Can Conservation Easements Give Young Colorado Farmers a Chance?

Dwarfed by five stainless steel grain-storage bins outside the Root Shoot malt house in Loveland, Emily Olander gestures toward the horizon. A two-story cookie-cutter house with a white fence peeks out from the rolling green land. “See that?” 38-year-old Emily asks. “That’s what we don’t want.”

The Olanders, who farm nearly 2,200 acres in northern Colorado and run a malt business that regularly supplies 150 breweries in the state, have nothing against the homeowners, of course. It’s the big-picture development they’re wary of—an encroaching sprawl that’s gobbling up farmland along Colorado’s I-25 corridor faster than older farmers can devise ways to affordably retire without selling their fields to the developers behind the ubiquitous mixed-use retail and residential enclaves.

According to land conservation nonprofit Colorado Open Lands (COL), the Centennial State lost 7.4 million acres of farmland between 1950 and 2010. A northbound drive from Denver along the interstate reveals one reason why: Pocket after pocket of tract-housing subdivisions have been plunked in the middle of open space and ag land. Perhaps it’s necessary to accommodate Colorado’s population boom. Our state’s population has swelled by nearly 4.5 million people since 1950, with about two million more projected to arrive in the next 30 years. That development, though, comes at the expense of a way of life that currently pours $40 billion a year into the state economy and forms a storied part of Colorado’s heritage.

Emily’s husband, Todd, is the latest in a long line of Olanders who have been farming in the area since the 1800s. Now 39, he grew up on the family’s Longmont farm, and, after graduating from Colorado State University, he became an official partner in the business in 2006. A decade later, the Olanders transitioned farm operations from commodity-driven custom dairy harvesting—i.e., growing corn to feed cattle—and cultivating barley for a little outfit by the name of Molson Coors to a direct-to-purchaser concept: Root Shoot Malting.

Of the acres they farm for barley, rye, wheat, oats, and corn (for distillers), the Olanders can afford to own only 140; they lease the remaining 2,060 acres, 45 percent of which are owned by a development company. Translation: Those acres could disappear on any owner’s or developer’s whim. “It just happened, actually,” Emily says, “at one of the farms [we lease from] down the road. We have barley planted there. Todd got a phone call that the owner sold to a developer. Three hundred houses will go up on 60 acres. They break ground [next month].”

It’s a threat that 34-year-old Aaron Rice, owner of Jodar Farms outside of Wellington, is all too familiar with. Jodar Farms, which raises pigs and chickens for meat and eggs to sell at local farmers’ markets, to restaurants, and in grocery stores, is a family operation Rice had been running on about 30 acres of his parents’ land. Several years ago, Rice realized his business was outgrowing the property and began looking to purchase more land.

As a small-scale producer, however, Rice couldn’t compete with developers willing to pay exorbitant premiums for land. “For anyone who wants to enter the field, if you come straight from town and your parents have no ground, it’s damn near impossible to get yourself a piece of property at a rate a young farmer is willing to pay,” Rice says. But, he adds, traditional leasing arrangements are risky for a farmer as well: “What happens when you invest a significant amount of money, say $20,000, to compost the leased ground, and then the landowner pulls it out from under you?”

Farmers like the Olanders and the Rices are at the forefront of a generational shift in agriculture; there are five times as many American farmers over the age of 75 as under the age of 25. By U.S. Department of Agriculture estimates, 70 percent of U.S. farmland will change hands over the next two decades. That transition will be riddled with obstacles for aspiring farmers with no property and moral conundrums for land-rich, cash-poor farmers approaching the ends of their careers.

“So many farmers are hitting retirement age, and they don’t have 401(k)s, and the land is so valuable,” says Clinton Wilson, executive director of Poudre Valley Community Farms (PVCF), a land cooperative that acquires farmland through a combination of member investment, community partnerships, and creative financing, then leases the land long-term to local farmers. “The ethical dilemma is that the best thing to do is sell it for $2 million and retire—but while they’d love to pass it on to the next generation, the next generation doesn’t have $2 million,” Wilson says. “They might have $500,000. And that would only last a couple of years into [the seller’s] retirement.” Hence, the vultures-circling behavior of developers—and, often, municipalities interested in coveted water rights—who have no trouble outbidding cash-strapped farmers.

PVCF is forging one path to solve the problem by providing affordable, accessible land to the next generation. “Our focus is small-scale, CSA-size producers,” Wilson says. “We want to purchase local farmland with water so farmers can stay in the community and local producers can produce right here.” The model enabled Rice to move Jodar Farms off his parents’ land and onto 74 acres of PVCF land known as Dixon Station, where he’s now three years into a 15-year lease. The co-op’s goals, though, are only one part of a patchwork of efforts to make sure young farmers have a fair shot at working the fields—and at keeping the land free of condos for farming generations to come.

Enter Colorado Open Lands, a nonprofit organization that’s adding another element to that variegated push. COL works with landowners to permanently protect their lands through legal agreements called conservation easements. In these voluntary accords, landowners relinquish development rights to a land trust—in this case, COL—which shields the acreage from any future development interests. Put another way, the easement ensures the land’s value, be it derived from recreation, wildlife habitat, water, agriculture, state heritage, or a combination thereof, remains protected no matter who owns the land in the future.

Each easement COL manages is tailored to the current landowner’s needs and generally includes restrictions on the volume and types of infrastructure that can be placed on the property. COL builds flexibility into its deed terms for the potentially shifting nature of agriculture in the future. While the property can change hands, each new owner must adhere to the terms of the easement. Once a landowner puts an easement in place on farmland, it cannot be sold for development; it must remain agricultural land. So how does this type of conservation provide relief for the impending generational shift? As one might imagine, it’s a complicated solution to a complex problem—one that involves development values, tax credits, and some rather convoluted math.

