ROUNDTABLE ON PARCELIZATION AND

FOREST FRAGMENTATION

 

 

FINAL REPORT

 

 

 

 

 

MAY 2007

 

Recommendations from a roundtable of over 100 participants.

 

 

Primary Author: Jamey Fidel, Forest and Biodiversity Program Director,

Vermont Natural Resources Council

 ROLE OF THE FOREST ROUNDTABLE

 

The Roundtable on Parcelization and Forest Fragmentation (hereinafter Forest Roundtable) was convened in August of 2006 by Vermont Natural Resources Council (VNRC) to identify the causes of parcelization and forest fragmentation and help reduce their effects in Vermont. Over one hundred people representing a broad array of public and private interests participated in the Forest Roundtable.  Participants included consulting foresters, professional planners, government officials, landowners, sportsmen, representatives from the forest products industry, conservation groups, biomass energy organizations, and public and private universities and colleges.

 

 

The goals of the Forest Roundtable are to:

 

·      Share information and educate roundtable participants and the public on the effects of parcelization and forest fragmentation and forestland loss.

·      Define the terms “fragmentation” and “parcelization”.

·      Identify gaps in information related to the trends of parcelization and forest fragmentation.

·      Bring in experts to inform the roundtable participants and the public.

·      Ground truth the effectiveness of existing programs designed to curtail the rate of parcelization and forest fragmentation in the state.

·      Craft new policies, strategies and ideas for curtailing the rate of parcelization and forest fragmentation in the state.

·      Mitigate the effects of parcelization.

·      Develop new partnerships to address the issues discussed in the roundtable.

 

PROBLEM STATEMENT:

WHAT IS PARCELIZATION AND FOREST FRAGMENTATION?

 

The term  ‘parcelization’ is used to describe changes in ownership patterns whereby large tracts are divided into smaller parcels.  The act of parcelization is mostly a legal exercise where large tracts of land are divided into smaller ownerships or land holdings. The result of parcelization may simply be an increase in the number of people who own a specific parcel of land.  However, when larger parcels are divided and sold or transferred into multiple parcels, often through the process of subdivision, the result can be disjointed land ownership patterns that promote new housing and infrastructure development (roads, septic, utility lines, etc.). When this development occurs, it can fragment the landscape and negatively affect plant and animal species, wildlife habitat (called habitat fragmentation), and water quality.  It can also affect the viability of large tracts of forestland to contribute to Vermont’s rural economy. Forest fragmentation and habitat fragmentation are often the result of parcelization and its associated development.[1] 

 

EFFECTS OF PARCELIZATION AND FOREST FRAGMENTATION

 

Parcelization and forest fragmentation have numerous ramifications to the ecology and traditional economy of forestland in Vermont. According to U.S.D.A. Forest Service publication Forests on the Edge: Housing Development on America’s Private Forests, parcelization and forest fragmentation can be associated with:

 

·      Decreases in native wildlife populations owing to decreased wildlife habitat quantity and quality, increased predation and mortality, and other consequences of human activity that change the relationships many wildlife species have with their environments.[2]

 

      For example, land clearing and road construction can result in the loss of evergreen/conifer trees used by deer for cover and protection during winter cold and snow.  Land clearing and road construction can also disrupt wildlife travel corridors, which negatively affects species such as black bear.

 

·      Alterations in forest structure and function that can adversely affect ecological processes on which forests and forest dwellers depend, resulting in less biodiversity and more opportunities for invasions of nonnative species, insects, and diseases.[3]

 

      For example, housing development may result in road construction, conversion of forest resources, planting of nonnative species, and “woodscaping” - the practice of removing forest understory (vegetation under eight to ten feet in height), so as to create a park-like appearance.  This can result in a loss of protective native habitat for ground-nesting birds and the introduction of potentially invasive, i.e. non-native, species of plants, insects and diseases.

 

·      Long-term modifications and reductions in water quality and aquatic diversity when forests can no longer regulate the movement of storm water across the landscape.  This leads to changes in streamflows, increases in sediment, reshaped stream bottoms and banks.  It adversely impacts water quality and aquatic species such as fish and mussels.[4]

 

For example, water runoff from roofs, paved driveways, fertilized lawns and new roads channeled into culverts and new ditches can alter natural flow patterns and the composition of soil and water.

 

·      Decreases in timber production and active forest management when population densities increase.[5]

 

For example, many landowners are unlikely to harvest timber in the immediate vicinity of their homes.

 

·      Changes in scenic quality and recreational opportunities owing to loss of open space, decreased parcel size, and fragmentation, all of which can degrade the recreational experience and lead to increased likelihood of land use conflicts.[6]

 

For example, land clearing and home construction on ridgelines and hilltops can impair scenic resources. Old logging roads formerly used by the public for recreational pursuits may be converted to private driveways.

