ODA And OSU Extension Kick Off 2023 Ohio Victory Gardens Program
Morrow County will be participating in this program.
REYNOLDSBURG, OH (March 12, 2023) – It’s time to get your hands dirty and start growing! The Ohio Department of Agriculture (ODA) and OSU Extension Offices are kicking off the fourth year of the Victory Gardens Program. Due to high demand, the program is expanding from 25 to 49 counties across the state, with 14,700 seed packets available free to the public to get people planting.
“We have seen a revived passion for planting through our Victory Gardens Program, said Dorothy Pelanda, Director of the Ohio Department of Agriculture. “Our Ohio Victory Gardens are meant to be enjoyed by everyone, from urban apartment dwellers, to those living in the country, and everyone in between. We hope this will inspire a new generation of gardeners who will be able to enjoy the fruits of their labor for years to come.”
“We are excited to expand our partnership with ODA on the Victory Garden Program. Last year, we had an overwhelming positive response to the program, so this year, we will be expanding the seed distribution initiative to 49 Ohio State University Extension county offices,” said Dr. Cathann A. Kress, Vice President for Agricultural Administration and Dean, College of Food, Agricultural and Environmental Sciences. “No matter your level of gardening experience, our OSU Extension educators will provide expertise that will help your gardens thrive.”
Seeds will be available to at Morrow County OSU Extension Office, 5362 US Highway 42, Mt. Gilead, Ohio 43338 Monday – Friday 8:00 – 4:30. We are closed from Noon – 1.
Planting resources and other information about gardening can be found at the Ohio Victory Gardens website.
Victory Gardens originated during World War I, an answer to a severe food shortage at the time. The idea was wildly successful, growing an army of amateur gardeners and serving to boost morale and patriotism. Although there’s no food shortage now, ODA and OSU Extension are reviving the effort and once again encouraging people to plant seeds, realize the fruits of their labor, and share with others if inspired. The Victory Gardens Program offers a full website with details on seed distribution, advice, and resources on every aspect of planting and harvesting produce.
The need for good farm insurance is well known and obvious to everyone in the farm community. However, understanding how farm insurance works is not as universal. Farmers know they need insurance and that the premiums must be paid but they may not be familiar with some of the key concepts of an insurance policy. One such concept is co-insurance.
A farm insurance policy is a contract between the insured and the insurance carrier. For the policy to be fair to both parties, the insured must provide an accurate inventory of the assets to be covered, including values. The insurance carrier then uses the inventory of assets and values to calculate the premiums it must charge to carry the insurance.
A policyholder may be tempted to suppress the values of the assets in an attempt to keep the premiums lower or, perhaps more likely, may not keep up with the replacement value of property. In either case, whether intentional or not, the insurance carrier is put into an unfair arrangement as it calculates premiums based on undervalued assets. Consider the following example:
Farmer bought a tractor five years ago for $80,000. Farmer believes the tractor has declined in value and includes a $60,000 value on his insurance policy. a similar tractor today would cost $100,000. Farmer’s insurance policy pays replacement value in the event of damage or loss. The tractor is lost in a fire. Farmer expects to be paid the replacement value of $100,000.
In this scenario, Farmer may expect to be paid $100,000 to replace the tractor but he paid premiums based on a $60,000 value. It would be unfair to make the insurance carrier pay $100,000 in replacement costs when it based its premiums on a $60,000 combine.
To avoid the scenario in the above example, farm insurance policies include a co-insurance provision. This concept is an agreement between the insured and the insurance carrier that a minimum amount of insurance must be purchased to replace property in the event of a loss. If the policyholder purchases less than the specified percentage, the insurance carrier is not required to payout the full replacement value – making the policy holder a “co-insurer”. The insurance policy usually requires the insured to purchase insurance on 80% – 100% of the value of property. Co-insurance generally applies to outbuildings, dwellings, and blanket farm personal property. Consider the following example:
Using the same example as above, Farmer’s co-insurance provision requires 80% coverage. The tractor was only valued at 50% of the replacement value so the co-insurance provision in Farmer’s insurance policy is triggered.
