Factors influencing a forest landowner's choice of incentive program commitment length

Abstract

State preferential forest property tax programs (PFPTP) are commonly used to incentivize landowners to keep their land in a forested condition. For those PFPTPs that offer multiple enrollment periods, an important decision landowners face is the length of time they commit their land to the program, especially if the program's financial benefits are linked to the length of time enrolled. This study explores what factors influence the program length commitment decisions forest landowners make when choosing to participate in a PFPTP that offers multiple commitment lengths and associated financial benefits. To do so, it used enrollment data from Minnesota's Sustainable Forest Incentives Act (SFIA). The SFIA is a state PFPTP that provides annual compensation to enrollees in return for agreeing not to develop their land. It offers enrollees the choice of multiple program commitment lengths, each with a different annual payment. We developed a theoretical model of how a profit-maximizing forest landowner would choose one of several commitment length options available, given their opportunity cost of not being able to sell their forest land for development while enrolled. This model was tested using over 1100 unique SFIA enrollments from 2002 to 2021, which found the program commitment length SFIA enrollees select is not driven by their desire to maximize the financial benefit of enrolling. A second model was then developed to evaluate how owner and forest land characteristics are associated with the choice of SFIA commitment length, finding several attributes are significantly associated with their commitment length decision.