Land Banking: Can It Work?

In August, the Land Board unanimously approved both reauthorization of the state’s land banking program and legislative changes the Department of Natural Resources and Conservation (DNRC) says will make the program operate more efficiently. Also at its August meeting, the Board gave its approval to DNRC to move forward on a couple of land sales and an acquisition under the program. But faced with enormous disparities in the current land values in eastern Montana and western Montana, questions regarding the value of the program, its costs, and its ability to work in the public’s benefit are likely to dog the efforts to reauthorize the controversial program. Land banking was authorized by the 2003 Legislature under HB 223 and, as a “pilot program,” was given a sunset date of 2008, at which time the program will end. by which the program would end, of 2008. In its purest form, the intent is to allow the state to offload trust lands that are wholly or partially surrounded by private lands and use the revenues from the sales to purchase other lands that can be added to existing state holdings to produce more manageable, publicly-accessible blocks of land.

 

Carbon Co. Land Sale Parcel

 

Since the program allows the state to sell state trust lands and buy other lands, it is fair to say there were many who worried the state would rush to raise money by selling land and then find itself unable or unwilling to purchase replacement lands. During debate, those concerns led the legislature to limit the number of acres that could be sold to a total of 100,000 acres and to require that 75 percent of the acreage sold “must be isolated parcels that do not have a legal right of access by the public.” A further limitation requires that the state not sell more than 20,000 acres “unless the board has acted to use the revenue from that land to make purchases” of other lands.

In seeking Board approval for the reauthorization of the land banking program, DNRC’s director, Mary Sexton, said the program has nominated 118,038 acres for sale, of which so far 26,145 acres have received approval to continue through the sale process. Total revenue expected to be generated by the sales is estimated by DNRC at $10,700,000.

State Auditor John Morrison moved to extend the sunset date by two years beyond the 2011 date suggested by DNRC to 2013, saying “a 5-year period is more conducive to predictable and long-range planning for acquisitions and dispositions. I’m concerned that three years might interfere with some of that planning.” Morrison then asked Director Sexton for her opinion and she explained that “it took 2-3 years to develop [administrative] rules and get the first go-around up and running” but that the department has experienced some of the glitches, suggested changes to make them better, and had no opinion on extending the sunset date. Morrison said his office had “sent letters to 43 conservation groups asking if there were any problems” with the program and received “no negative responses and one positive one.”

Attorney General Mike McGrath then jumped in and suggested that, given the controversial nature of the program, keeping the 2011 date was probably the right thing to do. “The program is up and running now,” said McGrath, “and won’t take the lead time it took to get where we are. But we have to be extremely cautious about the entire program when we’re talking about the sale of public lands. We have to do it right. I’m a strong believer in what it can do, but am nervous about its long-term potential.”

Morrison withdrew his motion to extend the sunset date and the Board voted unanimously to approve the draft legislation to reauthorize the program. Besides extending the sunset date, the draft reauthorization bill includes provisions to require bid deposits 20 days prior to the auctions instead of 45 days; lower the bid deposit bond to 20% from 50%; allow lessees to cancel sales within 10 days prior to the auction (instead of 30); and require that lessees who initiate sales proceedings pay the costs incurred by DNRC for the preparation of the sale including “appraisals, cultural surveys, environmental reviews and land surveys” within 10 days after preliminary approval of the sale by the Board. If the parcel is sold to someone besides the lessee who initiated the sale proceedings, those expenses will be remitted to the lessee upon the sale of the lands and the winning bidder will pay them instead.

Sales and acquisitions

One of the most significant problems faced by the land banking program is the notoriously low price for primarily agricultural lands in Eastern Montana compared to the skyrocketing land values for recreation and development in the western half of the state.

 

Carbon County land parcel up for sale

 

As an example, the Board gave preliminary approval for DNRC to purchase 40 acres next to Lone Pine State Park near Kalispell. The cost is estimated to be $550,000 – or $13,750 per acre. Meanwhile, in Garfield County on the eastern side of the state, an entire section of state land, which equals one square mile or 640 acres, is for sale at the minimum bid price of $70,400 – or just about what 5 acres in Kalispell costs!

As the old saying goes, “they’re not making any more land” and the huge disparity in land values soon brings into question the long-term wisdom and actual benefit to the trust from selling off socalled “low-value land” en masse to purchase such small parcels of high-value lands. Undoubtedly many such questions will be raised during the legislative effort to reauthorize the controversial land banking program — and the outcome remains far from certain.