By Phyllis Austin, Maine Environmental News (www.meepi.org). August 2, 2002.
(Penobscot River Photo by Bryan Wentzell)
Criticism of the West Branch Project in the investigative report on the U. S. Forest Legacy Program is based on misinformation, according to commissioner Ron Lovaglio of the Department of Conservation (DOC). In a July 23 letter to the House appropriations committee overseeing the inquiry, he acknowledged a perception that there’s been a "dramatic change in the direction of the project." But, Lovaglio asserted, it’s "still the same cake," just "the icing may look a little different."
A month earlier, Lovaglio was more to the point with Second District Congressman John Baldacci. "I can’t begin to express my frustration at the comments in the House investigative report on the West Branch," he said in a June 27 letter. The West Branch information "avoids the truth and makes false accusations toward Maine’s project – to an end I don’t understand," Lovaglio wrote, asking for Baldacci’s help in "getting the truth in front of the House."
The West Branch is the largest Legacy project ever undertaken and one of the most controversial conservation easement efforts in Maine. After more than two years of negotiations, the Forest Society of Maine (FSM) signed an option agreement in June with Merriweather LLC to acquire 47,000 acres in fee, 282,000 acres through an easement; and an access easement providing public vehicle and pedestrian access. FSM in turn sold the fee lands to the state and will donate the public access rights to the state at the closing, scheduled to occur by Dec. 31, 2003.
The cost of fee acquisition is pegged at $22 million, with $20 million coming from the Forest Legacy Program and $2 million from the state. FSM will raise approximately $10 million from private sources to pay for the easement purchase, which extinguishes development rights. The current deal is structured so that the fee and easement purchases must be made simultaneously at the closing.
The original project was advertised to Congress as a $40 million project to purchase an easement on 656,000 acres, according to the investigators’ report. The state’s share of that deal – 25 percent – was $10 million, and the Legacy program was to contribute $20 million.
The investigators contend that the project was restructured (twice) because Maine was unable to come up with its $10 million cost share by the closing deadline. In the end, the "new scheme could potentially result" in the Legacy funds protecting "significantly less acreage than originally expected," the investigators said.
In a June 24 letter to Christopher Topik of the House appropriations committee staff, Lovaglio referred to a characterization of the reconfigured deal as "bait and switch." Such a description "is inappropriate and demeans a tremendous effort of many parties of integrity," said Lovaglio.
In his July letter to House chairman Bill Young, Lovaglio maintained that the West Branch project "in its totality" remains "the same," explaining that his office is now working with the other West Branch landowner, Great Northwoods, LLC, on protecting 327,000 acres through a conservation easement. Completing the second phase of the two-part project would, in fact, "achieve protection on the entire 656,000 acres as originally contemplated," said Lovaglio. The West Branch is the best known part of the Penobscot River drainage and contains an ecologically, recreationally and spiritually important part of Maine’s fabled North Woods.
He denied that Maine reworked the first phase of the project so that it could lower its contribution. To the contrary, Lovaglio maintained. The final proposal actually betters cost share requirement (75 percent federal/25 percent state) under the Legacy program, he said. Based on a $32 million purchase price, the match of non-federal funds for the project is 63/37, he said. "This would be even more favorable if in-kind contributions, pre-acquisition costs and the stewardship fund were included."
The landmark West Branch Project, which Lovaglio calls "one of the most important" conservation projects in the state’s history, has been dogged by concerns over public benefits. The state’s deputy attorney general, Jeff Pidot, criticized the original proposal as favoring the interests of private landowners more than those of the public. Some environmentalists questioned its increasing costs. Negotiations stalled.
In Washington, other states with Legacy projects lobbied the appropriations committee to let go the $17.1 million that had been set aside for the West Branch. Consequently, the Maine project came under the scrutiny of the Congressional investigators in early 2002 as part of a multi-state review of how the Legacy program is working.
In the same timeframe, the West Branch landowners changed. When negotiations for the first phase of the project began, the property (330,000 acres) was held by Yankee Forest LLC, a subsidiary of Yale University’s endowment entity. Merriweather LLC, the current landholder of record, is a group of new, unidentified investors.
Legacy is popular with timber companies, land trusts, environmental groups and other interests because it "buys" protection of valuable lands and natural resources. Without the millions of Legacy dollars, which have leveraged other investments, Maine wouldn’t have been able to protect all the lands it has, said Ralph Knoll, supervisor of land acquisition for DOC’s Bureau of Parks and Lands (BPL) and in charge of the Legacy program for the agency. Legacy funds have been used to save Cupsuptic Lake, Pierce Pond and Nicatous Lake from development and are going to help protect Mt. Blue/Tumbledown and Leavitt Plantation.
