Case Study 2

Case Study 2 - Preserving Land for Public Use
Background and Information
The Trust for Public Land (TPL) is a national organization that purchases and oversees the
improvement of large land sites for government agencies at all levels. Its mission is to ensure the
preservation of the natural resources, while providing necessary, but minimal, development for
recreational use by the public. All TPL projects are evaluated at 7% per year, and TPL reserve
funds earn 7% per year.
A southern U.S. state, which has long-term groundwater problems, has asked the TPL to manage
the purchase of 10,000 acres of aquifer recharge land and the development of three parks of
different use types on the land. The 10,000 acres will be acquired in increments over the next 5
years with $4 million expended immediately on purchases. Total annual purchase amounts are
expected to decrease 25% each year through year 5 and then cease for this particular project.
A city with 1.5 million citizens immediately to the southeast of this acreage relies heavily on the
aquifer’s water. Its citizens passed a bond issue last year, and the city government now has
available $3 million for the purchase of land. The bond interest rate is an effective 7% per year.
The engineers working on the park plan intend to complete all the development over a 3-year
period starting in year 4, when the amount budgeted is $550,000. Increases in construction costs
are expected to be $100,000 each year through year 6.
At a recent meeting, the following agreements were made:

 Purchase the initial land increment now. Use the bond issue funds to assist with this
purchase. Take the remaining amount from TPL reserves.
 Raise the remaining project funds over the next 2 years in equal annual amounts.
 Evaluate a financing alternative (suggested informally by one individual at the meeting)
in which the TPL provides all funds, except the $3 million available now, until the park's
development is initiated in year 4.
Case Study Exercises

1. For each of the 2 years, what is the equivalent annual amount necessary to supply the
remaining project funds?
2. If the TPL did agree to fund all costs except the $3 million bond proceeds now available,
determine the equivalent annual amount that must be raised in years 4 through 6 to
supply all remaining project funds. Assume the TPL will not charge any extra interest
over the 7% to the state or city on the borrowed funds.
3. Review the TPL website (www.tpl.org). Identify some economic and noneconomic
factors that you believe must be considered when the TPL is deciding to purchase land to
protect it from real estate development.
ANSWER
1. For each of the 2 years, what is the equivalent annual amount necessary to supply the
remaining project funds?
P= 4 + 3(P/F, 7%, 1) + 2.25(P/F,
7%, 2) + 1.678(P/F, 7%, 3) +
1.815(P/F, 7%, 4) + 1.6(P/F, 7%,
5) + 0.75(P/F, 7%, 6)
= 13.1716 OR 13,171,600
A= (13.1716-3.0)(A/P,7%, 2)
= 5.6258 OR 5,625,800 per year
2. If the TPL did agree to fund all costs except the $3 million bond proceeds now available,
determine the equivalent annual amount that must be raised in years 4 through 6 to
supply all remaining project funds. Assume the TPL will not charge any extra interest
over the 7% to the state or city on the borrowed funds.
Remaining project fund needs in year 3

F= (13.1716-3)(F/P, 7%, 3)
=12.4602 OR 12,460,200
A= 12.4602(A/P, 7%, 3)
=4.748 OR 4,748,000
3. Review the TPL website (www.tpl.org). Identify some economic and noneconomic
factors that you believe must be considered when the TPL is deciding to purchase land to
protect it from real estate development.
When deciding to purchase land to protect it from real estate development, various economic
and non-economic factors should be considered to ensure a comprehensive evaluation. Here
are some key factors in each category:
Economic Factors:
 Market Trends and Demand:
- Prospective Value: Assess the current and future demand for real estate in the
area. Understanding market trends can help predict the potential value of the land
for development.
 Opportunity Cost:
- Foregone Development Potential: Consider the potential economic benefits that
could arise from allowing the land to be developed. Compare this with the value
of preserving it for non-development purposes.
 Financial Resources:
- Cost of Preservation: Evaluate the financial feasibility of purchasing and
maintaining the land for conservation purposes. Consider funding sources, grants,
and ongoing management costs.
 Tax Implications:
- Property Taxes: Understand the property tax implications associated with different
land uses. Some jurisdictions may offer tax incentives for conservation easements
or land preservation.
 Job Creation and Economic Impact:
- Development Contributions: Consider the potential economic benefits of real
estate development, such as job creation, increased local spending, and tax
revenues that could contribute to community development.
Non-Economic Factors:
 Environmental Importance:
- Biodiversity: Evaluate the ecological value of the land, including its role in
preserving biodiversity, wildlife habitats, and ecosystems.
 Cultural and Historical Significance:
- Heritage Preservation: Assess whether the land has cultural or historical
significance. Preserving such sites may contribute to the cultural identity of the
community.
 Aesthetic and Recreational Value:
- Public Enjoyment: Consider the scenic and recreational value the land provides to
the community. Preserving green spaces can enhance the overall quality of life.
 Community Well-being:
- Health and Livability: Examine how the preservation of the land may positively
impact the health and well-being of the community, providing spaces for
recreation, exercise, and relaxation.
 Sustainability and Climate Considerations:
- Carbon Sequestration: Assess the role the land plays in carbon sequestration and
its overall contribution to sustainability and climate change mitigation.
 Community Support:
- Public Opinion: Consider the level of community support for conservation efforts.
Public opinion and engagement can influence the success of preservation
initiatives.
A comprehensive evaluation that balances economic and non-economic factors is crucial for
making informed decisions regarding land preservation. It often involves collaboration
among various stakeholders, including government entities, environmental organizations, and
the local community.

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Case Study 2 - Preserving Land for Public Use

Background and Information

At a recent meeting, the following agreements were made:

Case Study Exercises

Remaining project fund needs in year 3

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