Fayette County

Should taxpayers spend millions to protect a 1,000-acre horse farm from development?

Castleton Lyons at 2469 Ironworks Pike in Lexington, Ky, on Aug. 15, 2016.
Castleton Lyons at 2469 Ironworks Pike in Lexington, Ky, on Aug. 15, 2016. palcala@herald-leader.com

Lexington’s Rural Land Management Board might decide Monday whether it will spend millions of dollars over the coming years to buy development rights for the 1,000-acre Castleton Lyons farm, which claims to be the largest privately owned unprotected parcel of farmland in Fayette County.

The decision promises to be controversial, with Mayor Jim Gray saying the city can’t afford the multi-million dollar payment and a lawyer for the horse farm raising the possibility of legal action if it is shut out of Fayette County’s Purchase of Development Rights Program.

Since its creation in 2000, the PDR program has allocated $77 million — $37 million in local money, $24 million in federal money and $16 million in state money — to buy conservation easements for 29,165 acres of land, protecting it from future development.

The problem with Castleton Lyons is that it’s owned by Shane Ryan, who is Irish and doesn’t pay income taxes in the United States. That means a federal program that generally pays for half the cost of conservation easements in the PDR program won’t help pick up the tab, leaving local taxpayers to foot the entire bill.

Based on appraisals for surrounding farms, conservation easements for Castleton Lyons could cost the city well over $4 million. This year, the PDR program received $2 million in local funds. Federal matching funds are typically between $1.5 and $2 million a year.

A ranking system to determine which farms qualify for conservation easements has ranked Castleton Lyons first among 31 parcels that applied. The most points are giving for soil quality, an area where Castleton Lyons scored highly. Another part of the ranking includes proximity to other farms in the PDR program. Castleton is surrounded by farms either in the program or being appraised for it.

Still, some members of the Rural Land Management Board have questioned whether the program should spend millions to protect a farm that can’t receive federal funding.

“In my opinion, we can’t afford it,” Gray said. “It is a board decision, but this is more than we spend on PDR in two years.”

The issue could end up in court.

In a letter forwarded to the board on March 16, Castleton Lyons lawyer Mike Meuser said the board cannot discriminate against Ryan because he is Irish. Also, there is nothing in the local ordinance that says farm owners have to qualify for federal matching funds to participate in the program, the letter said. The Herald-Leader obtained the letter through an Open Records Act request.

A representative from Castleton Lyons and Meuser did not return emails seeking comment for this story.

Some members of the Urban County Council, which passed the ordinance to create the program in 2000, also have questioned whether using the bulk of the program’s money on Castleton Lyons is a wise use of taxpayer dollars.

“With any government program, our goal is to maximize our outcomes, which is what we do when we use federal match funds. So, no. ... I do not support spending only local funds to protect this property,” Councilwoman Shevawn Akers said. “PDR funds are limited, and this amount of acreage would consume all of our local investment for multiple budget years.”

Councilwoman Amanda Bledsoe serves with Akers on a council budget subcommittee that oversees PDR program funding.

I definitely have concerns about moving forward and appraising it given that the owner is a foreign resident who does not pay (U.S. income) taxes.

Urban County Councilwoman Amanda Bledsoe

“I definitely have concerns about moving forward and appraising it given that the owner is a foreign resident who does not pay (U.S. income) taxes,” Bledsoe said

But At-Large Councilman Richard Moloney, who was on the council when the PDR program was created, said he does not have any issues with using solely local money for Castleton Lyons. The issue is complicated, he said.

“We have to be fair,” Moloney said. “If we don’t give the money, they could go to court or they could subdivide the land.”

Akers and Bledsoe said they would be in favor of the council discussing changes to the ordinance so it aligns with the federal program’s income and nationality requirements.

“I would support an amendment to the PDR ordinance to more closely mirror federal requirements,” Akers said. “Personally, I don’t believe taxpayers should buy development rights from someone who is not a taxpaying-citizen of the U.S. I also believe that we should impose income limits for landowners who apply for PDR funds or, at the very least, require that they donate a portion of their land and its easements to a preservation entity to preserve it in perpetuity.”

