Land Acquisition Funds in Jeopardy
posted 4/11/03

Below you will find:

General Introduction to Land Acquisition Funds Issue

Since 1986, the proceeds from a dedicated Wetlands and State Parks Land Acquisitions Fund have made it possible to bring many millions of matching dollars to Tennessee and put them to use in conserving critical natural areas. The creation of the funding source through a real estate transfer tax was a hard fought battle at the time but has proved to be a far sighted and valuable decision for the state of Tennessee. Since its inception the fund has empowered acquisition of nearly 190,000 acres of wetlands and state park areas.

This land acquisition fund has successfully leveraged state funds to gain matching money from federal, local and private money sources at an average 4:1 ratio every year. As a result, many thousands of acres of wetlands and state park lands have been protected that would otherwise have been lost forever. For example, $238,000 in state funds gave us protection for 9000 acres from Bridgestone Firestone Wildlife Management Area (WMA) valued at $8 million. Other successful examples include 74,000 acres for the International Paper WMA, and 11, 000 acres for the John Tully WMA. These protected natural areas give hope to the collective desire to save threatened wildlife, protect water quality, allow tourism and recreation economies to flourish, and provide much needed solace for the human spirit.

Unfortunately, the current state budget cuts threaten this fund.  The proposed budget goes beyond cutting the funding for the current year. The budget proposal would have all those dollars directed to the general fund, where they would be up for grabs.  Many accounts are being cut by some 9 percent, but no others are being rerouted to the general fund permanently.

The Tennessee Environmental Council and others are working to correct this budget miscalculation. Clearly this dedicated fund brings the state positive revenue returns many times over and leaves a legacy that must not be thrown away. The state legislature is being called upon to maintain the dedicated land acquisitions fund in the state budget. The primary decisions on the budget will be made by the Tennessee House and Senate Finance Committees.  You are urged to make your opinions known by contacting your senators and representatives and letting them know you oppose eliminating the wetland/land conservation accounts.  A 9 percent cut is fair, but the account should not be eliminated.  Below are some specific targets.

SENATE FINANCE COMMITTEE MEMBERS
Senator Henry (Nashville)
Senators Crutchfield (Chattanooga)
Senator Fowler (Chattanooga)
Senator Atchley (Knoxville)
Senator Burchett (Knoxville)
Senator Ford (Memphis)
Senator Kyle (Memphis)

HOUSE FINANCE COMMITTEE MEMBERS
Representative Tindell, (Knoxville)
Representative Armstrong (Knoxville)
Representative Overby (Knoxville)
Representative Rep. Tommie Brown  (Chattanooga)
Representative Chumney (Memphis)
Representative Kent (Memphis)
Representative Miller (Memphis)
Representative Sargent (Franklin/Nashville)

"Real Estate Transfer Tax: An Overview" by Marty Marina
(a white paper outlining the history and benefits of the fund)

 In 1986 the time was right for creating a mechanism for conserving Tennessee’s wetlands with a dedicated tax to fund the program. The idea came from two different study committees -- one spawned by the legislature and the other emanating from Governor Lamar Alexander’s administration. The legislature was intent on forestalling regulation of wetlands, while the Governor’s task force on Tennessean’s for the Outdoors set a broader agenda for conserving Tennessee’s natural resources for the enjoyment of future generations.

  Despite overlapping recommendations from these two committees and broad public support, Public Chapter 833 (Tennessee Code Title 11, Chapter 14) was not easy to pass. The initial legislation added $.04 to the Real Estate Transfer Tax, directed it to establishing the Wetlands Acquisition Fund, defined requirements for the land to be purchased, mandated purchases be made from willing sellers, and required cooperation between the Department of Agriculture and the Tennessee Wildlife Resources Agency for planning, decision-making and rule-making. Its passage was and still is considered one of the most important bills for conservation in Tennessee’s history. Among the others are those establishing the Tennessee Wildlife Resources Agency and the Tennessee Clean Water Act.

In 1991, the legislation was amended to dedicate $.08 of the Real Estate Transfer Tax to provide three more funds in addition to the Wetlands Funds. In the process, the Director of the Wildlife Agency agreed to lower the Agency’s portion to $.0325 so an Agricultural Fund could be established. The Funds and their portion of the tax are: Wetland’s Fund $.0325, Local Park Land Acquisition Fund $.0175, State Parks Land Fund $.0150, and Agricultural Non-Point Water Pollution Control Fund $.0150. These designated amounts have not changed, although the amount of money has grown because of increasing real estate values and an increase in transactions stimulated by lower interest rates. The legislature has on rare occasion authorized redirecting money from these accounts for a single year; however, it was not always taken, and the authorizing legislation was never permanently altered to do so.

The first $300,000 from the Wetlands Fund was set aside in a separate account for paying county governments in lieu of taxes to make up for lost property tax revenue. Acquisitions by the State Parks Land Fund were later included in this provision. Legislation was subsequently amended to allow for paying taxes directly from these Funds. Likewise, an amendment to pay restoration costs on land acquired by the Wetlands Fund from the interest on the Fund was subsequently amended to allow the money to be paid directly from the Fund. Since 1987, the Wetlands Fund has been amended to allow for the purchase of four large areas of high biological significance located in ecologically important watersheds, yet the focus remains on wetlands. The Agricultural Fund was amended to allow for the funding of best management practices (BMPs) to address both point and non-point source water pollution problems. In 2000, the State Parks Acquisition Fund was amended to allow for the purchase of Civil War Battlefields threatened by development. Doing so helped provide a much needed match for Federal and private dollars.

