Will wildfires leave lasting economic scars on California’s vital wine country?

Now that the wildfires that have swept through the vineyards, forests and towns of Northern California’s wine country since Oct. 8 have been virtually contained, it’s time to assess the damage.

So far they have destroyed more than 8,400 structures in Napa, Sonoma, Mendocino, Lake and Solano counties and killed at least 42, making it the deadliest series of fires in California’s history.

The devastating scenes of burned-out neighborhoods and wineries that have flashed across global television screens have prompted tourists to contact hotels, wineries and restaurants in the area to cancel reservations. Wine tourists who were in Napa and Sonoma immediately packed their bags and fled the smoky air as it filled with gray ash.

Initial reports indicate that more than two dozen wineries suffered damages, which means the region’s overall wine production, with more than 1,200 wineries, survived largely intact. Yet the overall economic impact could end up cutting a lot deeper, not only for the region but for the state and the nation.

So how long will the horrific images linger in the minds of tourists and keep them from returning to a region that depends on wine tourism as its economic backbone?

Napa and Sonoma: Beyond the tasting rooms

Wine tourism is a pillar of the economies in all five affected counties, employing tens of thousands of people. But the sudden absence of visitors to the tasting rooms of the region’s wineries will leave economic scars well behind those walls.

That’s because each time tourists visit a Sonoma or Napa Valley winery to taste or purchase a few wines, they reserve rooms in local hotels, dine out in regional restaurants, hire tour operators or enjoy local attractions such as hiking, biking, golfing or relaxing in a spa.

In Napa and Sonoma counties, the heart of America’s wine industry with almost 1,000 wineries between them, this is especially the case, as is clear when one looks at the numbers.

In 2016 alone, Napa Valley attracted 3.5 million tourists who, on average, spent US$402 a day on lodging, food and entertainment, resulting in $1.9 billion in total revenue. For Sonoma, visitors spent an average of $389 a day, or a total of $1.93 billion, in 2016.

Together the two neighboring counties employ more than 34,000 people in their tourism industries. At a time when both counties need additional funds to assist in rebuilding the infrastructure, any loss in tourism revenues will be painful.

From stem to stem

While the affected counties will bear the brunt of any long-term pain, the effects will be felt beyond their rolling hills. It’s easy to see by following the grapes from the vine stems on which they are grown to the fine-stemmed glasses in which they are drunk.

After the grapes are grown and harvested, trucks ferry them to a winery facility for crushing and fermentation. Next the wine is aged, bottled and then sold to distributors, retailers or end consumers.

Each of these steps is part of an extensive supply chain that involves wages, salaries, interest payments, taxation, rents and profits, all of which generate economic activity in the surrounding counties, the state of California and the country.

Bottles, advertising, consulting, corks, barrels, cardboard, stainless steel tanks, forklifts and all kinds of goods and services come from around the country. And all these wine industry workers, wherever they live, support their local economies with their wages.

For example, when a glass company in Arkansas gets an order for 100,000 new wine bottles, new workers may be hired and more revenues are made by the glass company. The employees and the employer now have a little extra money to spend in their local stores, and the town in Arkansas gets an economic boost that would not have existed if it hadn’t received the glass order.

Many economic studies, such as ones by Frank Rimerman & Co. in St. Helena, California, an accounting firm that specializes in the wine industry, show how wide and deep the wine industry is, not just in Napa and Sonoma but throughout the state and in many other states.

Napa County has an economic impact in the county alone of $13 billion, according to a regional vintner association, and $50 billion nationally, supporting 46,000 and 303,000 jobs, respectively. Sonoma County’s local impact in 2012 was estimated at around $13.4 billion, supporting 54,297 jobs and $3.2 billion in wages.

Unfortunately, these effects work in reverse. When an industry contracts and reduces its orders along the supply chain, the links in that chain also contract.

For example, if there is a contraction of the wine industry due to inventory, grapes and rootstock – the part of the vine that lives underground – destroyed by fire, the reverberations are felt up the wine industry supply chain. Orders for barrels, bottles, tanks, forklifts and other equipment may fall, and the number of hired hands may decline, regionally and around the country.

Any weakness may lead to an increase in imports, which could further harm California wine. In short, even a minor reduction in wine sales can ripple throughout the system, potentially causing a negative impact for many others.

A closer look at the impact of the fires

Thus far, the extent of the damage to the industry is unclear.

What we know so far: A local paper reported that fires damaged or destroyed the property of 27 wineries in the region. Another source claims 47 of the Napa Valley Vintner trade group’s more than 500 members have reported direct property damage.

The fires have also exacerbated the region’s already severe affordable housing problem because so many homes were destroyed and 100,000 people have been displaced.

On the bright side, the vast majority of wineries and vineyards remain intact. Furthermore, more than 90 percent of the 2017 harvest was already picked, crushed and in the process of fermenting when the fires struck. Though it may be a smaller production year, the quality should be as high as ever.

In fact, many regions of Napa and Sonoma remain pristine and untouched by the fires, such as most along the Russian River, Sonoma Coast and famous Highway 29 route in the Napa Valley.

Also, University of California at Davis research shows that grapevines are very resilient, so even though the leaves were covered in smoke for nearly two weeks, the smoke will not affect next year’s grape quality.

Support in a time of crisis

An interesting phenomenon occurred during the height of the wildfire crisis.

Many former tourists and wine club members contacted the wineries to see if their employees, vineyards and wines were safe.

Now, as employees return to work in the wineries, vineyards, hotels, restaurants and other tourist agencies, they are reassuring their customers and encouraging them to return to the region.

They also offered options for people to donate money to support firefighters and those in need. So in a time of crisis, it appears that support works both ways, and that wine tourists and wineries can be joined in a relationship that is symbiotic and not just focused on the material.

For readers interested in supporting these wineries, both big and small, the best way is to plan a trip to Napa, Sonoma, Mendocino, Lake and Solano counties. Or just pop down to your local wine shop, buy a bottle from the region and share a toast of thanks that this great American wine region is still able to produce some of the most delicious wine in the world.

That’s what we’ll be doing.

The Article was originally published on  Will wildfires leave lasting economic scars on California’s vital wine country?

Should “made in Texas” mean 100 percent Texas grapes? Texas grape growers split on wine bill

HYE — Chris Brundrett sat in a barn surrounded by barrels of wine he helped curate and swirled a glass of water in his hand, perhaps imagining it was something else.

Brundrett, accompanied by others from the state’s wine industry, drove home his pitch: “If we can just pump out wine from California and slap a picture of the Alamo or a longhorn on it and sell it,” he said, should wineries be able to put a “made in Texas” label on it?

A co-owner and winemaker at William Chris Vineyards between Fredericksburg and Johnson City, Brundrett was explaining why he backed House Bill 1514 by state Rep. Jason Isaac, R-Dripping Springs, which would require that wines with a Texas label be made only with Texas-grown grapes.

Under federal law, wine can have an appellation of origin from a state if a minimum 75 percent of its grapes are grown in that state. The other 25 percent can come from anywhere.

“I believe having something labeled as Texas should be from Texas,” Isaac told the Tribune, adding that his bill would encourage more Texas grape production.

Last year Texas produced about 3.8 million gallons of wine, according to the Texas Alcoholic Beverage Commission, and the state had more than 400 active permits to bottle, produce and sell wine. A separate study in 2015 found the wine industry contributed more than $2 billion to the state’s economy.

Grape growers and vineyard owners are scattered on the labeling issue. Paul Bonarrigo, co-owner of Messina Hof Winery, the state’s third-largest wine producer in 2016, said he was opposed to the measure, and the Texas Wine and Grape Growers Association said they don’t back Isaac’s bill, either.

Brian Heath, owner of Grape Creek Vineyards in Fredericksburg, said the bill could help the industry down the road, but if it passed now, he said it would limit winemakers’ options during unexpected events — like when strong Texas storms ruin grape crops. “You can’t predict what you can’t predict,” he said.

Others in the industry believe Isaac’s proposal would increase transparency and accountability and improve the authenticity of the state’s wines.

“We’re not the wine police,” said Brundrett, adding that regardless of whether HB 1514 passed, wineries would still have the right to produce and blend wine however they wished — as long as they were accurately labeled.

“But it’s an uphill battle because there are already other wineries who have come through and tried to pull wool over people’s eyes,” he said.

Back at the Capitol, Isaac said that while 100 percent Texas wine was the goal, some in the industry contend that it might be too challenging to use only Texas grapes by September when the bill would go into effect if passed.

