By New Times
By Connor Radnovich
By Robrt L. Pela and Amy Silverman
By Ray Stern
By Keegan Hamilton
By Matthew Hendley
By Monica Alonzo
By Monica Alonzo
"It was gut-wrenching," says Bob Sharp, who prefers not to comment on the final transaction other than to say, "It was the best possible outcome -- other than that we got tossed out."
Peter Warren had been in touch with the Sharps for years because TNC recognized the property's ecological value. He also served on the committee that advises the Parks Department on natural areas.
When the Sharps began shopping for a deal that would allow them to sell a conservation easement to relieve their financial problems and still keep them on the land, they went first to the Arizona Game & Fish Department and then to the Parks Department.
The time was right.
In 1997, the State Auditor General published a report that was highly critical of the Parks Department. Since 1991, the department had been receiving $1.7 million a year from the Heritage Fund to acquire natural areas and another $440,000 to operate and manage them. But very little of the money had been spent, and the account had grown to $8.8 million. Furthermore, the department was inappropriately using the management monies to fund other positions, according to the Auditor General.
The Auditor General suggested that the agency get busy staffing a natural-areas program and buying property, among other things (like finally opening Kartchner Caverns), or it could be shut down.
Bill Rowe, who served on the State Parks Department advisory board and is also former president of the Arizona chapter of The Nature Conservancy, says the money was deliberately hoarded so the department could accumulate enough cash to buy a significant property.
But Matt Chew, who was recently fired from his post as head of natural areas for the Parks Department for writing an essay critical of the department published in the Boston Globe, chalks the surplus up to mismanagement and to reticence on the part of the board to actually buy any natural areas.
According to Chew, the money earmarked for management and operations was spread all over the department's budget. He says some of the natural areas the department purchased were severely mismanaged. He cites as an example the department's Sonoita Creek natural area, which the state bought in 1993. The problem: the department bought one side of a creek, but it hasn't been able to keep the cows on the other side from mucking up the riparian area and crossing over to park property.
"San Rafael Ranch we stumbled into," Chew says, "and we were lucky as hell to protect something that was our highest priority. We'd just been fumbling around miserably since 1991."
In January 1998, the Parks Department announced that it was setting aside $6 million for the purchase, and by early summer it seemed that all of the details were hammered out. The department would purchase a portion of the ranch outright and buy a conservation easement on the rest. Then the Sharps pulled out suddenly, spooked, according to Peter Warren, by how much they would have to pay in corporate and personal capital-gains taxes. They put the ranch on the market for the outrageous price of $24 million.
That's when The Nature Conservancy rode to the rescue and structured a deal. In late 1998, it bought the entire corporation from the Sharps for $11 million. Then, using a since-closed federal tax loophole, TNC declared the corporation to be nonprofit, thus sidestepping the corporate capital gains.
Immediately, TNC sold the southernmost 3,600 acres of the ranch to the Parks Department, including the landmark ranch house. TNC kept the remaining 18,500 acres but sold the state a conservation easement on all but 1,000 of those acres. The total price to the state for the deeded land and the conservation easement was $8.6 million, nearly all of the accrued natural-areas money. TNC planned to keep a conservation easement on the remaining 1,000 acres that could someday be turned into a bed and breakfast or dude ranch, should the new owners find that environmentally friendly ranching alone wouldn't pay the bills.
Humphreys and Lowell came along in September 1999 and bought the deed-restricted 18,500-acre ranch from TNC. The deal closed at the end of February for an undisclosed sum, although it appears the price may have been close to $4 million. TNC still had about $2.4 million to recoup, along with legal fees of more than $100,000 and about $15,000 in interest per month. Humphreys acknowledges that the deal was somewhere in that range and concedes that TNC probably made a small profit on the transaction. TNC will not confirm the figures.
Humphreys expects to run a profitable ranch operation as well as hold the land as a real estate investment, figuring that the value of the land will appreciate even with the conservation easement.
At first, the rest of the environmental community was upset that Heritage Funds earmarked for acquiring property were mostly acquiring deed restrictions on land that would not be open to the general public. The Sierra Club and the Western Gamebird Alliance, a hunters' organization, protested loudly to the media and the Parks board.
Kieran Suckling of the Center for Biodiversity concedes that conservation easements are a useful tool. But he wonders if the Parks Department paid too much.
"With this deal they are establishing a precedent where we are going to drain our environmental budget rapidly," he says, "or we're not going to be able to do anything with conservation."