As successful as Legacy has been, especially in making nationally significant projects possible, the investigators found systemic problems in the program. Legacy has grown so quickly in its 10-year life, that managers haven’t been able to provide adequate administration and financial oversight, the investigators found. They pointed specifically to problems with states’ cost shares, appraisals and conservation easements. Until a new database is put into place this year, program managers won’t have an accurate picture what Legacy has really achieved.
(Deborah M. Fowles photo)
DOC’s Lovaglio said that the investigators’ report was comprehensive from a national perspective "and included some constructive ideas." Jym St. Pierre, Maine director of RESTORE: The North Woods and a frequent critic of the West Branch easement, said the document "contains some important findings," underscoring fundamental problems in the Legacy program. Maine, lacking adequate guidance from Washington because of those weaknesses, "has had to fumble its way through complex land deals with inexperienced staff and rely on outside parties such as private land trusts to handle negotiations," he said.
Investigators used the West Branch Project several times as an example of too little federal oversight. In May, 2002, Maine officials acknowledged they had raised "only a small portion of the $10 million they were committed to provide," the investigators said after a visit to Maine. "Forest Service officials, however, expressed confidence in Maine’s ability to meet its financial commitment" and never required Maine to provide its financial plan, the investigators said.
Projects costing more than $5 million are funded over several years so as not to take a big bite out of the program budget in a given year. The investigators questioned allowing "phasing" of projects, such as the West Branch, because it means setting aside Legacy money for several years while the deal is being completed. In effect, the "banking" of projects "mortgages the program’s dollars" when projects run into time problems, the investigators said.
"When questioned about alternative funding strategies, several state program coordinators wondered whether such expensive projects are simply too costly for the size of the Forest Legacy’s annual appropriations," the investigators reported. "These officials commented that the Forest Service must selectively and sparingly choose among the expensive projects."
If Legacy discontinues phasing in of projects, DOC’s Knoll said, "it would become almost impossible to do large projects at current funding levels." Several state program coordinators suggested that the Forest Service submit a separate budget request for large projects. Other state and Forest Service officials suggested the large projects should have higher non-federal cost share requirements, perhaps a 50 percent cost share.
As a precedent-setting project, the West Branch deal will inevitably effect other large projects in the pipeline. Ralph Knoll said the West Branch experience has made DOC realize that "we clearly need to have [a] project more fully developed before seeking large sums of money from Legacy or any other funding source." DOC has put in a request to Legacy for $5 million for fiscal 2003 for a half-million acre easement acquisition from Plum Creek Timber Co.
The Legacy program, within the U. S. Forest Service, came out of a 1990 federal study on the status of the Northern Forest, a swath of 26 million acres of largely unbroken woods from New York to Maine. Eighty-five percent of the forest was in private ownership at the time. The study concluded that the landowners, many of whom were large paper companies, were under increasing financial pressure to sell for development, and it recommended that conservation measures were warranted.
Congress established the Forest Legacy Project to identify and protect important parcels, and Maine was one of the five original participants. In the first eight years, $5.5 million of Legacy funds were used to leverage additional support. Since then, funding has risen to $65 million, with 31 states involved. From fiscal 1992 through April, 2001, 98 projects had been completed protecting approximately 153,000 acres of forestland.
In Maine, Legacy money has been used to help "sustain the economic viability of the industry," the investigators commented. Maine officials, St. Pierre noted, "have not disputed this." Legacy, however, "wasn’t intended to be another federal subsidy program for industry," he argued. "Rather it was to be a national effort . . . to protect the public conservation interests at stake in lands of national significance."
It is not the old pulp and paper company industry that’s benefiting most from Legacy, St. Pierre said. "Rather, it is a new breed of non-industrial landowner [pension funds, insurance companies, universities) which is queuing up for Legacy funds."
In its 32-page report, issued June 24, the investigators concluded that "inadequate Forest Service management and oversight of the program has hampered the program’s success." Problems with the West Branch Project show that the Forest Service "needs to establish meaningful performance measures" for the Legacy program, the investigators said. "Currently, the only stated goal of the program is to "slow the conversion of private forestland to non-forest uses.’ It’s so vague that "any progress, however slight, is considered a success," they said.
The investigators found that Legacy’s regional oversight structure "is ill-equipped to manage growing project funding and state participation." By 2003, the number of regional program managers will be reduced from 10 to seven, although the number of participating states will increase from 31 to 39. Moreover states will not be evenly spread across the remaining regional program managers.
Managers in the Northeast and South will be responsible for Legacy implementation in 29 states. They are the only two managers who work fulltime on Legacy, but the investigators said increased staff is necessary in order to visit each state annually, as well as the sites of proposed projects. (Jo D. Saffeir assists Ralph Knoll in administering the Maine program and is under contract with BPL.)
