Breaking Down the Numbers

By Beacon Staff

If you clicked this link, congratulations on being a sucker for punishment … or at least a citizen concerned about how our government spends money. Here we go:

FWP’s proposal is at: http://fwp.mt.gov/news/publicnotices/notice.html?action=getPublicNotice&id=2426

Several things struck me immediately. First, the FWP commission proposed agenda had the commission scheduled to take 10 minutes to consider giving the initial green light to the Spotted Dog buy. That’s a failure of due diligence, in my view.

Second, FWP’s appraisal contractor spent roughly one day at Spotted Dog, most of it flying around in a light plane. That’s a pretty minimal standard for such a large amount of money.

The appraiser assigned a value of $15.2 million to Spotted Dog. FWP wants to get $16.6 million from the NRDP, with the extra to cover overhead costs.

According to the EA, real estate brokerage Faye Ranches has the ground listed for $17 million, while the appraiser found past listings at $26.125 million.

As for what Rock Creek Cattle Company paid, or what YT paid RCCC, that data is private as Montana is a “nondisclosure” state. However, the appraiser stated that an RCCC spokesperson told him the “buy back” option for RCCC was agreed to at $9 million.

Spotted Dog is not viable as a stand-alone ranch at the asking price. While the land has been ranched for over 130 years, the profit from the current stocking level (2000 cow-calf pairs) would not come close to covering the capital and opportunity costs of the land.
Cow/calf profits have been wildly variable the past few years, from zero to $400. If the average return per pair on 2000 pair is $200 a year, like clockwork, the gross profit is $400,000 a year – not counting taxes, amortization, et cetera.

The interest alone on an $8 million five percent note is $400,000. At $16 million, the stock rate would have to double for Spotted Dog to have any hope as a cattle ranch. Two problems with that:

If cattle levels were doubled, then there would be less forage for the wintering elk, the very thing that makes Spotted Dog important for wildlife. It is doubtful that the Land Board and FWP would allow a doubling of animal units on the 10,000 acres of state ground, or allow fencing to keep cows off the state lands – which would be a waste of money anyway.

Furthermore, if FWP buys this, the agency intends to pull the cows (currently 2000 cow-calf pairs) completely off, at least until a forage review is done to see if cattle can be brought back in, mainly to work and enhance the forage for elk.

Current public access is extremely limited. As the FWP EA notes, “public access on the property is by private permission only.” Two of the four legal points of entrance are gated, from Avon and Deer Lodge, while 314 from Elliston is open. Most of the 117 miles of road are minimal jeep-and-logging type.

FWP wants Spotted Dog as big game winter range, to be closed from November 30 until May 15 with existing snowmobile use continuing on 314 and associated trails on the far east side.

“Public access would be provided to the extent that such access is compatible with the stewardship of soil, native vegetation, and the endemic fish and wildlife resources,” so don’t expect a new year-round playground. FWP “anticipates that many miles” of existing roads will be found “unnecessary” and be thus obliterated.

What is being bought for hunters? FWP anticipates each season will produce 3,000 hunter-days (500 hunters for 6 days each). Given the price of $16 or so million, since mortgages are so cheap these days, let’s say our interest rate is a puny 5%. On $16 million, the interest alone is $800,000 a year. Per hunter day, that is $266.67 per day. The average 6 day hunt thereby carries a “price tag” of $1600.

If Spotted Dog goes to FWP for the $9 million “buy back option” that YT and RCCC agreed to several years ago, our debt-service cost per hunter day ($450,000 divided by 3000) is $150, or $900 per hunt.

Those hunts, of course, are on a $20 tag, or $593 to $1,250 for nonresidents, certain to be a sought-after draw tag.

So, how to bring the cost down? Front-country around Deer Lodge and near Highway 12 at Avon could, and should be offered on the open market. A hundred parcels at $100,000 a pop would generate $10 million, which would completely cover a buy at the $9 million option price plus a million dollars for overhead. Then, the new hunter opportunity would be, in essence, free for a lucky few Montana sportsmen and women.

More important, the money recovered could be flipped back into remediation programs in the upper basin that otherwise would not get funding.

The fact remains that future owners of Spotted Dog will not actively destroy the wildlife productivity of the area. A trophy owner might capture the productivity for his or her own benefit, either in terms of real estate, high-dollar hunts, or any combination. But spending the $16 million as now proposed is not going to make a significant difference in whether or not the wildlife values continue to exist.

Finally, there’s one other thing. Spotted Dog is not the first package like this.
YT/RY is part of a family fiscal empire created by the late Ron Yanke, a highly-regarded Boise entrepreneur. Yanke was one of the Idaho smarties that invested in Micron in the early days.

Among other properties, Yanke owned 32,000 acres of forest near Anaconda, the so-called Watershed area. In 1999, the Rocky Mountain Elk Foundation came to Yanke wanting the buy the ground. Yanke agreed to sell for $20 million, but only after logging operations were completed.

Some money came from the Upper Clark Fork River Basin Restoration Fund (somewhere around $6 million, which bought about 8,000 acres for FWP. The other 23,500 or so acres went to the Forest Service, with the funds coming from the federal Land and Water Conservation Fund in several chunks over several years, from 1999 to 2003.

At roughly $625 an acre, this was a heck of a deal for YT. YT got the wood it needed, and when finished, got out with a chunk of change. If you look at the timing, those funds were apparently flipped over to buying Spotted Dog from RCCC.

Clearly, after logging Watershed off, the option would be to sit on the land, or offer it as trophy forest for subdivision. Yet RCCC was already offering a prime product in that market, which has since caved.

It made more sense for both RCCC and YT for YT to take its Watershed money and move it into Spotted Dog. YT clearly intended to log and then flip its money back into more loggable land elsewhere, then move on from that.

Watershed and Spotted Dog taken together are 55,000 acres plus that will no longer compete with RCCC for the high-end trophy buyer, a clear benefit for RCCC. As FWP’s EA indicates, RCCC’s main ranch near Deer Lodge “has been developed with a private golf course, trophy homes, and numerous luxury amenities.”

In conclusion, while nobody should object to YT being able to get out from under land it no longer needs, I would prefer not to overpay public monies for a questionable benefit. FWP needs to be a lot stingier and smarter, and capture more value for its constituents, the people and sportsmen of Montana.

Related: Advice for FWP

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