The notion of preserving land sounds on-brand for Coloradans, but the state’s recent history with conservation easements is complicated. Colorado began issuing tax credits in 1999 to landowners who placed their properties under conservation easements; credits were typically worth up to 50 percent of the easement value, which was and still is determined by a private appraiser. But the system had a flaw: inflated appraisals.

From the early 2000s through 2013, when there was a change in program oversight, hundreds of Centennial State landowners were denied the tax credits they were promised due to bloated appraisals. Bankruptcies, foreclosures, and personal upheaval ensued for some farmers who had been depending on the system to deliver the guaranteed financial incentives. In the state’s most recent legislative session, a reparations bill, which set aside $149 million to pay back certain landowners for the denied credits, failed to pass, leaving the disputes unresolved and some landowners hesitant about the idea of conserving their lands, even though new rules, better oversight, and, as of June, an increased 90 percent cap on tax credits are now in place. “Conservation easements still have a black eye because of this,” says COL conservation project manager Carmen Farmer.

Nevertheless, conservation easements have arguably saved the I-25 corridor from Fort Collins to Colorado Springs from being one long stretch of mini-malls and developments. “We look at state demographics projections all the time with horror, but all these people need to live somewhere,” says COL communications director Leslie Volkar. “We look at it like this: While we have this chance, let’s save what’s most special.” That means thinking strategically about where and how the population is swelling and prioritizing protection for the places where food is grown and wildlife thrives.

In one of its latest efforts, COL—which has helped protect more than 581,000 acres of Colorado land over its 40-year history—worked with PVCF to shepherd an easement this past March on the Dixon Station parcel. In many ways, it was an altruistic move on the part of PVCF, which gave up its development rights—plus paid a transactional fee, which can run anywhere from $70,000 to $100,000—to the COL trust. Now the property is eternalized as farmland that will produce food in perpetuity—beginning with Jodar Farms—and play a part in PVCF’s larger efforts to preserve affordable ag land for generations to come. But, just like many traditional landowners, PVCF doesn’t have a bank account big enough to be completely philanthropic. Beyond the tax credit, placing farmland under a conservation easement can earn owners, like PVCF, financial support from outside sources, like Great Outdoors Colorado (the state trust fund that redirects lottery money to preserving Colorado’s outdoor resources) or voter-approved tax initiatives geared toward the environment.

Ultimately, though, easements are a monetary sacrifice on the part of most landowners, who will never be able to sell the land for its full worth (see “Easement Arithmetic,” page 58). While it may make sense for some—say, a land co-op model like PVCF with a long-term plan for future preservation—it’s not an easy ask of lifelong farmers considering the next phase of their lives, which frequently involves padding their savings by unburdening themselves of their land. Still, getting landowners on board with conservation is what the Olanders are hoping for when it comes to the land they’re leasing.

One could call the Olanders ambassadors of the budding movement. “Our hope is that we can bring awareness to the idea of conservation,” Emily says, “and give landowners and farming families another option to save their family history as opposed to selling the farm.” Put another way, an easement could provide an infusion of cash if landowners want to step back from farming and lease their lands to others, or it could function as an estate-planning tool to cover taxes if retiring farmers want to transfer land to their heirs. Currently, the Olanders and COL are working through the terms of a conservation easement for 112 of the 140 acres Root Shoot owns. That leaves about 1,200 acres of nondeveloper-owned land the Olanders lease and farm, which they say is ripe for conservation.

If the Olanders and Rices are representative, young farmers are feeling cautiously optimistic about conservation efforts—and how they might help American farmers make the generational shift. Indeed, Farmer says COL has seen an uptick in interest from landowners who are encouraged by the local shift from commodity-based to direct-to-purchaser trends. These more conscientious consumer attitudes, she hopes, will highlight the need for accessible and affordable land and water for small-scale producers: “We wouldn’t do this work if we thought we were swimming upstream,” she says.

In the meantime, the Olanders ponder the future as they work to the hum of the machinery that churns barley and rye into the craft malt upon which so many local breweries depend. Twenty years down the road, and beyond, this land will still be ag land, assuming they complete the easement. They, of course, plan to be the ones working the fields, as so many Olanders have before them. Although they dream of implementing next-level ideas at Root Shoot, for now they are content knowing that no matter what Colorado’s farm prospects look like in 100 years, their land, at least, will continue to feed us in perpetuity.

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Easement Arithmetic

The complex math behind a conservation easement.

Although it’s a small plot of land compared with the average farm, PVCF’s Dixon Station received an appraised development value of $620,000. That $620,000 is the easement’s initial worth—a dollar value that PVCF likely cannot recoup if it ever decides to sell the conserved land. Due to an open space preservation tax program, however, Larimer County paid PVCF $150,000. Then, thanks to a bill passed this past spring, the co-op qualified for a tax credit of 90 percent on the remaining $470,000, or about $423,000. If the application for the credit is approved, the “donated” value—a dollar number PVCF theoretically gave up to conserve the land—will shrink to $47,000. Most of the time, small-scale farmers in Colorado choose to sell the tax credits privately or via a brokerage at a discount (about $0.85 on the dollar) to other local taxpayers with higher liabilities, then invest the cash into more land or property improvements. In the here and now, the process typically yields a net cash gain, which can help aging farmers both keep their lands (for future generations or to lease to other farmers for some steady income in retirement) and retire with a little more green in the bank.