The Forest Service’s financial accounting system provides "incomplete obligation and expenditure information on the" program, the investigators said, "resulting in the inability to accurately evaluate the use of Forest Legacy funds." The system – the Foundation Financial Information System (FFIS), is an off-the-shelf commercial system used by over 40 federal agencies.
The problem, according to the investigators, is not with FFIS but "with the Forest Service’s failure to fully integrate it at all management levels and adapt it to meet program management information requirements. As a result, Forest Service staff are not using the FFIS for financial oversight and, thus, have no vested interest in ensuring the FFIS data is accurate, complete and usable," they said.
On the matter of Legacy program policies, some managers said guidelines are "unclear and are leading to confusion in the field." Guidelines have been updated twice since first issued in 1992 – mostly recently in May 2001. However, that last update "has never been finalized," the investigators said, "and Forest Service officials say it still "needs further revision to reflect changes in the project selection process and clarification of cost share calculations and other program requirements."
Legacy’s enabling act states that the federal share of the program costs shouldn’t exceed 75 percent. But at issue is "how to properly calculate and apply" the non-federal cost share amount, the investigators said. They noted "a lack of consistency across the regions as to the level of documentation required from the states to support their cost share estimates." As project costs have increased, regional managers questioned whether the states can meet that cost share, the investigators said, again noting the West Branch Project issue.
On the matter of appraisals, the investigators noted that Legacy’s authorizing legislation requires that the federal government pay only fair market value with program funds. It further states that these interests must be valued using federal appraisal standards. To ensure the standards are met, a "qualified review appraiser" must review the appraisal. States, not the federal government, are responsible for ensuring the appraisals meet federal standards.
But Forest Service appraisers questioned the adequacy of the state appraisal and review process and explained that the Forest Service has not provided necessary oversight for the appraisal process and "has not formally defined [in the guidelines] the agency’s own role in the process," the investigators said. One state coordinator admitted the forest service review appraiser had rejected 14 out of 15 appraisals submitted by his state because they didn’t meet federal standards.
The service’s chief appraiser said the agency hasn’t established a policy regarding when the federal appraiser should be required to review Legacy appraisals to ensure they meet the standards. Regional managers, without adequate guidance from Washington, have implemented a number of different policies on the use of federal review appraisers, the investigators found.
In the Northeast, the regional policy calls for the forest service to review all appraisals over $1 million. Ralph Knoll said that Maine hasn’t had much interaction with federal appraisals. There are only 42 review appraisers left in the forest service nationwide, at least half of them nearing retirement, and Legacy work is extra to their national forest responsibilities.
Negotiating conservation easements is in the states’ hands. Most states use "boiler plate" conservation easement language for Legacy acquisitions to help simplify negotiations with landowners. The terms vary, reflecting the uniqueness of the specific land parcel. Regional managers look over the language but "rarely provide input into the negotiation process," the investigators said. But they should be more involved, the inquirers said.
Map by Tom Funk
As evidence of insufficient easement oversight, the report noted that Legacy deals have acquired or will acquire interests in a 192-acre gravel pit in New Hampshire, a 12,500-square foot conference center in Connecticut, and a 9,200 acres of town-owned land that is already protected by state law in New Jersey. Ralph Knoll said he’s unaware of any such inappropriate parcels acquired in Maine.
There are growing costs of monitoring easement holdings, the state program coordinators told investigators. The amount of land to monitor has quadrupled in recent years "and this growth may eventually exceed state staffing and funding capacity," they said.
Legacy guidelines require the states to monitor easements and, at a minimum, prepare annual monitoring reports that must be made available to the Forest Service. "All state program coordinators cited the long-term financial burden of monitoring large tracts as a developing issue," the investigators said.
The number of proposed Legacy projects has always exceeded funding availability, and the Forest Service has routinely prioritized projects. The Washington office operated on the idea that every participating state should receive some funding to provide equity to the states.
Beginning in fiscal 2002, however, Congressional guidance required the Forest Service to nationally rank projects for funding on a merit-based, fully competitive process. A national panel was convened to select and rank projects for funding. The panel agreement on which ones should be funded but couldn’t reasonably distinguish the rank of one project compared to another on a national basis, the investigators said. Thus, the projects on the fiscal 2002 and 2003 lists do not actually represent a national prioritization.
Ralph Knoll said that competitive prioritization "has always been a tough issue for the states and the Forest Service. No matter how perfect the rating system might be, in the end, how can anyone determine how a project like the West Branch or Tumbledown/Mt Blue is more or less important than protecting 1,000 acres in New Jersey next to New York City," he said.