Isaac said he would look into offering an amended version of HB 1514 that would phase in the change, with benchmarks at 80 or 90 percent before requiring 100 percent Texas grapes. Isaac also said his bill would allow the Texas Department of Agriculture to allow exceptions to the threshold if severe weather or drought damaged state grape crops.

Regardless, Brundrett said he was happy to see discussion on the issue.

“This bill is getting the conversation rolling,” he said. “It’s an idea that’s been presented, and I hope in the next couple of months we see some greater participation from the consumers, growers and winemakers.”

The Article was originally published on Should “made in Texas” mean 100 percent Texas grapes? Texas grape growers split on wine bill.

Martinez vetoes beer and wine delivery bill

Gov. Susana Martinez vetoed a Senate bill that would have allowed for home deliveries of beer and wine.

The bill, sponsored by Sen. Gerald Ortiz y Pino, D-Albuquerque, would have allowed deliveries of two six packs of beer and two bottles of wine with certain food orders.

In an executive message announcing the veto, Martinez raised concerns that the bill would facilitate dangerous drinking by minors by allowing large quantities of beer and wine to be delivered with food orders.

She added that while the bill did have language specifying allowed hours of delivery, it did not specify whether the times are for when the orders are placed or when the deliveries are made.

A similar concern was raised by the state’s Regulation and Licensing Department in the bill’s Fiscal Impact Report.

The report added that the bill states the Alcohol and Gaming Division would be able to enact rules to clarify delivery cut-off times.

Still, Martinez said she was would not sign the bill due to what she saw as significant problems.

Ortiz y Pino told New Mexico Political Report he thought Martinez was more concerned with a Democratic sponsor and less with the bill itself.

“It was a simple thing that was going to make restaurant businesses and hotel occupants benefit and now it won’t benefit [them],” Ortiz y Pino said. “I have to believe it has to do more with her discomfort at a bill that was sponsored by a Democrat than by a bill that has some problems in it.”

Ortiz y Pino said many concerns were raised and answered during the session.

Rep. Jim Smith, R-Sandia Park, was a cosponsor of the bill.

He also said he had high hopes when he saw that other bills that make changes to alcohol sales were signed by Martinez.

“It’s just incomprehensible to me that she would veto that bill,” he said.

Martinez signed a bill, sponsored by Rep. Dona Irwin, D-Deming, that would allow for internet wine sales.

New Mexico Political Report made several attempts to contact the governor’s office, but they could not be reached for a comment.

The Article was originally published on Martinez vetoes beer and wine delivery bill.

House for hire: Lords used to wine and dine clients

Peers are using the House of Lords as a private club to wine and dine business clients despite a ban on using the facilities for commercial purposes, an investigation by the Bureau has found.

The revelations, published in the Independent, will add to concerns that Lords may be using their position to advance their own financial interests and those of their family and friends, with few checks to ensure that they stay within the rules.

After Lord Heseltine, a director of publishing firm Haymarket, used the peers’ dining room to launch a magazine in 2008, new guidance was issued forbidding peers from sponsoring promotional events in the Lords for companies in which they have a financial interest.

But the Bureau’s investigation, published in the Independent, has found that peers are still using the Palace of Westminster for corporate dinners and parties. Such events offer guests the opportunity to network in parts of the historic Palace of Westminster which are off-limits to the public.

Beautifully decorated, the function rooms in the House of Lords are among the grandest in the building, with wood panelling, high decorated ceilings and deep red carpets.

The peers include the former Metropolitan Police Commissioner Lord Stevens of Kirkwhelpington, who hosted a ‘customer event’ for 140 in the peers’ dining room for private forensics firm LGC.

Lord Stevens is a non-executive director and shareholder in the firm, which made headlines in March after a rape case collapsed because LGC had allowed evidence to be contaminated. At the function he hosted for the company in the Lords Lord Stevens gave a speech praising LGC’s ‘dedication to pushing the boundaries of forensic science’.

LGC’s website afterwards described the night as a ‘customer event’.

LGC ‘showcased its full range of cutting edge forensic services to representatives from various UK civil and military police forces, the RAF, the Forensic Regulator, Crown Prosecution Services, Coroner’s Office and the private sector,’ the website said.

An LGC newsletter later hailed the evening as a ‘great success’ and ‘a perfect opportunity …. for our existing and potential customers to realise the full range of service we provide.’

Lord Stevens was not available for comment but an LGC spokesman said: ‘This was not a promotional event. Those attending would have no responsibilities for procuring our services. The point of the event was to educate those attending about the wide range of methods and technologies within the world of forensics and to allow them to discuss the latest innovations with relevant scientists.’

Lord Sheikh launches insurance firm
The prestigious Cholomondeley Room is the most sought-after location in the House of Lords, allowing guests the chance to walk onto the terrace and view the Thames.

Conservative peer Lord Sheikh booked the room and terrace for the launch of insurance broking firm, MacMillan Sheikh, last April.

A page on the firm’s website announcing the launch – which was removed after Lord Sheikh was contacted by the Bureau – said the space was ‘filled to capacity’ with guests including insurers, brokers, loss adjusters, suppliers to the insurance industry and journalists.

Speakers included Omar Faruk, who introduced himself as the peer’s ‘chief of staff on the political side’. Another speaker, Nigel Dyer, an insurance industry consultant, said insurance underwriters could expect a ‘long term relationship’ with MacMillan Sheikh ‘provided they price the product sensibly.’

‘We are here today celebrating the arrival of a new professional insurance brokerage,’ he added.

Lord Sheikh told the Bureau the event was a social gathering which was ‘in no way intended as a source of business development in any shape or form’ and that business was not discussed. He added that he had not received payment from MacMillan Sheikh and despite being a director and chairman of the firm, did not own shares in it.

According to company accounts filed in 2011, the peer’s daughter Zarina is the majority shareholder in the firm.

Related article: Conservative Treasurer accused of breaking House of Lords rules 

Some peers have ‘flipped’ sponsorship of events. For example, every year since at least 2007 the IT services firm 2e2 has held an evening reception for several hundred people at the House of Lords. Until 2009, Lord St John, a paid adviser to the firm, sponsored the reception. But rules forbidding sponsorship of promotional events by peers with financial interests then came into force.

The following year, Lord Erroll, who shares his office in the Palace – and an interest in IT – took over the role.

However Lord St John continued to attend the events and a copy of the invitation to the September 2011 event on 2e2’s website said:

‘Hosted by Lord St John of Bletso, a sitting member of the House of Lords and strategic advisor to the 2e2 Board, this is a fantastic opportunity for invited guests to visit the Lords and enjoy canapés and drinks with 2e2’s senior executives, partners and peers on the terrace of Westminster.’

2e2 declined to say why Lord St John was listed as host on the invitation, why the event was now sponsored by Lord Erroll rather than Lord St John or whether guests at the 2011 reception included customers, clients or journalists.

‘As an IT services provider we are not best placed to comment on the way that the palaces [sic] of Westminster conduct their affairs,’ a spokeswoman said.

Lord Erroll said: ‘I share an office with Anthony St. John and knew that it needed a new host, so I offered to do it.  I find these events a useful alternative to spending a day at a conference.  The failure to change the named host on the invitation was an oversight, presumably by their PR department.’

The peer seemed uncertain of the company’s name when contacted by the Bureau, referring to it as C2E and C3E.

‘The annual event which C2E sponsor is a useful forum in which parliamentarians, civil servants and industry professionals can meet and bring each other up-to-date,’ Lord Erroll said. ‘I made the opening speech at the C3E events and welcomed the guests.  I introduced Anthony [St John] who said a few short remarks and there were some other industry speakers, but I can’t remember who.  Speeches were kept short as the purpose was to network, not to promote anything.’

Lord St John said: ‘Lord Erroll and I share an office in the House of Lords and we both have a keen interest in IT related issues. He agreed to host the event for 2e2 where he had the opportunity of hearing developments in the sector. I similarly agreed to host an event for him, sponsored by Flexeye in 2010 where Lord Erroll was on the advisory board and I had no financial interest.’

The Article was originally published on House for hire: Lords used to wine and dine clients.

Economic and social implications of regulating alcohol availability in grocery stores

Regulatory policies governing alcohol sales and distribution in the United States continue to be informed by a hodge-podge of local and state economic interests, regional customs and cultural norms, and historical legacy ideas about consumption running from the Colonial days through Prohibition and beyond. The very diversity of these policies suggests they do not uniformly rest on social science and public health research. Take for example the wide variety of state laws relating to whether grocery stores can sell alcohol: 12 states prohibit groceries from selling alcohol; six allow the sale of beer; 15 authorize the sale of beer and wine; and 17 allow sales of beer, wine and spirits. States continue to see debates over proposals to modify these laws, many focusing on the wider distribution of beer and wine.