The payout calculation for this loss is as follows:
Tractor Replacement Value = $100,000
Co-insurance requirement = 80%
Required amount of insurance = $80,000 ($100,000 x 80%)
Actual amount of insurance purchased = $60,000
Actual insurance/ required insurance = 75% ($60,000/$80,000)
Required payout1 = $75,000 (50% x $100,000)
As this example illustrates, Farmer did not meet his obligation to buy insurance on at least 80% of the value of the tractor. Farmer reported a value of $60,000 or 75% of the value of the tractor. By not meeting the 80% co-insurance requirement, Farmer triggered the co-insurance provision and is therefore partly responsible for the replacement cost. Farmer becomes the co-insured for 25% of the replacement value, the proportion that Farmer undervalued the combine. If Farmer had valued the tractor at $80,000 or higher, the insurance carrier would have been required to payout the full $100,000 for the loss. By inadvertently undervaluing the combine, Farmer forfeited $25,000 of insurance payout.
Co-insurance is an important part of a farm policy insurance that most people have never heard of. The co-insurance provision should be reviewed with the insurance agent along with the value of assets to ensure that full payouts will occur in the event of a loss. It does no good to discover that assets are valued too low after a claim is submitted, any adjustments in value to comply with the co-insurance requirement must be done before there is a loss.
1. Any deductible would also be deducted from the payout.
As you may now know, Callery Pear, Pyrus calleryana, and its cultivars (examples include ‘Bradford’, ‘Cleveland Select’, ‘Chanticleer’, etc) are officially on the Ohio Invasive Plants List. On Saturday, January 7, 2023 it became ILLEGAL to plant, grow, propagate, or sell Callery Pear in Ohio. It is now deemed to be an invasive species in many states and similar bans have gone into effect in Pennsylvania and South Carolina.
Callery Pear is a small, deciduous flowering tree native to China that that was originally brought to the U.S. as a source of resistance to the disease fire blight, Erwinia amylovora. It became popular as a landscape tree for its white flowers, site adaptability, and compact size. Individual trees cannot self-pollinate but can and do hybridize with other Pyrus calleryana selections, native, or domesticated pears, resulting in a fertile fruit. This resulted in the trees’ spread by birds and wildlife, which soon choked native plants and invaded disturbed areas and forests.
Under the rule:
– Nurseries and garden centers with remaining stock are not allowed to sell these trees and must destroy them.
– Homeowners and landscapers may not purchase nor install them.
– Have one in your yard? You do NOT need to remove it.
However, with an arguably stinky flower, messy fruit, weak branch angles, and its tendency to spread and invade… maybe it is worth considering a replacement tree. But what to choose?
This photo captured by Joe Boggs illustrates the weak branch angles of Callery pear, leading to irreparable damage in an ice storm.
If you are looking for a white-flowered alternative to Callery Pear in your landscape, or just need some suggestions for a new tree, consider these!
Let’s Start with the EARLY BLOOMERS….
SERVICEBERRY, Amelanchier spp.
Serviceberry is an Ohio native with four seasons of landscape interest. It is available as a large, multi-stemmed shrub or trained to a small tree. (Height 15-25 feet with an oval to round crown). Like Callery pear, it has a crisp white flower in early spring, blooming at around 150-160 Growing Degree Days. This would put its bloom within hours to days of ‘Bradford’ Callery pear which blooms at 142 GDD. In addition to flowers, the blue-green foliage of summer transforms into shades of gold to reddish-orange in autumn, making it, as Michael Dirr states, “…one of our finest native trees for fall coloration” pg 101.
Many cultivars have been selected for their fall color, some of these are: Apple Serviceberry, a hybrid (A. X grandiflora), with names such as ‘Autumn Blaze’, ‘Autumn Sunset’, and ‘Autumn Brilliance’. ‘Ballerina’ has been selected for excellent leaf spot resistance and low occurrence of fireblight in susceptible years.