  A review of the history and administration of these Funds reveals that while they have always met their legislative mandates, their operation has evolved over time as better scientific data has become available and in an effort to capitalize on Federal programs. Each Fund has clearly established goals and a defined method for evaluating and recommending projects to Agency oversight committees, boards, or commissions for review before submission. Competition is fierce, only a few of the projects submitted can be funded and the ultimate selection is made by Fund Committees whose members include technical experts and citizen leaders.

Fund managers and their partners have cooperated to get the most creative use of every dollar in order to meet the many challenges facing Tennessee (see list). Projects have to meet more than one of the highest priorities to be selected and partners know their project must consider creative ways of minimizing on-going operating costs, consequently many local groups are providing volunteer hours and in-kind services for operations.

Since their inceptions the Wetlands and State Parks Acquisition Funds have invested $97,404,146 to acquire 236,468 acres for the state. The Agricultural Resources Fund and the Local Parks Land Acquisition Fund have invested more than $54,473,000 in nearly 15,000 projects that affected all 95 Tennessee counties. Local government, non-governmental organizations (NGOs) and individuals have helped leverage state funds with gifts of cash, land, or easements. Ratios range from a high of 1 (Wetlands Fund) to 1.75 (public and private dollars) to a low of 3 (Agricultural Fund) to 1 (public and private dollars). The latter is a smaller match because of a legally mandated Federal match requirement. In many cases there would be no match for federal conservation dollars available to our state without the Real Estate Transfer tax and in all cases it provides the state with increased flexibility.

  In the last five years, increasing national attention has been placed on Tennessee because of the threats to our rich biological and cultural heritage. With the help of its partners, Tennessee has been able to utilize the Real Estate Transfer tax to capitalize on more than two dozen Federal matching programs, matching funds from more than 14 private organizations and more than 60 towns and counties. Understanding how the Real Estate Transfer Tax works takes time because it is used in so many ways, yet this flexible approach, balanced by competition and public scrutiny has allowed the state to realize an uncommon gain for its investment. Each year the competition for funds increases as does the ratio of matching funds, any changes will impact this momentum.

Graph: Recent Uses of Wetlands Acquisition Funds
* WMA is "Wildlife Management Area"
"Budget Should Not Be Balanced On the Back of Dedicated Environment and Conservation Funds"  (an opinion piece by Will Callaway, Executive Director, TEC)

There is no doubt that Governor Bredesen faces a monumental task in getting Tennessee’s fiscal house back in order.  The budgetary mess left behind by the previous administration demonstrates what many have been saying for years: this is no way to run a government.

The governor’s efforts to halt the budgetary red ink are commendable and statutorily required.  However, no member of the “Tennessee family,” as Bredesen phrased in delivering his budget, should be abandoned entirely.  While most elements of state government will be impacted by the roughly nine percent cuts, some would be eliminated, entirely.

Through statutory changes requested in the governor’s budget, the following dedicated funds may be eradicated, channeling all revenues to the general fund:

                        Wetland Acquisition Fund 
                        Local Parks and Recreation Fund
                        State Land Acquisition Fund
                        Agricultural Resource Conservation Fund

Through a portion of the real estate transfer fee the legislature created a dedicated revenue stream to address environmental and conservation goals in the state.  Land acquisition for parks, wetland protection, agricultural conservation and many other valuable policy objectives are met through use of these dedicated funds.  Taxes are levied with the intent and assurance that the revenues will be used for specified purposes.

Since their inceptions the Wetlands and State Parks Acquisition Funds have invested $97,404,146 to acquire 236,468 acres for the state. The Agricultural Resources Fund and the Local Parks Land Acquisition Fund have invested more than $54,473,000 in nearly 15,000 projects that affected all 95 Tennessee counties.  

Instead of taking a percentage of the funds, as is the case in most other areas of government, the governor’s legislative effort (introduced as SB 1991 and HB 2073) aims to transfer 100 percent of the revenues to the state’s general fund and changes the statute to make the diversion of funds permanent. 

This is no way to run a government, either.

Making statutory changes through the budget process is almost always bad business.  These dedicated accounts must remain intact. 

Members of the environmental community are not asking that the funds be exempt from sharing the burden, but do not eliminate them in a shortsighted rush to find every penny available. 

The legislature should maintain the Tennessee code, as written, for all these funds.  A one-year diversion of nine percent of each fund is appropriate given current budget conditions.  This diversion should not be permanent.  Like all other budgetary items, the use of the dedicated funds should be revisited next year.  After all, we hired the governor and the legislature to do their job every year. 

Budget problems should not be an excuse to raid long-standing, dedicated funds that serve so many constituents.  We’ll all share the burden, but let’s do it in a fair manner.

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