This paper explains the public benefits of open space and the important role of private property owners in protecting open spaces. Virtually every level of government recognizes the public benefits of open space, which they support through stated policies. These policies guide the actions of agencies and the implementation of regulations. In order to encourage the private protection of open space, the federal, state, and local governments provide various incentives to land owners. These incentives include assistance from government agencies through expertise and they include financial assistance in the form of direct and indirect payments. Tax incentives are one form of indirect payment. Individuals who protect open space through the voluntary donation of conservation easements are eligible for certain tax breaks.

The Case for Local Open Space
The saying that "cows don't get on school buses" has been used for many years to help illustrate the beneficial contribution of open space to sustaining a responsible fiscal policy while accommodating new development and an increasing population. This is because building and operating schools consumes anywhere from two-thirds to three-quarters of a county's annual budget. Property taxes on average residential real estate do not cover the government expenditures required by the people who live there. The difference is made up by other kinds of local taxes and by payments made to the county by the state and federal governments, all of which come from other taxes you also pay! Additional funding may also come as proffer payments negotiated with the county by developers who pass them along to individual homeowners.

Unfortunately, cows don't buy cars and houses, so there is the perception by some in the business community that open space is bad for their bottom line. Cows do, however, help support an important agriculture industry that is happy to have the business.

A county can be viewed as a business, and from a fiscal management standpoint alone open space is one of the best net income producers the county has. That is because open space generates taxes but requires little in the way of public services. However, we do not have to conduct an internal audit to tell us the importance of open space. Orange County’s 1999 Comprehensive Plan, the keystone to our business plan, speaks to the importance of protecting and preserving open space. The plan identifies the critical role of open
space in protecting agriculture, forestry, all components of the natural environment, historic
assets, and not least of all the rural character of the county .Specific goals and means of
implementation are recommended throughout the plan for protecting open space and the uses it supports.

Planning for Open Space
Every comprehensive plan contains a future land use map. Orange County's 1999
Comprehensive Plan contains a generalized Future Land Use Map that broadly illustrates the locations for a variety of land uses that are articulated in the plan. The map of the Germanna Highway Corridor provides an example of a location where the County has conducted more detailed land use planning, so the resulting map is more specific about the locations for desired development.

A quick glance at the countywide Future Land Use Map reveals that, except for discrete areas around the towns and villages and in selected areas near Lake of the Woods, the vast majority of Orange County, perhaps 90 percent, is planned for either Rural Agriculture or Rural Conservation uses. The difference between the two Rural areas is that appropriate development may be encouraged in the Agriculture area but development is to be discouraged in the Conservation areas.

The regulatory means for implementing the Comprehensive Plan are the Zoning Ordinance and the Subdivision Ordinance. The Orange County Comprehensive Plan does a good job in establishing and identifying future land uses. Unfortunately, the supporting Zoning and
Subdivision Ordinances currently are not structured to implement the recommendations of the plan in the Rural areas. At a time when external development pressures are intense and ever increasing, a Zoning Ordinance that permits houses to be built in either Rural area at a density of one dwelling per two acres and a Subdivision Ordinance that permits the by-right division of one parcel into four parcels every four years cannot possibly implement the County's adopted goals and policies for open space protection.

There are only two methods for protecting the rural characteristics of Orange County that are so treasured by its citizens and that are extolled in the Comprehensive Plan. Both of those methods require the will of the citizens. One method is for the citizens to request that the Board of Supervisors change the Zoning and Subdivision Ordinances so that the County regulations better implement their vision for the county. The other method is for citizen landowners, on their own initiative, to voluntarily protect their property from inappropriate development.

Private Initiatives to Protect Open Space
There are many ways for landowners to protect the rural, open space qualities of their property. The easiest way is simply not to do anything on the property that would endanger those qualities. In fact, this is exactly what has kept most of Orange County rural.