Apple Serviceberry, A. X grandiflora
Apple Serviceberry, A. X grandiflora
Shown: Allegheny serviceberry A. laevis
Amelanchier x grandoflora ‘ballerina’ by Tom DeHaasThe fruit of ‘Ballerina’ by Tom DeHaas
White Eastern Redbud (Cercis canadensis)
Cercis canadensis var. alba is a tree that can be found growing sporadically throughout Eastern North America. This is a naturally occurring white flowered form of the more common pinkish purple Eastern Redbud. This small 15-25’ tree has a vase like to rounded shape.
As a member of the Fabaceae family, Cercis have pea like flowers. The flowers bloom just after serviceberry and along side some of the first flowering crabapples at 191 GDD.
The flowers are followed by distinctive heart shaped 2.5” green leaves and pea like seed pods. There are several cultivars of the white form of Eastern Redbud including the upright ‘Royal White’ and weeping ‘Vanilla Twist’ PP22744 introduced by plantsman Tim Brotzman of Madison, Ohio.
WHITE CRABAPPLE (Malus spp)
Love them or hate them, crabapples can be a suitable replacement for Callery pear! There are HUNDREDS of types of crabapple varying in size, bloom time, color, and shape. For our purposes here, many cultivars have white flowers such as ‘Adirondack’, ‘Beverly’, ‘David’, ‘Donald Wyman’, Golden Raindrops(R), Harvest Gold(R), and, heavens! So many more. Secrest Arboretum in Wooster, Ohio boasts a substantial crabapple collection. If you need inspiration, feel free to browse the list and take a drive out to view them. They are a site to behold in bloom, best viewing occurring around 200 GDD. This may help you select YOUR next crabapple.
Tree Amigo, Eric Draper of Geauga County shared a few of his favorites: including ‘Adirondack’, ‘Firebird’, ‘Lollipop’, ‘Pumpkin Pie’, Sargent Crabapple (Malus sargentii), Tina (Malus sargentii ‘Tina’), ‘Calloway’, ‘King Arthur’, ‘Guinevere’, ‘ Holiday Gold’, ‘Dolgo’ (for those wishing edible landscape types) and ‘Silver Moon’.
Secrest Arboretum Crabapple plots in bloom!
Shown: Flowers of cultivar, ‘Pumpkin Pie’ which has extraordinary orange fruit!Shown: ‘Adirondack’ Crabapple in bloom at Secrest Arboretum. Its white flowers and compact form may be a nice replacement for Callery pear.
With deeply cut and textured leaves, I would never have known THIS is a crabapple! Shown here the foliage of ‘Golden Raindrops’, a white flowering, low disease selection with golden yellow fruit.
But why limit yourself to white flowers when we’re talking crabapples! So many beautiful red and pink varieties exist too. This article by Jim Chatfield gives just a few highlights of the stunning pinks and reds of crabapples. https://bygl.osu.edu/node/1560
IMPORTANTLY… when selecting a crabapple pay attention to disease resistance. The problem many people have with crabapple is apple scab which can cause premature leaf drop and an unsightly mess early in the season. However, many cultivars now have good to excellent resistance for apple scab and fireblight to keep your landscape plants in good appearance most years.
NEXT… MID SEASON BLOOMS
Photo: The Alliance for Historic Hillsborough Shared CC by 2.0
Carolina Silverbell (Halesia carolina)
An underused native, Carolina Silverbells, is a small to medium size tree with beautiful, showy bell-shaped flowers. A member of the styracaceae, it has no serious pest issues unlike some members of the rosaceae. However, it can be susceptible to chlorosis issues in higher pH as it prefers slightly acidic soil. It does not do well in drought conditions.
Bloom occurs between 213 – 266 GDD. The fall color is nothing to write home about, but does have a slightly attractive yellow autumn color. It attracts hummingbirds and can host several species of moth and butterfly caterpillars. It will bloom after only a few years and has a long life expectancy. It has the potential to have a dramatic leaning and twisting trunk as it really matures up.
Dogwood (Cornus spp.)
Michael Dirr notes that there are over 50 species of Dogwood from ground cover to trees.