 

·      Shifts in price levels and economic benefits for forest-based products – including fewer options for timber management, recreation, and other uses whose economic benefits rely on large forested areas.[7]

 

For example, fragmentation of large forest parcels in a single ownership to several smaller parcels in different ownerships can lead to access issues, higher maintenance costs, higher property taxes and reduced timber value available per entry.  These factors can increase costs and reduce revenue, to the point that active forest management is no longer practical.

 

CAUSES OF PARCELIZATION

 

There are many causes of parcelization. Perhaps the greatest driver may simply be escalating property values and land prices in Vermont. As land valuation and development opportunities increase in Vermont, market conditions prompt an increased desire to subdivide and develop property for economic gain. Other factors that foster forest parcelization include:

 

•           Population growth,

•           Changing demographics,

•           Shifts in cultural values regarding land management,

•           Inadequate land-use planning and regulation, and

•           Lack of planning within families to ensure consistent forestland ownership through multiple generations.

 

Increasing Land Prices

 

Over the past couple of decades, unprecedented real estate activity has occurred in Vermont and the Northern Forest Region. On a regional scale, between 1980 and 2005, approximately 23.8 million acres changed hands in the 26 million acre Northern Forest region.[8] Of significant interest, nearly one-half (45%) of the land transactions that occurred during this 25-year period occurred in the last five years.[9]  While many of these transactions may have involved the same parcel of land, these transactions indicate a recent trend in real estate activity that has helped to drive an increase in land values in the region.

 

In Vermont, the real estate market has seen a noticeable increase in value in the last five or six years.[10] According to the Office of Federal Housing Enterprise Oversight (OFHEO), Vermont homes recently experienced very strong appreciation, having on average climbed sixty-six percent in the last five years.[11] While the housing market may be starting to cool, Vermont in 2006 was still showing the greatest appreciation in New England, posting rates that were higher than New York State and the national average.[12] Since 1980, Vermont values on average appreciated 351%; --higher than the national average of 299%.[13]

 

Information from Vermont’s property transfer tax data provides useful trend data for Vermont’s real estate market. From 2001 to 2005, the average sale price for primary homes and condominiums rose 56.8 percent, from $126,000 to $185,000.[14] Similarly, the median price of vacation homes and condominiums rose significantly from $110,000 to 200,000, an increase of 81.8%.[15] During the same time period, the median price per acre of open land and forestland parcels of twenty-five acres or more rose 62%, from $974 per acre in 2001 to $1,580 in 2005. However, the median price per acre of open land and forestland parcels of between one and twenty-five acres experienced the highest growth rate, rising 117%, from $4,505 per acre in 2001 to $10,000 in 2005.[16]

 

According to Phil Dodd of the Vermont Property Owners Report, “the last figure, showing very strong demand for smaller parcels of land, suggests why owners and developers and speculators may have been tempted to subdivide and sell smaller parcels of Vermont land: this has been a very profitable business to be in.” As highlighted by Dodd in a presentation to the Forest Roundtable, “all you need to do is buy a commodity (larger land parcels) that is going up in value at a rate of 62% every five years and then split it up and sell it as a commodity (smaller parcels) that is going up in price at the rate of 117% every five years.”[17]

 

Increasing Property Taxes

 

Increasing land and property valuations, along with higher school and municipal spending, have led to rising property tax rates.   In some areas of Vermont, property tax rates have increased significantly.[18] This puts additional pressure on landowners to divide and sell a portion of their land. Not surprisingly, the National Woodland Owner Survey conducted by the U.S.D.A. Forest Service lists property taxes as the number one concern among landowners.[19]

 

The state offsets property taxes by providing income sensitive payments to lower income residents, but landowners that own large tracts of forested open space are not eligible for this payment.[20] Landowners who are land rich and cash poor feel the pressure of rising property taxes, unless they are have taken measures to reduce their property tax burden by enrolling in Vermont’s Use Value Appraisal  (UVA) Program (commonly called “Current Use)”. Approximately 38% of all eligible forestland is enrolled in the UVA Program.[21]  This is a significant accomplishment, yet it indicates that there is still a large percentage of forestland that remains vulnerable to property tax driven development pressures.