There is a host of state and federal government programs that provide assistance to land owners in helping them manage their rural properties. The most common programs are associated with agricultural activities, but there are other programs that help landowners protect soils, streams, forests, wildlife habitat, and lots else.

The one serious limitation to the methods discussed above is that they only work while the
current landowner chooses to participate. If the land changes hands, then the new owner may choose to manage the land in ways that do not maintain its rural character. Once the land is converted from rural to more intensive uses, experience tells us that land will never again be rural in character.

While it is possible to permanently change rural lands into suburban or even urban-type uses, it also is possible to permanently protect rural lands from being converted into incompatible and inappropriate higher intensity uses. Private land owners can voluntarily restrict certain types of development from ever occurring on their property , even after they no longer own it. The legal instrument used by landowners to permanently protect their property is a form of deed restriction called a conservation easement.

Conservation Easements
A conservation easement is a voluntary legal agreement in the form of a deed in which a
landowner specifies restrictions on certain types of future uses. These legal agreements also may be called open space easements or scenic easements. A separate party, sometimes a public agency and sometimes a private agency, like a land trust, agrees to be the steward of the easement. They monitor the property to ensure that all future landowners abide by the terms of the easement. The easement steward also has the right to legally enforce the terms of the easement. These two provisions, monitoring and enforcement, are what principally differentiate conservation easements from simple restrictions written into a deed. Another, very important aspect of a conservation easement is that its terms may be permanently attached to the property. In legal terminology, such a conservation easement is said to be "in perpetuity".

Virginia, through the Open-Space Land Act, 1966 and the Conservation Easement Act, 1988, permits public bodies and charitable organizations to hold conservation easements. In 1966, the state created its own public land trust, the Virginia Outdoors Foundation (VOF), to hold conservation easements.6 The VOF currently holds over 16,000 easements on more than 280,000 acres of land throughout the state! Private land trusts, federal agencies, local governments, and other state agencies such as the Soil and Water Conservation Districts also hold additional conservation easements on private land around Virginia.

Not every property is eligible for a conservation easement. It is equally true that conservation easements are not appropriate for every property. Organizations that hold easements, whether public or private, have criteria and guidelines for qualifications of the land and for the terms of their easements. Under the Open-Space Land Act regulations, section 10.1-1700, Virginia has defined "open-space land" as lands that are preserved for the following:

• park or recreational uses
• conservation of land or other natural resources
• historic or scenic purposes
• assisting in the shaping of the character, direction, and timing of community development
• wetlands

In addition, the Act requires that the remaining land uses resulting from conservation easements held by public bodies conform with the local comprehensive plan. In other words, conservation easements are most appropriate for properties located in areas that are designated in the comprehensive plan for the types of land uses that the easement permits. Another way of looking at it is that the protection of conservation values, whether by easements or some other mechanism, is supported by the comprehensive plan.

Government Incentives to Protect Open Spaces
As financial incentives to private landowners who willingly provide a public benefit by protecting the conservation values of their land, federal, state, and local governments provide various tax incentives and direct payments through special programs. Tax incentives include reductions in federal and state income and estate taxes and in local real estate taxes.
Numerous programs are sponsored by federal and state government agencies to promote
agriculture and forestry, to protect environmentally sensitive lands, and to preserve historic
resources. Some local governments have adopted purchase of development rights (PDR)
programs to help accomplish similar goals.

The Internal Revenue Service (IRS) provides income and estate tax benefits to people who
voluntarily donate qualifying conservation easements to appropriate public or private agencies. Because a conservation easement restricts and limits specific future uses of property, the potential value of that property is reduced. Simply stated, a property with a by-right development density of one house per two acres that is limited by a conservation easement to one house per 100 acres has a lower potential value today under easement than it would have if it were unencumbered. That difference in potential value is what the IRS uses to calculate the tax incentives available to private landowners. However, the value of the land follows the market over time. The trend has been for land values to increase.