A 2013 study published in the journal Applied Economic Perspectives and Policy“Economic and Social Implications of Regulating Alcohol Availability in Grocery Stores,” looks to extend what the researchers call the “large body of literature” on the costs of alcohol consumption for society and to examine how the practices of local stores might influence outcomes. For example, to establish correlations with crime rates and traffic fatalities, research has looked at variables such as the density of liquor stores — as well as the effects of different types of outlets — Sunday sales restrictions, and even restrictions on malt liquor. The authors of the 2013 study, Bradley J. Rickard and Teevrat Garg of Cornell and Marco Costanigro of Colorado State University, analyze a wide variety of national and state data on alcohol availability, consumption, pricing, store opening hours and more to assess how the sales of wine, in particular, might shape societal outcomes.

The study’s findings include:

  • The data show that “a higher share of wine correlates with lower rates of traffic fatalities, while the opposite is true for beer. Spirits appear to be more strongly associated with traffic fatalities than wine, but less than beer.”
  • The findings, however, are complex: “We do not find evidence that introducing wine into grocery stores — either alone or coupled with the introduction of beer — would have an impact on traffic fatalities. Introducing [wine in grocery stores] would increase total alcohol consumption, which would increase total traffic fatalities; however, [it] also increases wine’s share of consumption and decreases beer’s share of total consumption, which would decrease total traffic fatalities. The net effect on traffic fatalities from the introduction of [wine] appears to be negligible — perhaps because it includes these competing effects from changes in total alcohol consumption and from changes in the consumption of the various beverages.”
  • The timing of store hours also proves important in terms of safety: “Sale hours for alcohol impacts traffic fatality rates, and policies regarding hours of sale of alcohol at grocery stores should be considered in conjunction with legislative proposals that seek to change alcohol availability in grocery stores.”
  • The data have strong policy implications concerning the issue of drinking by minors: “Increases in total alcohol consumption and beer consumption as a share of total alcohol consumption have relatively large effects on youth traffic fatalities. Because youth fatality rates are particularly sensitive to total alcohol consumption, this result highlights the need for policies that can enforce age limits on alcohol sales.”

Related research: Two peer-reviewed metastudies provide insight into the issue of taxing alcohol and corresponding public health outcomes. A 2009 study the University of Florida published in the journal Addiction“Effects of Beverage Alcohol Price and Tax Levels on Drinking,” finds that the correlation between increased prices and taxes on alcoholic beverages and their decreased consumption is both statistically and practically significant. It suggests that public policies seeking to raise the price of alcohol may be an effective means to reduce drinking. A 2010 metastudy published in the American Journal of Public Health“Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review,” further examines the links between alcohol price and risky behavior. The authors state that based on the evidence, it is “beyond any reasonable doubt” that raising the price of alcohol reduces both consumption and the rate of adverse health outcomes. Doubling alcohol taxes, they conclude, would have the effect of reducing traffic crash deaths by 11%, sexually transmitted disease 6%, violence 2%, and crime 1.4%.

Also worth considering are the findings of a 2013 study, “Brand-Specific Consumption of Alcohol Among Underage Youth in the United States,” which outlines the continuing problems in this area, including on illegal purchases and consumption. A 2006 study, “Measuring Public Policy: The Case of Beer Keg Registration Laws,” sheds light on issues related to college and high school drinking, including the diversity of laws around the Unites States, the relative lack of enforcement and the weakness of penalties.

The Article was originally published on  Economic and social implications of regulating alcohol availability in grocery stores.

Mississippi entrepreneur savors sweet taste of success

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Since 2004, Vino del Sol has built a reputation as a leading importer of estate-grown, sustainably farmed and family-owned winery offerings. It all started with a Mississippi native, a passion for wine and an elevator speech.

As a United States importer with annual sales of more than 250,000 cases, Vino del Sol is recognized within the industry as “The Argentine Wine Specialist.”

Named one of 2016’s Top 40 Under 40 Tastemakers by Wine Enthusiast Magazine, Corinth native and Vino del Sol co-founder and president Matt Hedges is well known throughout the wine world. While studying abroad in Buenos Aires in 2001, he fell in love with the country and its wine. He returned home hoping to find a variety of the same wines. It turns out those offerings were scarce.

“When I came back to the U.S., I was surprised that it was hard to find; after all, Argentina was the world’s fifth largest wine producer and the Malbec grape was perfect for the American palate,” Hedges said. “It became apparent importing Argentine wine would be a great and fun opportunity. The timing was perfect where we could choose and partner with Argentina’s top wineries.”

Hedges’ love for fine wine began at an early age, in none other than small town Mississippi.

“I was lucky that my parents exposed me to a lot when I was young, such as international travel and wine,” he said.

After earning his MBA from the University of Mississippi in 2004, he won the Wake Forest Elevator Competition, a Shark Tank-style pitch delivered in an actual elevator.

The venture was Vino del Sol, which means both “wine of the sun” and “comes from the sun” in Spanish. Given that the sun is on the Argentine flag and also an important characteristic of Argentine wines (most grape-growing regions receive more than 300 days of sun throughout the year), the name seemed like a good fit.

But despite those heavy Argentine influences, Hedges said it was Mississippi that made it all possible.

“Vino del Sol wouldn’t be here without Ole Miss. Ole Miss allowed me to shape all of my MBA classes around the idea of importing Argentine wine,” he said. “The professors were extremely supportive and sent a classmate, Andrew Jones, and (me) to an international business plan competition. After we won, Ole Miss was instrumental in introducing us to investors. I am very proud that the majority of our board of directors and investors are Ole Miss alums and extremely thankful to the Ole Miss community for making my dream come true. We are currently selling well over 2 million bottles a year.”

Hedges founded Vino del Sol with Thane Prichard and Alejandro Darago. The company now has an experienced team of 16 wine professionals working with a network of more than 60 wholesalers across all 50 states.

Hedges’ Mississippi roots also have been instrumental in Vino del Sol’s focus on family farming. Wine begins in the vineyards, and Vino del Sol believes it is important for wineries to own and farm their own vines. Every winery Vino del Sol works with directly controls the majority of the vineyards used to make their wines.

All of the wineries in the Vino del Sol portfolio are sustainably farmed.

“We have become the trusted source for our customers,” Hedges said. “The wine industry is long-term and we’ve proven we can develop products that over-deliver for the consumer and are consistent year-in and year-out. We have many competitive advantages in logistics as well as winery partnerships. We focus on working with good people and being good people and partners.”

Because the wine business is a long-term one, decisions made in the vineyard today may not be reflected in the bottle for several years. This is why all of the Vino del Sol wineries are family operations with a shared multi-generational vision for a sustainable long-term business.

“The formula for success for each individual is different, but the reasons for success in Matt’s case are drive and planning,” said Thane Prichard, co-founder and national director of sales at Vino del Sol. “We’ve been able to work on building a business from the ground up with a focus on Argentina, a wonderful country with great wines. We started importing wines from Argentina very early in the growth of the company, working with the farmers and their families from around the world.”

The focus on sustainability and family farms has contributed to Vino del Sol’s success in the U.S. They currently sell in all 50 states and have many local, regional or national plays with chains, such as World Market, Whole Foods, Central Markets, Truluck’s, HEB, Seasons 52, Giant Eagle, Oceanaire and many more. Costco alone sells tens of thousands of cases of their wine annually. They’ve also developed successful private label brands and have begun building their brands in some of the world’s top placements, such as American Airlines, Air Canada, the Bellagio, Mandalay Bay, the Cosmopolitan, and Celebrity, Royal Caribbean and Disney cruise lines.

Though Hedges largely credits his Mississippi education for his successes in the world of wine, his advice to novice entrepreneurs can be summed up in three simple steps.

“Be passionate about what you want to do,” he said. “Work harder than your competitors, and be sure you have competitive advantages that cannot be duplicated easily by another.”

The Article was originally published on  Mississippi entrepreneur savors sweet taste of success.

Chicken plastic and wine leather – giving waste new life

A fashion collection made from the remains of grapes from the wine industry and plastic made from chicken feathers are two new twists on the practice of making new products from waste, and a growing demand for sustainability from consumers mean there could be a ready market for this type of innovation.

