Property Rights

[cowman]

Got away to the South Pacific for a bit...you know how it is...all work and no play makes Jack a dull boy! It was okay, but was pretty well homesick after about 10 days.
Just one other thing about this grazing lease thing: At one time the grazing leases were owned by guys trying to make a living running cattle. Today many of the grazing leases are being bought up by wealthy businessmen for a playground...oh they are raising cattle, but the reality is they are just playing "cowboy"? Or having a great place to take their buddies out hunting, horseback riding, quadding etc.? A classic example of this is the heritage ranches south west of Calgary? They say the road is full every morning from Turner Valley with BMWs and Hummers, on the road to downtown Calgary oil offices!

[coppertop]

cowman, there are still a few people in this area that rely on the grazing leases for pasture but one by one they are getting out of the cowbusiness, and are keeping enough cattle around to stock the grazing lease to avoid losing it.
One person that I know of sells off the entire herd of 35 pair each fall, buys new pairs in the spring and out to the grazing lease they go. Of course the lease rental checks come in every year which is a tidy sum.

[farmers_son]

I guess there are differing opinions out there regarding crown land. However the gist of this thread is that a municipality is selling crown land that was leased to area families for probably generations and is this being done fairly.

To correct my earlier statement that in order for the investment in crown land to equal the investment in deeded land the crown would have had to pay the leasee $2000 just to take the lease, I have reworked the numbers and using the assumptions I outlined the correct number would be $911 per quarter section. That is the money that the leasee would have had to been paid up front to farm that lease versus that person buying deeded land for $8000 per quarter in 1967. I think an argument could be made that the province owes those people who stuck it out in the depressed regions of the province, stayed and made communities and built roads, schools, a rural economy. Just to have some fun with the numbers, if the $911 that arguably should have been paid to the leaseholders to stay and farm that land was invested at 9%, today it would be worth $31,189 per quarter.

The important point is that the lease holder was not getting a sweetheart deal at all and those who wistfully look across the fence at people who depend upon crown leases to make a living are mistaken. Not only was the crown lease an underperforming investment but the leasee only receives about half the surface revenue per well that they would receive if that same well was located on deeded land even though the inconvenience etc. is exactly the same. The grass often is not greener on the other side of the fence.

Tax recovery lands may not be exactly the same as a conventional crown lease but assuming the tax recovery land is real property as cowman points out then these people should have had an equity value in that land because they could have transferred it to someone else for an amount of money. If so, then that equity value they would have had should be recognized and deducted from the price those leaseholders would have to pay for the land if it is sold and they buy it.


The important point is that the lease holder was not getting a sweetheart deal at all and those who wistfully look across the fence at people who depend upon crown leases to make a living are mistaken. Not only was the crown lease an underperforming investment but the leasee only receives about half the surface revenue per well that they would receive if that same well was located on deeded land even though the inconvenience etc. is exactly the same. The grass often is not greener on the other side of the fence.

Tax recovery lands may not be exactly the same as a conventional crown lease but assuming the tax recovery land is real property as cowman points out then these people should have had an equity value in that land because they could have transferred it to someone else for an amount of money. If so, then that equity value they would have had should be recognized and deducted from the price those leaseholders would have to pay for the land if it is sold and they buy it.

[Horse]

Farmers-son lets try some of my figures just off the top of my head. Origanly leases were free and most were $10 per yr mostly bush, land with mabey 50 AUM at $.78/AUM .
Deeded land at $10,000/ at 8% 25yr comes to app $25,000 you have paid, anual cost to service $980 , cost of lease $40 App $940 left owning minus lease, $940 invested at 4% for 25yr is close to $15,000 and you have had the use of lease plus all the lease payments are 100% deductable, I dont think I we can assume just because land is where it is that it will always be on such a positive margin.
I have read many documents that to cut your costs you have to increase your land holdings and the far cheapest way to do that is RENT.

[farmers_son]

The original homesteads were free too but in the south east corner of Alberta people could not make a go of it with free land.

You make an excellent point about increasing your land holdings. The real advantage some of those people had in those areas was not cheap crown leases but the ability to expand. Those that took advantage of that ability to expand did well.

I can follow your figures. I would point out that assuming the person purchasing the land could get a loan with nothing down, he/she could purchase a quarter for $10,000 (using your figures) and at the end of 25 years would have a paid for quarter section of land now worth about $34,000 assuming 5% annual growth. Since the person had no equity in the land to begin with in year 0 and had assets worth $34,000 in year 25 that investment in deeded land earns an infinite return on the original investment.

The person renting the land does not acquire an equity position and using your figures would only realize a 4% before tax return on the money invested in the bank. When you compare an infinite return versus a 4% before tax return you can see why leasing the crown land was not a good investment.

Leasing offers advantages, owning does too. It is my opinion that owning land has been good for those who bought years ago. The survivors of the original generations around Taber who were leasing the land are now being hung out to dry. I doubt very much that if any of us were to find ourselves in their position today that we would be very comfortable. Seven or so municipal councilors will decide if those people get to keep farming or not. That is what is happening at Taber.

And if the land is sold to others who is going to buy it? Not necessarily the people who have been taking care of that land and building the communities for generations.

[wbrower]

Also why should the County or M.D. be entitled to a windfall profit over and above the value of the unpaid Taxes against these lands.