Cornus kousa is a favorite as a four-season tree with its exfoliating bark, edible pink fruit, and white flowers. It reaches15-20’ in size with a rounded form. The 2-5″ showy white “flower petals” are actually bracts that ring the smaller yellow-green true flowers at the center, which produce beautiful raspberry-like reddish fruit that last into autumn and attract wildlife. Leaves generally have good scarlet to red-purple color in fall and the bark exfoliates with age to reveal several shades of orange, tan and gray for all season interest.
Kousa also carries more resistance to many of the pests that affect flowering dogwood, C.florida. This plant has better disease resistance to anthracnose and better cold hardiness than flowering dogwood, Cornus florida, and is an excellent alternative to flowering dogwood in areas where dogwood anthracnose is a problem.While non-native, it has NOT been found invasive. It is cold hardy in Ohio, possibly up to zone 4.
There are white and pink flowering forms as well as selections with variegated leaves. ‘Milky Way Select’ very larger flowers, good orange red fall color best resistance to anthracnose
Florida dogwood starts to blooms around 263 GDD.
Kousa dogwood starts to bloom around 593 GDD for mid-season interest.
Kousa Dogwood, Photo: Ann ChanonKousa Dogwood has exfoliating bark, Ann Chanon
Fruit of Kousa Dogwood, Photo Ann Chanon
LATER SEASON BLOOMS
Sweet Bay Magnolia , Magnolia virginiana
Sweet Bay Magnolia blooms later in the season, between 566-717 Growing Degree Days.
This small tree is native from Massachusetts to Florida and is a nice selection for wetter sites. The tree reaches a height of 10-25’ tall with vase forms or spreading forms which makes a great specimen tree.
The cup-shaped 2-3” creamy white flowers have 9-12 petals with a sweet lemon fragrance. Yum. The elliptic to lanceolate leaves are shiny dark green above and silver green underneath give the tree a two toned appearance when the wind blows. Cone-like fruits with bright red seeds mature in fall and can be showy.
Sweet Bay Magnolia, by Ann Chanon
It can be a faster growing tree. As with any tree, plan for the space it will need when it matures.
This plant has no serious pests or diseases but it can be host to the puffy and honeydew spewing Magnolia Scale (Neolecanium cornuparvum). While a big and showy scale, catching it early is always the best bet. Read more about magnolia scale here.
This species prefers organic acidic soils, but tolerates heavy clay or wet soils unlike other magnolias. It is susceptible to chlorosis in alkaline soils.
*WHITE FRINGETREE, Chionanthus virginicus
*If you’re willing to try… we know that EAB can use this as a host tree… see below.
In the landscape, fringetree is often found as a multi-stemmed shrub or small tree. It has a wide spread and slow growth that allows it to be a great option for a small-tree space or specimen tree. Its genus name, Chionanthus comes from the greek Chion (snow) and Anthos (flower), these “SNOW FLOWERS” have slender white petals and are slightly fragrant. It leafs out and blooms (435 GDD) later than Callery pear, but still provides a gentle white flowering tree as a feature in your yard.
Like many plants it prefers moist, well drained, fertile soils but is described as being EXTREMELY ADAPTABLE, surviving well in full sun to partial shade and various soil types, including clay. This is great news for many landscapes. With few problem pests it could be a great option for many landscapes; HOWEVER, there is one notable exception. Emerald Ash Borer (EAB). Fringetree has been found to be a secondary host for Emerald Ash Borer. In studies, it has been found that EAB can cause damage and even death of some white fringetrees. In one study in Ohio between 2015-2018, damage was severe enough to warrant removal of the tree in 7% of the examined trees (Ellison et.al., 2020). Other individual trees did not experience any die back. So factor this into your decision to try this tree in your yard. Emerald Ash Borer populations may have reduced after the initial die off of so many ash, but the beetle is NOT gone from Ohio. Fringetree may also be protected from EAB by the standard pesticides for the pest.
Syringa reticulata, Tree Lilac
This non-native from Japan has become a common replacement as a street tree instead of Callery Pear, at least in my neck of the woods in Northeast Ohio. Use caution in planting a monoculture of any species.