The federal income tax incentive is provided in the form of a deduction that reduces taxable
income. The value of an easement also is subtracted from the donor's estate. An easement also may provide additional reductions in the calculated value of an estate further lowering the taxes paid by the heirs.

The value of the income and estate tax incentives derived from an easement on a particular property depend entirely on the characteristics of the property, the zoning currently in effect, the existing market for similar land, and the precise terms of the easement (i.e. how restrictive the terms are). The value of the incentives to the landowner is dependent not only on the value of the easement but also on the tax bracket of the individual.

Virginia provides both a state income tax deduction and an income tax credit. The deduction occurs because Virginia bases its income tax on the federal adjusted gross income. In addition, Virginia has its own program that provides a tax credit, which reduces the actual income tax paid to the state.

The Code of Virginia requires localities to recognize the reduced value of lands under
conservation easement. In localities that have adopted a land use taxation program, the Code allows eased lands to be recognized under the program as open space without having to meet any other requirements in order to qualify. Orange County has a land use valuation program in order to reduce the tax burden on lands being used for agricultural purposes. Many localities have a forest component to their land use tax programs. Orange County does not. However, under the provisions of the Code of Virginia, the entire area of eased properties in Orange County, including the forest cover, is eligible for land use.

Benefits of Conservation Easements
Conservation easements held by the VOF and other agencies are held in the public trust. Each easement must protect identifiable, quantifiable conservation values that, even though they are located on private property, benefit the public. Each deed of easement begins with a recitation of these values, and the terms of the easement are developed so as to protect those values. Because easements are permanent they provide a lasting public benefit by protecting open space, scenic beauty, air and water quality, wildlife habitat, and historic resources.

In Orange County , conservation easements are perfectly suited to implement the goals and
policies established in the Comprehensive Plan for the Rural Agricultural and Rural Conservation areas. There are properties located within the other land use categories established in the plan whose unique characteristics also are worthy of protection with conservation easements, but requests for easements on individual properties in those areas should be reviewed to ensure that the results would not conflict with the plan.

As previously noted, there currently exists a disconnect between the Orange County
Comprehensive Plan and the County's Zoning and Subdivision Ordinances. While the Plan
outlines the County's long-term vision, the ordinances control the way the County develops
today. The actual development potential resulting from the current Zoning and Subdivision
Ordinances is detrimental to the land use goals of the Comprehensive Plan. In addition to being plan busters, the amount and timing of the potential development resulting from the current ordinances cannot be sustained by the County in a fiscally responsible manner.

Easements help to implement the land use component of the Comprehensive Plan by limiting the development potential of properties to levels and types reflected in County policy, in particular the goals and objectives establishing the Rural Agricultural and Rural Conservation Areas. Easements help Orange County to develop in a fiscally responsible manner by helping to guide development into those areas where it can best be accommodated. Orange County has identified designated growth areas where it can provide for growth most efficiently and economically.

Even under the reduced taxes provided for through the County's land use assessment program, lands in the program provide a net tax benefit. Numerous studies have shown that, on the whole, land in residential uses require more in government services than they pay in taxes. The break point at which residential property pays for itself is well above the threshold that would define affordable housing. On the other hand, land permanently protected from over development will generally pay more in taxes than it will require in government services when compared against its maximum development potential.

In 2003, the American Farmland Trust (AFT) prepared the Cost of Community Services Study for Culpeper County. AFT has conducted numerous similar studies nationally. The Culpeper study uses fiscal year 2002 data. Analysis of the data revealed that for every $1 of revenue collected from residential properties, the county spent $1.22 providing services to those lands. On the other hand, for every $1 received from farm, forest, and open space lands the county spent only 32 cents providing services. Stated another way, 73 percent of the county revenue was generated by residential land uses while 89 percent of county expenditures went to provide services for residential land uses. Similar findings have resulted from many studies made across the country.

