Five years ago, local investors bought 1,200 acres of Albemarle County land for $46.2 million. The developers promised to build the county’s biggest and best neighborhood, and after two years of review, a plan for 3,100 housing units won approval and accolades. The county government said it was a good thing.
After I.J. Breeden bought Biscuit Run’s 1,300 acres in 1971 for $1 million, intent on developing the property, he left it to his son David and daughter-in-law Elizabeth to manage. In 2005, they sold the property for $46.2 million.
Nine months ago, the Commonwealth of Virginia bought the same 1,200 acres for $9.8 million and an undisclosed amount of tax credits. The land would forever be preserved as open space, and the Charlottesville area would finally get a state park. The state government said it was a good thing.
But the Biscuit Run acquisition process, from start to finish, was a hasty affair that involved no public input and a network of businessmen and politicians with close ties. No one who negotiated the deal could control how much taxpayers paid—the decision is left to a few unelected bureaucrats in the state tax department. It very well could have bailed out businessmen who had made an ill-timed real estate investment at the height of the bubble.
As far as I can tell, the story of Biscuit Run isn’t a story of illegal corruption. It is about something far more prosaic, and possibly more disturbing—how influential people align their interests and justify their actions by saying they did it for you and me.
Forty years of development potential
The land we call Biscuit Run—sometimes known as Forest Lodge—has been marked for development since at least 1971. That’s when a Northern Virginian by the name of I.J. Breeden paid $1 million for 1,300 acres.
Breeden, a developer with experience in Manassas, saw in the cattle fields of Forest Lodge/Biscuit Run the next big development boom. Albemarle County had seen tremendous growth in the 1960s, particularly with development along the 29 North corridor. Breeden thought the south was the next logical place, and he bet on a large chunk of land, relatively flat, that lay between two ridges and that would not require an expensive bridge across the Rivanna, according to his daughter-in-law, Elizabeth Breeden.
Craig’s eventual plans for the Biscuit Run development earned praise from then-Supervisor David Slutzky (top), who called it "a poster child for how development can make its way through our process and add value to the community." With those plans scrapped in favor of making a state park out of the property, Supervisor Dennis Rooker (bottom) was none too pleased: "You’ve got the, quote, saving of 850 acres of—not farm land, not rural land—but development area land."
Included in the purchase was the Southwood mobile home park with 350 trailer pads. I.J.’s first development plan was to basically double the trailer park, and he tasked his son David with the job. David moved to Biscuit Run in 1974, soon joined by his new wife, Elizabeth.
“I clearly remember the application to double the trailer park,” says Elizabeth. “They had to have [the public meeting] over at Piedmont Virginia Community College because everybody was so undone by the prospect of a 600-trailer trailer park.”
After the Board of Supervisors shot it down, the Breedens presented a new plan that was in many ways similar to the one that developer Hunter Craig would propose 30 years later, a large mixed-use development that would include a school site and connector road from Route 20 to Old Lynchburg Road. It, like the version to come in 2006, would have been the largest residential development in Albemarle County history.
But the Board of Supervisors wasn’t ready for it. “I think it was just the magnitude of the development,” says County Executive Bob Tucker, who then was in the planning department. “It would have been the first development off 20 South of any significance.”
From that point until 1980, David and Elizabeth Breeden would occasionally bring ideas to the county planning department—Elizabeth says they wanted to make sure the county didn’t forget that they wanted to develop the property. In 1980, the county underwent a sweeping rezoning, establishing 5 percent of the county as designated growth area, where development would be encouraged, and labeling the other 95 percent rural area, where development would be discouraged. The Breedens were content that most of the land—about 800 acres—was included in the newly established growth area.
They also became more involved in art than development. “David was building houses, supposed to be developing and building trailer pads, and making art in the garage,” says Elizabeth. “And I said, ‘Honey, you’re not good at those other two things. Why don’t you stick to the arts?’ And he was very good at the arts, so it worked out for us.”
Soon, the names “Forest Lodge” and “Biscuit Run” became synonymous with eclectic sculpture and Charlottesville’s longest running pot luck, a weekly affair that lasted from 1974 until David’s death in 2006.
