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Open Space Institute releases Plum Creek financial analysis

LATEST UPDATE November 3, 2006 

Plum Creek's Concept Plan before Maine's Land Use Regulatory Commission (LURC) 

Open Space Institute to release analysis of Plum Creek's revised development plan for the Moosehead Lake region of Maine in December 

Plum Creek Timber Company, the nation's largest private landowner, has proposed to rezone 426,000 acres of its land around the Moosehead Lake in northwestern Maine to develop as many as 1,000 lots. The development proposal has raised important questions about the amount and location of residential and commercial structures, as well as the balance of conservation and development in the region. 

The Open Space Institute has developed a new model to determine the net financial benefit to the company from Plum Creek's plan including both proposed development and conservation measures as well as alternatives the company may pursue if its rezoning request is turned down. Having refined an earlier version of the model described in a recent press release OSI will release soon an analysis of Plum Creek's revised plan. Our goal is to help stakeholders understand the financial return to Plum Creek from approval of the concept plan versus developing its land without, and therefore to assess the financial feasibility of alternative development scenarios. 

The financial model and baseline analysis were developed in partnership with the Margaret Chase Smith Policy Center at the University of Maine and Industrial Economics, Inc (IEc) and funded with contributions from the Merck Family Fund, Jessie B. Cox Charitable Trust, Horizon Foundation, Sudbury Foundation, Orchard Foundation and Davis Conservation Foundation. We will be posting our analysis of Plum Creek's revised plan on this web site in the in the next three to five weeks. 

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New York, NY - March 16, 2006 - Debate has intensified over the proposed development plan for a large swath of land in Maine's Moosehead Lake region by Plum Creek, one of the nation's largest private timberland owners. OSI has developed a new financial model to provide a framework for understanding the development plan, and on March 15th, announced the first independent studies of the Plum Creek development proposal at a meeting of community, conservation, and business leaders in Greenville, Maine. 


The model and analysis of Plum Creek's development options are the subjects of two discussion papers developed by the Open Space Institute (OSI) in partnership with the Margaret Chase Smith Policy Center and Industrial Economics, Inc. (IEc). The papers, were released this week at a meeting of community, conservation, and business leaders in Greenville. 

To download OSI's Plum Creek studies click on "Baseline Development Scenario" or "Plum Creek Financial Model.”

The prospect of significant financial return to Plum Creek from approval of its plan creates both challenges and opportunities to balance private and public benefit. The OSI model seeks to provide community, environmental, and public policy leaders with the information and tools to assess their preferred mix. 

The Seattle-based Plum Creek is the nation's second-largest timberland owner with almost 900,000 acres in Maine. Plum Creek, a timber real estate investment trust (REIT), is currently revising its April 2005 concept plan -- which included 975 home lots and two resorts, as well as sporting camps, campgrounds, affordable housing and mill sites, and various conservation measures in response to public concerns about proposed development. It is expected to submit a revised plan to Maine's Land Use Regulatory Commission (LURC) in early April. The Natural Resources Council of Maine recently offered an alternative vision with clustered development that envisions a maximum build-out of only 450 lots. 

“The OSI discussion papers raise important issues about alternative development paths facing Maine policy-makers and residents,” said Jonathan Rubin, director of the Margaret Chase Smith Policy Center at the University of Maine at Orono, which has helped to review the papers. “The work also helps to illuminate the challenges, as well as uncertainties, in assessing the broader balancing of public interest and private gain in the region.” 

“Our goal is to help inform public dialogue and improve public decision-making,” said Peter Howell, OSI's vice president. “We believe that in the currently polarized environment, unbiased information can help key parties better assess and potentially act on common interests.” OSI developed its financial model in response to a recommendation made by the Northern Forest Land Council in its 10th Anniversary Report in 2005, for increased analysis of the financial objectives and interests of the new forestland owners, in particular REITs and timber investment management organizations (TIMOs). 

“The landscape of the Northern Forest is being transformed by the large-scale change in forestland ownership,” observed Lloyd Irland, a leading timber economist and one of three authors of a recent study of changes in forest landownership by the Manomet Center. “It is essential that we understand in greater depth the motivations, desires and constraints faced by these new owners. This analysis goes a long way in helping Maine residents and policy-makers to understand how REITs such as Plum Creek operate, and the financial pressures forcing forest landowners to consider subdivision and development.” 

Plum Creek stands to earn significantly more under its concept plan than through traditional zoning because it could develop more of its lands and more quickly (a dollar of revenue today is worth more than ten years from now), according to OSI's second discussion paper, “Plum Creek Financial Model.” A concept plan also requires landowners to commit to some level of permanent conservation. 

Although LURC's review criteria for concept plans do not address a landowner's economic return, financial benefit is a useful approach and provides one, though by no means the only, metric for analyzing the balance of private gain and public benefit. 

“To be feasible, any alternative development scenario must be financially attractive to Plum Creek,” said Tom Walker, a principal at Industrial Economics, Inc., which developed the financial model. “You can't construct a workable alternative without understanding Plum Creek's financial objectives and constraints. By providing such information, we seek to provide diverse stakeholders with the tools to explore the range of outcomes that efficiently balance private gain and the array of public benefits being sought.” 

If Plum Creek's revised concept plan is withdrawn or not approved, it can always develop its land through traditional zoning a more piecemeal and time-consuming approach that yields lower financial return, according to OSI's discussion paper. The OSI analyses also found that, assuming no major changes in zoning or regulation, Plum Creek could secure approval for between 447 and 800 residential lots compared with 975 lots it is seeking through its concept plan. It is possible that some of this development could be highly scattered and also likely that there would be less permanent conservation with this approach. 

“It is difficult to predict the future of land use regulations in the unorganized territories over the next thirty years, though the general trend has been toward policies that seek to target growth areas and discourage sprawl,” said Jerry Bley of Creative Conservation, principal author of the discussion paper, “Baseline Development Scenario.” “A well conceived lake concept plan can, in theory, reduce risk to the landowner by assuring specific development opportunities and can reduce the risk to public resource values by incorporating permanent conservation for important recreation and conservation lands.” 

The discussion papers were commissioned by OSI, a New York-based land conservation organization that has facilitated the protection of large-forested landscapes in Maine through its Northern Forest Protection Fund. The papers were prepared by a team of experts brought together by Industrial Economics, Inc., a Massachusetts-based consulting firm, that included a Maine land use expert and registered Maine appraiser. The Margaret Chase Smith Policy Center has helped to facilitate an ongoing dialogue and expert technical review of the discussion papers.

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