Acquisition of Conservation Easements (ACE) Waiver of Income Determination Method




Request approval to waive a requirement in the ACE ordinance that makes income determination subject to aggregate AGI instead of weighted AGI





Messrs. Tucker, Foley, Davis, Cilimberg, Benish, Goodall



March 17, 2004


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Per the Executive Summary of August 13th, 2003, the Board of Supervisors approved the appraisals of six (6) properties from the ACE applicant pool for FY 2002-03.   One of these appraisals was for the 611.172 acre Mehring Family Partnership property, located on the east flank of Castle Rock Mountain approximately 3 miles west of North Garden.  Based on the ranking evaluation criteria, it is the highest ranked property in the applicant pool and has tourism value because 46 acres of land lie within a mountain “ridge area boundary”.  Before the County can extend the owner an “Invitation to Offer to Sell”, staff must determine the purchase price, which is calculated by multiplying the appraised value by the applicable percentage of appraised value – as set forth in the income grid on page 9 of the ACE ordinance (see Attachment “A”).  In the case of a family partnership, such as the Mehrings, “the average adjusted gross income shall be based on the aggregate annual adjusted gross income of the partners.” At its January 14th meeting, the Board of Supervisors approved staff’s recommendation to waive this approach when determining adjusted gross income for the Henley Forest, Inc. property, an “S” corporation.  Though the Mehring property is not an “S” corporation, staff believes the existing method (for determining income) again unreasonably lowers the purchase price of the easement for the Mehrings. 




As per section A.1-110(I) of the ACE ordinance, the Board of Supervisors may waive or extend any requirement or deadline if, for good cause, it is shown that circumstances exist which warrant such action.




Goal: 2.1 – “Protect and/or preserve the County’s rural character”.  Goal: 2.2 – “Protect and/or preserve the County’s natural resources”.




The Mehring property is held in a family partnership consisting of four (4) different couples, each of whom is a direct member of the Mehring family.  Under partnership accounting rules, income taxes are paid by the individual partners of the partnership rather than by the partnership as a whole.  In addition, all profits and losses are allocated according to each partner’s proportionate share of the partnership.  Under the calculation required by the ACE ordinance, which considers only the aggregate income of all the owners, the Mehrings would receive only 4% of appraised value because their aggregate income exceeds $200,001 (by a substantial margin).  


Though the aggregate income approach may be appropriate in some cases of multi-person ownership, it is the opinion of staff and the ACE Committee that this approach would unfairly under value the easement for the Mehrings, whose average annual income should earn them 88% of appraised value.  The Board of Supervisors heard a similar case on January 14, 2004 when they approved staff’s recommendation to waive the aggregate income approach (when determining adjusted gross income) for the Henley Forest, Inc. property.  Though the Mehring property is not an “S” corporation, staff believes the existing method (for determining income) raises similar issues when applied to Mehring. 


One of the original objectives of the ACE program was to give landowners of modest means a financial incentive for placing their property under easement since current tax laws provide little or no benefit from donating an easement.  Since the partnership’s net profit and taxable income is not based on the shareholder’s aggregate income, staff believes it would be inconsistent to base the determination of (easement) purchase price on the partner’s aggregate income.  If each of the partners of the Mehring Family Partnership have insufficient income to benefit from a donated easement, the purchase of an easement is the only financial incentive available to these landowners of modest means.


A more equitable solution would be to use a “weighted average” approach whereby payment is based on a partner’s proportionate share or contribution of income (see Attachment “B”).  The purchase price of the easement would thus be determined by multiplying the appraised value of the easement ($550,000) by an individual partner’s proportionate share of the partnership.  The resulting value would then be adjusted according to the income grid.  The individual payment for each of the four (4) partners would then be added up to produce the total ACE payment.  This approach would follow the accounting standard for family partnerships. Using the weighted average approach, the net ACE payment would be $484,660 or 88% of the total appraised value.


Clearly, the Mehring property has significant conservation value.  In addition to qualifying for tourism funds because it has 46 acres and more than 7,000 feet of ridgeline within the mountain “ridge area boundary”, the property has 6,455 feet of common boundary with another property currently under easement.  When clustered with easements on both Highland Orchards Farm and Wingspread Farm, the Mehring easement would create a 2,300 acre contiguous block of protected property that runs from Route 29 (an Entrance Corridor in the Comprehensive Plan) to the peaks of Mill and Castle Rock Mountains.  Since this ridgeline is one the highest in Albemarle County (Castle Rock Mountain is 2,340 feet in elevation), it is highly visible from Route 29.  In addition, the Mehring easement will not permit timber harvesting on any land above 1,600 feet elevation and it will create 75 foot wide riparian forest buffers around all major streams.  Since development would be restricted to a family division on 55 acres at the bottom of the property, the remaining 556 acres would be forever protected from development and residential construction.  This easement would help to preserve the rural character of Albemarle County, conserve and protect biodiversity and wildlife habitats, and provide a permanent wooded buffer to protect the quality of water flowing into the Hardware River.




Staff recommends that the Board of Supervisors waive the aggregate income method for determining income for the Mehring property and allow the determination of AGI and purchase price to be based on the weighted average of the partners of the family partnership as described above and shown on Attachment ”B”.  Using this approach, the purchase price for the Mehring Family Partnership ACE easement would be $484,660.


View Attachment A

View Attachment B

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