This tree reaches a height of 20-30’ at maturity with an oval crown. The 6-16” panicles of creamy white flowers are attractive to a variety of pollinators. The leaves are simple, ovate and dark green. Fall color is not showy. The bark is dark reddish brown and shiny with prominent lenticels.
This plant has low maintenance requirements. It can tolerate salt, pollution and urban conditions and is pH adaptable.
Ivory Silk Japanese tree lilac (Syringa reticulata ssp. Reticulata ‘Ivory Silk’) is currently one of the better known cultivars.
Syringa reticulata, Japanese Tree Lilac, by Tom DeHaas
From his series of street tree articles, Tom DeHaas suggests, “Syringa pekinensis ‘WFH2’™, Great Wall Tree Lilac is a good choice for its pest and disease resistance. Syringa pekinensis ‘Beijing Gold’™, Beijing Gold Peking Lilac makes an ideal small street tree.” (BYGL: Street Trees Part 9)
SO MANY MORE!!!!
And of course there are many other trees that can be suitable alternatives to Callery Pear. These were just a few white-flowered options for the Ohio landscape. Check out the STREET TREES Series by Tom DeHaas for more inspiration and other articles and stay tuned to BYGL for more updates on all your HORT news! Have conversations with your local nursery and see what they are having success with in the area where you are located too!
Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University
Seungki Lee, Assistant Professor, Agricultural, Environmental, and Development Economics, Ohio State University
Chris Zoller, Associate Professor and Extension Educator, Agriculture & Natural Resources
Ohio State University Extension – Tuscarawas County
Background to the Dispute
The recent announcement by the Office of the US Trade Representative (USTR) that it was requesting technical consultations with Mexico under the Sanitary and Phytosanitary Measures (SPS) Chapter of the United States-Mexico-Canada Agreement (USMCA), is the latest step in the ongoing dispute over Mexican efforts to ban imports of genetically modified (GM) corn (Office of USTR, March 6, 2023).
The dispute has its origins in a decree issued by the Mexican President Andrés Manuel López Obrador on December 31, 2020, calling for GM corn for human consumption to be phased out by the end of January 2024 (Reuters, February 13, 2023). Not surprisingly, given Mexico is the second-largest export market for US corn totaling $4.792 billion in 2022 (USDA/FAS, 2021) (see Figure 1), with about 17 million metric tons of yellow corn crossing the border annually (USDA/ERS, December 13, 2022), the original decree ratcheted up trade tensions between the two countries. Following US pressure, Mexico scrapped the 2024 deadline banning GM corn for animal feed and industrial use on February 13, 2023, all the while retaining the ban on its use for human consumption (Reuters, February 13, 2023).
Despite these changes, the recent move by USTR is essentially the first step in the process by which the USMCA dispute settlement mechanism is triggered, once other efforts/mechanisms to resolve the issue have failed – specifically, in its response to a letter from USTR, Mexico did not “…allay U.S. concerns with Mexico’s measures concerning [genetically engineered] GE corn….Therefore, the United States does not consider that further use of other mechanisms would resolve the matter…” (Ambassador Katherine Tai, USTR, March 6, 2023).
