Millions go to board members of Lexington’s farmland conservation program

Six current or former members of a board that oversees a Fayette County farmland preservation program have received millions from the program, records show.

In total, past and current members of the Rural Land Management Board have received $6.2 million in payments for conservation easements on their farms as part of the Fayette County Purchase of Development Rights program. Farms that are owned or partially owned by three of those former or current board members received more than $1 million each from the program.

The Herald-Leader received the records through an Open Records Act request.

According to board records, none of the members were on the board at the time the program bought conservation easements for their respective farms. But several have rotated on and off the board for years. They received payment for their conservation easements between stints on the board.

The 2000 city ordinance that created the PDR program doesn’t prevent a revolving-door approach to membership on the Rural Land Management Board, although at least one other city board bans the practice. For example, a city ordinance says developers who serve on a board that oversees Lexington’s affordable housing program can’t accept money from the fund for six years after leaving the board.

Rural Land Management Board members said they didn’t get special treatment, and they followed all the rules of the program.

In some cases, their efforts helped promote the program, said Frank Penn, a current board member who has participated in the program in the past and pushed for its creation in 2000.

“When we first started this program, it’s not like we opened the door and there was a rush of farmers who wanted to put their farms in,” Penn said. “When I would try to recruit people, they would ask me, ‘Why don’t you have your farm in the program?’”

Still, Mayor Jim Gray said he would support making changes to a city ordinance to ensure that there is no perception that board members have an unfair advantage.

“Requirements for board members should ensure there is not even a perception of conflict of interest. … Citizens rightfully expect government to be accountable for every dollar,” Gray said.

In total, the PDR program has allocated more than $79 million toward buying conservation easements for nearly 30,000 acres of Fayette County farmland. Of that total, $38 million is local money, $15 million is state money and $26 million is federal money. The 11 members of the Rural Land Management Board are appointed by the mayor but nominated by several groups representing the farm, business, building, historic preservation and tourism industries.

‘We need to thoroughly examine it’

The city’s PDR ordinance also allows landowners to pay for a counter appraisal, which often leads to a higher payout from the program. A Herald-Leader analysis of PDR records found that board members sought counter appraisals more often than those who didn’t serve on the board.

Three of the six board members used counter appraisals to increase the amount their farms received from the program. Overall, a counter appraisal was used in 23 percent of conservation easements purchased from 2000 to August 2016. For board members, though, nearly 50 percent of conservation easements received a second appraisal.

The federal government, which typically pays for 50 percent of conservation easements, no longer allows second appraisals.

Gray said he supports changing the local ordinance to do away with second appraisals.

“While board members have met the requirements of the ordinance, the program is 16 years old. … We know we need to thoroughly examine it and update it,” he said. “I encourage the board to eliminate second appraisals from the process.”

A subcommittee of the Rural Land Management Board was formed in August 2016 to consider changes in the program, but it didno’t recommend prohibiting those who had served on the board from participating in the program. Nor did it recommend doing away with counter appraisals.

The subcommittee, though, is expected to re-examine its recommendations before taking a vote on them, said Greg Bibb, chairman of the Rural Land Management Board. Bibb said there has been turnover on the board — several new board members were recently appointed — since the original subcommittee was appointed.

“We felt it best to revisit the recommendations prior to a vote,” he said.

Lexington-Fayette Urban County Councilwoman Jennifer Scutchfield said the issue of second appraisals might come up at Tuesday’s council committee meeting. Scutchfield, the chairwoman of the Planning and Public Safety Committee, asked for the review of the PDR program.

“One of the biggest questions I have is, why doesn’t our PDR program follow the same rules as the federal guidelines?” Scutchfield said.

The federal government also doesn’t allow non-citizens and those who make more than $900,000 to receive federal matching funding. The local program has no upper income limit, nor does it require landowners to be U.S. citizens.

That became an issue earlier this year when Shane Ryan, an Irish citizen, didn’t qualify for federal matching money to buy conservation easements for Castleton Lyons farm. Ryan wanted the city to use $5 million in local money to buy the development rights for the Iron Works Pike farm. The Lexington council ultimately decided not to buy the conservation easements.

The issue of board members receiving payments from the program might go to a council subcommittee that is already examining the make up of the city’s other planning bodies, Scutchfield said.

‘It’s in the ordinance’

Rural Land Management Board members whose farms have been protected under the program said they didn’t have an advantage over others.