Historic farm

Castleton Lyons learned before it applied to the PDR program in 2014 that Ryan, whose father, Tony Ryan, started European airline Ryanair, would not qualify for federal funding.

Castleton Lyons Inc. is a Delaware company owned by Taylor & Carr, an Irish company. According to an Aug. 2014 email from a representative of the U.S. Department of Agriculture, which oversees the federal conservation funding program, Castleton Lyons was not eligible because Taylor & Carr was owned by Ryan, a non-U.S. citizen.

The federal program also limits eligibility to those with annual incomes of less than $900,000. It’s not clear whether Ryan’s income exceeds the $900,000 limit, because he was disqualified from the program before the income limit was addressed, according to emails the Herald-Leader obtained through an Open Records Act request.

In its application, Castleton Lyons proposed two ways in which the city could buy development rights to the historic farm on Iron Works Pike. One option was to buy a conservation easement for the entire 1,000-acre farm. The other option would separate the farm into four parcels.

Aerial view of Castleton Lyons farm, 2469 Ironworks Pike, August 12, 2016. Ironworks Pike is seen running right to left near the bottom of the photo. Faron Collins

The farm was once the home of John Breckinridge, a former U.S. senator and U.S. attorney general under Thomas Jefferson. It also was once owned by James R. Keene, a Wall Street investor who transformed the farm into a well-known Thoroughbred operation. Tony Ryan bought the farm in 2001 for $14 million, according to property records. He left the farm to his son when he died in 2007.

Shane Ryan, in his application, said the farm should qualify for local funds. “There is no maximum income limitation,” he wrote. “There is no provision for match grant funding.”

No donations

Billy Van Pelt, who was director of the PDR program until October 2013, notified the board in late 2014 that he was representing Castleton Lyons. Because the farm could not receive federal funding, Van Pelt pushed an option that would allow the city to pay Castleton Lyons over time. That option is allowed under the ordinance but has never been done.

Finance commissioner Bill O’Mara said the problem with paying over time is that funding to the program is decided each year by the Urban County Council and the mayor.

“A current council can not bind a future council,” O’Mara said. “We run into this with multi-year contracts, and we always have a disclaimer that it is subject to future council appropriations.”

Castleton Lyons also wouldn’t be prohibited from making changes to its 1,000 acres until the city made its final payment.

According to minutes of the December 2014 Rural Land Management Board meeting, Van Pelt was asked whether Ryan would be interested in donating a conservation easement for part of the farm.

Some larger farm owners have donated land to the program, and others have taken cash for some parcels and donated other parcels in the same farm. Greg Goodman, who owns a nearby farm, donated 122 acres to the program but was paid for conservation easements on 638 acres, according to a database of PDR farms.

Van Pelt said Castleton Lyons was not interested in a donation, according to the minutes.

Castleton Lyons at 2469 Ironworks Pike in Lexington, Ky, on Aug. 15, 2016. Pablo Alcala palcala@herald-leader.com

During a March 2015 meeting, board member Nathan Billings expressed reservations about pursuing appraisals for conservation easements for Castleton Lyons. Billings, a lawyer, said the farm’s refusal to donate any portion of the 1,000-acre parcel gave him pause. He also was concerned about the lack of federal matching funds. The board had no guarantee that the money would stay in Fayette County, he said.

The issue came up several times during meetings this year, but with no resolution. In March, Meuser sent the board a letter saying it should pursue appraisals for Castleton Lyons because the farm and its parcels were highly ranked. Meuser argued that a local ordinance requires the board to pursue the “highest-priority conservation easements first.”

The board, however, has not pursued conservation easements in the order they were ranked in previous years.

Local money

In other documents, Castleton Lyons said the board has used only local taxpayer dollars to pay for conservation easements in the past.

In 2015, Don and Mira Ball were paid $1 million in local funds for development rights to their 291-acre farm on Old Frankfort Pike. The Balls applied to the federal program, but late in the process, the federal government discovered that the Balls, who own a home-building company, exceeded the income limit.