“This will be the gold standard”
An earlier death in the Breeden family brought back the specter of development at Biscuit Run—that of Hilda Breeden, David’s stepmother. In order to satisfy the 25 heirs, Biscuit Run was put up for auction in 2005, the high-water mark of the local real estate bubble. It couldn’t have come at a better time for the family: The highest bidder paid $46.2 million for the 1,200 acres.
Who was the highest bidder? A conglomerate of investors who called themselves Forest Lodge LLC, led by local developer Hunter Craig, manager of the limited liability company. Craig, who did not return repeated calls for comment on this story, would only ever say that the others were locals, and that no big corporation was involved—“unless you call me and several other local investors a big corporation.” Rumors circulated about the identity of those others, but it would be years until anyone else stepped forward as a Biscuit Run investor.
Among local developers, Craig is hard to pin down, a man without the confrontational chutzpah of Wendell Wood or the “Developers Unite!” team spirit of Chuck Rotgin. Vice Chairman of Virginia National Bank, which he helped open in 1998, Craig runs a property investment company in his own name. He owns a number of buildings in the City of Charlottesville, both on the Corner and Downtown, including the building that currently houses C-VILLE.
In Albemarle County, Craig, like I.J. Breeden, trained his sights on the southern side of town. In the 1990s, he created Mill Creek and Mill Creek South, developments that represented over 400 housing units, most of them understated wood-paneled cottages nestled in the rolling hills adjacent to Avon Street Extended. For years, he has moved slowly toward building a major shopping center on the south side of town off Fifth Street Extended, with co-developer Coran Capshaw, whose representative confirmed for the first time publicly that he is also a Forest Lodge investor.
Biscuit Run could easily surpass Craig’s other work, but to unlock its development potential, he first had to rezone the property—the same process that had repeatedly stymied I.J. Breeden in his attempts to reap a fortune from the farmland. Craig, either by luck or design, handled the two-year rezoning masterfully (though some would argue that in the process he sowed the seeds of the project’s ultimate failure).
Craig assembled the A-team of the local development business—attorney Steve Blaine, engineer Scott Collins, public relations firm Payne Ross. The Biscuit Run playbook was filled with all the classics of the development trade. The team first unveiled a behemoth, with 5,000 housing units, unleashing the expected froth and horror—the cars! the school kids! the lost open space! the cars! Then, Forest Lodge LLC redesigned the project, enlisting the planning expertise of a prominent national firm, Torti Gallas, the same firm that Albemarle County had hired several years earlier to revamp its code of development and create the so-called neighborhood model. And with Biscuit Run, Torti Gallas designed an exquisite example of the neighborhood model, with bike trails and bus stops and pocket parks and village centers, all illustrated with charming renderings. Even better, the number of housing units was scaled down to 3,100—still the biggest residential development in county history, but much smaller than the 5,000 first proposed. The froth and horror simmered into a resigned grimace.
There are two major stages to the local rezoning process: the Planning Commission and the Board of Supervisors. Though the Board has ultimate authority, it is more likely to approve something that the Planning Commission has also approved.
With its first go-round at the Planning Commission, in March 2007, Biscuit Run got shot down unanimously. Why? Albemarle County needed more money.
Rezonings often involve quasi-bribery. Local government looks more favorably on projects that “off set” their cost to society in the way of infrastructure, schools, and fire stations. The developer will proffer to pay for a road or set aside room for a school or simply give the local government cash. Put enough in the kitty, and eventually most local governments acquiesce to the rezoning. At that March 2007 Planning Commission meeting, Biscuit Run proffered what staff valued at $20 million—not enough to appease the county.
The leverage is not entirely on the side of local government, however. A developer can choose to walk away from the rezoning and simply build by-right, i.e. build what the existing zoning allows. In the case of Biscuit Run, by-right development meant between 1,000 and 1,400 units, but without any proffers—no public park, no school site, no connector road, no affordable housing, no cash. Blaine told the Planning Commission that by-right was just fine with the developers.
But instead, after the Planning Commission denial, the Biscuit Run team altered the plans, upped the proffers to $30 million in cash and donations combined, and returned to the Planning Commission in May of 2007. Asking forgiveness for the previous meeting was Oz himself, Hunter Craig, whose name was in the courthouse records but whose face had not been seen publicly in conjunction with Biscuit Run until that meeting.
