Windfall for Biscuit Run developer? Tax credits could become cash

The developer of the 1,200-acre, 3,100-home Biscuit Run project south of Charlottesville could receive tens of millions of dollars in state income tax credits that could later be sold for cash, if negotiations with Virginia officials to donate the property as a state park succeed.

Forest Lodge LLC and its principal, Hunter E. Craig, a local banker, real estate agent and developer, could strike a deal with the state before the end of the year, insiders say.

The amount of tax credits, the appraised value of the donated property and who — if anyone — buys the income tax credits are not matters of public record, officials said.

The transfer to the state could also put a wrinkle in Albemarle County’s plans for managing development. The 800 developable acres, and 400 acres originally proposed for a county park, are between Route 20 and Old Lynchburg Road, in one of the county’s designated growth areas. Urban development is only permitted in about 5 percent of the county’s land.

“They had anticipated building the project and then market conditions did change,” said Susan Payne, of Payne, Ross & Associates, a public relations firm that is representing Biscuit Run and the developer. She said the development partners hope to make the transfer this year.

Mark Graham, the county’s director of community development, said that the state has entered into negotiations to accept the land as a donation for a park with little input from county officials.

“The county has tried very carefully to define its development areas and limit the areas in which growth can happen,” Graham said. “The county would have greatly appreciated the state expressing an interest in a park and providing the opportunity to review [with the state] the county’s goals.”

Officials familiar with Virginia income tax credits say there are plenty of landowners pushing to close similar transfers before Dec. 31. That allows them to take advantage of favorable federal tax deductions that are due to expire next year, as well as the Virginia tax credit program.

Transferable credit

“Unlike a tax deduction, a tax credit is transferable: If you can’t use all of your credits, you can give them away or you can sell them,” said Larry Durbin, assistant tax commissioner with the Virginia Department of Taxation.

Virginia issues tax credits equal to 40 percent of the appraised fair-market value of donated land, Durbin said. Those credits could be sold, in whole or in part, to other taxpayers who want to reduce their tax bills.

Forest Lodge reportedly paid more than $46.2 million for the property in October of 2005.“There’s a robust market for them and a lot of people wanting to buy tax credits,” said Rex Linville, of the Piedmont Environmental Council, which negotiates many land donations to the state. “The credits are usually sold at a discount — about 80 cents on the dollar — so, if you owe $100 in taxes and you buy $100 of tax credits for $80, you’ve saved yourself $20 in actual taxes.”

Durbin noted that with larger properties such as Biscuit Run, state officials and the property owner often have several appraisals and determine a value through negotiations. Tax information for individuals and private corporations is not public information and no public record of the land’s appraised value, the amount of tax credits or the buyers of the credits will be available in public records, officials said.

Neither Payne nor state officials would discuss the property’s current value.

“It’s potentially an ongoing land transaction so we’re really not going to comment on anymore at this point,” said Gary Waugh, spokesman for the Virginia Department of Conservation and Recreation.

Waugh said that, in general, DCR does not discuss land transfer negotiations publicly, because doing so could place the state out of position for successful negotiations.

Original intent changed

Officials said the tax credit program was not originally designed for large-scale development properties, like Biscuit Run, but to assist cash-poor, land-rich farmers and families with large tracts.

“Many farmers and landowners are land rich, but cash poor and they cannot use the tax deductions and that’s why Virginia offers tax credits,” Linville said. “They are transferable because it’s unlikely that a farmer would have the type of income needed to take advantage of a tax deduction or of a tax credit to the amount that the property is worth. This gives the landowner an incentive to make a donation or an easement and allows them to recoup some of the value that they gave up.”

If Biscuit Run is donated to the state, the county will no longer receive about $325,000 per year in property taxes.

The most recent county assessment for the totality of the property’s nine parcels was approximately $43.7 million.

The county would also lose out on more than $38 million worth of proffers associated with the development, including money for a new school, as well as a road connecting Route 20 to Old Lynchburg Road.

However, Albemarle Supervisor Kenneth C. Boyd said no longer receiving the $38 million worth of proffers might not be as bad as its sounds, considering that much of what was proffered “offset the expense of the development there.”

“If you don’t have the development, you don’t have the expense,” Boyd said, adding that any future developments that might be done in place of Biscuit Run would likely require proffers as well.

However, the loss of what local officials had expected to be development area could eventually lead county officials to look elsewhere to expand the growth area.

“It would not break my heart at all if that was a beautiful state park,” Albemarle Planning Commission member Calvin Morris said. “Now, on the other hand, I fully realize, if it is a state park, we’re going to lose hundreds of precious acres that are currently designated development area.”

Morris said that he’s not prepared to call for an expansion of the county’s development area, if Biscuit Run does become a state park. However, he said that if the growth area were to be expanded, the only logical expansion would be “south of the city, and that’s where Biscuit Run is.”

The county plans to create a southern urban area master plan in about a year, Graham said.

Would it stay a park?

Officials note that Albemarle County is not park poor, having nine parks with 2,000 acres for organized sports, hiking, bicycling, swimming and other activities. Shenan-doah National Park borders the northwest portion of the county, and the Blue Ridge Parkway also is nearby, as are state and national forests.

A Virginia state park has seldom been converted into another use, but if the state does take over Biscuit Run, it could potentially use the area for something other than a state park. Although unlikely, the state could also sell it.

Waugh said he only knows of one circumstance in which such a conversion of a state park has occurred, which was during World War II, when part of what had been a state park was converted to a military base.

“The state does not like to restrict itself in regards to its property,” Linville said. “It’s possible that, at some point, the state could declare the property surplus and sell it, but that’s not likely. It’s a politically tough move to sell a park once it’s a park.”