMENT OF THE CONCEPTUAL PLAN
The methods used in this analysis are fairly straight forward, although extensive.
PRIMARY SOURCE OF DATA:
Copies of the three counties’ tax roll files for sections containing priority panther habitat as defined by the U.S. Fish and Wildlife Service were used as the source of the majority of data used in this analysis. We are indebted to the U.S. Fish & Wildlife Service for obtaining the tax roll files, and preparing them for use by the Florida Stewardship Foundation in this analysis.
The data in these files were extracted into query tables, sorted, and then used in computer spreadsheets to calculate the costs of the various aspects of the conceptual plan. The process was extremely time-consuming since the files, especially those for Collier County, were cumbersome. As a matter of fact, the Collier County files contained almost 22,000 records with each record representing a parcel of land. Also, 122 fields were included for each parcel of land. This represents almost 2.7 million pieces of data for just one of the three counties involved in this analysis!
Land uses are coded in the tax roll files according to a list of codes supplied by the Florida Department of Revenue (DOR). These codes are used by all counties, but may be titled differently. For example, some may call them DOR codes, others may call them Land Use Codes (LUC), and others Property Use Codes (PUSE). We have tried to be consistent throughout this analysis and use the term DOR codes. However, there may be occasions where one of the other terms is used in reference to that county.
The agricultural DOR codes have different numbers for various categories of use within the same general type of use. For example, cropland has three codes, 51, 52 and 53 on the form from the state, each labeled as cropland, but having a different "soil capability class." However, each county uses these codes for different types of crops, frequently without reference to soil capability. Additionally, the counties agricultural property appraisers break these codes down into 4 digit codes in their own computer programs, but the tax roll files uses only the 2 digit codes. For instance, Hendry County’s agricultural appraiser’s actual code for sod is 5100, and Lee’s is 5380. Since the codes vary from county to county and are not tied to the capability classes listed by the state, only the 2 digit codes were used in this analysis, and the codes for cropland (51-53) were treated the same for income purposes, as were the codes for grazing (60-65).
It should be noted that in the Lee County tax roll file there were roughly 2200 parcels which had no size indicated. These were mostly single family lots, both vacant and developed. An average size per lot was calculated by using plat book maps, and subtracting the listed acreages for parcels in those sections from the total amount of acres in that section that were included in the priority panther habitat areas.
OTHER CONSIDERATIONS:
The bulk of the costs of the conceptual plan would impact the federal government since the plan proposes both income and estate tax credits. County governments and schools would be adversely affected if the conceptual plan is not adopted and the land is purchased by government agencies since it would be taken off the tax rolls. This would also impact the South Florida Water Management District since the county collects taxes on property for them. These losses would be offset to a degree by "payments in lieu," which are payments the state or federal agency that buys the land might pay to the counties.
It should also be kept in mind, that regardless of which method is used — conceptual plan, conservation easement, or public purchase — there will be some loss of local tax revenue. If the land is purchased by the public, the only local revenue would be in the form of "payments in lieu" whose value depends upon the size of the county population and other factors. If the conceptual plan or a conservation easement plan is used, local tax revenues would be reduced since the market value of non-agricultural land so encumbered would be less than land which is not encumbered and included development rights. However, since agricultural land represents such a large portion of the area under consideration, and agricultural land is valued for property tax purposes under the Greenbelt law, there would be no reduction of local taxes due to the conceptual plan or a conservation easement.
The assumptions used in each section of the analysis are presented in that section. However, some overall assumptions included the following:
In order to assure that costs to the government of the conceptual plan were not understated, the calculations used assumptions which tended to the high side.
The costs of implementing and managing the conceptual plan or a conservation easement were assumed to be approximately equal to the costs of implementing and coordinating the purchase of the land (not including actual land purchase costs). These costs would involve, such things as property appraisals, legal fees, administrative and overhead costs, etc.
All agricultural and vacant lands are included, but since improved non-agricultural land would not be considered priority panther habitat, it was not included.
Since it is the intent of the conceptual plan, although not specifically so stated, to provide the benefits of the conceptual plan to individual owners and family owners of corporations listed as the landowners, all of the calculations are based as if the land were owned by sole proprietorships rather than corporate entities. As shown in the following table, the majority (84%) of the net farm income in Lee, Collier and Hendry counties is from farm proprietor ownership as opposed to corporate ownership.
The information in the above table is confirmed by the 1992 U.S. Census of Agriculture for Florida which shows that 82% of the farms in Collier, Hendry and Lee counties are either sole proprietorships or partnerships. This figure jumps to 94% when family held corporations are included (pp 281-285).
Additionally, according to Tom Jones of the Barron Collier Company, and a member of the Working Group, most of the farm corporations in these counties are closely held by families. Mr. Jones also stated that it is the intent of the Working Group that the income tax credit be applicable to the family members who own that corporation. Therefore all income from the land was treated for tax purposes as owned by a sole proprietor rather than a corporation.