Food waste isn’t just the result of groceries that have gone off or uneaten meals. As food is processed for consumption, huge amounts of waste are generated. The European poultry industry, for example, generated about 3.1 million tons of discarded feathers in 2014. And during wine production, around 25% of the weight of grapes, such as the skins and seeds, are wasted.

These byproducts could soon be given a second life, as scientists work out how to transform them into new materials.

‘The idea of unlimited resources is not valid anymore so it is necessary to look for alternative sources of raw materials,’ said Sarah Montes, research scientist with Spanish company Cidetec. She coordinates a project called KARMA2020, which is looking at how to transform unwanted feathers into biodegradable plastics.

Chicken feather waste, which is generated almost all over the world in large amounts, is typically incinerated or ends up in landfills or as low grade animal feed. But it has the potential to be a valuable resource. Feathers are made up of about 90% keratin – the same fibrous protein that gives hair, hoofs and horns their toughness.

‘Most of the waste is a profitable material,’ said Montes. Due to its high keratin content, feathers are likely to produce plastics that are stronger and more tear-resistant compared to those using modified starch or plant proteins, for example.

However, there are challenges involved in using feathers as a raw material. First and foremost, they need to be sanitised before processing to remove any pathogens. Since feathers are very light, it can also be hard to get them to flow through machinery, says Carsten Niermann from German bioplastics company FKuR, one of the project engineers.

One-and-a-half years into the three-year project, the KARMA2020 team has so far figured out how to pre-treat feathers so that they are clean and safe to handle, and how to turn them into a raw material. They have also created samples of feather-based materials that could be used for packaging, using a process where heated material is injected into a mould to shape it.

Economic feasibility

The next challenge is to scale up their production process for industrial manufacturing and test how well feather-based raw materials work in particular end products. At the moment, the researchers are primarily looking at how to make food packaging from feathers, although they are also developing other applications such as slow-release fertilisers, composite materials and flame-retardant coatings, depending on economic and technical feasibility.

Demand for products from the circular economy – where byproducts from one industry are used as the raw materials for another – could benefit from a phenomenon known as conscious consumerism. A 2017 report from Unilever showed that a third of consumers prefer sustainable brands. And this is likely to grow, as a company’s environmental credentials are increasingly important among young people.

Italian company Vegea, is counting on this trend to help them compete with existing players in their field – leather production. Both animal and synthetic leather production are well-established, but Vegea believes that a bio-leather made from grape waste could help build up their own market niche if they demonstrate that their process is cost-effective and eco-friendly.

Through a project called WineLeather, Vegea is producing their bio-leather using grape marc – the solid parts of grapes that are waste products from wine production. The team has been focusing on the development of natural textiles to satisfy the demand for sustainable alternatives in the clothing and apparel industry.

‘After looking at several potential feedstocks, grape marc was selected because it contains both oil and lignocellulose, two components that are optimal for the creation of bio-based textiles with our technology,’ said Marco Bernardi, Vegea’s research and development manager.

To make their fabric, leftover grapes are first dried in order to preserve them so that the raw material is available year-round and not just during wine-making season. Then the feedstock is processed in different ways depending on its end use.

‘It is refined with specific treatments to obtain different grades of weight, width, elasticity, embossing and colour,’ said Bernardi. The end product is then spread to form a textile.

Fashion collection

They have already produced sample products using their material for apparel company H&M that were showcased in an exhibition last year. ‘We prepared an entire fashion collection for them, with dresses, shoes and bags made with our wine-based material,’ said Bernardi.

The WineLeather project is now scaling up their production capacity so they can move from prototype stage to a commercial venture.

Although the production method makes use of existing technologies, the team has come up with greener alternatives to the toxic and environmentally harmful chemicals that are typically used. Their production process is considered to be zero impact since they are solely using waste as their raw material, don’t use chemical reagents or additional water and don’t produce any byproducts.

Bernadi thinks their material could eventually be used as a substitute for any leather product. However, although there has been considerable interest from the automotive industry and furniture manufacturers, producing a suitable fabric for use beyond clothing is more of a challenge.

The recipe for their material and the process must be tweaked to meet the requirements of each application. ‘The specs are way more stringent than what we are used to in fashion,’ said Bernardi.

The research in this article was funded by the EU. If you liked this article, please consider sharing it on social media.

The Article was originally published on  Chicken plastic and wine leather – giving waste new life.

The Billion-Dollar Loophole

The idea seems like the perfect marriage of environmentalism and capitalism: Landowners give up their right to develop a piece of property, and in exchange they receive a special tax deduction. Nature is preserved and everybody benefits.

That’s traditionally how what are known as “conservation easements” worked. In California’s Napa Valley, for example, a former biology professor and museum director named Giles Mead agreed not to develop 1,318 hilltop acres in 1983 and got a deduction in return. The property, Mead Ranch, features vernal pools and rare and endangered plants. Two entirely new species were discovered there. Bears, bobcats and mountain lions roam the grounds. Mead allowed groups of hikers, birders, and plant enthusiasts to visit. He sometimes greeted them with glasses of wine from the family’s vineyard. Since Mead’s death, his daughter has kept the property available to the public.

A growing number of recent easement donations, however, are driven by a more commercial reward — an outsized tax deduction for wealthy investors. Known as “syndications” (or “syndicated partnerships,” since they’re typically offered in that structure), they’re deals orchestrated by middlemen with the goal of big payoffs for all of the participants, many of whom have never visited the land in question.

One example: the former Millstone Golf Course outside of Greenville, South Carolina. Closed back in 2006, it sat vacant for a decade. Abandoned irrigation equipment sat on the driving range. Overgrowth shrouded rusting food and beverage kiosks. The land’s proximity to a trailer park depressed its value. In 2015, the owner put the property up for sale, asking $5.8 million. When there were no takers, he cut the price to $5.4 million in 2016.

Later in 2016, however, a pair of promoters appeared. They gathered investors who purchased the same parcel at the market price and, with the help of a private appraiser, declared it to be worth $41 million, nearly eight times its purchase price. Why? Because with that new valuation and a bit of paperwork, the investors were suddenly able to claim a tax deduction of $4 for each $1 they invested.

Such transactions are booming today, transforming an incentive for charitable gifts into a windfall for the wealthy looking to save big on their taxes. The provision they’re exploiting is the single most generous charitable deduction in the tax code, according to experts.

The use of syndicated easement deductions has exploded in recent years, according to Brookings Institution economist Adam Looney, who began researching the subject while serving as a top tax official in the Obama Treasury Department. They cost the Treasury between $1.2 billion and $2.1 billion, he estimates, in lost tax revenue last year.

That’s a negligible sum for the federal government — but it’s a proxy for a bigger, more systemic problem. There are plenty of other flawed provisions in the tax code that create opportunities for abuse, says Bill Hutton, an emeritus tax law professor at the University of California Hastings College of the Law. They often take years to surface — and many more to shut down. “The tax shelter advisors’ mentality just seems to live forever,” Hutton says. “Shelters keep coming back.”

That makes the treatment of syndicated easements a telling prism through which to view the tax system at a moment in which Congress has been frantically redrafting the tax laws. It’s also a case study in how difficult it can be to turn the rhetoric about draining Washington’s swamps into reality. Even as Republicans scrambled to find revenue to underwrite their tax cut — legislation that they claimed would reform and simplify the system — they permitted syndicated easements to survive intact.

And the 1,000-page bill is likely to open up costly new loopholes, according to experts. “It clearly is going to create artificial incentives to engage in transactions that have no economic purpose other than to reduce taxes,” says Looney. “The abuses in the new tax bill are going to make the costs of conservation easements seem trivial in comparison.”

Conservation easements have generated controversy in the past, particularly when it came to light that private golf course owners were taking the deduction. Indeed, the nation’s current president has availed himself of such write-offs in large quantities. In 2005, Donald Trump took a $39 million deduction on his private golf course in Bedminster, New Jersey. In 2014, he donated an easement on an 11.5-acre driving range in Los Angeles. (In both cases, he pledged not to build houses on the property.) All told, Trump has made at least five easement gifts, generating more than $100 million in write-offs.

But Trump’s deductions are relatively tame compared to the aggressive strategies employed by others in recent years. A change in tax laws encouraged enterprising promoters to reap deductions many times the size of the investment, on behalf of investors who hadn’t previously owned the properties in question. A preliminary IRS analysis of syndicated partnerships this summer showed investors claimed an average of $9 in tax deductions for every dollar they put in.

