Year of Publication
2006
College
Martin School of Public Policy and Administration
Date Available
9-10-2014
Degree Name
Master of Public Administration
Executive Summary
In January of 2000, the Lexington-Fayette Urban County Government established a purchase of development rights (PDR) program as part of the comprehensive Rural Service Area Land Management Plan. The goal of the program is to purchase conservation easements on 50,000 acres of farmland and natural areas within the county by the year 2020. By purchasing the development rights of these lands, the program intends to preserve the agricultural and natural character of the county that development pressures otherwise threaten.
Typically, PDR programs calculate the value of a conservation easement by subtracting the current value of the property with the easement in force from the current value of the land if it were to be developed. While there are rules to appraising consistency remains an issue. As well, traditional techniques may not capture values on which public land programs place an emphasis. Some researchers and policy makers suggest using a point or attribute-based system reflecting the contribution of certain characteristics to easement values. In the past, this has proven difficult due to the lack of data on easement values. Such a system, if properly modeled, could provide an alternative and/or supplement to costly appraisals.
A hedonic price analysis of 116 easement transactions in Fayette County, from 2001 to 2005, provides information on easement costs and the contribution of specific characteristics to these costs. The estimated model explains 33.65% of the observed variation in easement values. Results of this analysis suggest that the marginal contributions to easement cost of several parcel characteristics are significant including the following: parcel size, distance from urban center, adjacency to other lands under easement or designated for long-term natural resource use, adjacency to or within the view of the interstate, within the view shed of public lands, within a national or local historic district, designation as a national historic landmark, possessing registered or significant archeological sites.
Considering these characteristics carefully when evaluating applicant farms may reduce total purchase costs and maximize social benefits. Specifically, program administrators can use this information to refine the relative weights of the selection criteria to focus on the most desirable mix of parcel attributes.
This type of analysis can also be used as an alternative to traditional, more costly appraisal systems. Fayette County’s current appraisal fees are approximately $2,500 for each farm. Using a formula-based appraisal to eliminate this cost for the remaining land needed to reach the program’s goal could save over $700,000 in current dollars. Moreover, this report suggests savings approaching $9 million, in current dollars, could be realized by purchasing the remaining land needed (36,000 acres) to reach the program’s goal using this report’s estimates vs. the current actual average. As the pool of land available for participation diminishes and funding sources tighten, efforts to reduce costs and maximize available dollars may be prudent.
Recommended Citation
Papka, Perry A., "Purchase of Development Rights in Fayette County: A Hedonic Price Analysis of Easement Payments" (2006). MPA/MPP/MPFM Capstone Projects. 76.
https://uknowledge.uky.edu/mpampp_etds/76