The time period used in the present value calculations was 1000 years ("Present value" is a calculated value which represents the present worth of a flow of money over time and is useful in comparing alternative flows of money over varying time periods). This is due to two reasons: 1) if the government were to purchase the land, the purchase cost may be a one-time cost but the maintenance costs would go on forever, and 2) in order to compare apples to apples, it was assumed that the 25 year lease under the conceptual plan would be renewed continually. (Since a conservation easement would be a one-time cost for each participant, no present value calculation was necessary).
The discount rate used in calculating present values of the various aspects of the conceptual plan was the most recent 30-year real rate (the rate without inflation) for treasury bonds. This rate was chosen because it represents a long-term rate.
The capitalization rate used to determine the agricultural value of the land was 10.12%. This rate represents an average rate of return on a type of business (agriculture) which involves an element of risk, as opposed to a rate of return for a safe investment like a bank CD. This rate is based on the rates used by the three county agricultural tax appraisers in using the income approach to valuing agricultural land.
Although other forms of incentives were mentioned in the conceptual plan such as cash or "other" types of payments, at the time of this writing, these concepts were not specific. Therefore, this economic analysis does not deal with them as cash. It would be anticipated, however, that since they are alternatives, their amount or value would be the same as if they were non-cash incentives, and thus the bottom line of this analysis would not change.
A team of advisors made up of four experts in economics, agriculture and statistics was formed to review the initial methodology and drafts of this analysis. This team consists of the following individuals:
TECHNICAL ADVISORY GROUP (TAG)
1. Dr. Clyde Kiker
Institute of Food and Agricultural Sciences University of Florida Gainesville, Florida (Dr. Kiker provided some suggestions and ideas at the beginning of this analysis, but because of changes in his schedule was unable to continue as a member of TAG.)
2. Dr. Fritz M. Roka
Dr. Roka is an agricultural economist at the University of Florida's Southwest Research and Education Center in Immokalee, Florida. Before joining the faculty in December 1995, he worked at North Carolina State University in Raleigh, North Carolina. His research and extension activities include farm management topics associated with all the major agricultural commodities of Southwest Florida -- citrus, vegetables, cattle and sugar cane.
3. Dr. Richard Thalheimer
Dr. Thalheimer is the president of Thalheimer Research Associates in Lexington, Kentucky. He has been involved in many areas of business and economic research for more than 20 years and has written a variety of academic publications in the areas of public finance, economic forecasting, regional economics and the microeconomic aspects of the parimutuel horse racing industry. He also has conducted economic impact studies of the horse industry in Kentucky, Florida and Palm Beach County, Florida. For nine years Dr. Thalheimer was Executive Director of the Office of Revenue Estimating and Economic Analysis for the Kentucky State Revenue Cabinet. He also is currently an Associate Professor in the Department of Equine Administration at the University of Louisville, a position he has held since 1989.
4. Dr. J. John Charbonneau
Dr. Charbonneau is the Acting Chief, Division of Economics for the U.S. Fish and Wildlife Service In Arlington, Virginia. Previously he was an economist for the Division of Program Plans for the U.S. Fish and Wildlife Service and also for the Strategic Studies Unit, Office of Pesticide Programs for the Environmental Protection Agency. He has degrees in Agricultural Business, Resource Economics and Quantitative Methods. His areas of expertise include Economic Impact Analysis, Benefit/Cost Analysis, Conducting National Surveys, Trend Analysis and Wildlife Valuation.
These advisors have provided excellent suggestions on our initial methodology and drafts. They also supplied other studies and articles which describe other methods of valuing land.
One excellent method which has not be used at this point in time due to limited available funding, is to do a multiple regression analysis of land sales to determine which factors most influence the market value. This analysis would also provide a formula to use in predicting the values of smaller segments of land, rather than the total of all lands which was addressed by this study. If time and funding become available, a regression analysis would be an excellent addition to this study.
An explanation of the calculations that were used in the spreadsheets (shown in the Full Report) is presented here for easy reference.
1. Income Tax Credit
The conceptual plan states: "No income tax would be levied on any income earned from the land within the Panther Habitat Protection Plan Area, regardless of the agricultural development stage during the life of the lease." (A Landowners' Strategy for Protecting Florida Panther Habitat on Private Lands in South Florida: A Project Report (p. 39).
The assumptions used that are specific to this section include:
The top income tax rate (39.6%) was used. Although this tends to inflate the cost of the conceptual plan, it was used to be consistent with our intent of erring on the high side of costs for the conceptual plan. For comparison purposes, a middle rate of 31% was tried and the present value of the cost of the conceptual plan per acre dropped by 16%.
The average number of deductions and exemptions for Florida were used.
Non-agricultural land uses do not usually produce income, so it was assumed that only agricultural land uses would participate for the income tax credit portion of the conceptual plan.
The net income per acre rate for crop and grazing lands were derived from data from Dallas Townsend's economic analysis in A Landowners' Strategy for Protecting Florida Panther Habitat on Private Lands in South Florida: A Project Report (pp. 46-47) since the figures were similar to information provided by the agricultural property appraisers in Lee, Hendry and Collier counties, as well as to more recent information on crop and cattle prices.