The farm was already under contract. According to an audio recording of the May 2015 meeting, the Balls said they thought the city had to honor its contract. A lawyer for the board said there didn’t appear to be anything in the contract that said the city could back out if federal funding falls through.

The board ultimately voted 7-2 in a June 2015 meeting to pay the $1 million using only local money.

Beth Overman, the PDR program director, said the Ball farm was the largest farm to receive only local money in the last ten years. Other farms that received only local money were much smaller and were only funded after matching federal funds had been exhausted.

“In the last ten years, 16 were not federally funded. But the maximum amount we paid was $347,000,” Overman said.

Overman also said the board has since changed its contracts to include language that would make local funding dependent on federal funding.

Protected ‘regardless of who owns it’

As board members again contemplate this week whether to pursue an appraisal for Castleton Lyons, it’s clear that the board remains divided.

The intent of the PDR program is to purchase the highest and best farmland in Fayette County regardless of ownership.

Don Robinson, member of the Rural Land Management Board

Billings said he would support pursing a conservation easement if Castleton Lyons would also consider donating part of the land into the program. Buying conservation easements for all of Castleton Lyons would deplete the budget of the program for several years. The board can’t commit to spend money it doesn’t have, Billings said.

“We have not heard that they are willing to donate any portion of the land,” Billings said. “The request is outside of what the rural land management board has the authority to do.”

Don Robinson, another board member, said the program is designed to protect prime farmland regardless of who owns it. Citing the threat of legal action, Robinson stopped short of saying how he would vote on the issue.

“The intent of the PDR program is to purchase the highest and best farmland in Fayette County regardless of ownership,” Robinson said. “It may be the biggest and contiguous piece of farmland left in Fayette County. It’s probably some of the best land that has ever applied to the program. It would be protected in perpetuity regardless of who owns it.”

Beth Musgrave: 859-231-3205, @HLCityhall

Purchase of Development Rights: How it works

What is the Purchase of Development Rights program?

The program buys conservation easements from landowners. Those easements guarantee the land is restricted to agriculture use and cannot be developed. Even if the land is later sold, the easement restricting development stays with the parcel. It can never be developed because those rights have been sold.

What farmland is eligible?

Any parcel of more than 20 acres that has good marketable value as a farm. Priority is given to farms located in the A-R zone — which is the major agriculture zone.

How are farms selected for purchase of development rights?

Farms that apply to the program are ranked according to a point system. The highest points are given for soil quality. Other categories include proximity to other protected farms, number of acres and historic quality.

How are development right values determined?

An independent certified real estate appraiser, who is paid by the Rural Land Management Board, completes an appraisal to determine the value of development rights.

Who pays for the development rights?

For the majority of easements, Fayette County pays for 50 percent and the federal government pays for the other half through the National Resource Conservation Services, a division of the U.S. Department of Agriculture.

Who qualifies for federal funding?

The federal government only allows American citizens to receive money through the program. Anyone who has an adjusted gross income of more than $900,000 per year also can not receive federal funding. If the farm is owned by a limited liability corporation, neither the corporation nor the members of the corporation can make more than $900,000 per year.

Who is on the Rural Land Management Board

The board has 11 voting members and two non-voting members. The board is appointed by the mayor and confirmed by the Urban County Council. Members represent a variety of constituencies, including two from the Fayette County Farm Bureau; two from the Kentucky Thoroughbred Association, one from the Home Builders Association of Lexington; one from the Lexington-Bluegrass Association of Realtors; one from the Greater Lexington Convention and Visitors Bureau; one from the Lexington Neighborhood Council; one from a private non-profit conservation group, one from an historic preservation group; and one from the Greater Lexington Chamber of Commerce. The two non-voting members are the Fayette County Extension Agent and the district conservationist from the National Resource Conservation Services.

Source: Fayette County Purchase of Development Rights Program and Fayette County ordinance establishing purchase of development rights program.

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