“That was solely my mistake,” said Craig, apologizing for pushing for the up-or-down vote. “It was a gross mistake, but sometimes good things come out of mistakes.” Unanimous denial became unanimous consent.
Four months later, the Board of Supervisors voted just after midnight to give its endorsement to Biscuit Run, thanks in part to the proffers growing to $41 million, about $13,000 per unit. The September 2007 meeting was just shy of the two-year anniversary of the $46.2 million purchase. A few weary members of the public opposed the plan, but it was a dwindled band compared to the early army of opposition.
Supervisor David Slutzky, a Democrat, called Biscuit Run “a poster child for how development can make its way through our process and add value to the community,” while Supervisor Ken Boyd, a Republican, commented, “It’s not the perfect project, but it’s probably one of the best to come along in a very, very long time.”
Craig wasn’t bashful in extolling the virtues of his own project: “I think this will be the gold standard for the neighborhood model plan.”
“A gift from God”
As the real estate bubble popped, however, Biscuit Run transformed from Craig’s crown jewel to his hulking albatross.
In the heady days of easy financing, Forest Lodge LLC took out a $33.3 million loan from UBS Real Estate Investments Inc. to purchase Biscuit Run. In November 2007, two months after the rezoning won approval, the loan was transferred from UBS Real Estate Investments to UBS Real Estate Securities Inc.
For whatever reason, in April 2008, UBS left the deal, and Forest Lodge LLC had a new lender, First Community Bank, N.A, with the loan amount creeping up an extra $1 million. Court records don’t indicate which party initiated the change, but UBS, among the world’s largest financial firms, was also among the first to get hammered for its real estate securities as the mortgage market collapsed—that same month, it announced it was writing down $19 billion and was forced to raise $15 billion in new capital. Its chairman resigned.
First Community Bank, wholly owned by a publicly traded parent company, First Community Bancshares, appears to have kept $7 million of the $34.3 million loan and sold the rest to other investors in what is called a “participated” loan.
First Community must soon have regretted its acquisition. By the fall, the Forest Lodge LLC loan appears to have entered the first stages of default. The following appeared in First Community Bancshares’ third quarterly report, which it issued in November 2009: “The Company has identified a $7.0 million retained portion of a $34.3 million participated loan which has displayed early stage delinquency for which management has concerns regarding the ability of the borrowers to meet existing repayment terms. The collateral for this loan is a large tract of undeveloped land in Virginia and the Company currently feels it is adequately secured. Although this loan has been identified as a potential problem loan, it has not risen to the level of nonperforming or impaired.” First Community Bancshares would not comment on whether the loan referred to the one taken out by Forest Lodge LLC, which was also for $34.3 million and secured by a large tract of undeveloped Virginia land.
By the time the quarterly report was issued, however, Craig was pursuing a new strategy—he would give the property away.
For most of us, giving away our possessions is not a winning proposition, but because Forest Lodge LLC was giving away undeveloped land, it had the help of Virginia’s generous land preservation tax credit program. With the combined remuneration of those tax credits along with normal federal and state tax deductions for charitable gifts, a land donor could get back more than 70 percent of the value of the donation (see sidebar).
That fall, Craig contacted the Piedmont Environmental Council (PEC), a nonprofit that facilitates land conservation, about putting Biscuit Run under conservation easement in perpetuity. If Biscuit Run were entirely in the rural area, that likely would have happened. But state law stipulates that all conservation easements must be consistent with the comprehensive plan of the locality; Biscuit Run, with 800 acres in the county’s growth area, did not fit the bill, and could not qualify for tax benefits if it were merely put under conservation easement.
However, if the entire property were donated “in fee simple”—that is, all ownership completely relinquished, rather than just the building rights—the donor could claim land preservation tax credits. Forest Lodge LLC discussed the option of donating Biscuit Run to PEC. But PEC, which also promotes long-term land use planning, was uncomfortable accepting a donation that would controvert Albemarle County land use policy. It recommended that Forest Lodge LLC donate the property to either Albemarle County or the Commonwealth, which had more authority to make what was in essence a political decision.
“We felt like that was a decision we as an organization should not be making, because of the scale of the property and project and those comprehensive plan issues,” says Rex Linville, a local conservation officer for PEC. “We felt like if it was deemed to be consistent at the local or state level with the long range plans, that could be made at a higher level.”