The net income per acre for citrus was based on data for oranges and used Townsend's methods with more recent data (see "Net Income Calculations for Oranges" in the Full Report).
The calculations used in this section are presented in the Full Report. The concept used in these calculations is:
Acres by land useX Net IncomeExemptions and deductions times number of ownersX Income tax rate
=Income tax
Discounted to find the present value of the income tax credit
2. Estate Tax Credit
The conceptual plan states, "No estate tax would be levied on the land and improvements located within the Panther Habitat Protection Plan, regardless of the agricultural development stage, during the life of the lease." (p. 39).
The assumptions used that are specific to this section include:
Since the value of the estate tax is based upon the value after the estate tax exemption is applied, the first step was to deduct the exemption amount. With the recent passage of the Taxpayer Relief Act of 1997, the estate tax exemption has increased to $1.3 million for farms and small business owners effective 12/31/97, and for others the exemption is phased in from the current $600,000 to $1 million by 2006. The first step was to aggregate all the parcels by landowner and then subtract the appropriate exemption. Most entries were less than $600,000, so these were not included. The remainder after the exemptions were subtracted was the amount used for the estate value. Those landowners with parcels valuing less than $600,000 (or $1.3 million for agricultural properties), may well have other assets which would increase their total estate value to more than the exemption amount, however since this is impossible to know, the estate tax credit analysis had to be made based on the value of the land and improvements given in the tax roll. (For this section of the analysis, the just value given in the tax roll was used since that is the closest approximation of fair market value, and this part of the analysis had to be done owner by owner as opposed to the approach used for the Fair Market Value section.)
The just value represents an appropriate value to use in the estate tax calculation since it is frequently somewhat lower than fair market value. Varying opinions have been expressed as to whether the estate value for land under a conceptual plan lease is worth less than fair market value. One opinion is that since some of the bundle of rights have been leased, that the land is worth less. Another opinion is that although the land is encumbered by such a lease, the owner is still being "made whole" via the lease tax credits which can pass to a new owner or to an heir (unlike a conservation easement payment which is usually made up front to the owner). By being made whole by transferrable credits, the land would pass at full value to a buyer or an heir. However, still another opinion is that although the credits would tend to "make whole" the owner, the fact that a new buyer's options are restricted would tend to decrease the value of the land. Thus the just value approximates fair market value while still tending to reflect a lower fair market value that could result from the conceptual plan lease agreement.
Additionally, since it is impossible to know how large an estate each landowner has, it is assumed that the maximum estate tax rate (55%) would apply. This, however, results in a higher cost for the conceptual plan, but it is consistent with our intention of using the high side rather than the low side. However, for those who feel that using the middle rate would be more appropriate, using the 29.4% rate (middle) would result in reducing the present value of the estate tax credit by roughly half.
The calculations used in this section are presented in the Full Report. The concept used in these calculations is:
Total taxable value after exemptions are applied
x Annual death ratex Estate tax rate
=Annual estate taxes
x Present value calculation
=Present Value of the Estate Tax Credit
3. Fair Market Value
The fair market values were calculated in two ways: 1) Scenario 1 which includes all vacant and agricultural land uses from data on the tax rolls and 2) Scenario 2 which only includes agricultural land uses and is based on a survey done by the University of Florida's Institute of Food and Resource Economics. This survey included land values for cropland, grazing land and citrus land, with lands close to the urban area being segregated out. This survey covered more counties than just Hendry, Lee and Collier. It used a wide variety of knowledgeable people such as rural appraisers, farm lenders, real estate brokers, farm managers, investors, county extension agents, Farm Services Agency and Natural Resource and Conservation Service personnel, county property appraisers and others to provide information on current land values for these types of agricultural lands. The values calculated in this section were used in various other calculations such as the cost for the government to purchase the land.
In using sales data to determine fair market price, only sales which are at "arm's length" should be used. "Arm's length" is defined as "A transaction freely arrived at in the open market, unaffected by abnormal pressure or by the absence of normal competitive negotiation as might be true in the case of a transaction between related parties." (Byrl N. Boyce, Real Estate Appraisal Terminology, Cambridge, Massachusetts: Society of Real Estate Appraisers, Ballinger Publishing Company, 1984, p. 18.)
The tax roll files from Hendry and Lee counties, which were used for Scenario 1, included codes that identified each sales transaction as to whether it was considered to be at "arm's length." Collier County's tax roll file, however, deletes those codes when data is given out, so all sales which were within the last four years and either less than 30% or more than 300% of the listed just value were eliminated. These steps were done since any major deviation from the just value would represent a sale which would not be at arm's length. The resulting sales from Collier County were combined with the Lee County sales and the median was then used to compute the price per acre.
It could be argued that the land values in two (Collier and Lee) of the three counties may be somewhat high due to including more sales of lands near urban areas than the rest of the counties with priority panther habitat. Additionally, it is unclear in the conceptual plan whether non-agricultural land would be included. For these reasons, Scenario 2 was calculated using land values which may be more representative of the total priority panther habitat and includes only agricultural lands. The first scenario, which uses actual sales in the last four years by land use code to determine fair market value had only a limited number of sales for some of the land use codes, so the second scenario (although it includes only agriculture) may be somewhat more reliable.
