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It's a tiny parcel, less than a square mile chunk of Kittson County grassland in far northwestern Minnesota. The owner's decision to donate it hardly seemed controversial.


This transaction, though, was a little different. The Nature Conservancy owned the land, which it bought a few years earlier using a grant from the Lessard-Sams Outdoor Heritage Fund, which is funded by the state sales tax. The nonprofit is transferring ownership to the U.S. Fish and Wildlife Service, and that takes the property off the local tax rolls.


Vexed state and county officials are now trying to get their arms around how state money was used to buy land that is now no longer taxable in a county with an already small tax base.


"The Nature Conservancy, they're a good steward of the land, they pay their taxes on time. But when you hold 16,000 acres of land in our county, when we start to see the first of it transfer over to the federal government and we haven't had any communications, we got a little panicky," said Kittson County Administrator Eric Christensen.


The panic is because while The Nature Conservancy pays property taxes, the federal government does not.


"Kittson County has a small population base, has a small tax base. We understand that, we don't want to make that situation worse," said Neal Feeken, the Nature Conservancy's grassland conservation program director. He recently assured county officials that the group has no plans to transfer additional lands.


"Minnesotans clearly said they want to see our natural habitats, our wildlife habitat, protected for the next generation," he said. "They want to see it open for public access."


The U.S. Fish and Wildlife Service does provide some money to compensate local governments through a revenue sharing program, but the payments are based on how much money Congress puts in the budget. In recent years, payments have been about one third of property taxes according to an agency official.


The Minnesota Department of Natural Resources makes what's called a payment in lieu of taxes, or PILT. The payment varies but usually makes up for the lost property tax.


County officials argue the state PILT payment is an uncertain revenue source that can change at the whim of the Legislature.  


Groups like the Nature Conservancy are good stewards of land they buy, but "once they transfer it over to state or federal ownership there's no more guarantee. And that's the concern," said Matt Hilgart, a government policy analyst at the Association of Minnesota counties.


"There are core functions that county governments have to serve," he added. "Conservation should not come at the expense of reduced services to constituents in that land area or increased property taxes."


Counties are not opposed to conservation, but they want to know they will be paid for lost tax revenue, he said. 


"If the state sees a recession or a depression are legislators going to dip into that large pot and take money from that to keep the budget contained? We don't know," Hilgart said. "That's the threat we're facing as units of local government."


There have been efforts to reduce or eliminate PILT in the past.


Some county officials see a growing threat from nonprofit groups buying land with state legacy funds and turning it over to government agencies.


Besides the Nature Conservancy, the U.S. Fish and Wildlife service also works with Pheasants Forever. That group has purchased 11,594 acres it later donated to the wildlife service for waterfowl production areas, said Minnesota Chapter President Eran Sandquist. 


But it's less about what happens to the land, more about property taxes.   


"This is a very, very big deal. These are very, very real issues," said state Rep. Dan Fabian, R-Roseau.


Fabian, who represents several northern Minnesota counties, plans to introduce legislation to regulate land transfers from nonprofit groups to government agencies.


"Whoever Nature Conservancy would transfer that land to, they would have to agree to pay the taxes at the same assessed rate," Fabian said. "If there's something in statute that prohibits the government from doing that, then the transfer is off."


Fabian has support from state Rep. Denny McNamara, R-Hastings, who chairs the House Environment and Natural Resources Policy and Finance Committee.  


State law gives county boards some control over land sales, McNamara added.


"When governments buy land they are supposed to meet with the local counties and get the county commissioners approval to move forward," he said. "That's not required when an NGO (non-governmental organization) purchases the land. We don't want people skirting the intent of the law."

Christensen isn't supporting any specific plan. He just wants a legislative fix.

"I'd just like to see it so it doesn't become our tax dollars buying land that's on the tax rolls and then removing it," he said. "It hurts the people of Kittson County."

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The Nature Conservancy's donation of Kittson County land to the federal government is raising red flags for some state and county officials worried about lost tax revenues.

Land transfer cultivates tax worries in NW Minnesota

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