So in November 2009, Craig met in Richmond with the state’s Department of Conservation and Recreation (DCR), which manages state parks, and discussed donating the property to the state. To the department’s director, Joe Maroon, it sounded almost too good to be true. At home on medical leave after foot surgery, he participated via conference call.
“Being on the telephone, when I heard the presentation, I certainly had to ask a couple of times if what I was hearing was correct,” says Maroon. “And, yes, it was, and they were eager to make us a very attractive offer.”
For more than 20 years, the state parks department had been interested in a Charlottesville area acquisition. The state’s target is 10 acres of park for every 1,000 people, and the Charlottesville region had one of the biggest deficits, 2,233 acres (the metric does not account for national or local parkland). Though the state had flirted with a few property owners over the years, nothing had worked out.
“I was skeptical that in Albemarle County, a pretty affluent place where land values were for the most part extraordinarily high, that we could ever afford to do that,” says Joseph Elton, Virginia’s state parks director since 1994. “So while you always keep your eyes open for opportunities, there had grown over time a sense that we may never accomplish that goal.”
This certainly appeared to be that opportunity to Elton, who watched Craig’s presentation in person. “Sitting in a meeting in November and hearing about 1,200 acres intact, within walking distance of many neighbors—not to be dramatic, but it seemed like a gift from God. Or at least a golden opportunity, should it have the other attributes that are required.”
“I think when we all committed to it,” says Maroon, “it would have been the biggest total donation in the history of the Commonwealth, from a value standpoint, that anyone could recall.”
There was, of course, a catch: The deal had to happen by the end of 2009 or it might not happen at all. Elton says, “My impression was, it could be sold to the Commonwealth in ’09, or it could go to the highest bidder in 2010. But they were intent on selling the property.”
The rush likely came because of an impending change in federal tax law. If the transaction was filed in 2009, the members of Forest Lodge LLC could spread the tax deduction over 16 years. But if they waited until 2010, the tax deduction could only be used over six years, and would be limited in each year to only 30 percent of their adjusted gross income instead of 50 percent.
Elton counted 45 days to complete one of the biggest land donations in Virginia’s history—45 days peppered with holidays and vacations during the midst of an administrative transition from one party to another.
“As I said in that meeting, bureaucracies being what they are, it’s going to be a tall order getting it to the finishing line in ’09,” remembers Elton. “My crystal ball was such that I knew that we needed every second to get the job done.”
So when staff pulled out their calendars to arrange a site visit and tossed out dates 10 days and two weeks ahead, Elton finally piped up: “My recommendation is that we go there tomorrow.”
Maroon, because of his surgery, couldn’t make it to the site, but Elton visited within a couple of days along with a few other high level DCR staff members. “It didn’t take long to recognize what I think the developers recognized,” says Elton. He snapped photos of birds, snakes, and beehives, and was pleased to find no environmental issues that needed to be dealt with. The easy access to power, water, and sewer was also a significant plus. And he was aesthetically impressed by a clearing on high ground with nearly 360-degree sight lines that involved almost nothing man-made. Elton was sold. He recommended that the acquisition move forward.
Still, Elton knew the stars needed to align for everything to happen by the end of the year—and that this wasn’t something that he or Maroon could push up the chain of command. It needed the unifying support of Governor Tim Kaine.
Governor’s office to the rescue
L.F. Payne, the former Fifth District congressman who developed the Wintergreen resort in the 1970s, was the first to inform Kaine of the project. He was in a unique position to do so. As husband of Susan Payne, Craig’s PR representative and fellow board member at Virginia National Bank, L.F. knew of Forest Lodge LLC’s desire to donate the property. As an established Virginia Democrat, he regularly advised Kaine, talking with him every couple of months.
Payne says he never actually spoke to Kaine about Biscuit Run, but did leave a voicemail. “I had become aware that Biscuit Run was looking to be donated, and I knew that he had a policy of looking to get 400,000 acres of green space set aside during his administration, and I told him I thought this might be something worth taking a look at,” Payne says.
Kaine has said that after the phone call, “I did what any great executive does, I immediately turned him over to the people who really know things, Preston Bryant and Joe Maroon, and they continued to have dialogue.”
