Fair Market Value Leases Could Fund Jersey Park System

Responding to protests from Public Employees for Environmental Responsibility (PEER) and others, the State of New Jersey has dramatically hiked the lease payment it is demanding for a proposed shale gas pipeline crossing state parklands. Despite this huge increase, the state is still not collecting fair market value on hundreds of leases, easements and concessions, thus forfeiting millions of dollars.

Tomorrow, the state Department of Environmental Protection (DEP) is holding a public hearing on its plan to lease up to 30.21 acres of state land in High Point, Long Pond Ironworks and Ringwood State Parks to Tennessee Gas Pipeline Company. This pipeline is just one segment of the "Northeast Pipeline Project" to import natural gas into the New York City metro area. The gas is produced by controversial "fracking" of Marcellus shale clay overlying most of Pennsylvania and New York's southern tier.

DEP originally proposed a lease payment for an earlier pipeline segment of just $45,000 for a 24-year term. After protests led by PEER, the state raised that rent to $180,000. DEP is now proposing for the next pipeline segment a rent of approximately $7.84 million over the same period - a more than 170-fold increase over what DEP proposed for the first segment. Even with this hefty hike it is not clear that DEP is charging the full market value as it is required to do by law.

"PEER is proud to have won New Jersey taxpayers $8 million in additional revenue but they may be owed even more," state New Jersey PEER Director Bill Wolfe, who testified against the original lease in July 2010 before the State House Commission which must approve all state land leases. "DEP proposed a lease that was less than pennies on the dollar due to a flawed real estate appraisal but we still do not know at what price a proper appraisal would peg this lease."

Over the last several years, a series of audits by the Office of Legislative Services found major flaws in the DEP Office of Leases and Concessions, most notably its failure to charge fair market value or collect overdue lease and concession payments. In response to these audits and PEER advocacy, the Legislature mandated that DEP "conduct a re-appraisal of the rents and fees charged for all residences and other buildings and structures, and for utility easements and right-of-ways, located on State park or forest lands to ensure they reflect current fair market values and will continue to do so" (P.L. 2008, c.31). DEP was then supposed to integrate this with its plan to fund state parks and forests, a plan due on July 1, 2009.

More than two years after this statutory deadline, DEP has done neither mandated task. Instead the Christie administration has explored a number of small revenue measures to commercialize parks, such as selling corporate naming rights for park facilities and privatizing various park operations.

"As this new lease richly demonstrates, charging fair market value for utility easements from the energy industry, as the state is required to do, would be a major funding source for depleted parks and state lands budgets," Wolfe added. "If the Christie managers want to run the state more like a business, it should start by collecting the rents truly owed. Doing this basic job would eliminate the need to panhandle in the parks with chintzy privatization schemes."