In the ongoing saga of conservation easements, it now looks like the state will have to spend over $6.6 million to collect on $222.8 million in questionable conservation easements taken during the 2000-2007 conservation easement free-for-all.

Rep. Marsha Looper's (R-Calhan) HB11-1300 is up for second reading May 3 in the House, and if the bill passes, it creates a "go straight to court" shortcut for landowners whose easements are contested.

Easements overvalued up to 14000%, says state

The state's Department of Revenue has haggled with landowners for about four years to recover lost revenue from tax credits derived from the easements.  The most current easement property review shows 600 dicey easements, one of which the state believes is 14,000% over valued.  

HB-1300 will allow consolidation of cases so the state can fast forward their adjudication in the civil courts.  Overall, the state will have to put six judges on the cases, spend $2.070 million on appraisers and appraisals, and hire 18 people to manage the litigation.  Another $400,000 will go to travel expenses.

Currently, landowners are racking up interest and penalties on the claimed tax credits:  the tax credit liability is about $155 million, with an additional $18.6 million in penalties and $49.3 million in interest. 

Appraisers, lawyers, accountants, tax credit merchants will do well

Appraisers are the lucky ones in this deal.  Landowners paid some appraisers for the allegedly overstated property values.  Now different appraisers will go in for the do-over.  Of 67 appraisals currently completed by the state, the average over-valuing is 2876%, or $1,478,000 from state appraisals v. $42,520,000 from landowners' appraisals, with 533 appraisals to go.

The state has to find the money to fund the clawback.  Apparently, an amended bill will reduce the $26 million conservation easement cap set for three years from 2011-2014 to gin up the dollars.  The easement cap will drop to about $22.5 million each year for 2011-12 and 2012-13.  It will pop up to $33 million in 2013-14 so landowners, land trusts, appraisers, accountants, lawyers, and tax credit buyers can recoup the lost revenue from the earlier two years.

Landowners could negotiate, but prefer Judge Judy

Meanwhile, landowners could save themselves and the state the trouble by negotiating with the Department of Revenue.  But most landowners have decided not to take that route because of the huge disparity in appraisal value.  They also hold hope that Rep. Wes McKinley's (D-Walsh) bill, HB11-1208, that affirms the tax credits and takes landowners off the hook, will pass.

Added to this is a core issue with the program itself.  Much of the value of the contested property is in gravel from the Arkansas Valley. Some question whether protecting gravel is an appropriate use of easements, no matter how the property is valued.

In any case, if the bill passes, landowners will not have to grovel for their gravel - they will have their day in court.  PEN  5.2.11  

 

This post was published on May 2, 2011. Permalink »