 

Population Growth and Land Use

 

Population growth and changing land use contribute to forestland parcelization. Between 1982 and 1992, the human population in Vermont grew by about 10 percent, but the amount of developed land increased by about 25 percent. [22]  Since population growth is occurring in mostly rural areas (defined as fewer that 2,500 people), forestland and important rural resource lands have experienced growth pressures that have led to parcelization.[23]

 

Tracking parcelization rates in Vermont is tricky, but survey work that was repeated in the 1980s and 1990s demonstrates increasing parcelization in the state. For example, the number of non-industrial private landowners in Vermont has increased from an estimated 61,900 in 1983, to approximately 80,000 in 1993.[24]  This corresponds with a decrease in the average size of a parcel of land.[25] Data specific to forestland shows in 1983, 19,000 individuals owned forest parcels 1-9 acres in size. By 1993, there were 40,900 owners of 1-9 acre parcels – an indication of increasing parcelization and landscape fragmentation.[26] This reflects a national trend of more people owning smaller pieces of forestland, with the current average parcel size of 24 acres projected to decrease to 17 acres in 2010.[27]

 

In 1970, there were 165,063 housing units in Vermont.[28] In 2000, this number had increased to 294,382 units.[29] Between 2000 and 2005, years with high real estate appreciation rates, 17,673 building permits were issued in Vermont.[30]  While the number of building permits does not necessarily give an accurate picture of the degree to which parcelization has occurred on the land, it does highlight the level of housing growth that has occurred in Vermont. 

 

The Forest Service estimates that by the year 2030, housing densities on private forests in Vermont are projected to increase between 5 and 40 percent across the majority of the watersheds, with the highest projected development expected to occur along the Connecticut River.[31] This level of increased housing across the majority of the watersheds will contribute to a moderate to high level of parcelization of privately owned forestland.[32]

 

 

Cultural and Demographic Shifts

 

The aging population of forestland owners also leads to parcelization.  According to a recent report, 25 percent of all privately owned forestland in the United States is owned by people who are 65 or older.[33]  While estate planning can provide ways to keep forestland intact among successive generations of forest owners, the will of a deceased landowner often divides the ownership of land into smaller parcels for purposes of bequeathing the land to multiple children.  This leads to the parcelization of forestland unless the landowner has provided a way to keep the land intact.   

 

Another driver of forest parcelization is urban dwellers’ desire to either relocate or purchase second homes in rural settings where land is relatively cheap compared to urban real estate markets. This trend, labeled ‘exurbanization’, is defined as the migration of urban residents to rural environments.[34]  Rather than buying rural land for traditional uses such as timber and agriculture, private residences are typically built a long distance from towns and services in order to maximize privacy and views. The demand for high-end homes in Vermont is contributing to the increasing parcelization of forestland, especially in resort areas.

 

 

VERMONT  VALUES  AFFECTED  BY PARCELIZATION  AND

FOREST FRAGMENTATION

 

Participants in the Forest Roundtable were asked to identify Vermont forest values and attribute a score for their importance and vulnerability.  A diverse group of participants identified the environmental, social, and economic values of greatest importance to them, and the values most threatened by parcelization and forest fragmentation.

 

The group was most interested in maintaining forest ecosystem function, forest-related jobs, flow of forest-based materials (wood and clean water), habitat connectivity, and values held by individuals (sense of place, sense of stewardship, and valuing outdoor activities).  All of these values were considered to be highly vulnerable to the impacts of parcelization and forest fragmentation.  The recommendations in the following section were developed as a way to maintain this set of environmental, social, and economic values.  Results of this exercise are presented in Appendix A.

 

ROUNDTABLE RECOMMENDATIONS

 

The Forest Roundtable held seven meetings to discuss the causes of parcelization and forest fragmentation in the state, and to develop draft recommendations to curtail the rate and mitigate the effects of parcelization and forest fragmentation. 

 

Roundtable meetings addressed multiple topics, including trends in the real estate market, forestland valuation, property tax policy, land use and conservation planning, estate planning, landowner incentive programs such as the Current-Use Program, and the long-term sustainability of the forest products industry. These topics are condensed into the following four major focus areas of recommendations for addressing parcelization and forest fragmentation. 

 

RECOMMENDATIONS REGARDING TAX POLICY

 

The following recommendations focus on tax policies that influence the way forestland is managed and conserved in Vermont.

 

1.   The Forest Roundtable strongly endorses Vermont’s Use Value Appraisal Program (UVA) including continued funding.

 

      Vermont’s UVA Program, commonly referred to as Current Use, is a vitally important program for keeping land in an undeveloped condition. As long as land is enrolled in the program, it is maintained for productive agriculture and forestry uses and is taxed at the value of these uses rather than “highest and best use”, which usually equates to housing or commercial development. The UVA Program has been a very successful tool for reducing the effects of parcelization and forest fragmentation and should continue to be fully funded and supported by the Legislature.

 

2.   Educate municipal officials regarding the lack of impact of the UVA Program on municipal tax rates.

 

Towns are reimbursed for lost property tax revenue at the municipal level from land that is enrolled in the UVA Program. Since Act 60 and Act 68 were established, towns are reimbursed by the state for any municipal property tax revenue that would have been realized if enrolled parcels were taxed at highest and best use. These reimbursements are usually referred to as Current Use Hold Harmless Payments.  As long as these payments continue to be mandated by state law, local tax rates are not directly affected by enrollment in the UVA Program.