People have accomplished that by exploiting a giant loophole: The size of the tax deduction is based on a claim about how much the land’s value is diminished by the promise not to develop it. By law, that estimate is delivered by an appraiser hired by the taxpayer. The appraiser is free to assert that the donated land is actually worth many times what investors paid for it, often just months earlier. That, in turn, inflates the deduction. The process is abetted by law firms, brokers and accountants who pocket millions in fees.

 

“They’re bogus,” says tax expert Steve Small of syndicated easements. Small helped write the charitable-gift rules at the IRS and is now a tax attorney in Cambridge, Massachusetts. “They’re tax shelters masquerading as conservation easement transactions, based on highly inflated appraisals. Someone’s using a charitable contribution provision of the tax code to make a profit. That’s not what any charitable contribution is designed to do.” Former Montana Sen. Max Baucus, a sponsor of the legislation that updated the easement write-off, agrees. “Unfortunately, people have taken advantage of the code in ways that were not intended,” he says. “These things should not be legal.”

One reason abuses have multiplied is that a surprising amount of the oversight consists of the honor system. The genteel guardians of the old-line conservation community pledged to try to keep practitioners in line. But they’ve been unable to rein in the syndicators, whose rise they have watched with growing horror.

The traditionalists are embodied by the Land Trust Alliance, a Washington, D.C., association whose dues-paying membership includes the vast majority of the nonprofit trusts that, by law, administer conservation easements. (See sidebar, below.) The Alliance has long been the most important advocate for the tax break.

The Alliance’s leadership now fears that public outrage over profiteering will jeopardize the deduction altogether. “These need to be shut down,” says the organization’s president, Andrew Bowman. “These few bad actors are going to give us a bad name.” Bowman’s predecessor, Rand Wentworth, calls syndications “large-scale, multi-million-dollar tax fraud.”

As views harden among the traditionalists, a schism has occurred. A splinter group of land trusts has sided with the syndicators, providing a welcome home for their deals. Most prominent among the renegade land-trust leaders: Robert Keller, a brash conservation biologist in Georgia who has built an empire through syndicated easements.

Unable to stop syndicators through moral suasion, the Alliance has increasingly prodded the IRS to take action. The IRS has policing power, and it wields that clout chiefly by auditing the returns of those who take the deductions. But that’s a torturously slow process and one that so far has yielded negligible results. The speed at which the syndications have increased has left the resource-starved agency looking like a befuddled mall cop lurching off his chair and trying to figure out which of the dozen teenagers simultaneously grabbing candy bars to chase down.

The IRS announced a broader crackdown in December 2016. It took the rare step of branding syndicated easement deals as “listed transactions,” subject to special reporting and scrutiny. Such IRS moves usually scare off audit-wary investors. But this time, the action appears to have had little, if any, effect.

The syndicators, arguing that the profit motive produces big environmental benefits, have fought back with a million-dollar public relations and lobbying offensive. That campaign produced a move to eliminate the funding for the IRS crackdown — one of multiple fronts on which a legislative battle is being waged.

It might sound like an arcane matter. Yet there’s a lot at stake for all Americans: billions in tax revenue and a system that protects 56 million acres of U.S. land from being turned into resort developments and Walmarts. How has a widely derided abuse — almost universally criticized by tax experts — managed to survive repeated attempts to fix it?

Not so many years ago, conservation easements seemed to be approaching extinction. Starting in 2003, investigative reports in The Washington Post generated clouds of scandal over the write-off. The stories exposed self-dealing at the Nature Conservancy; sham deductions taken for protecting facades on urban buildings; and jaw-dropping write-offs for golf resorts, whose chemical-doused fairways and private membership seemed at odds with the goals of protecting natural habitat and providing “significant public benefit.”

The deduction seemed destined to die, or at least be sharply limited. In January 2005, Congress’ Joint Committee on Taxation proposed killing the tax break for some easements and slashing it for the rest.

But the Land Trust Alliance lobbied hard, promising it would do more to prevent misuse of the deduction. Prominent conservationists chimed in with support for easements. And another constituency with a mom-and-apple-pie appeal also weighed in: Farmers and ranchers, often rich in land but poor in cash, argued that the provision helped keep them in business, producing the nation’s food.

As a result, rather than eliminating the easement deductions, in 2006 Congress expanded them. The updated law raised the maximum annual write-off from 30 percent to 50 percent of taxable income; farmers and ranchers were allowed to deduct 100 percent of what they make. All were given 16 years to use their full write-off.

 

As for enforcement, Congress adopted a stance that could mostly be called “trust but don’t verify.” It accepted the industry’s promises to reform, which included a voluntary accreditation program that would set best practices for land trusts. Meanwhile, the law did mandate new training requirements for appraisers.

It was left to the IRS to police conservation easement misconduct through case-by-case audits, with stiffer penalties for those found to have violated the rules. That method would prove woefully inadequate to combat the coming wave.


It’s impossible to identify the precise birthplace of the syndicated conservation easement. But it’s safe to say it became an industry in Georgia. Between 2010 and 2012, taxpayers in the Peach State claimed about 36 percent of all federal tax deductions for conservation easements — despite having only 2.5 percent of the nation’s land under easement — according to a report published in May by Adam Looney, the former Treasury official, who is now a senior fellow in economic studies at the Brookings Institution. Eight of the ten biggest syndicators are located in Georgia, according to his research.

The syndication technique wouldn’t have spread the way it did without a confluence of people and events. They include a small-town conservation biologist and a couple of big-city ex-bankers who met after the easements law was changed — at a moment in the wake of the real estate crisis when investors began looking for ways to salvage value from land whose price had plummeted.

The small town was Jasper, Georgia, pop. 3,684 (about 60 miles north of Atlanta) and the biologist was Robert Keller. In the world of land trusts, no one embraces and enables syndicated deals quite like he does. Keller, 60, is CEO of the Atlantic Coast Conservancy, where he has built a conservation empire. By his estimate, ACC oversees 80,000 acres of conserved land in 11 states.

Despite the IRS’ recent crackdown, Keller expects to accept more than 80 easements this year. He did 79 in 2016. Like most land trusts, Atlantic Coast Conservancy doesn’t report the total value of its donors’ conservation deductions. But a sampling of deal documents suggests it took easements and land donations responsible for as much as $1 billion in write-offs in 2017.

Keller accepts more syndications than any one and he’s utterly unapologetic. “They call me a rogue land trust,” he says. “I’m sick of people pointing an accusatory finger. I’m putting aside to the tune of about 12,000 acres a year that will never be developed. Ever. If I can do that, then I feel like I’m doing what I was tasked to do. I’m supposed to conserve land. What am I doing wrong? This is almost like me going to church every week, and somebody telling me I’m going to burn in hell.”

 

During the day I spent with Keller in northwest Georgia, followed by many email exchanges and phone calls, he was charming, forthcoming and blunt. Stocky, with a red face and white beard, he was dressed in a black T-shirt, blue shorts and running shoes. His left leg bears a tattoo of a shark. On his right calf there’s a tattoo of a leopard seal. “They eat penguins,” he says.

Keller’s story — and a close look at some of the deals he’s embraced — explains a lot about the battle over syndicated conservation easements. For starters, in a world of nonprofit land trusts, Keller is a proud capitalist. His direct compensation from the nonprofit he heads totaled $156,750 in 2015, tax returns show. But that’s dwarfed by the $602,432 he made from Environmental Research and Mapping Facility, a side business he operates that works exclusively for his land trust.

Keller served in the Navy for a decade before earning a doctorate in conservation biology at Wake Forest University. He then worked as an assistant professor at the University of Tennessee, Chattanooga, for seven years. He left in 2006, to become the executive director of the Mountain Conservation Trust, a tiny outfit in Jasper, where, says Keller, “land conservation moved at a glacial pace.” Keller’s stock in trade, he says, was the expertise he’d picked up in the Navy about satellite-based global information systems, which allows him to survey land sites virtually anywhere in the U.S. “I wanted to expand and do more things,” he says. “They wanted to putter along.”

Keller’s ambitions didn’t find the right vehicle until about 2009, when two former Wachovia bankers rolled into Jasper from Atlanta. They pitched Keller on the idea of exploiting the devastated real estate market by urging developers and lenders to recoup some of their losses through partnerships donating “monetized easements” (Keller’s preferred term). Notes Keller: “Most of these people would never have talked to a conservation biologist if the economy hadn’t turned down because they were going to turn it all into a subdivision and make a bunch of money.”

