Newsday's Open Space Poll
Newsday is running an online poll today: Should communities keep up land preservation efforts as they struggle with their budgets?
The answer is of course yes, but it’s not really that simple.
For one thing, most of the towns on Long Island’s east end collect money for open space through a real estate transfer tax. The amount of money rises or falls depending on the number of real estate sales in any given year but, regardless, there’s always money coming into the fund. And that money can only be spent on open space preservation projects. It can’t be used for salaries or for highway repairs or for sewers. It has nothing to do with money in the town’s operating budgets or with struggles to balance the budgets.
So if the towns have it, they might as well spend it, assuming they can find good deals.
But that raises another issue, for towns that collect open space money through a real estate transfer tax and for towns that do not.
By law, municipalities must get an appraisal before they buy land, and they are prohibited from paying more than the appraised value. When land values are high, that is not a problem. Municipalities can pay the appraised value, as we did in 2006, when I worked at Westchester Land Trust and we helped the Town of Somers buy the 654-acre Angle Fly Preserve for $20.5 million. Or they can pay less than appraised value and allow the seller to take a tax deduction for making a bargain sale, which we also did several times.
But that works only if the sellers believe they are being paid a price that is close to what the land is worth. And right now, land values as documented by qualified appraisals are extremely low. In fact, they are far lower than many land owners want to believe. Which can make it very hard to strike a deal.
Think of it this way: If you own land that you think is worth, say, $12 million (perhaps because you paid $12 million for it), and a town offers to buy it for $5 million because that’s what it was appraised for, why would you agree unless you absolutely had to sell for financial reasons? It’s impossible to make up a difference that big with a compromise price. Unless you had to sell, you’d be smart to hang on to your land until values rise again.
So no matter what the answer is to the question in Newsday’s poll -- Should communities keep up land preservation efforts as they struggle with their budgets? -- the real answer is that it’s a lot more complicated. Look for great deals, but you might have a hard time finding willing sellers.
The answer is of course yes, but it’s not really that simple.
For one thing, most of the towns on Long Island’s east end collect money for open space through a real estate transfer tax. The amount of money rises or falls depending on the number of real estate sales in any given year but, regardless, there’s always money coming into the fund. And that money can only be spent on open space preservation projects. It can’t be used for salaries or for highway repairs or for sewers. It has nothing to do with money in the town’s operating budgets or with struggles to balance the budgets.
So if the towns have it, they might as well spend it, assuming they can find good deals.
But that raises another issue, for towns that collect open space money through a real estate transfer tax and for towns that do not.
By law, municipalities must get an appraisal before they buy land, and they are prohibited from paying more than the appraised value. When land values are high, that is not a problem. Municipalities can pay the appraised value, as we did in 2006, when I worked at Westchester Land Trust and we helped the Town of Somers buy the 654-acre Angle Fly Preserve for $20.5 million. Or they can pay less than appraised value and allow the seller to take a tax deduction for making a bargain sale, which we also did several times.
But that works only if the sellers believe they are being paid a price that is close to what the land is worth. And right now, land values as documented by qualified appraisals are extremely low. In fact, they are far lower than many land owners want to believe. Which can make it very hard to strike a deal.
Think of it this way: If you own land that you think is worth, say, $12 million (perhaps because you paid $12 million for it), and a town offers to buy it for $5 million because that’s what it was appraised for, why would you agree unless you absolutely had to sell for financial reasons? It’s impossible to make up a difference that big with a compromise price. Unless you had to sell, you’d be smart to hang on to your land until values rise again.
So no matter what the answer is to the question in Newsday’s poll -- Should communities keep up land preservation efforts as they struggle with their budgets? -- the real answer is that it’s a lot more complicated. Look for great deals, but you might have a hard time finding willing sellers.
posted by Tom Andersen at 2:03 PM
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