The Cost of Conservation and Decision Making David L. Faulkner, USDA

1. �The Cost of Conservation and Decision Making� � David L. Faulkner, USDA/NRCS Natural Resource Economist Lands for Tomorrow Conference Longwood University, June 29, 2011

2. Standard disclaimer�

3. Why and How to estimate costs Why estimate the costs of conservation? Our clients estimate costs for planning and investing purposes�ultimately to make a decision; And they often look to us for an idea of the cost; How to estimate the costs of conservation? - Component by component based upon site specific considerations, local input markets, availability of contractors, etc�

4. Attempting to recognize trade-offs, on both the costs and benefits side is important Every year that I don�t perform a prescribed burn, do I increase the risk of a catastrophic wildfire�or not? If I allow my cattle to graze in the woods will it hurt the growth and productivity of my trees? Should I replant at a lower density to increase wildlife habitat or go for maximum timber or pulp production?

5. Program staff such as myself estimate cons. practice costs� For planning assistance�to help our clients make decisions; To establish financial incentives to help our clients achieve their objectives; We use both component by component and total actual cost approaches to est. costs; What we pay is a function of what we think a given practice costs for typical farm situations;

6. Forestry Practices (priority or companion) Access control Brush mgt. including forestry mulchers for invasive species Prescribed burning Critical area planting (includes disturbed forest mgt. access areas � landing areas, skid trails, access roads, etc.) Fencing Firebreaks Forest site preparation Tree and shrub establishment Early successional habitat development Forest stand improvement

7. Virginia Guidance A Forest Management Plan is required for eligibility � a Form DOF 75; EQIP contracts for the Forestry concern are limited to 300 acres land area; Higher planting density -> lower ranking; Lower planting density -> higher ranking; Forestry mulching is for invasive species control only;

8. Effects of financial incentives� What does the client want? To achieve their goals; Everything we do starts with this preposition; What do we want? To help the client achieve their goals and along the way improve mgt. of their natural resources� Why are we interested in improved land management?

9. The interests of society�stewardship-sustainability Maintenance of long-term productivity (food and fiber in perpetuity); Concurrent damage reductions (minimize the short-term cost implications of erosion); Reduced variable production costs in the short-run; ?fixed costs in the long-term; Yield enhancement (greater output, greater income);

10. The interests of society (continued)� All of the above have to do with either food security or operational efficiency and economics, i.e., lower inputs and costs/equal or greater output, �but wait there�s more�� Improved environmental performance: on-site as well as off-site (wildlife habitat, protection &/or improvement of water quality, carbon sequestration, etc. in short: enhanced ecosystem functioning to create a higher quality of life);

11. How do we get to sustainability? Fundamentally we are all about adult education through tech. assist. (and more fundamentally � we are about relationship building with our clients) T.A. helps answer the tech. feasibility question of a client�s pending decision: can what they want be done? If yes, does it make tech. sense or is there a preferred alternative; another, better way or something else they should be focused on?

12. How do we get to sustainability (continued)? Secondarily, we are also about providing financial incentives to accomplish mutual goals � a marriage of private and public interests; and F.A. helps the client deal with the economic feasibility question: does it make economic sense, i.e., pay for itself or better, over the life of the investment in a given practice (this is the net present value and/or average annual value?);

13. How do we get to sustainability? Lastly, the client always has to take everything we�ve shared with them and that they have gotten from others and filter it all through their own decision calculous: Does it make sense for them? Even if it makes sense technically, can they afford to make the investment (this gets at the financial feasibility question and only the client can make this call);

14. Stewardship/Sustainability Concerns Summary Technical feasibility; Economic feasibility; Socio-cultural feasibility needs to be added; and Financial feasibility All of these can have multiple layers and we typically only scratch the surface, but�

15. That�s okay if� The client gets to the point where they feel that they can make an informed choice and we feel they have a sound technical basis for their decision-making; That said, follow-up to monitor and learn from experience is always needed for continuous process and product improvement;

16. Direct effects of T.A. & F.A on our clients Reduces perceived costs of failure/perception of risk and real cost of implementation; Reduces the learning curve costs (the real cost of making mistakes); Reduces the �cash-cost� hurdle; Enhances the potential for success, including improved profitability of their farm; All of these are important factors to keep in mind

17. Conservation Partners A �Cecil B. DeMille� cast of thousands� DCR and the SWCDs (state cost/share program) DOF (RT program) NRCS (EQIP, WHIP, CSP, FRPP, WRP, GRP) FSA (CRP and CREP) CBF, USFW, USFS, TVA, TNC, DOF, VA Outdoors Foundation, land trusts, local gov�t., etc. for holding easement and purchase of development rights;

18. Political economy context Funding for conservation will likely shrink; We will have to work together more than ever and emphasize the educational aspects of our work a lot more Sell what we do to the public in general more based upon protecting prime farmland, wildlife habitats and environmental functions and values;

19. AFT Cost of Community Service Studies Calculate revenue-to-expenditure ratios for land use categories (taxes raised from vs. the cost of services provided to a given land use); Results from over 151 studies since the 1980s show that agricultural and forest lands make a net contribution to the tax base; developed lands don�t & communities pay a high price for unplanned development;

20. AFT Cost of Community Service Studies Results dispel three major misperceptions: 1) �Open lands, including productive farms and forests, are an interim land use that should be developed to their �highest and best use.�

21. AFT Cost of Community Service Studies (continued) Results dispel three major misperceptions: 2) �Agricultural land gets an unfair tax break when it is assessed at its current use value for farming or ranching instead of at its potential use value for residential or commercial development.� 3) �Residential development will lower property taxes by increasing the tax base.�

22. AFT Cost of Community Service Studies (continued) An acre of land with new houses, commercial or industrial properties built on it generates more total revenue than an acre of farmland, but the acre of farmland requires little public infrastructure and few services; therefore: Working lands generate more public revenue than they receive back in public services;

23. AFT Cost of Community Service Studies (continued) Median COCS per dollar of revenue raised to provide public services: Commercial & industrial: $0.29 Working open land (agric. Incl. forests): $0.35 Residential property: $1.16

24. AFT Cost of Community Service Studies (continued)

25. AFT Cost of Community Service Studies (con�t.) The bottom-line is that on average residential land uses do not cover their costs and they must be subsidized by other land uses; Converting agricultural land to residential land should not be seen as a way to balance local budgets;

26. CREP � the best deal since sliced bread Get trees planted on marginal pasture along riparian zones and other sensitive landscape features, e.g., wetlands, sinkholes, etc. Pays a healthy competitive return to the cooperator over the life of the contract (10 or 15 years) and does a world of good for the environment;