Dispute Settlement under USMCA
Like the World Trade Organization (WTO), USMCA has a defined legal process by which trade disputes involving its member countries are to be settled. Once other procedures have been exhausted, technical consultations are the first stage of the process, USTR appealing to Chapter 9 of the USMCA addressing SPS measures,
“…Pursuant to Article 9.19.2, the United States requests technical consultations with Mexico with regard to Mexico’s measures concerning genetically engineered (GE) corn and certain other GE products. These measures may adversely affect U.S. trade with Mexico and appear to be inconsistent with Mexico’s commitments under the Sanitary and Phytosanitary (SPS) Measures chapter of USMCA…” (Ambassador Katherine Tai, USTR, March 6, 2023)
Substantively, USTR is arguing that in seeking to implement its regime on GM corn imports, Mexico is violating its commitment to ensure any SPS measures are “…based on relevant scientific principles…” (Article 9.6.6(b)), and an “…approval procedure that requires a risk assessment…” (Article 9.6.4 (a)). Therefore, the United States and Mexico should meet with “…the aim of resolving the matter cooperatively…” (Article 9.19.3)
If this fails, under Chapter 31 of USMCA concerning dispute settlement, the United States can seek establishment of an independent panel to investigate and rule on Mexico’s measures relating to GM corn, which, once constituted, would be expected to present its initial report within 150 days (Article 31.17.1). After a further period of 60 days, allowing for country comments and finalization of the report, the report would be made public (Article 31.17). Assuming the panel rules against Mexico, resolution of the dispute should then occur within 45 days, Mexico either removing its GM corn measures, providing compensation to the United States, or provision of some other remedy (Article 31.18.2). If Mexico fails to implement the panel ruling, the United States would be allowed to suspend trade benefits with Mexico equivalent to the damage caused by the latter’s GM corn measures (Article 31.19.1), most likely in the form of a tariff(s) against specific Mexican products.
How Might a USMCA Panel Rule?
In thinking about how a USMCA panel might rule, it is important to note the chapter on SPS measures draws heavily on the approach applied in the WTO’s own SPS Agreement, the definitions contained in the latter being incorporated into the USMCA chapter on SPS measures. Therefore, while the United States is not expected to file a complaint against Mexico under WTO rules, it seems reasonable to argue the 2006 WTO ruling in favor of the United States against the European Union’s (EU) regulation of GM crops would likely influence any USMCA panel ruling. The WTO panel found the safeguard measures implemented by six EU member states against the import of specific GM crops, were not based on a risk assessment as required under the WTO’s SPS Agreement (Sheldon, Brown Journal of World Affairs, 2007). In other words, a USMCA panel is very likely to find for the United States against Mexico on the grounds that Mexico has not applied scientific principles and appropriate risk assessment in seeking to ban the import of GM corn.
Implications for the Ohio Corn Market
The direct economic impact of not resolving this dispute on the Ohio corn market would likely be modest, given the modest reported value of Ohio corn exports to Mexico over the past two years, as compared to the 10-year average of $6.64 million, and the small proportion of white corn in US corn exports (see Figure 1). Specifically, over the last two years, Mexico accounted for only 2 percent of corn exports from Ohio, while Canada and Asia accounted for the largest shares at 39 and 35 percent respectively (see Figure 2). There are two reasons for these export market shares: Mexico’s import diversification and increased use of Brazilian corn (S&P Global Commodity Insights, December 29, 2022), and strength of the US dollar.
However, two broader factors could result in substantial indirect impacts on Ohio farmers. First, there would likely be a “ripple” effect as additional supplies are diverted to the domestic market, driving down corn prices. As a result, Ohio corn farmers would likely see increased risk of a squeeze on their margins. Second, and more broadly, if this dispute is not resolved in favor of the United States, it would introduce considerable regulatory uncertainty, with the potential of undermining the stable operation of commodity markets. This could increase the cost of any risk management measures such as hedging and options, placing further financial strain on Ohio grain producers.
Figure 1. Corn Exports to Mexico (MX)
Note: Corn export graphs (bars and scatters) correspond to the left-axis. Exports from US to MX are in billion dollars, and exports from Ohio to MX are in 10 million dollars. The line graph stands for the portion of white corn in total corn exports to MX and corresponds to the right-axis.
Source: US Census Bureau
Figure 2. Corn Exports from Ohio
Source: US Census Bureau
Planning for 2023
This latest development is another example of volatility in commodity markets and shows how world events impact US and Ohio agriculture. As you plan for the 2023 planting season, we encourage you to know your cost of production and understand the impact to your returns if the commodity market drops. How do a five, ten, and twenty percent drop in price impact your bottomline?