The calculations used in this section are presented in the Full Report.
4. Agricultural Development Rights
The conceptual plan states that if, due to a request for development which is "inconsistent with prescribed panther management," a landowner is denied "the right to develop any part or all of his land from the raw state or any intermediate level of agricultural development to a higher or more intensive agricultural development, the landowner would be compensated for the lease of agricultural development rights as follows:"...in addition to the non-agricultural development lease provisions, the "landowner would receive additional tax credits equal to the value of the annual lease income earned from leasing the agricultural development rights." (pp. 40 - 41). This annual lease rate would be based on the difference between "the value of the land for the most restrictive agricultural use in the raw or native state. This value would be derived by capitalizing the anticipated annual income from that agricultural enterprise by a reasonable rate of return" and "the value of the land that would be realized if it was sold on the open market, fully permitted for the most intensive agricultural use that may be permitable." (p. 40).
Upon implementation of the conceptual plan, each parcel of land involved would have to be looked at individually. However, for purposes of this cost estimate, it was decided that the best approach would be to use the difference between the current use and the most intensive use.
The assumptions used in this section include:
The retained value (see Full Report) is used since it reflects the value of the property after the non-agricultural rights have been leased and is based on the capitalized net income.
The return on investment rate (ROI) used in this calculation is the rate used for capitalization since it reflects a reasonable level of risk which would be involved with an agricultural venture.
To determine an estimate of how many landowners might request increased agricultural use per year, we looked at the following information: According to the 1992 US Census of Agriculture for Florida, cropland in the three counties has increased 71%, 11% annualized (see Full Report)), in the last five years (pp 240-244), and according the "Florida Gulf Citrus News," First Quarter, 1997, pp. 1 & 3, citrus acres in the 5-county area of Charlotte, Collier, Glades, Hendry and Lee counties increased by 1.4% from 1994 to 1996, and 25% in the last 10 years (1986 through 1996). Using both these trends, we assumed a slower annual growth in cropland in recent years, and taking into account the dramatically increasing population in recent years, we assumed a permit request rate per year of 7%. (Note: although this number is an estimate, doing a more in-depth and time-consuming research to see if there might be a way to find and use some other type of information which might be useful -- such as number of permits requested, granted and denied by land code and by date -- would change the results only an insignificant amount. Sensitivity analysis reveals that if instead of 7%, an unreasonably high 100% is used, the bottom line cost of the conceptual plan only increases by 5%, and substituting 0%, the change is only a decrease of 0.4%).
The calculations used in this section are presented in the Full Report. The concept used in these calculations is:
Estate tax credit/acre of most intensive ag use
- Annual estate taxes/acre by DOR code
X Total acres by DOR code
X Reasonable return on investment (ROI) rate
= Annual tax credit of denied increased ag intensity
The sum of the annual values of denied increased ag intensity by DOR codes
are then summed, and multiplied by a factor representing the percentage of owners requesting permits. The resulting annual total value is then discounted to obtain a present value figure. Obviously, not all of the requested permits would be denied, but one of our assumptions is to tend towards the high side in order to not understate the cost of the conceptual plan, so this analysis has calculated the cost as if all permits are denied.
5. Agricultural Privilege Tax Exemption
Although this item was not addressed in the conceptual plan, it was raised by some landowners at a meeting as an incentive which should be part of the plan. For that reason, we have included it in the cost analysis.
The Agricultural Privilege Tax of the Everglades Forever Act consists of two taxes: 1) a tax on agricultural lands in the Everglades Agricultural Area (EAA) (since the EAA does not extend into Lee or Collier counties, and none of the priority panther habitat area in Hendry County is in the EAA area, this tax is not involved in this analysis); and 2) a per acre tax on agricultural classified lands in the C-139 Basin, which is entirely within Hendry County. This tax is calculated by dividing $654,656 by the number of acres in the basin which are classified agricultural. This number is in effect until the tax notices are sent out in November of 2014, when the tax changes to $1.84 per acre. According to Gloria Trope of the South Florida Water Management District's budget department, the agency that calculates the tax, the tax for bills in November of 1997 are $4.38 per acre.
The method used to calculate the effect of exempting land from the C-139 Agricultural Privilege Tax was to use maps of priority panther habitat provided the U.S. Fish and Wildlife Service, along with a plat book of Hendry County, to identify the C-139 parcels in the Hendry County tax roll file of priority panther habitat, and then total the acres. This total was then multiplied by the tax per acre through the year 2014, and then at the lower rate. A present value was then calculated for that period of time. The spreadsheet used to calculate this value is shown in the Full Report.