Bryant, Kaine’s secretary for conservation, became the primary negotiator with the landowners—Maroon says he wasn’t involved directly with the negotiations. The support of the governor’s office would prove crucial when the Biscuit Run negotiations hit their biggest snag—Forest Lodge LLC needed some cash out of the deal. A simple donation would no longer cut it.
The problem involved the land preservation tax credits. As November 2009 drew to a close, the state had nearly reached its cap on land preservation tax credits, which in 2009 was about $106 million, and it became clear that Biscuit Run would be squeezed out of the 2009 allocation. Biscuit Run could still receive tax credits in 2010—but that delayed timeline apparently did not work for Biscuit Run investors and their lender, who might also have wanted some cash regardless.
So the negotiations shifted from an outright donation to a bargain sale, with a $10 million target, according to Bryant. The Department of Conservation and Recreation scraped together $5 million, the last of the available money from a $119 million state bond referendum that was passed in 2002. But state coffers weren’t exactly flush—in October 2009, Kaine had announced a $2.5 billion shortfall in the two-year budget. Where could the Commonwealth find another $5 million?
Here’s where Kaine’s cabinet came to the rescue, thanks to a casual lunch conversation in late November between Bryant and State Secretary of Transportation Pierce Homer.
“I was telling [Homer] about the potential project, the due diligence we were doing, how the potential acquisition was perfect for a new state park, and that we would need to have a certain amount of cash to make it happen,” Bryant explains by e-mail. “He was immediately interested in seeing how VDOT might be able to help, as VDOT gets an annual federal grant of funds that can be used for such projects if they meet federal criteria.”
After research by Assistant Transportation Secretary Nick Donohue, a member of the governor’s office, VDOT found $4.8 million it could allocate by using federal transportation enhancement funds, which are distributed by the Federal Highway Administration (FHA) and used for transportation-related scenic easements, environmental mitigation, and the like. According to documents obtained through a Freedom of Information Act (FOIA) request, VDOT felt Biscuit Run fit the bill—it was in the viewshed of Interstate 64 and Carter Mountain and within the Journey Through Hallowed Ground National Heritage Area. The guidelines for transportation enhancement funds strongly encourage public involvement and representation from regional and local agencies, but do not have specific requirements. VDOT and the governor’s office produced a two-page letter to FHA justifying the lack of public review. After jumping through a few other hoops—including a property appraisal—VDOT secured the $4.8 million allocation on December 23.
So on December 31, 2009, Forest Lodge LLC conveyed Biscuit Run to the Commonwealth of Virginia for $9.8 million, retaining only the mineral rights for seven years. First Community Bank must have been on board with the decision. The same day, it partially released the Forest Lodge loan, retaining an interest in the tax benefits, as well as the mineral rights.
It was the swiftest acquisition for the largest amount of land in Elton’s 26 years as state park director.
“What I’m convinced of,” says Elton, “and I’d have to be convinced otherwise, is that all the ‘i’s were dotted and ‘t’s were crossed, and nobody created a special path, they just created an acceleration through the steps along the way.” Maroon, who left state government with the end of Kaine’s term, gives a similar endorsement to the hasty process.
On January 8, 2010, Biscuit Run the Development was officially laid to rest, and Biscuit Run the State Park was officially conceived, at a ceremony at Monticello. Tim Kaine had the pleasure of announcing that not only did he meet his goal of 400,000 acres of land conservation over his four-year term, but he exceeded it, with 424,103 acres. Biscuit Run, the final acquisition completed, wasn’t even necessary to cross the threshold.
At that ceremony, a second Forest Lodge LLC investor came out of the woodwork—the Dave Matthews Band fiddler, Boyd Tinsley, who also has close ties to Kaine and implied that other band members had been involved.
“It’s such a great honor for the governor to honor us with a state park, and it’s pretty clutch that he did it a week before he leaves office,” said Tinsley, who has given $127,500 to Kaine’s sundry political funds since 2005 and has dined at the executive mansion. “But the band is very glad to be a part of this effort. Because we live in such a beautiful place, we’ve always been very conscious of the environment.” According to Elton, Tinsley hopes to include something in honor of LeRoi Moore, the band’s late saxophonist, in the Biscuit Run State Park.
“To all who were part of the ownership of this parcel,” said Kaine, “I just want to say thank you. This is going to be a magnificent property in an area that really needs it.”