 

3.   Provide the UVA Program with adequate resources to administer the program. The Agency of Natural Resources, The Department of Taxes, and the Legislature should study ways to improve the overall efficiency and administration of the Program.

 

      County foresters are overburdened with the responsibility of monitoring parcels of land enrolled in the UVA Program.  Some members of the Roundtable feel that additional county foresters and staff at Property Valuation and Review are needed to help with monitoring, enforcement, and landowner technical assistance; and that options for funding new staff should be explored.  Other members believe that this may not be feasible, and that improvements to the overall efficiency and administration of the Program should be explored instead. For example, options for improving administrative efficiency include removing the statutory requirement to inspect each parcel every 5 years, and improving and/or lengthening landowner reporting requirements.

 

4.   Conduct an independent legislative study of the UVA Program which examines the statutory goals of the program and assesses the program’s effectiveness with respect to the original goals. For example, is the goal of conserving natural ecological systems adequately addressed?  This study should also assess ways to expand landowner enrollment in the program, and assess the effectiveness of the land use change tax.

 

      According to 32 V.S.A.§ 3751, the purpose of the UVA Program is to maintain and conserve Vermont’s productive agricultural and forest land; protect Vermont’s natural ecological systems; prevent the accelerated conversion of these lands to more intensive use by the pressure of property taxation; achieve more equitable taxation for undeveloped lands; preserve and enhance Vermont’s scenic natural resources; and enable the citizens of Vermont to plan for orderly growth in the face of increasing development pressures.  The Legislature should examine whether the Program is effectively meeting all of the established goals. 

 

      In addition, the Legislature should assess ways to expand landowner enrollment as a way to decrease parcelization and forest fragmentation.  Some Roundtable members believe implementing a tiered approach like the New Hampshire Current Use Program, which has different use value categories such as wildlife habitat and open space, could improve overall enrollment in the Program.  Other Roundtable members believe this would detract from the focus of use value appraisal on the contribution of working forests to Vermont’s economy.

     

      Due to increasing rates of development of land that is withdrawn from the Program, the Legislature should also analyze the effectiveness of the land use change tax, which is the penalty landowners pay for developing their property after enrolling in the Program.

 

      Finally, the Legislature should study the effectiveness of the program for conserving natural ecological systems and non-timber resources, and make improvements if necessary.  Some members of the Roundtable believe that certain ecological systems, such as riparian and wetland buffers and rare or significant forest communities, should be allowed to be enrolled in the program without being subject to timber harvesting.  Other Roundtable participants believe the program is already adequately providing for the conservation of natural ecological systems. 

 

5.   Assess property with perpetual conservation easements at a lower value.

 

      Landowners who place conservation easements on their property typically give up development rights on the property forever. Conservation easements, however, may not reduce the value at which property is assessed in Vermont. There is little guidance in the state for appraisers in assessing the value of land with conservation easements, which leads to inconsistency in practice among towns.  Because land with perpetual conservation easements can never be developed, Roundtable participants believe land with such easements should be assessed at a value that accounts for the loss of development rights.  Such a policy would make easements more attractive to landowners, thus increasing the potential to mitigate the effects of parcelization and forest fragmentation.

 

      Some Roundtable members believe land with conservation easements should be assessed at a rate comparable to use value appraisal in the Current Use Program.  Other members believe such a rate would reduce the incentive for landowners to enroll in the UVA Program and actively manage their land.  In addition, some members believe it would not be fair to assess easements at use-value, which is derived from the productive capacity of the land for timber or agricultural products. 

 

6.   Disburse property transfer tax revenue according to the formula set in statute.

 

      Revenue that is collected from the property transfer tax on the sale of real estate in Vermont is supposed to be disbursed according to a formula established in state statute. The disbursement formula is: 1% to the Tax Department; 33% to the General Fund; 50% to the Housing and Conservation Trust Fund; and 17% to the Municipal and Regional Planning Fund.  The goal of the Housing and Conservation Trust Fund is to create affordable housing and preserve the state’s agricultural land, historic properties, important natural areas and recreational lands. The goal of the Municipal and Regional Planning Fund is to fund the Regional Planning Commissions, municipal planning grants, and the Vermont Center for Geographic Information.

 

In recent years, the disbursement of property transfer tax revenue has been skewed in favor of the General Fund.  In Fiscal Year 2005, the General Fund received approximately double the amount it was supposed to according to the statutory formula, while the other categories received approximately one-half of statutorily approved funding.[35]  The Legislature should disburse the property transfer tax revenue according to the statutory formula.  This would significantly strengthen the ability of the Housing and Conservation Trust Fund to conserve forestland.  It would also strengthen the ability of the Regional Planning Commissions to mitigate the effects of parcelization and forest fragmentation.