6. Panther Habitat Restoration
The conceptual plan states that in "some cases, the government may request that land within the project area be restored to its native state or modified to a lesser agricultural use." (p. 18). In addition to the other incentives, the landowner "would receive additional tax credits equal to the value of the agricultural improvements destroyed, the cost to dismantle the existing agricultural structures and re-establish the native vegetation and the land value reduction that would occur. These values would be determined by an appraisal by a professional in agricultural land use evaluation. In addition, the landowner would also be compensated for the economic impact that the loss of the agricultural development may cause to other enterprises. For example: The loss of 500 acres of existing vegetable or citrus lands would have a serious economic impact on a packing and/or marketing facility the landowner may also own. ...The landowner [would have] the right to use the tax credits to satisfy any other income or estate taxes that he or she may owe...the landowner [also] would have the right to continue to own the land and sell the tax credit rights or to sell the land along with the tax credit rights." (pp 41-42). (It should be noted that the phrase "economic impact" as used in this quote from the conceptual plan means the lost income of related businesses the landowner might own -- it does not mean the same as the ripple effect described in the "Economic Impact" section of this study.)
According to Duke Hammond, a Biological Scientist in the Florida Game & Fresh Water Fish Commission's Division of Wildlife, the chances of a landowner being required to either restore the land to native habitat or change it to a less intensive agricultural use are slim. This is because the land identified in the Florida Panther Habitat Preservation Plan: South Florida Population was identified because it is now providing habitat for the healthiest panthers, based on its current mosaic of land uses. In other words, the main need is not to restore this land nor reduce its level of agricultural use, but rather to protect it as it is today -- a mix of uses such as grazing, row crops and citrus. The far greater threat is the loss of habitat to development, whether it be residential, industrial, or further agricultural development. The major purpose is to ensure that landowners don't escalate the land uses or agricultural intensities and thereby destroy the current mosaic and bio-diversity. Preservation, not restoration, is the main thrust of The Florida Panther Habitat Preservation Plan: South Florida Population, according to Mr. Hammond.
The assumptions used in this section include:
According to the conceptual plan, incentives would include "reimbursement for design and conversion costs, tax incentives or other forms of payments for the difference in value between the pre- and post-conservation action." It is assumed for this analysis that the incentives would involve tax credits in the amount of the value of the conversion cost plus the value of the revenue lost due to the prohibited agricultural activity.
The cost of compensating the landowner for the impact that "the loss of the agricultural development may cause to other enterprises" (owned by the landowner) is not included in this analysis for two reasons: 1) the lack of available data, and 2) the fact that it is the intent of The Florida Panther Habitat Preservation Plan: South Florida Population, according to Duke Hammond of the Florida Game and Fresh Water Fish Commission, not to make changes, but rather to preserve what is already there. Mr. Hammond states that if any restoration is requested, it would be extremely minimal and would most likely only involve a small number of acres to be used as corridors.
Also with regard to this issue, one of the Technical Advisory Group members, Dr. John Charbonneau, made the following recommendation: "Under the third level of compensation the landowner would be compensated for the economic impact associated with a loss of farming activity. I think there should be a distinction between farming activity and processing of farm products. If a processor loses a supplier, it's up to the processor to secure more raw material from elsewhere. The fact that the landowner also owns the processing plant is immaterial. Look at it the other way. If the landowner does not have a connection with the processor and the loss of farming activity causes the processor to lose profit, should the landowner be compensated for the processor's lost profit? I think farming activity is the only compensable activity under this plan."
The value of the restoration tax credit is assumed to be the value left after the non-agricultural rights and the agricultural rights are leased. Thus it is calculated by subtracting these values from the Fair Market Value.
It was assumed that any restoration to native habitat would involve wetlands conservation or the creation of corridors, and that these would involve only a relatively small portion of the entire land area under concern. The percent used is 1%.
It is reasonable to assume that only the more intensive agricultural uses would be required to change to a lesser agricultural use, so for purposes of this analysis, a percentage of citrus and cropland would be required to be used only as grazing land. Mr. Hammond stated that it would be very unlikely that landowners would be asked to reduce the level of agricultural intensity on large acreages since parcels that are of such size provide adequate cover and attract the prey on which panthers thrive in spite of their more intensive use.
The value of requiring more intensive agricultural users to change to lesser agricultural uses is the difference between the value of the more intensive use (citrus or cropland) and of the least intensive use (grazing). Since this would be a one-time cost, this cost is the present value.
7. Conservation Easement Cost
One of the goals of this study is to compare the cost of the conceptual plan to not only the cost of the government purchasing and maintaining the priority panther habitat land, but also to compare it to another conservation method, conservation easements.
The amount (or cost to the government) of a conservation easement is equal to the value of the development rights. The retained value of agricultural land is the value of the land after the non-agricultural development rights are leased. Therefore, the value of the conservation easement is computed by subtracting the retained value of the agricultural land from the fair market value. A conservation easement would allow agricultural activities to continue on the land.
8. Economic Impact
Although not discussed by the conceptual plan, one area to be considered in this analysis is what impact the loss of agricultural lands through public land purchases would have on the regional economy. This impact is not involved in the conceptual plan elements or incentives, but it does impact other industries and needs to be considered in the issue of the purchase of private lands by the government. Thus this analysis examines the economic impact benefits that agricultural activity provides to the regional economy. (The economic impact is not included in the cost of the conceptual plan, but is shown separately since it is not a direct cost to the government, but rather an impact on the regional economy).
