Land Bank revenues dip in 2008
Reflecting the general downturn in Island real estate sales, Martha's Vineyard Land Bank revenues are off significantly in fiscal 2009, compared with a like period in the prior fiscal year.
For the period that began with the start of the 2009 fiscal year on July 1, until Friday, October 31, Land Bank revenues are 42 percent off. The Land Bank took in $2,450,000 on 461 transactions compared to $4,250,000 on 471 transactions in the same period one year earlier.
The Land Bank is a public agency funded through a two-percent surcharge on most real estate transfers in the six Island towns. Established in 1986, the Land Bank owns more than 2,876 acres that are available to the public for a variety of conservation, agricultural, and recreational purposes.
James Lengyel, Land Bank executive director, said this week the most significant factor in current revenues was August real estate transactions. "This August was extraordinarily slow," said Mr. Lengyel. "October and September were off, but not surprisingly so."
Photos by Susan Safford
As an example, he said in August 2008 the Land Bank took in $310,000, compared with August 2007, when revenue for the month was $1,585,000. Less striking is October 2008. The Land Bank received $938,000, compared to $1,120,000 in 2007.
Mr. Lengyel said he uses several benchmarks to gauge Land Bank revenues. The first is to compare the current fiscal year to the one immediately preceding it.
He said that if revenues continue on the same track, Land Bank revenues for this fiscal year, which ends June 30, 2009, would be approximately $5,800,000. By contrast, audited Land Bank revenues for the fiscal year that ended June 30, 2008 totaled $9,580,000.
The second is to look at the most recent high point in real estate sales, and that would be fiscal year 2006, the period from July 1, 2005 to June 30, 2006.
The Land Bank has weathered downturns in Martha's Vineyard real estate market in the past.
"The way it is going it appears that there has been a 50- to 55-percent drop from the peak year of 2006," Mr. Lengyel said. "And that is analogous to the drop that the Land Bank experienced in the years 1988 through 1991. So from the Land Bank perspective, at least today, there is a similarity between the two periods, and we will see if that continues through the balance of the fiscal year."
The Land Bank has adopted the same policies it used during the previous downturn, from 1988 to 1991. "We are doing now what we did then, which can be summed up in three words," said Mr. Lengyel. "Adjust, adjust, adjust."
Those adjustments mean the Land Bank will postpone any new land acquisitions unless the property is modest in size or the price is a particular bargain. Mr. Lengyel said the Land Bank's top priority is repayment of debt. The "creditors come first," he explains
Mr. Lengyel estimates revenue of $5,800,000 for this fiscal year. Cash on hand totals $15,800,000.
The annual operating budget is divided between administration and land management. In the current year the Land Bank's administrative budget is $442,000. The land management budget is $776,000.
Current annual debt service, the amount the Land Bank must pay for purchases already made, is $7,800,000. Of that amount $4.7 million is payment on long-term debt. The balance is short-term debt, in the form of promissory notes that the Land Bank expects to pay off by 2011.
"Presumably by then, Land Bank revenues will have rebounded as well," said Mr. Lengyel. But for now the plan is to sit tight, dip into the cash reserves to make up any shortfall between revenues and debt payments and avoid taking on any new debt.
Based on current revenue projections, the Land Bank will have no problem satisfying its creditors, said Mr. Lengyel, "but when it comes to land acquisitions our spontaneity is going to be curbed."
For many years the hot real estate market provided the Land Bank with the luxury of pursuing its core properties and acting quickly when opportunities arose. That spontaneity is over, at least for the near term, Mr. Lengyel said.
Other cutbacks in the next fiscal year may be necessary. That will become clearer as the year proceeds, Mr. Lengyel said. Those savings could take the form of projects delayed, for example new footbridges or trailhead construction.