Fayette County

Audit: $80 million Lexington farmland preservation program needs changes

PDR Farm at 6284 Russell Cave Rd. in Lexington, Ky., Monday, August 15, 2016.
PDR Farm at 6284 Russell Cave Rd. in Lexington, Ky., Monday, August 15, 2016. cbertram@herald-leader.com

An audit of Lexington’s farmland preservation program recommended several changes to strengthen oversight and minimize possible conflicts of interest in the nearly $80 million program.

Two major recommendations from the October audit include requiring board members to wait at least one year after stepping down before they can apply to get money from the program and prohibiting landowners from using the results of their own land appraisals to negotiate better deals.

The audit of the Purchase of Development Rights program was presented Tuesday during a Lexington-Fayette Urban County Council Planning and Public Safety Committee meeting. The audit also recommended other changes to the city ordinance that authorizes the program, including striking language that allows farm owners to receive payments over several years and clarifying language on the minimum number of acres a farm must have to apply to the program.

The Rural Land Management Board, which oversees the farmland preservation program, has agreed to make some changes to the ordinance that address some of the issues raised in the audit, said Derek Paulsen, the city’s Planning Commissioner, who oversees the PDR program.

The council committee, though, did not vote on any changes to the ordinance during its Tuesday committee meeting despite months of discussions about possible changes.

Since its creation in 2000, the Purchase of Development Rights program has spent nearly $80 million in federal, state and local money to buy the development rights to protect approximately 30,000 acres of Fayette County farmland. The city spends an average of $2 million a year on the program. The federal government, through the National Resource Conservation Service, picks up roughly half the tab to purchase the development rights.

The city audit of the PDR program covered a period between Jan. 1, 2014 and Dec. 31, 2017.

Questions about oversight of the program first surfaced more than three years ago, when a 2015 federal audit by the National Resource Conservation Service found Fayette County had overcharged the federal government $350,000 in two land transactions. The federal government later decided not to charge Fayette County because it had made a good faith effort to correct the problem.

The federal government has not allowed land owners to use second appraisals when negotiating an easement deal for several years, but those appraisals were used in the land deals questioned by the federal government.

In addition, a September 2017 Herald-Leader article found that six current or former members of the Rural Land Management Board had received $6.4 million from the program. None of the board members were serving on the board at the time they received money from the program, but several have rotated on and off the board for years. They received payment for their conservation easements between stints on the board.

Paulsen said the Rural Land Management Board recommended that board members wait one year after serving on the board before putting their farm into the program. In comparison, members of the board that oversees affordable housing in Lexington can not apply for affordable housing money for six years after serving on the board.

“The board discussed this a great deal,” Paulsen said. “Given the length of time it takes the farm to go through the process... really you are off the board for several years before the farm is purchased.”

Councilman Kevin Stinnett questioned why board members who have farms in the program aren’t prohibited from serving on the board. The board also monitors and enforces the program and can vote on issues that could affect their own land value, Stinnett said.

“But they also enforce it,” said Stinnett. “That’s the biggest complaint (about this program) is that the people who are serving on the board vote on things that affect them.”

Paulsen said the board felt people who have put their farms in the program are key to recruiting other farms. Paulsen said they try to make sure that the board members don’t vote on issues that could affect their own land values.

Another recommended change includes striking language that would allow a farm owner to receive payments over time. There is a legal question about whether the council can obligate future councils to set aside money for a project.

“We will eliminate this during the application process,” Paulsen said. “We don’t feel like we can pay it out over time.”

That issue came up two years ago. The owner of the more than 1,000-acre Castleton Lyons horse farm wanted the city to pay it up to $5 million in city money for its development rights over several years. The council ultimately opted not to purchase the farm’s development rights.

It’s not clear when recommended changes to the PDR ordinance will come back before the council committee.

Also on pause is a move by the council to change the make up of the Rural Land Management Board, which some on the board have fought. The board has never had a minority member. Some on council want to expand the membership of the board to address the lack of diversity.