If the government were to purchase the agricultural lands in the priority panther habitat area, there would be an associated loss to the economy. This loss is the economic impact of agriculture to the region. Economic impact is the amount of money flowing into the economy as a result of a particular industry's sales, plus related sales of supporting industries, and the resulting "ripple effects" caused by these sales through spending by employees to buy consumer goods and services.
When a business produces a product or service for sale outside the region, which channels outside dollars into the region, it is known as an "export" or "basic" industry. Almost all the output originating from the region's agricultural production is exported to markets outside the region. Hence, these sales import dollars into the region.
Businesses and industries that make sales outside the region, in turn, use these dollars to pay their employees, pay property taxes and purchase supplies and services. These dollars are then re-spent by each employee, by local governments and by the businesses providing sales and services to these businesses and industries. Thus, the dollars generated from the sale of services and products exported from the region are circulated and re-circulated throughout the local, regional and statewide economies.
This process of expanding the employment and income base of the region's economy through economic interactions of these businesses and industries and other economic sectors is known as the "multiplier effect."
Economic impact, which is the combination of direct cash sales outside a region plus the "multiplier effect" that these sales have on the region's economy, is calculated by using a Regional Economic Multiplier computed by the U.S. Department of Commerce. This multiplier is applied only to the income that results from sales outside the region, not to local sales that are generated within the region. This multiplier accounts for the indirect and induced impacts that result when money brought in from outside the region is spent locally.
In order for an economy to grow and avoid stagnation, it is important to be a net importer of income. It is this ability to import income that determines the economic base of an area. The economic base of a community is defined as: "The economic activity of a community which enables it to attract income from outside its borders. Those activities that are net exporters of goods and services are thus basic industries; that is, they produce and sell more of a good or service than is consumed or purchased locally."
Direct impacts are the sales of the agricultural products grown or raised on the land within the region.
Indirect impacts include such items as:
Sales of fertilizers and chemicals to growers;
Sales of parts and repair services to growers and processors;
Sales of office supplies, packing materials and business supplies; and
Sales of legal, accounting and consulting services.
Each sale by a local business to the agricultural industry represents additional economic activity for the region that, in turn, generates additional jobs and income for local residents as a result of the sales of agricultural products outside the region.
Induced impacts include:
Spending by employees who earn their income directly from the agricultural industry; and
Spending by employees who earn their income from businesses that sell products and services to the agricultural industry.
This spending translates into local retail sales; local bank accounts; purchases of consumer products, automobiles and homes; entertainment purchases through local restaurants, theaters and sporting facilities; and purchases of legal, accounting, medical, beauty, cleaning, repair and other personal services.
When sales of agricultural products outside the region increase, a chain reaction of increased local spending is triggered. Businesses that provide services and supplies to the agricultural industry hire new employees and increase their local purchases to meet the increased demands of the agricultural industry. This expansion, in turn, leads to increased hiring, output and local purchases by the firms that supply products and services to these businesses. At the same time, the additional dollars earned by employees trigger additional spending activity in the region's retail, banking, consumer product, entertainment and personal service industries.
Conversely, when sales of agricultural products outside the region decrease, a chain reaction of decreased local spending is triggered.
Without products and services to export to generate sales, an economy will stagnate, and eventually shrink, since money is being constantly exported out of the region through the purchase of products and services offered by companies in other states and regions, payments to state and federal agencies, travel and payments on loans held by investors outside the region.
The direct plus indirect and induced impacts that result from agricultural industry sales were calculated by multiplying the numbers for the direct cash sales of agricultural products by the Regional Economic Multiplier computed by the U.S. Department of Commerce, Bureau of Economic Analysis, using their Regional Input-Output Modeling System (RIMS II).
The basis of the RIMS model is a transactions table showing the distribution of sales and the pattern of purchases for each sector of the economy. As Dr. David Mulkey and Dr. Rodney Clouser of the Food and Resource Economics Department at the University of Florida explain:
"A sector consists of a group of firms producing similar types of products ... Households (consumers) are treated as a separate sector which produces goods and services and sells labor.
"For each sector, the transactions table reflects the dollar value of sales to every other sector and the dollar value of purchases from every other sector. In effect, the table provides a picture of interactions between sectors in a regional economy and allows the flow of dollars to be traced through the economy. This information allows the calculation of multipliers which can be used to assess the total contribution of a particular sector to the economy of a region or state ...
"Multipliers are measured in terms of output, employment and earnings and were estimated for 531 sectors ... Thus, resulting multipliers capture direct, indirect and induced impacts of each sector on the state and regional economy."
The loss to the regional economy as a result of public land purchases is the amount of the economic impact of agriculture less the amount of economic impact of such things as hunting, fishing, entrance fees and federal expenditures in the local area that might be generated by that land as publically owned lands. This economic impact is discussed more fully in the findings section.
