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Market Drop Creates Opportunity for Flathead Land Trust

By Beacon Staff

The abrupt drop-off in land development throughout the Flathead Valley over the last year has caused its fair share of negative consequences, but it has resulted in some benefits as well – particularly for those focused on conservation. With little or no pressure from developers to buy up the agricultural lands along the Flathead River corridor, the Flathead Land Trust has found its mission to preserve those private parcels, mainly through voluntary conservation easements, made much easier of late.

“Because land values are low, developers aren’t really interested right now,” Brad Seaman, outreach and development director for the Flathead Land Trust, said. “We’re the only ones out there talking money.”

The Land Trust has secured 38 conservation easements since 1985, but over the last year, interest by landowners in this option has grown rapidly. So far this year, the Land Trust has secured easements on four parcels along the Flathead River as part of its River to Lake Initiative, protecting some 840 acres through federal and state partnerships, totaling about $2 million. According to Seaman and Executive Director Marilyn Wood, these transactions will expand recreational access, preserve open space and maintain wildlife habitat and water quality. Agricultural land secured as easements will also help keep some level of food production local.

“If the economy is going to tank, this is one way people can make lemonades out of lemons,” Seaman said. “We have a once-in-a-lifetime opportunity.”

With large swathes of approved, but yet-to-be-developed subdivisions laying dormant throughout the Flathead, long-time landowners in the valley don’t have developers knocking on their doors to sell the way they did during the boom of the last decade. The result, Wood said, is that many farmers are taking a fresh look at conservation easements brokered through the Flathead Land Trust.

“It’s really worked, kind of, to our benefit to have a little bit of breathing room with the real estate market right now,” Wood said.

A conservation easement is a voluntary, permanent and legally enforceable agreement between a landowner and a land trust limiting the type of development and industrial activity allowed on the land, in return for tax benefits and the preservation of the land’s traditional use. Working farms and ranches, timberland and other uses can continue, and often the landowner can specify in easement agreements that future family members may build homes on the property. But the landowner can no longer subdivide, mine or dump toxic waste on their property.

The Flathead Land Trust funds its easement purchases through private donations and state and federal dollars. If, for example, a parcel of farmland also includes riverfront riparian habitat, it may qualify for public grant money. The landowner continues to own and manage their property, and must pay property taxes, but the easement often qualifies as a charitable contribution and receives federal income tax and estate tax benefits. Because the easement is a restriction on the future use of the land, it does reduce the land’s value.

Over the last several months, there have been more property owners looking into easements than the Flathead Land Trust has the funds to accommodate.

“We have a list of landowners who are ready to go and we can’t meet their needs,” Wood said. “They’re calling us saying, ‘We’d like to participate in the initiative and how can we do it.’”

But Wood and Seaman are aware that their window of opportunity is limited.

“Once the market rolls around again, and it will, and people realize they want to own a piece of the Flathead, they’ll look here.” Wood said.

On top of that, the clock is ticking on another major motivating factor for landowners to enter into conservation easements: At the end of this year, the federal conservation easement tax incentive program will expire. The bill allows landowners who earn at least 51 percent of their income from their land to deduct up to 100 percent of their adjusted gross income for up to 16 years, or until the charitable contribution is spent.

Introduced in 2006 at the urging of two Helena directors of the Montana Land Reliance and carried by Sen. Max Baucus, D-Mont., the bill has the support of Montana’s entire federal delegation, as well as Gov. Brian Schweitzer. It has 34 co-sponsors in the U.S. Senate and the support of 257 representatives in the House. But the bill is essentially caught in the bottleneck of bills backed up behind health care overhaul legislation – and the potential expiration of these benefits has Montana’s 12 major land trusts concerned.

That tax incentive – and its imminent expiration – was key to a major 2008 donation by Glenn and Hazel Johnston of some 700 acres off of Columbia Falls Stage Road, much of it along the Flathead River.

“They were specifically interested in that tax benefit at that time,” Wood said. “It was a tremendous donation and it was because of that.”

“That tax incentive, for farmers in particular, is really gold,” she added. “Farmers can actually capture most of the deduction.”

The Flathead Land Trust is now turning its attention to the north shore of Flathead Lake, primarily the tracts of undeveloped land between Highway 82 and the water. In April of 2008, the Flathead County Commission voted to deny a proposed subdivision in the area, that would have put about 290 residential lots on 367 acres, due to its location in a floodplain. Wood is hoping to protect some of that land before future proposals come forward, and has spoken with the seven key landowners in what the trust has dubbed, the “North Shore Conservation Opportunity Area.”

“They’re willing to talk about this as long as they get fair compensation, and that’s what they’re trying to do,” Wood said. “There’s more flexibility than people realize, and I think in the long run, these future parcels are going to be worth their weight in gold, because there’s not going to be that many of them.”