Land Banking: A Long Way To Go

In theory, the controversial Land Banking program initiated by the 2003 Legislature should work just fine. Isolated parcels of state land that are completely surrounded by private lands would be sold off and the resulting revenues would be re-invested in other lands that are publicly accessible. In theory, the new parcels would be aggregated to provide manageable and productive trust lands and everyone -- trust beneficiaries, the recreating public, and those who consolidate their own properties -- would be happy.

But reality has a funny way of throwing legislative and bureaucratic theories off-track.

As Department of Natural Resources and Conservation Director (DNRC) Director Mary Sexton told the Land Board in regard to the appraisals of potential properties: "That is something we are struggling a little bit with." Indeed it is. As illustrated by the Miller Land Exchange (see article "Land Board Rejects Bitterroot-Lincoln Land Swap), the method of appraising land values is becoming quite a struggle thanks to the question of whether state trust lands should be appraised with or without access.

It would seem obvious that isolated, wholly-surrounded trust lands don't have public access. But if they are sold to the surrounding land owner, their value skyrockets because they do have access to that landowner, including for development purposes. Yet, the value of lands when appraised "with access" has caused a number of landowners who wished to buy those wholly surrounded trust lands to pull out of the process because the appraised values simply outstripped what they were willing to pay to acquire the state land.

Further complicating the Land Banking program is the vast disparity in land values between eastern and western Montana. While the program envisioned selling off the so-called "donut holes" of surrounded public land so common in the large ranches and farms of eastern Montana, their value relative to what the state can buy other lands for – say, publicly accessible recreational lands in western Montana – are minimal. You have to sell a lot of agricultural "donut holes" to accrue enough to buy even one large chunk of land in the booming areas of the Flathead, Bitterroot, or Gallatin valleys – if you can even find a large parcel for sale, that is.

Finally, there's the problem of the coming legislative session in which the Land Banking program will need to be re-authorized or it will cease to exist. So far, the state has not sold the "donut holes," it has not purchased other lands, and it has nothing in the bank with which to do so. While DNRC told the Board it expects to begin selling in June, there are no plans to purchase replacement lands until the agency has accrued at least $1 million in revenues from land sales. DNRC only started aggressively soliciting lands to purchase in April, with a June deadline for the first round of nominations (see article "Your Voice Counts").

Early critics of the program warned that the state would be far more likely to sell public lands than acquire them. Should the state not manage to acquire sufficient replacement lands, with sufficient public values, rest assured those critics will be back at the next session more than willing to end the land banking program.

It's all up in the air at this point, so stay tuned and we'll keep you informed on the eventual fate of Montana's Land Banking experiment.