The calculations used in this section involved taking the percentage that priority panther habitat agricultural acres are of total agricultural acres for all three counties and applying that percentage to the total agricultural sales, the total agricultural jobs and earnings.A more precise way would be to determine the sales dollars per acre by each agricultural DOR code and then multiply that times the number of acres of that code in the priority panther habitat area. However, sales values by DOR code are not complete, and those that are available vary by the source of the information.
Dr. Fritz Roka of the University of Florida, Southwest Florida Research and Education Center in Immokalee, Florida has assembled the most complete set of numbers from a variety of sources. He shows the sales value for row crops, citrus and cattle (with limited data on other agricultural products). His data, when applied to the acres in the priority panther habitat area, represents 60% of the total sales for all three counties. Using his numbers would result in economic impact values that would be 16% higher than the values obtained in this analysis.
It is unclear from the available data whether this difference is due to the mix of agricultural land uses in the priority panther habitat area compared to the three counties overall, or if it is due to different sources of agricultural sales. A combination of these reasons is also a possible cause of this difference. Regardless of this variance, the results obtained from Dr. Roka’s data and the results obtained in this study both show that the economic impact of leaving land in agriculture is significantly higher than if the government purchases the land. These values were then multiplied by the percent exported (to reflect imported dollars). The appropriate Regional Economic Multiplier was then applied to exported sales (also called output), jobs and earnings. Local amounts were then added back in to get the annual economic impact for output, jobs and earnings. Present values for these amounts were then computed. The economic impact values for public lands was then subtracted from these amounts in order to determine the net economic impact.
9. Cost for the Government to Purchase and Maintain the Land
Several sources of data on the cost per acre for the government to purchase land were examined in order to decide what source or method would provide the most realistic values. The usefulness of these sources varied, but all are presented here for comparative purposes:
First of all, the values used in A Landowners’ Strategy for Protecting Florida Panther Habitat on Private Lands in South Florida: a Project Report, were examined. They deal only with agricultural land, and are based upon several farmland and citrus grove sales. The figures used were $10,000 per acre for citrus, $2,200 per acre for usable future citrus or vegetable land, $3,000 per acre for current vegetable land and $1,000 per acre for grazing land.
A draft of a paper done by Dr. Fritz M. Roka and Dr. Martin B. Main of the Southwest Florida Research and Education Center of the University of Florida in Immokalee, gathered data on land purchase costs for four sites: Big Cypress National Preserve, Florida Panther National Wildlife Refuge, Fakahatchee Strand State Preserve and Picayune State Forest. They found that for these four sites, land purchase costs ranged from $2,500 per acre to $315 per acre. The average for these four sites was $480 per acre. It should be noted, however, that these purchases involved unimproved rangeland and not more intensive agricultural uses, so these values would be applicable only to similar types of land uses.
According to the 1994 Save Our Rivers Five Year Plan, the Corkscrew Regional Ecosystem Watershed was purchased at $1,017 per acre.
According to the Conservation and Recreation Lands 1996 Annual Report, overall costs per acre for lands purchased under CARL, EEL and P-2000 was $1818 in 1995, and $1329 from 1974 to 1995. Belle Meade spending was $2500 per acre, and Fakahatchee Strand was $511 per acre.
The two sources/methods which were used in our calculations are:
The fair market value by DOR codes from the Lee, Collier and Hendry tax roll files was calculated for the land within the priority panther habitat. These values were based on arm’s length transactions for DOR codes that would be eligible to participate in the conceptual plan (all codes for vacant or agricultural lands except publically owned, subsurface, utilities, right of ways and streets). These fair market values are used in Scenario 1.
The survey done by the University of Florida’s Institute of Food and Resource Economics (IFAS) on land values for cropland, grazing land and citrus land, Florida Land Value Trend Continues: 1996 Survey Results, covered 14 counties in southwest Florida and used a wide variety of knowledgeable people to provide information on current land values for these types of agricultural lands. These values are used in Scenario 2.
Since Scenario 1 has only limited or no sales for a few of the DOR codes, it is felt that Scenario 2 is likely to be a bit more realistic than Scenario 1.
Although only the tax roll sales method and the survey results were used in this analysis, the other sources were used for comparative purposes. A summary of all these various sources is presented in the following table.
SOURCE
PRICE RANGE
AVERAGE
PRICE
LAND USE PRIOR TO PURCHASE
Landowners’ Strategy $1,000 - $10,000 NA Agricultural Roka & Main $315 - $2,500 $480 NA Save Our Rivers $1,017 $1,017 NA CARL $511 - $2,500 $1,818 NA IFAS Survey $958 - $7,457 NA NA FSF’s Analysis (see the Full Report)
$400 - $4,892 (median of FMV’s for each DOR except 80-94 which would not be eligible) NA NA With regard to the cost for the government to manage and maintain the land, informal estimates by employees of public land management agencies have ranged from $15 to $30 per acre.