Living in Ohio can be a little difficult in the winter months, as it is one of the cloudiest states in the country, coming in within the top six. Many people don’t realize how dependent a person becomes until there is a lack of sunshine. It can be even more of a struggle for someone that may have depression or Seasonal Affective Disorder (SAD). Read on to learn more about what SAD is and how light therapy may be something that could be helpful.
Seasonal Affective Disorder is a type of depression that is recurrent with a seasonal pattern lasting approximately 4-5 months. SAD can be a winter or even summer-related pattern.
The winter pattern symptoms may include:
Oversleeping (hypersomnia)
Overeating, particularly with a craving for carbohydrates
Weight gain
Social withdrawal (feeling like “hibernating”)
A type of treatment that is becoming more popular for winter SAD is light therapy. It has been proven to be effective for mild to moderate episodes of winter SAD as a form of self-help. When it comes to severe episodes it has been effective in combination with therapy and potential medication.
Are they safe and effective to use?
Yes, as long as they are used as directed.
Use no more than 30 minutes in the middle of the day.
If there are any pre-existing eye conditions consult an eye doctor.
Other tips:
The most important feature of a light therapy lamp is the strength of the bulbs. The light therapy lamp should be 10,000 lux. It’s also important for the light therapy lamp to be UV-free or filter out UV light so that you’re not exposing yourself to harmful UV rays.
If you experience SAD and have been experiencing side effects like those mentioned above for more than four weeks, reach out to your doctor and talk about treatment options. Never hesitate to call 988 if you struggling with ongoing mental health challenges or suicidal thoughts or feelings.
Cell tower leases can be a great source of income for landowners. The towers have a relatively small footprint on the land and can provide monthly income of $1,000 or more. Additionally, and in some cases most importantly, having a cell tower can increase cell service quality and dependability.
Many landowners are eventually contacted by the cell tower company or another third-party company to purchase the lease rights. The purchasing company offers a large, one-time payment to buy out the lease rather than continuing to receive monthly payments. This buyout presents the landowner with an opportunity to generate a large, one-time payment rather than waiting on the monthly payments. The issue for the landowner is whether the one-time payment is large enough to give up the future stream of payments.
When deciding if the one-time payment is enough to relinquish the monthly payments, the first course of action is to determine the Present Value of the lease. Present Value calculates the current value of a future stream of income. There are calculators available online to easily calculate the Present Value. The offered payment should be something close to the Present Value.
Another factor to consider when analyzing the payment structure is the number of carriers on the tower. Some cell tower leases pay additional rent when carriers are added to the tower. Thus, the value of the lease many not be limited to just the Future Value of the current income stream but also the potential for increased revenue due to additional carriers added to the cell tower. For leases with the opportunity to increase revenue with the addition of new carriers, this additional value should be factored into the one-time payment analysis.
Like most business transactions, taxes are an important factor in analyzing the favorability of the deal. Cell lease buyouts are no different. The buyout payment will likely be considered a capital gain. Therefore, the gain will likely be taxed as capital gains rate rather than ordinary income. Capital gains tax rates tend to be lower than ordinary income tax rates.
Taking the one-time payment has advantages. The first, and most obvious advantage, is it creates a much larger and immediate payment than the monthly payments. Additionally, the buy-out payment can usually be used in a like-kind exchange. That is, if the sale proceeds are invested into other business real estate, the capital gains tax is deferred. Lastly, the one-time payment is a guaranteed payment for a certain amount. There is not the same certainty with the lease payments. Cell leases typically allow the cell company to terminate the lease at any time.
The obvious disadvantage of taking the one-time payment is the loss of the monthly payments. The payments are a nice supplemental income and are a dependable source of income. Additionally, taking the one-time payment could cause the landowner to be pushed into the higher, 20% capital gains tax rate.
For those landowners who have cell leases and receive an offer to buy out the lease, seeking tax and legal advice is a good idea. An accountant and/or attorney can provide valuable guidance and insight into analyzing the advantages and disadvantages of having the lease bought out. Working with an attorney who has experience with cell tower leases can have significant benefits. The attorney can help advise as to how much the buyout payment should be, help negotiate better terms and, also help reinvest those funds into other real estate to defer capital gains.