The local aftermath
The deal worked out to the satisfaction of Hunter Craig, Boyd Tinsley and DMB manager-cum-real estate developer Coran Capshaw, who escaped a loan in early default and got an extra 10 years to write off the loss on their federal taxes. It worked out for Tim Kaine, who could brag about adding a state park and preserving more than 424,000 acres. And it worked out for the state parks department, which got an expansion and came closer to satisfying its park goals while only having to spend $5 million to acquire 1,200 acres.
Yet the deal did not please everyone. County Supervisor Dennis Rooker, for one, was angry when I spoke to him in January, both because of the inconsistency with the county’s comprehensive plan and also the expense involved.
“You’ve got the, quote, saving of 850 acres of—not farm land, not rural area land—but development area land,” said Rooker. “That whole program was designed to protect rural area property, not growth area property.” While Albemarle doesn’t have any state parks, Rooker pointed out, it does include sizeable county parks as well as a large swath of a national park, Shenandoah.
Rooker also worried that the death of a high quality development plan would push housing development out into the rural area, continuing the low density sprawl and its issues of increased vehicle miles, soil erosion, water degradation, and general paradise paving.
State officials were to some degree aware of some of the local politics involved.
“There was, at that very first meeting, a discussion of the political environment in Charlottesville,” says Elton. “And there was the assertion that maybe not 100 percent of the political establishment, but quite nearly 100 percent would be supportive of this.”
The only official response from Albemarle County during the state acquisition process was tepid. Local comment was required for the Department of Environmental Quality’s (DEQ) report. Among the negatives, the county pointed out that 825 acres of the land was designated for development and that the county would lose tax revenue. It finally noted, “The County does not see the need for a traditional state park in this area of the state as an urgent need due to the availability and character of the local park system in the area.” DCR did not address those concerns in the DEQ report.
Elton contends it’s a winning swap for county residents. Removing the infrastructure needs for 3,100 or 5,000 homes “should be viewed as a marvelous accomplishment, a life-enhancing thing for people in the area,” says Elton. “I understand you lose real estate taxes—but in terms of quality of life, substituting a state park for 3,100 homes—that’s a deal I’d make any day in my community.”
Bryant says he talked to a number of county supervisors, and most did not share Rooker’s concerns. “It was clear to me that the vast majority of the board was in favor of the project,” he explains by e-mail. “Yes, the site was in a designated development area; however, everyone realized that the Biscuit Run residential development was not going to happen. That project was dead. The owners offered a deal to the state, and it just happened to be in an area that for many years, decades even, had been identified as in need of a state park.”
Supervisor Duane Snow, who was only a supervisor-elect at that point, remembers a call, but does not remember from whom. “I thought a park would be great.”
Supervisor Ann Mallek says she didn’t receive a call from the state regarding the project. “I was disappointed for the loss of staff and community time,” says Mallek. “But I would much rather focus on making lemonade out of this situation.”
Only the tax collector knows
The most questionable part of the Biscuit Run transaction is that even Bryant, who led negotiations on the deal, doesn’t know how much the acquisition cost the taxpayers. While we know that $5 million came from state bond money and $4.8 million came from federal transportation dollars, we do not know how many land preservation tax credits the Biscuit Run investors will receive (or have already received).
Unless we know that, we can’t tell if the deal was an extraordinary windfall for taxpayers or the donors. And the decision regarding the tax credits lies with unelected administrators of the state taxation department.
The amount of tax credits received depends on fair market value at the time of the donation, and with a property like Biscuit Run, fair market value can become highly subjective. We know what happened in 2005, when the highest bidder paid $46.2 million for those 1,200 acres before they were even rezoned. But what would the highest bidder have paid on the last day of 2009?
It’s a hypothetical question. How much value does the rezoning, which increased housing units to 3,100 from 1,400, add to the property? How much does the market slump subtract? Appraisers can reasonably estimate these factors with common property transactions, like single-family homes, but with such a singular property as Biscuit Run, there isn’t enough data to answer those questions with surety. Reasonable people can disagree widely.
As part of its review, VDOT hired an appraiser who put the fair market value of the entire Biscuit Run property at a mere $12 million. If that were the case, Forest Lodge LLC would only receive $880,000 in land preservation tax credits, and the Commonwealth would have paid basically what the land was worth.