The data provided by Dr. Main and Dr. Roka showed an average cost of maintenance and management on public lands of $6 per acre. However, since this number was taken from their draft copy, it is subject to change. This figure was based on four sites: Big Cypress National Preserve, Florida Panther National Wildlife Refuge, Fakahatchee Strand State Preserve and Picayune State Forest. All but Big Cypress National Preserve have fairly low levels of public access, which results in a low value for maintenance per acre. Big Cypress has a higher level of public access, but much more acreage, so its resulting cost per acre for maintenance is also low.
Since the informal numbers quoted and those in Dr. Main and Dr. Roka’s study varied quite a bit, another source was obtained which presented more data from which the cost of maintenance and management on a per acre basis could be derived: the draft of a study being done by Florida Atlantic University and Florida International University Center for Environmental and Urban Problems for the Everglades National Park that looks at nine different federally owned areas. The data presented includes federal expenditures for each area, and the number of acres for each (obtained by calling the specific park or reserve). However, three of the nine locations either had no data on acres that was available in a useable manner or the location was not a comparable use to the priority panther habitat land (for example, a marine sanctuary). Using the remaining expenditure data from that study and the number of acres for each location, a weighted average cost for maintenance and management was obtained. This value was $10.74 per acre.
It should be noted, however, that these expenditures only included direct costs. Indirect costs such as overhead management costs incurred at the federal level the agency’s Washington, D.C. headquarters, were not included. If numbers on these overhead costs were available, the cost per acre would be higher. (Note: since payment in lieu of taxes, or PILT payments, were added into our calculation at a latter point, they were subtracted from the expenditures given in the FAU/FIU study). This FAU/FIU study included two of the four sites used in the Main/Roka paper plus four other useable sites, so it was used in our analysis.
The real cost per acre can vary significantly depending upon the type of maintenance activities, the use of the land, amount (if any) of public access, the type of land (swamp, upland, open, forested, etc.), the condition of the land originally (the presence and extent of exotics which have to be removed, for example), and the amount of public access services provided such as boardwalks, nature presentations, concessions, fencing, etc. Additionally, a park with costly public buildings and boardwalks can still have a low cost per acre if it is of significant size, while a very small park with limited public access and services can have a high cost per acre. Thus although a single number had to be used for comparison purposes, the real cost per acre can be a wide range of values.
10. Farm Plan Costs
The conceptual plan states that landowners would be compensated for any additional costs associated with developing and implementing "farm plans." The elements of administrative costs which might be created by such plans would include legal fees, surveys, consultant/engineering fees, aerial photos and surveys. Elements of operational costs which might be created include controlled burning, chopping of undergrowth and creation of water retention structures.
Administrative costs would normally be incurred in any of the three alternatives: the conceptual plan lease, conservation easements and public purchases of the land, thus they are not additive. Most of the operational costs involve actions which the landowners would normally perform as part of their regular operations. If anything extra was required, it would be compensable under the conceptual plan. However, since it is the intent of the Florida Panther Habitat Preservation Plan: South Florida Population to preserve what is already there, it is anticipated that any "extra" operational requirements would be negligible.
11. Effects on Local Taxes
When private lands are purchased by the government, they no longer contribute as much money to the tax rolls as when they were privately held. The complete loss of tax revenues is offset to a degree by "Payments in Lieu." These PILT payments are made to the counties by the government agencies that manage the land.
Using the regular federal PILT payment rules and assuming the "Additional Payments" would also apply, the regular PILT payments were determined to be less than the "ceiling amounts," so the calculation was as follows:
$1.36/acreX 53.33% pro rated amountX Number of eligible priority panther habitat acres= Potential PILT payments to the counties+ Potential "Additional Payments" (1% times fair market value -- see FMV in Full Report)= Total potential PILT and "Additional Payments" to the 3 counties.The taxable values for Hendry and Lee counties were multiplied by their respective millage rates and added to the actual taxes paid for Collier County (only Collier County included the actuals in their tax roll).
From this tax amount, the potential annual PILT and "Additional Payments" were subtracted to calculate the loss to the counties if the land were to be purchased by the government. (Note: since the "Additional Payments" are only for 5 years, their annual value was calculated by multiplying the amount by 5 and then dividing it by the discount period. This was necessary in order to calculate the present value of the loss of taxes to the counties).
It might be argued that if the conceptual plan or a conservation easement plan is used, local tax revenues would be reduced since the market value of land so encumbered would be less than land which included development rights. This would only be true in the case of any non-agricultural land which might be involved. The taxes on agricultural land would not change since they are covered by the Greenbelt law which bases valuation for property tax purposes upon the income approach rather than market value.
12. Comparison of Conceptual Plan to Conservation Easement and to Government Purchase and Management of the Land:
The present values for each of the elements of the conceptual plan were added together and then divided by the number of acres (all "eligible" acres were included in the first scenario, and all agricultural acres were included in the second scenario). This number was compared to the cost per acre of a conservation easement (the present value is the same as the cost since a conservation easement is a one-time cost) and to the present value per acre of public land purchase with ongoing land management by a government agency.
You also may view other sections of the study (in another part of this web site) by clicking on:
| Acknowledgments | Introduction | Executive Summary | Findings | Other Methods of Valuing Habitat | Recommendations | Order Full Report |
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