[coppertop]

The county or MD must sell the lands by public tender. So of course they will sell to the highest bidder. The county will have a reserve bid in the amount of the value of the property. Counties and MD's can retain this property, change the zoning to Municipal Reserve land or whatever they choose if title to these lands rests with the municipality.

[farmers_son]

Coppertop: wbrower said "Several counties and MD’s have taken back administration of these lands from the province and came to amiable terms with the farmers that had previously leased and integrated these lands in their operations. Most cases I am aware of the Local government sold the land in question to the lessee on terms that were affordable and that did not break the original operator. In this way the local government was able to recover and receive tax monies that had not been paid, and the farmer was able to carry on farming."

How is it these other municipalities were able to respect the previous tenants of the land but it seems you are suggesting the Municipal District of Taber has their hands tied and must sell the land to the highest bidder. It would seem that if one municipality can do it then Taber can do it too.

[coppertop]

Under the municipal government act, any municipal owned lands that are offered for sale must be sold by private tender. In this instance there are likely circumstances that are outside of what is considered to be municipally owned lands. In one case I was aware of during my years on council a business had leased a lot from the municipality adjacent to his operation. He wanted to purchase the lot, and the refused indicating that the lands in question were not being considered for sale. Upon getting a legal opinion we were advised that should the municipality offer the land for sale it must be by the tender process, but we could allow the current leasee the opportunity to match the highest bid. I realize this is not the same issue as what is being dealt with in the MD of Taber.

[wbrower]

Coppertop, The question is: Will this new Stelmach government, that was put in power by rural Albertans, entrench Property Rights.

Or are they just a new face on the same old big oil shuck and jive routine that has short changed rural Alberta since Peter Loughheed refused to include our Property Rights in Trudeau's constitution.

[Horse]

F-S I still dont see why someone should get a preferencal rate. Lets say joe looses his farm to the bank for lack of payment do you think the bank should sell it to tom for what is owing or mabey 50% of what is owing or do you think it should be tendered to the highest bidder? We will all be paying the loss to the bank in hidher rates.
A few yr ago there was a case here where a farmer lost his land and the gov sold it to his brotherinlaw for 40cents on the dollar and there was no oportunity for otheras to bid was that fair? The 40 cents was mabey because mabey he was that far in the hole that40 cents was still a fair price but the real kick was that there was other neibours that would have met that or more but no chance, I will agree that it could be tough but I would like to see things transparant.
I know of a 1/2 section that was tengered by the owner because there was 2 neibours that wanted it, 1 bid 40,000 more than the next highest just because he wanted it or mabey to stop the other from getting it so crap happens but at least everyone had a fair chance.

[coppertop]

The thing I don't understand about this issue is whether or not the taxes owing on these lands was owed to the municipality. All property taxes are now paid to the municipality and any failure to pay property taxes for a period of three years results in the property being put up for tax recovery sale. If the properties in the MD of Taber were in tax arrears to the MD, then they are within their rights to put these lands up for sale, and under the provisions of the Municipal Government Act the lands must be sold by public tender, possibly with the leasee having the opportunity to match the highest bid. In my view this is a fair and equitable way of disposing of these lands.

I don't know what the government will do with respect to entrenching Property Rights, but I would suspect that they will look to the rural and urban municipalities associations for some direction, as they are the ones most affected when taxes are left unpaid.

[farmers_son]

Coppertop: I will quote wbrower as he is more familiar with the exact situation but I agree with his understanding “Tax recovery lands are lands, most likely old homesteads that were abandoned or taken for non payment of taxes years ago. These lands were administered by the provincial government along with grazing leases until recent times there was a cabinet decision to turn tax recovery land back to the counties and MD when requested by the local government to do so." I would add that I would expect the municipality did not even exist at the time these lands were taken over by the crown. They are not tax recovery lands in the same way that would happen today if you did not pay your taxes and the municipality would offer the lands for sale. The owner would have up to the sale date to pay his/her taxes or the land would either be sold at the appraised price or higher or else be transferred to the municipality. I believe these were crown leases for generations and as such the leaseholder would have had an equity position in those leases. It appears from this conversation that the leaseholder equity value was lost when the province handed over the property to the MD of Taber.

Horse; It would seem that fair depends upon which side of the fence you are sitting on. There have been cases in this area where lenders did make special provisions so that land could stay in the family. At that time most here thought that was very fair of the bank, it was actually a good business move on the banks part. It seems like there is more competition for land today and the neighbours here are cutthroat when it comes to land. Quite a change from even 10 years ago. Myself I am guided by the principle do unto others as you would have others do unto you. If I was in the boots of the leaseholders around Taber I would want to be treated fairly as it seems people were treated fairly by other municipalities.

[coppertop]

The MD of Taber was incorporated as the MD of Eureka in 1945, so they are one of the older incorporated rural municipalities in the province.

I have searched on the provincial government website for any information on these lands, it really intrigues me.

[coppertop]

Finally found info on tax recovery lands.The government began acquiring these lands in the 1930's. They are transferred to municipalities upon request, and then the cost is $1.00 per parcel.
The municipalitiy must honor grazing leases for the current and ONE additional term prior to offering the lands for sale or lease by public tender. In my view this is a fair practice, the lands are NOT arbitrarily taken from the leasee, but after a period of time are offered to anyone wishing to buy or lease them.

I do not think that any individual should have lifelong control of lands that are owned by the public, that is the position I took during the time of the Thurber committee's review of grazing leases and it hasn't changed to date.