The ex-bankers needed a nonprofit to accept easement gifts, and they had struggled to get a land trust on board. Keller smelled opportunity. He convinced his board to take a look.

They didn’t like what they saw. In December 2009, the board of the Mountain Conservation Trust asked Keller to resign. Cody Laird, then one of its directors, says Keller was proposing accepting easements with “excessive appraisals” that went “against the IRS guidelines.” He adds, “It’s something we didn’t want to do as a board.” (Keller denies the allegation and blames the move on “a personality conflict.”)

In 2010, Keller set up Atlantic Coast Conservancy, and began to accept “monetized” easements. By then, the Georgia syndication industry had begun to flourish. It touted itself with the get-rich-quick appeal of an infomercial. “Thinking about tax deductions for this year?” began one marketing email from a promoter called Forever Forests. “Contact us right now for more information on how you can facilitate a conservation easement and get incredible tax benefits for doing so.”

For the promoters, the deals were lucrative, often generating $1 million or more in fees per transaction. New entrants rushed in from careers in banking, real estate, law and accounting. In Georgia, they included a former lieutenant governor and a former state senator, even a practicing dentist.

The new syndication businesses typically had earth-friendly names: ForEverGreen, EvrGreen, EcoVest, Webb Creek. They set up websites featuring images of forests, waterfowl, and mountain streams. Their text proclaimed their principals’ deep concern about the fate of the earth. For example, Frank Schuler, president of Ornstein-Schuler, among the most active promoters, describes a personal epiphany that he says spurred his move into the conservation easement business after a decade in Atlanta commercial real estate. In an interview, Schuler recalls driving with his toddler son past a large residential development where the site had been bulldozed. “Every square foot was going to be paved. There were no trees. My son said, ‘Dad, that’s pollution!’” Says Schuler: “The importance of conserving land for him and future generations really pushed me to this point. … That’s why today I’m so passionate about conservation.”

But returns were front and center in marketing pitches. Eco Terra’s website, for example, offered the motto “Be Green, Make Green.” The website for a law firm that handles easements displayed a chart listing its clients’ high-end demographics: It said 92.5 percent had a net worth over $10 million. A 2015 summary for one fund reported that it was on track to deliver a return of 89 percent for the year.

The Land Trust Alliance became alarmed about the growing syndication-easement movement, fearing that it would generate a fresh wave of scandal and Congressional outrage. But syndications also posed a ticklish internal situation for the Alliance. Some of its members were an essential part of the chain that made the deals possible.

In 2010, Russ Shay, the Alliance’s public policy director, privately urged IRS officials to crack down on the syndicators through more aggressive action than individual audits — perhaps by issuing a public advisory. But the IRS remained silent. (The agency declined to make officials available for on the record interviews for this article.)

To be sure, the agency was auditing dozens of conservation easements; they were among the most litigated issues in federal tax court. But the case-by-case enforcement had limited impact. And given the years it took to pursue a case, says Shay, the result “is they were solving yesterday’s problem.” He adds, “They did not seem interested in solving the problem of the present — which we told them was much bigger.”

Deep budget cuts left the IRS with limited resources for the costly task of disputing an appraisal, which often required hiring outside experts. “The IRS is outgunned,” says Steve Small, the former IRS attorney. “They don’t have the budget or personnel to audit a fraction of these transactions.”

The IRS also lost some key battles. In one challenge to a $30.6-million golf course deduction taken in 2002 — but not resolved until 2009 — the presiding tax court judge allowed 94 percent of the write-off. Claud Clark III, a folksy Alabamian who had appraised the coastal property and defended the deduction in court, became the syndicators’ star expert. Marketing materials hailed him as the man who beat the IRS.

Promotional documents for syndicated deals always acknowledge the risk of an IRS audit, which can result in an assessment for back taxes, interest and stiff penalties. Recent Ornstein-Schuler marketing materials, for example, say the firm assumes “all partnerships will be audited,” but that it trusts its “conservative, defensible valuations …” It noted: “As of 3/13/17, approximately 11 percent of the partnerships have been audited and none of the valuations have ever been reduced as a result of an IRS examination or review.” Syndication deals routinely include a six-figure “audit reserve” for battling the IRS. A few even offer “audit insurance” to help offset any disallowed write-offs.

To many investors, the promise of a fat deduction seems worth the remote peril of a government audit. “If there’s a day of reckoning,” noted Small, “it’s way, way, way out in the future.”

By 2013, Atlantic Coast Conservancy’s “monetized” business was booming. Keller accepted 49 easements that year, and established a branch operation in Mobile, Alabama. He began staging promotional seminars around the Southeast with such agenda topics as: “Turning an Easement into a Source of Liquidity” and “Defending the Tax Audit from Examination through Litigation.”

Keller had also applied for formal accreditation from the Land Trust Alliance, through a painstaking process that required him to submit reams of documents and a $12,000 application fee. Keller was an Alliance devotee, donating to the organization and faithfully attending its seminars. He was confident about measuring up to its rigorous standards. Noted Keller in a website posting: “Obtaining the prestigious Land Trust Alliance seal of accreditation … makes a public statement that ‘we do things right!’”

But by this point, the Alliance had issued a memo counseling its members to reject gifts with “grossly inflated appraisals,” regardless of the land’s conservation virtues. As the memo put it, “The public has entrusted us to act on its behalf. Enabling abuse endangers that confidence.”

The Alliance was concerned by the practices described in Keller’s application. In an August 13, 2013, call, accreditation commission chairman Larry Kueter, a Colorado attorney who had reviewed Keller’s submissions, questioned him and his directors about “troubling” appraisals on several easements. “In all of the applications when I’ve been on the commission, I haven’t asked a question like this before,” Kueter said, according to a recording of the conversation that Keller made and provided to ProPublica.

Almost every easement appraisal he had reviewed, Kueter said, “just showed a really significant, significant increase … within not real long periods of time. One of these I wouldn’t have thought twice about it. …But here we saw it four or five times. … The pattern was concerning.”

In one transaction, Kueter noted, the valuation soared “from $300,000 to $1.7 million in 15 months at the back end of the real estate crisis. And I’m thinking I would have asked the appraiser … ‘How do you get to that kind of a judgment?’”

Keller countered that a land trust has no legal obligation to challenge an appraiser’s professional judgment. “Roaming around in the appraisal is not something that we do,” explained Keller on the call. “We feel like we’re giving tax advice if we do.”

Keller’s argument was not well-received. “I’m not sure there’s more to talk about that on this call,” Kueter finally said. The Alliance, he said, believes land trusts have a “duty of inquiry” as part of their obligation to participate in “credible transactions.”

By the end of the conversation, Keller says, it was clear “they were not going to let us through.” He withdrew his application for accreditation.

This setback, however, didn’t seem to hurt the Atlantic Coast Conservancy’s business, as syndicators rejected by other land trusts brought even more deals to him. Their easements have protected “gorgeous land,” says Keller. “It turned out to be this wonderful conservation ploy. … For me, as a conservation biologist, this is the best.”

In a typical syndicated deal, the investor partnership has acquired the property within the past year or two, presumably from a seller determined to get what it’s worth. How, then, can an appraiser conclude its value has suddenly multiplied eight or 10 times from what the partnership paid for it?

Under federal regulations, an appraisal must offer an opinion on the land’s fair market value — the price a knowledgeable buyer would pay a knowledgeable seller when neither is desperate to make a deal. But when it comes to conservation easements, syndication appraisers typically claim there are no comparable area sales. So they use a more subjective approach (albeit one that often includes reams of complex projections and reports): They try to estimate what the land would be worth if put to its most profitable legal use — as, say, a development of resort homes. Under tax court rulings, this transformation is supposed to be “reasonably probable” to occur in the “reasonably near future” and not rely on “mere speculation and conjecture.”

Based on a skeletal development plan, consulting studies commissioned by the promoter, and an array of optimistic assumptions, the appraiser then projects the development costs and profits for the imagined business. On syndicated deals this invariably results in a sky-high valuation — a calculation of what the investors are giving up and can thus claim as a deduction — that makes everyone a hefty profit.

The syndicated easement on the old Millstone Golf Course in South Carolina, donated to the Atlantic Coast Conservancy, illustrates how this works. The project was the brainchild of two attorneys, Hank Didier and Andrew Speaker. The men had formed their company, Ethos, in 2016. This was their first easement deal together. Their partnership would split a few months after the donation was made.

Didier was a Florida personal injury lawyer who had previously started two other businesses: one represented companies pursuing claims from the BP oil spill; another counseled injury victims on how to cash out on long-term settlement awards.

