Conservation easement makes ag land purchase possible

By Cherry Sokoloski
North Forty News

Many farm families have sold their land to developers in recent years; many more are thinking about it. Not Jason and Cheri Kraft, however. The young couple, age 28 and 29, just bought 130 acres of farmland near Wellington and hope to move there in the near future to farm the property.

The purchase represents not only an optimism about farming, but also a unique method of buying agricultural property. For the first time in Larimer County, a conservation easement was placed on property concurrently with the closing of a sale. Larimer County open space staff helped the Krafts navigate the complicated process.

It's no secret that land values in Larimer County have skyrocketed in recent years. Wellington is one of the fastest growing areas, and prices for both ag land and water rights have gone through the roof in response to development demand. All this conspires against farmers, whose income has not risen in line with land and water costs.

Despite all these challenges, the Krafts wanted to continue their long family traditions in agriculture. Jason is a fourth-generation farmer from northern Colorado; the family has farmed south of Wellington since 1947. Cheri comes from a ranching family in southern Colorado. Before the recent purchase, the Kraft family farmed about 500 acres in the Wellington area.

Three-way deal

The young Krafts had their eye on a piece of property near the family's existing operation, at the corner of County Road 56 and County Road 9, but it was the conservation easement that made the purchase possible. A three-way transaction was designed among the Krafts, seller Gloria Cramer and Larimer County. The county's role was to purchase a conservation easement on the property, in essence buying up the development rights.

The tricky part of the deal was that the Krafts had to negotiate with both the seller and the county at the same time, since the amount the county was willing to pay for the easement influenced how much the Krafts could offer for the property.

In the end, county parks and open lands appraiser Kevin McCarty set the development rights at $460,000, almost half the purchase price of $925,000. The county commissioners approved the purchase of a conservation easement, and the deal closed on April 6.

"It was a pretty major task," Jason Kraft said, after working on the project for more than six months. Charlie Johnson, the county land agent who helped the Krafts with the land deal, said the typical time for engineering a conservation easement is between three and six months.

The easement made the ag land much more affordable for the Krafts. "Basically," said Kraft, "the county bought the development rights, and we bought the agricultural rights."

The county benefited from the deal, too, Johnson noted. One of the county's goals is to preserve property in agriculture, and the location of the Krafts' new property also makes it valuable as a community separator between Fort Collins and Wellington. Another appealing feature of the Kraft parcel is that it is irrigated by four wells. If the Krafts had needed to purchase shares in a ditch company, the property could have been more expensive.

Future trend?

Will such three-way transactions become a trend in the purchase of agricultural land? Kraft doesn't think so. "It was a unique situation for a unique operation," he said. "It has to fit your business plan and your goals."

Johnson agreed, noting that for the county to consider a conservation easement, the property has to lie in one of the county's priority areas. However, this type of three-way deal could happen again if the circumstances are right, he said, and using a conservation easement can be a good way to add new property to a farm operation.

Even with the price break on the property, Kraft said the purchase still doesn't make economic sense. "As property values increase, the value of the development rights need to increase as well," he said. "Economically, the value of farming is not driving up the price of property in this area."

Johnson said a professional appraiser figures the value of the development rights, and that a second appraisal can be ordered by the county or the landowner.

For now, Kraft's father, brother and grandfather are farming the new property while he maintains his job as an ag commodities broker. The Krafts live in Bennett, a small community east of Denver, and they're expecting their second child soon. When economics allow, they will build a home and outbuildings on the 130 acres they purchased this spring and join the rest of the family in active farming.

As to the future of farming in this area, Kraft believes it will become "a bigger and bigger challenge" because of the high cost of land and the crowding caused by housing developments.