Increasing tax levels so that residential land uses pay for themselves would create burdensome, and unaffordable taxes for individual residential land owners. By the same token, building houses with assessed values that generate taxes that pay for the services required would price all but the upper class from a community. Neither alternative is acceptable. Assessing impact fees also raises the costs of housing. Unfortunately, impact fees do not offset the tax base deficit created by residential development because they do not recapture all costs and they are one-time only assessments. In addition, impact fees can only be assessed when a residential development requires a rezoning. It is ironic that development occurring in properly zoned, designated growth areas cannot be assessed impact fees to help offset the financial deficit they create. 

Protecting a certain amount of open space helps to ensure a community will have some net
positive tax base generators, and it guarantees that certain lands cannot and will not be converted to higher density residential uses, which are net tax negatives. It is a common sense rule that, all else being equal, a locality can never build enough housing to create a self-sustaining tax base. Commercial and industrial uses that further increase the need for housing do not make up the difference. Open space, then is an important contributor to a healthy tax base, and easements guarantee open space.

Another factor in the financial benefits of conservation easements to localities is their effect on the computation of the Local Composite Index (LCI). The LCI is used by the state to allocate aid to local school divisions. A higher LCI results in lower per pupil aid for education. The index formula is comprised of three elements: property values, adjusted gross income, and sales tax receipts. Property values are weighted 50 percent, AGI 40 percent, and sales taxes 10 percent. As property values increase in a locality , the effect on the LCI results in a lowering of state aid for education.

For the purposes of computing the LCI, full market value not land use values are used.
Therefore, a locality with both escalating land values and a large enrollment in its land use
program collects less in taxes and has a higher LCI that results in less state aid. On the other
hand, the computation of the LCI does factor in the reduced values attributed to properties under conservation easement. Therefore, properties under easement not only provide a net tax benefit to a locality, they lower the LCI, which results in higher aid payments to the locality for education.

Conclusion
Placing a conservation easement on your property is completely voluntary .For those with a keen interest in the preservation and stewardship of their property, easements provide peace of mind. Such a decision is the highest expression of private property rights.

Conservation easements permanently protect conservation values that have public benefits.
Broadly identified these values include open space, agricultural and forest lands, scenic lands and vistas, air and water quality , wildlife habitat, and historic resources.

Conservation easements are most appropriate on lands that are identified in the Comprehensive Plan as being suitable. The land uses resulting from the recordation of conservation easements help to further the goals of the plan. The Orange County Comprehensive Plan identifies two land use categories particularly suitable for conservation easements: Rural Agriculture and Rural Conservation. These two categories comprise the vast majority of the county.

Conservation easements benefit Orange County by helping to ensure the implementation of the Comprehensive Plan goals and objectives, by providing a net tax benefit, and by lowering the LCI, which increases state funding for education. The financial benefits of open space to a locality are icing on the cake, so to speak. Even so those benefits are not inconsequential.

Orange County comprises approximately 350 square miles, which is 224,000 acres. Currently in Orange County , there are about 18,500 acres under conservation easements that have been donated over the course of the past 25 years. This is equal to 8.25 percent of the county land area, a tiny portion of the entire county and a mere fraction of the area of the county identified in the Comprehensive Plan as Rural. The area under easement could quadruple and the effect on total land use in the county still would not fully implement the goals and objectives of the Comprehensive Plan.

While it can be seen that conservation easements have a potentially significant, positive role in shaping land uses that conform with the Comprehensive Plan and they help to ensure the fiscal stability of the County, it is unlikely that a significant percentage of County land owners will choose to donate conservation easements on their property .That is an unfortunate reality because if Orange County does not take steps to develop Zoning and Subdivision Ordinances that better implement the goals and objectives of the Comprehensive Plan calling for the protection of open spaces it either will have to find other means for protecting the Rural areas or the County will have to give up on the vision of its citizens for a livable, fiscally sustainable rural community .