Speaker was best known for causing an international uproar in 2007. Then a personal injury lawyer in Atlanta, he’d defied health officials by traveling to Europe and back after being informed that he’d contracted a highly drug-resistant strain of tuberculosis. The incident prompted congressional hearings and multiple lawsuits.

The old golf course property, four miles outside of Greenville and renamed River West, had been for sale since January 2015. CBRE had marketed it as a development site, approved for 2,136 residential units and 172,500 square feet of commercial space, at $5.8 million. When it didn’t sell, the firm cut the asking price to $5.4 million — about $22,000 an acre. That’s when Didier and Speaker entered the picture. They raised $9.8 million from 52 investors.

The two men hired Claud Clark, who concluded that the property’s most profitable use was as a gated community with 1,404 single-family homes. Among the heady assumptions: The home lots would sell for $60,000 apiece, and be gone in six years.

Although the outcome was usually pre-ordained, Ethos, like most syndicated promoters, formally offered investors three options: to develop homes on the site; to hold it for “long-term appreciation”; or to donate 185 acres for a conservation easement. According to Clark’s preliminary appraisal, the “conservation option” would justify a $40 million deduction. That’s a value of more than $215,000 an acre — almost ten times the price at which the land had been offered for sale just months earlier. This choice would reward each of the partnership’s $25,000 investors with a $100,000 federal tax write-off.

Local real estate experts express shock at this valuation. “It wasn’t anything that was going to sell,” says Frank Hammond, a Colliers International commercial broker with 30 years’ experience in the Greenville market. “It’s in a blue-collar service area, with very little in the way of upper-income demographics. It’s a rough piece of dirt in an area that isn’t sought after very much right now.” A list of comparable sales showed only four tracts of 100 to 200 acres that had sold in the area over the past three years. The most expensive had brought about $8,400 an acre.

The premise of lofty syndication appraisals is that the promoters have suddenly discovered something on the land that multiplies its value, or come up with a sure-fire, highly profitable development idea that no one else contemplated. In the real world, experts say, that rarely happens. “Real estate is actually a very efficient market,” says Wentworth, the former chief of the Land Trust Alliance. “There’s a vast amount of local knowledge about what a thousand acres of pine trees in central Georgia is worth. People did not just fall off a turnip truck.”

In an interview, Didier called the old golf course site “a great property” that had been “completely recaptured by nature” and defended its valuation. “The $40 million is what the value of the property is with the development on it,” he said. “I could absolutely build those homes and make a god-awful amount of money for my investors. If they [had] elected that, we would be ready to go.” (Speaker declined comment for this story; Clark didn’t respond to calls.)

Stratospheric valuations for syndicated easements don’t always depend on a theory that a wildly profitable housing development could be sold on the spot. Increasingly, promoters have been declaring high valuations for parcels of land that sit on top of sand and rock, which they claim could be lucratively mined.

In the fall of 2015, promoters from ForEverGreen Group, based in Atlanta, contacted Judy Steckler, who runs the Land Trust for the Mississippi Coastal Plain. They had a piece of land they wanted to conserve: 203 acres along the Pearl River, near the Louisiana border.

Steckler took a team to inspect the tract. Much of it was covered in cypress pond swamp, prone to flooding, with wetlands habitat. There was also a good bit of sand, reputed to be of high quality for oil and gas fracking. The property sat inside the boundaries of an operating quarry. Steckler concluded that the property met her trust’s conservation standards.

She advised ForEverGreen that she was prepared to accept the easement, pending some standard reviews. But days later, Steckler says, a friend forwarded her a private placement memo seeking investors for the deal. The document said the property had an estimated appraised value of $160 million — $786,000 an acre.

Steckler was gobsmacked. “I’m familiar with what that land sells for,” she says. “There is no piece of property I know in the Mississippi Gulf Coast in the six coastal counties that would ever sell for that much.” (A 240-acre parcel nearby had sold just months earlier for $2,125 an acre.) Steckler pulled out of the deal.

There was another land trust that had no problem with the donation: Atlantic Coast Conservancy. Keller says he didn’t care about the size of the write-off, and found the wetlands there interesting. In a detailed email, he said the area is also the most likely habitat of the storied — but long-unseen — Ivory-billed Woodpecker.

Although an environmental study of the site found “a high percentage of land area in wetlands”—which would add extra costs for any commercial operation — mining was the basis for the site’s stratospheric valuation. Investor documents show the appraisal, conducted by star appraiser Claud Clark, relied on two expert studies, which concluded that the land’s most valuable use was to mine for fracking sand. (It was not clear why the original landowners, who were operating the surrounding quarry, wouldn’t want to mine the site themselves.) Nevertheless, in its 2015 tax return, Atlantic Coast Conservancy listed the value of the Mississippi land, which was ultimately donated as an outright gift rather than as an easement, as $170 million — more than $835,000 an acre.

As time went on, syndicators became more audacious. Some began acquiring large tracts of land themselves, then selling it in pieces to investors they recruited, who then used it to extract easement deductions. The two-step process had the effect of inflating the values even higher (and letting the syndicators make money on the sale, too).

In central Florida’s Polk County, for example, entities controlled by Ornstein-Schuler bought the County Line Ranch, a 3,475-acre tract once owned by a citrus baron. They then carved it into 20 parcels and began selling them to investor partnerships run by Ornstein-Schuler and three other syndicators. Nine separate partnerships, all of them listing their address as a drop box at a Lakeland, Florida, UPS store, then donated easements to Keller’s land trust in December 2015. Eleven new partnerships followed a similar pattern in 2016.

In a matter of weeks, the land’s value jumped from $3,500 and $6,500 per acre (its listing prices before the syndicators bought the land in two pieces) to about $20,000 an acre (the price at which the syndicators resold it to their investors) to more than $200,000 an acre (the claimed easement deduction). Once all that was accomplished, most of the partnerships gave away the land, earning one final, much smaller, deduction on its residual value.

The valuations defy common sense, say mining experts, who rejected the stated claims that the parcels could each be developed into highly profitable limestone mines. Dean Saunders, a commercial broker who listed the County Line Ranch for years, says a previous owner tried to sell it in 2008 as a potential mining site for $10,000 an acre, but found no takers. He “realized the economics didn’t justify trying to mine,” says Saunders. He calls the $200,000 per acre appraisal “a farce and a travesty and an abuse of the system.” (Schuler defends the transaction, saying his company relied on “qualified, independent experts” who concluded that “profitable limestone mining operations were feasible.”)

For his part, Keller calls it a “heck of a project.” He says the area’s avian and amphibian diversity is “amazing” and that the land will also help protect the endangered Florida grasshopper sparrow. “If I can provide habitat for that. … I think I’m doing a heck of a good job.”


As Keller’s syndication business mushroomed, so did his conflict with the Land Trust Alliance. Keller blamed the group for growing aversion to the promoters within the conservation community. In 2014, Keller heard scuttlebutt that Heather Benham of the Athens Land Trust had voiced qualms about syndication at a public forum. He shot her an email seeking “any and all” correspondence with the Land Trust Alliance on the issue. Keller also blamed the Alliance for Judy Steckler’s decision to pull out of the ForEverGreen deal. (Steckler says it played no role.)

In 2015, Keller tried to convince Chuck Roe, a former Land Trust Alliance executive who he’d hired as a consultant, to launch a rival trade association. Roe declined. He says he recognized that it would be an advocate for syndications, which he calls “horrifying.”

By the end of the year, Congress once again addressed easements. The 2006 law that expanded the deduction had actually been temporary and had been renewed periodically since then. But in December 2015, even as concern mounted about syndications, Congress decided to make the enhanced deduction permanent.

In August 2016, the Land Trust Alliance officially barred all accredited land trusts — and later, all of its members — from accepting syndicated easements. It urged avoidance of deals that are managed by a paid promoter, involve land acquired within the past 36 months, and claim deductions of more than 2.5 times the property’s acquisition cost.

The Alliance’s position forced land trusts to choose sides. In 2016, the Georgia-Alabama Land Trust, an accredited and influential group which had previously accepted syndicated deals, broke off discussions to accept another from a previous donor. Keller accepted the easement instead.

Keller dismisses concerns about “hyper-inflated” easement values, declaring it “something the Land Trust Alliance made up” as part of a “smear campaign.” He says he knows the promoters bringing him easements are “in this for the money,” but he says his mission is to conserve land. “At the end of the day,” he says, “I don’t care if they get their tax benefit or not.”