Neither Forest Lodge LLC nor First Community Bank would comment on the amount of tax credits applied for, and the information is protected from FOIA requests. However, circumstantial evidence suggests that the fair market value in the application is far higher than VDOT’s $12 million figure.
First Community Bank issued a partial release of collateral, explicitly maintaining an interest only in Biscuit Run’s tax benefits and mineral rights. If the principal was knocked back by $9.8 million, then that still left $24.5 million. Assuming the tax credits sold for 80 cents on the dollar, that meant a tax credit target of $30.6 million. Forest Lodge LLC would need to submit the fair market value of Biscuit Run as $86.4 million in order to cover the principal of the loan (though not the year and a half of interest accrued).
Could Biscuit Run have requested $30.6 million in tax credits? It seems possible. Consider that, in November 2009, First Community Bancshares appears to have felt that the Biscuit Run property was reasonable security for a $34.3 million loan; Maroon says that DCR thought Biscuit Run would be the most valuable land donation that anyone could remember. Kaine, at the Monticello event, told reporters the land “was worth dramatically more than [$9.8 million]. Dramatically more than that.”
Other circumstantial evidence points that way too. The $107 million tax credit cap for 2010 was reached in July, considerably earlier this year than in previous years. In every year since 2006, when the state instituted a cap on land preservation tax credits, the cap hasn’t been reached until December.
That the cap was reached so quickly has left some land donations in limbo. “There’s a lot of confusion out there right now about what’s going on with tax credits,” says a tax credit broker who requested anonymity because of ongoing relationships with those involved with Biscuit Run. “The cap’s reached, no one’s quite sure where all the credits are. The general belief is that Biscuit Run absorbed the big chunk, however many that might be.”
Larry Durbin, the state tax department administrator of the land preservation tax credit program, can’t comment on specific applications, but admits that the rush came in part because of rumors that large donations would eat up the fund.
“We certainly had several pretty large ones,” says Durbin. “I don’t know that the numbers were significantly different than what we’ve seen in the past.”
It’s possible that neither Forest Lodge LLC nor First Community Bank has received the tax credits yet—or that they ever will. Although all $107 million in tax credits were claimed in July, the tax department has taken its time issuing those credits.
About $31 million in tax credits are still under scrutiny and haven’t been issued, an unusually large number—and a number that could include a very large Biscuit Run application. “This year it’s taken us a little bit longer on some of those [tax credit application reviews], but we don’t issue them automatically when they come in,” says Durbin.
Still, the evidence that Biscuit Run received tax credits on the order of $20 million or more is only circumstantial. The tax broker points to the change in federal law from 16 to six years for using tax deductions that might have caused a rush on the credits at the end of 2009. Durbin speculates the 2010 rush might have happened in part because of a General Assembly change that made it more expensive to transfer large amounts of tax credits, which went into effect July 1.
If the tax credits for Biscuit Run fall through, the taxpayers could be huge winners and the lenders—First Community Bank and those who bought the rest of the $34.3 million participated loan—could be the big losers, depending on how the partial release was structured. Forest Lodge LLC still walks away with any federal tax benefits, which are non-transferrable, though those benefits also decline as the claimable value of Biscuit Run declines.
“The investors will not come out whole, and no one is getting a windfall,” said Susan Payne, speaking for Forest Lodge LLC in an interview with Charlottesville Tomorrow in December.
Even if the sale and tax benefits were enough to cover the $34.3 million loan, it’s possible that Forest Lodge LLC took a loss on the transaction. Holding costs included over $300,000 a year in county taxes, not to mention bills for the planners, lawyers, engineers, consultants and public relations involved with the rezoning. However, the investors in Forest Lodge LLC likely received significant federal tax deductions that they can use over the next 15 years.
If the land preservation tax credits were $31 million, that meant the total cost to taxpayers ran closer to $41 million, not counting the federal tax revenue lost. It’s hard to imagine Biscuit Run would have fetched much more in an auction to the highest bidder in 2009 or 2010.
