Mt. Emily Recreation Area Coalition

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QUESTION: What is the LLC plan for MERA?

ANSWER: In an email on Jan. 22, 2010, Tony Malmberg outlined this plan for a group of private investors (an LLC) to avoid this summer's planned Trails Unit harvest and ultimately allow some significant portion of it's trees to be retained permanently under a conservation easement.

1. Start a Limited Liability Company (LLC).  This will be a FOR PROFIT business that will limit people's exposure to risk.  This company will raise money from investors.
2. Once you have the entity funded, enter a buyers listing agreement with John Collins (a local realtor) to get a Contract for Sale.
3. Develop a business plan and cash flow projection demonstrating how the investors will make money.  It will go something like this:
   1. Get the timber cruise (TC) info from FC and a market value for the trees.  This has to be from a reputable source and this value is your "collateral" and will be used to get investors in your LLC and a loan to payoff FC for the TD.
   2. Raise a minimum of 30% of funds needed to purchase the TD from FC.  50% would be better.
   3. Go to a bank and get a loan to payoff FC.  A bank should view a 50% loan as well secured and it shouldn't be too tough.  If you have some good solid timber people with good track records they would probably make a 70% loan.
   4. You will have a harvest plan already done in your business plan that you got investors with. It looked something like this:
      • TD-  $500,000
      • Sell trees < 24"DBH  $250,000
      • Sell CE  $300,000
      • Profit  $50,000 or 10% ROI
4. Develop a contingency plan.  You must demonstrate to investors and the bank that you can log the property to pay off the investment.  IF your primary plan fails, you log the forest and payoff the loan and investors.

QUESTION: What is a LLC?

ANSWER: A Limited Liability Company.

• A type or form of for-profit incorporated company where ownership is divided into shares, and where the governing rules are set forth in a contract entered into by all of the initial shareholders. (Wikipedia: Limited Liability Company)
• Form of doing business combining limited liability for all owners (called members) with taxation as a partnership.  An LLC is formed by filing articles of organization with an appropriate state official.  Rules governing LLCs vary significantly from state to state. (http://www.startheregoplaces.com/glossary/#L)

QUESTION: Are there restrictions on conservation easements?

QUESTION: Since the county is the landowner, how would the LLC be able to sell an easement?

ANSWER: Conservation Easements (CE) can be put on any aspect of land, mineral, trees, etc.  They go with the title if the land changes hands but does not have to be in the land owners name. (notes from MMc & TM emails)

QUESTION: Why couldn't the county just sell the conservation easement and have us raise the remainder (of the cost of the timber)?

QUESTION: What about the process of selling a conservation easement?

QUESTION: Since the purchase was made with Oregon State Park funds, isn't there already a conservation easement as a condition of those grants?

ANSWER: MERA property was bought with Oregon State Parks funds and there is a recreational easement on it.  What restrictions apply is not known at this time, but the assumption is that it's mostly an agreement that the land will continue to be available for public recreational access in perpetuity. (notes from KA email 1/22/10)

"Working forest" or "community forest" easements are possible to develop, but difficult to finance.  Currently, there are few pots of funding available for purchasing conservation easements (CE's) on forest land.  Most easements are donated, instead of sold.  Donation of an easement reduces the taxable value of land and reduces the costs of ownership.  Consequently, private landowners may benefit financially from donating an easement to a qualified land trust.  There would be no tax incentive derived from a CE on MERA for Union County, since the county already owns the land and pays no taxes on it. (notes KA)

It may be possible to fund a CE for the timber through Oregon State Parks funds.  That may require charting some new territory for that agency, but it is territory that will need to be explored as other communities seek to preserve their economic viability through taking over ownership and management of former industrial timberlands.  Other conservation organizations, such as the Rocky Mountain Elk Foundation may be possible funding sources. (notes KA email)

Any CE developed for the MERA Trails Unit would require Union County Commissioner involvement and approval on behalf of the county.  A CE on the timber would set permanent limits for future timber harvest.  The stringency of those limits would be established in the CE agreement by the funders and the easement holder (qualified land trust).  It would become the obligation of the land trust to monitor the easement property to insure compliance with the CE.

QUESTION: Are there other issues or concerns?

ANSWER: Certainly. Union County remains the land owner and ulimate authority for land use decisions.  The LLC will need to go through serious negotiation with commissioners over the issue of any harvest restrictions placed on the area by a conservation easement.

CE

Conservation Easement

DBH

Diameter Breast Height, a standard forestry measurement for the size of trees

FC or FCP

Forest Capital Partners

LLC

Limited Liability Company

MERA

Mt. Emily Recreation Area

ROI

Return on investment

TC

Timber Cruise

TD

Timber Deed