State & Local Issues

Colorado is cracking down on conservation easements.  At the same time, Governor Ritter has endorsed a plan to raise severance taxes to fund – conservation easements.  With all due respect to G.K. Chesterton, perhaps the ridiculous can be ridiculed.     

Conservation easements are valuable tools to protect open space, wildlife habitat, scenic vistas and the fast-disappearing agricultural character of many landscapes.  Since it began awarding grants in 1994, Great Outdoors Colorado (GOCO) has spent over half a billion dollars on land acquisition and conservation easements in Colorado.  GOCO receives all of its funding from lottery proceeds.

The vast majority of Colorado’s 50,000 farmers and ranchers are above age 50.  And the average age of farmers and ranchers may be approaching 60 years old.  Land, water and minerals are often the closest thing to retirement accounts they have.  To these hard-working stewards, conservation easements provide a crucial tool to allow the land to stay in production and, hopefully, to give the next generation a chance.   

But GOCO funding is competitive and, therefore, not always available.  Many landowners rely upon Colorado’s innovative tax credit system to earn desperately-needed revenues for transferring away their development rights.  The system has worked so well that Colorado is one of the leading states in the nation for conservation easements and open space protection.  Recently, spurred by a handful of questionable transactions, and Department of Revenue complaints about impacts to state coffers, Colorado has imposed new layers of bureaucracy on the popular program.  These changes are already resulting in delays, higher costs and skepticism.

Now, Colorado voters may be asked to endorse a proposal to dramatically increase severance taxes to fund, among other things, conservation easements.  Putting aside the effects that punishing the producers could have on already astronomic fuel and energy prices, raising taxes to fund easements is bad policy. 

The severance tax is a tax on natural resources that are removed from the earth.  §39-29-101 C.R.S.  Producers and royalty owners must pay severance taxes.  Severance taxes are split equally between the Departments of Natural Resources (DNR) and Local Affairs (DOLA).  DNR allocates severance tax dollars to water projects through its perpetual account and a variety of programs through its operational account.  Seventy percent of the DOLA severance tax revenues are diverted to a Local Government Grant Program and 30% goes back to local governments to help offset impacts to roads, schools, infrastructure, etc. from energy development.

In fiscal year 2003-2004, severance taxes in Colorado amounted to $125.1 million.  The following years they reached $152 million, a staggering $234.3 million in FY 2005-2006 and $145.1 million in FY 2006-2007. 

Initiative 113, endorsed by the Governor, would remove key incentives for industry to invest in Colorado, increase costs and lend credence to the “political risk” factor that may drive resource producers away from the state.  Rather than punish the producers, as well as landowners, the state should refocus on incentives for conservation with a proven track record.