The deal certainly hasn’t sullied Craig’s reputation, at least with Virginia politicians. After having his bank loan bailed out by one governor in December 2009, Craig was rewarded in June 2010 by a different governor, Robert McDonnell, with a place on the University of Virginia’s Board of Visitors—where he now serves with L.F. Payne. Craig has donated $63,500 to McDonnell’s committees since 2007.
I don’t mean to suggest there were any quid pro quos—only to point out that these people tend to run in the same circles.
When nature takes over
In his defense of the transaction, State Parks Director Joe Elton looks to the long-term horizon. “Virginians a hundred years from now will be very grateful,” says Elton. “Which is kind of the view I try to take toward a lot of the projects—what are they going to think 50 or 100 years from now?”
Boyd Tinsley of Dave Matthews Band fame outed himself as a Biscuit Run investor, joining his buddy Tim Kaine to announce the sale of the property to the state.
On a hot late summer day, I stroll out in a field tall with yellow ironweed and look out from the summit that Elton particularly admired when he first visited the property. The foliage obscures the view to the north in a way it probably didn’t in November, but the view to the south is still very pretty, channeled by the gentle ridges of Carter Mountain to the east and Dudley Mountain to the west.
“If it weren’t for those towers on Carter Mountain, you wouldn’t see any trace of man,” points out Forrest Gladden III, the state park district manager who shows me around the property on an ATV.
Many parks have stand-out features around which themes are organized—a beautiful waterfall or towering mountain or historic plantation or Civil War battle site. Biscuit Run’s pleasures will be more prosaic. Trails for hiking, mountain biking, or horse riding; picnic areas; perhaps campsites or cabins. The Albemarle County Fair could find a permanent home at Biscuit Run.
“I’d love to tell you this will go there, and that will go here, but we just don’t know anything yet,” says Gladden. The park’s programming will depend on what a master planning committee of locals decides—within the bounds of the conservation easements and state park guidelines. Whatever they cook up will need the approval of the General Assembly.
It will also need funding. The General Assembly will consider a state park bond referendum for 2012, which could cover the capital costs. But it would also have to create an ongoing operating funding for the park. Elton says that the state parks create $180 million in economic impact from only $16 million in state operating funding, but such arguments don’t always translate when local and state coffers are already diminished.
So it will be years before the public gets to enjoy the views and forests of Biscuit Run. In the rosiest scenario, the state park opens in 2014, but in all likelihood, that date will be later.
While they wait, state officials mull potential themes for Biscuit Run State Park, and Gladden says that a leading idea is how quickly nature takes over again. Our ATV descends a hill and Gladden points out what he believes was once the stage coach road to Scottsville—now, it’s a stretch of aging trees. The old Buck family homestead, probably built in the 1930s, is nothing but a chimney. It’s one of a few spots on the property that Elizabeth Breeden finds particularly noteworthy.
“There’s a beauty to that that’s remarkable because its history is so clearly evident,” she says. “The daffodils come up and there’s that lady’s lawn, except all that’s there is a chimney.”
Nature is well on its way toward reclaiming most of the land at Biscuit Run from the works and days of man. The cattle fields are increasingly going to seed, largely speckled with autumn olive, invasive, shrubby trees that produce small red berries that park managers will have to thin out.
“My generation, everyone had a place with open space, a grandparent’s old farm, to go to,” says Gladden. “Kids growing up today don’t always have that. Just to be able to come out and see this—that butterfly on the clover. It’s just a neat experience.”
Elton is probably right—100 years from now, what will matter is that Biscuit Run is a state park, and no one will particularly care who won or lost in the deal, just as we don’t worry much about the winners and losers when Shenandoah National Park was created. There might remain a few disgruntled former residents embittered by the use of eminent domain to push them off their land, but most of us take unalloyed joy in the presence of the park’s hiking trails and Skyline Drive.
When Biscuit Run finally opens, we can walk up to the clearing surrounded by forest that for 40 years was supposed to be surrounded by houses. At that point, we might know whether a tax administrator’s ruling meant that we got this land cheap or whether we bailed out a set of wealthy individuals from an investment gone bad and set up future fights in Albemarle County over the adequacy of a diminished growth area—while those involved move on to new investments and new careers.
Then we can sigh and return to the beauty of Biscuit Run. If we’re lucky, on the walk back, we can spot a butterfly on the clover. If Biscuit Run’s acquisition was a mistake, nature will eventually reclaim the human folly.