Penn is one of two current board members who have served multiple terms on the board. He has received payments for conservation easements on two farms between his three terms on the board.

In 2004, Penn received $172,381 for conservation easements on 76 acres on Mouny Horeb Pike. In 2011, he received $624,164 for conservation easements on 201 acres on Russell Cave Road.

Penn got a second appraisal on the Mount Horeb Pike farm property after the program-obtained appraisal recommended paying $1,200 an acre. The second appraisal was for $2,250 an acre. The board agreed to the higher price of $2,250.

Penn didn’t get a second appraisal on the Russell Cave Road property.

According to board minutes, Penn served on the board from 2000 to May 2004. His second stint on the board was from May 2005 to June 2010. He began his third term on the board in June 2015.

The closing date on the Mount Horeb Pike conservation easement was March 2005, but Penn applied in May 2004, PDR records show. The Russell Cave Road property closed in 2012, according to PDR records.

Don Robinson, another current board member, has received two payments from the PDR program during times he wasn’t on the board. In May 2007, Robinson received $834,110 for conservation easements on 276 acres of his Military Pike farm. In 2011, he received $343,108 for 110 acres on Military Pike.

He served on the board from July 2004 to February 2007 and from May 2008 to January 2010. His current term started in July 2011.

Robinson accepted the board’s appraisal in both land transactions, but he said board members who got second appraisals didn’t have an unfair advantage.

“It’s in the ordinance,” he said.

Robinson said he had always planned to put a conservation easement on his farm so the land would be protected. Robinson said he wanted to donate his conservation easement, but a friend who is an appraiser argued against it. “He told me, Don, you aren’t rich enough to donate,’” Robinson said.

The PDR program ranks farms that apply for funding based on specific criteria. The most points are given for soil quality. Other categories include proximity to other protected farms and historic value. Staff ranks the farms based on those points. The farms are then referred to by number until after the deal has closed to ensure that favoritism isn’t part of the process, Robinson said.

“Now some people on the board who are farmers might know who those farms are, but a lot of board members don’t,” Robinson said.

A matter of survival

Penn and Robinson moved quickly to put their farms into the conservation program after leaving the board, but two others allowed more than six years to lapse between their participation in the program and service on the board.

James Shropshire, who served on the board from 2000 to May 2005, was paid $1.1 million for conservation easements on 315 acres on Royster Road in June 2013. Shropshire also obtained a second appraisal.

Shrophsire said he got the counter appraisal based on the advice of his attorney, not because of knowledge he had as a former board member.

“I don’t think it gave us an advantage,” Shropshire said. “I think we got their appraisal and then on the advice of our attorney got a second appraisal.”

Phillip Meyer was appointed in July to serve on the board, nine years after his farm was placed in the program in 2008. He received $723,957 and didn’t get a second appraisal.

The two other board members with ties to farms in the program are Don Slagel and John Phillips.

Slagel served on the board from 2000 to 2001. A year later, he put his farm into the program. Slagel received a payment of $537,600 for a conservation easement on 203 acres. According to the closing documents, Slagel didn’t get a second appraisal.

John Phillips, who served on the board from 2000 to May 2004, is a member of a trust that was paid for conservation easements on two separate tracts of Darby Dan Farm on Old Frankfort Pike.

Phillips is a member of the Galbreath Trust, which owns Darby Dan Farm. In June 2007, the Galbreath Trust was paid $757,399 for conservation easements on 242 acres. In December 2007, the Galbreath Trust was paid $1,156,999 for 375 acres.

In both transactions, the Galbreath Trust obtained a counter appraisal.

“It’s a fairly black-and-white process,” Phillips said.

He said the money from the conservation easements saved Darby Dan Farm, which was created in 1906. The farm’s infrastructure — including water and gas lines and its barns and buildings — was old and needed updating.

“We would not have survived if it wasn’t for PDR,” Phillips said.

The farm employs more than 40 people and averages about $12 million in sales a year.

“It imports a lot of wealth into this community,” Phillips said of the horse industry. “This farm supports a lot of families.”

Robinson said the payments he received for development rights ensured that his cattle and horse farm, which has been in his family since 1948, will remain a family business.

“The program has allowed us to add some acres and I was able to bring my son into the business,” Robinson said. “The program has done what it was supposed to do.”

This story was originally published September 18, 2017 at 1:55 PM with the headline "Millions go to board members of Lexington’s farmland conservation program."