The Article was originally published on The Billion-Dollar Loophole.

That Cabernet Might Not Be Good For Your Health After All

You’ve probably heard that a little booze a day is good for you. I’ve even said it at parties. “Look at the French,” I’ve said gleefully over my own cup. “Wine all the time and they still live to be not a day younger than 82.”

I’m sorry to say we’re probably wrong. The evidence that alcohol has any benefit on longevity or heart health is thin, says Dr. Timothy Naimi, a physician and epidemiologist at Boston Medical Center.

He and his colleagues published an analysis 87 of the best research studies on alcohol’s effect on death from any cause in the Journal of Studies on Alcohol and Drugs on Tuesday. “[Our] findings here cast a great deal of skepticism on this long, cherished belief that moderate drinking has a survival advantage,” he says.

In these studies, the participants get sorted into categories based on how much alcohol they think they drink. Researchers typically size up occasional, moderate and heavy drinkers against non-drinkers. When you do this, the moderates, one to three drinks a day, usually come out on top. They’re less likely to die early from health problems like heart disease or cancer and injury.

But then it gets very tricky, “because moderate drinkers tend to be very socially advantaged,” Naimi says. Moderate drinkers tend to be healthier on average because they’re well-educated and more affluent, not because they’re drinking a bottle of wine a week on average. “[Their] alcohol consumption ends up looking good from a health perspective because they’re already healthy to begin with.”

To make things worse, Naimi says that some of the non-drinkers in these studies weren’t always dry. “People in poor health tend to quit drinking,” he says. In the studies, those who abstained from alcohol altogether were lumped together with those who quit later in life, bringing down the overall health of the entire group.

Naimi and his colleagues sorted the lifetime nondrinkers from the quitters, controlled for socioeconomic class and reanalyzed the data from all 87 studies. “When we accounted for these biases, moderate drinkers had no survival advantage,” Naimi says. “It became a wash either way.” Those who imbibe one or three glasses a day appeared to do no better than those who never touch alcohol.

What’s more, Naimi says the group that did the best were the people who had on average one drink every 10 days. “It’s almost homeopathic amounts of alcohol. So it’s extremely unlikely that it’s the alcohol that’s making them look good,” he says. The heavy drinkers had the shortest lives on average, which should come as no surprise.

The meta-analysis severs one arm of reasoning why alcohol might be beneficial, says Dr. Jennie Connor, a physician and researcher at the University of Otago in New Zealand who was not involved in the work. “They’ve very successfully investigated one of the many series of problems in this reasoning,” she says. “People used studies to say, ‘Hey, look there’s a benefit [to alcohol], and when we talk about harms we have to balance that against the benefit.’ That’s always been a fallacious argument, and it’s really been reduced to nothing now.”

The Centers for Disease Control and Prevention has also given the purported health benefit of alcohol a wary eye. The agency recommends people have no more than one drink a day for women and two a day for men. This refers to the amount imbibed on one day and isn’t meant to be taken as an average over several days. The Dietary Guidelines for Americans suggests people who don’t drink alcohol should not start for health reasons.

Naimi says the biological hypothesis for why alcohol could be good for health has also been eroding. “[Alcohol] raises your good cholesterol. That’s the main biological argument,” he says. “But the whole idea that [good cholesterol] causes heart health is going away now.” A recent study published in Science showed that people with naturally higher levels of good cholesterol had more cardiovascular diseases than those without.

But still, the notion that alcohol extends our lifespans is a persistent one. According to Connor and Traci Toomey, an alcohol policy researcher at the University of Minnesota, studies supporting the link between moderate drinking and long life have been used to argue against certain alcohol harm reduction policies. “Usually there are proposals of having [health] labels,” Toomey says. “[The industry] controls a lot of the messaging around alcohol.”

In Connor’s eyes, that messaging has kept the notion alive in spite of recent work showing moderate drinking does not provide a cardiovascular benefit. “Even if it were true,” she says, “the idea that people are going to drink only one or two drinks a day as medication for the rest of their lives is just ridiculous. We’ve been sold an idea that’s incoherent.”

The Article was originally published on That Cabernet Might Not Be Good For Your Health After All.

Sip Wine And Chat About Postponing Motherhood — At An ‘Egg Social’

BEVERLY HILLS, Calif. — Your grandma hosted Tupperware parties. Your mom attended Mary Kay soirees.

Now, you might be sipping cocktails at an egg-freezing fête.

Judging from a recent event at a swanky Beverly Hills hotel, female fertility could be the next big thing in direct marketing.

About 20 women — and a few men — gathered this fall in the presidential suite of the Viceroy L’Ermitage in this famously upscale city to chat, drink wine and eat hors d’oeuvres while hearing about the possibility of freezing their eggs for future conception.

This story also ran in USA Today. It can be republished for free (details).

Some of the women said they hadn’t found the perfect partner and wanted to keep their fertility options open. Others said they were focused on their careers now and didn’t want to compromise their chances of having a family later.

All were willing to put aside their inhibitions for one evening to learn about an intensely private subject in an unusual setting: a cocktail party.

Frances Hagan, 35, had heard about the “egg social” from a friend and was eager to find out how egg freezing worked. Hagan, a lawyer, said she is single and still hopes to find someone with whom she can have children the old-fashioned way. But she said it doesn’t hurt to consider freezing her eggs as a backup.

“I’d like to wait and just see what happens,” Hagan said. “But if I wait too long, maybe it won’t happen. I’m trying to be proactive.”

It is probably no coincidence that the event was held in a place like Beverly Hills, given the considerable expense of freezing eggs — and of using them later.

Egg freezing costs between $10,000 and $15,000 for the procedure and the medications. Thawing the eggs and fertilizing and transferring an embryo could cost thousands more later on. A few Silicon Valley employers, including Facebook and Apple, cover egg freezing for their workers, but most employers and insurers do not.

In the past, egg freezing was primarily for women who risked infertility because of cancer treatments. But in recent years, more women have been choosing to freeze their eggs for non-medical reasons — such as not being ready to have a baby.

As the practice becomes more widespread, so do events designed to raise awareness of it and recruit patients for clinics that perform the procedure. In recent years, cities such as Los Angeles, New York and San Francisco have been the venues of egg-freezing parties.

At the Beverly Hills hotel, physicians from the Southern California Reproductive Center, the fertility clinic that sponsored the event, projected slides on a wall and explained the history and science of egg freezing. They told the guests that it was an insurance policy for women who want children in the future.

“It’s the smartest thing any woman can do if they are not in a serious relationship that is leading to children,” said Shahin Ghadir, a fertility specialist at the practice.

Ghadir said hosting women in a casual environment makes the idea less intimidating and stigmatizing. “It lets people know it’s not a medical issue — it’s a social issue,” he said.

Besides, Ghadir said, “with a glass of wine, everything sounds better.”

The first baby created from a frozen egg was born about 30 years ago, but it wasn’t until 2012 that the American Society for Reproductive Medicine declared that egg freezing should no longer be considered experimental. That opened the door for more women to freeze their eggs, said Evelyn Mok-Lin, medical director of the UC-San Francisco Center for Reproductive Health.

UC-San Francisco started offering “elective” egg freezing soon afterward, and the number of women opting to freeze their eggs has since risen sharply, Mok-Lin said.

More than 6,200 women in the U.S. froze their eggs in 2015, up from 475 in 2009, according to the Society for Assisted Reproductive Technology. And 155 births resulted from the fertilization of women’s frozen eggs in 2014, up from 28 in 2009.

Egg freezing gives women control over their reproductive health and fertility, and the medical risks are very low, said Mok-Lin. But given the high cost, not everyone can afford egg freezing, and it doesn’t always work. “It is a luxury for many people and without any guarantee in the end that the investment will pay off,” she said.

The process involves stimulating the ovaries, extracting the eggs and flash-freezing them.

Necka Taylor, a nurse who attended the Beverly Hills soiree, said her first cycle of in vitro fertilization was unsuccessful, but she’s hoping to try again. Taylor, 32, said she has several friends who have had babies, and she knows she wants children herself.

“I just don’t know when it’s going to happen,” she said. “I knew I needed to take steps to have a healthy baby.”

Her friend Dominika Martinez, 35, said she had considered egg freezing in the past but it wasn’t until she got married last year that she decided to freeze embryos with her husband.

“I am still not where I want to be in my career,” said Martinez, a social media marketer. “I feel like I need a little more time.”

Martinez said that when she and her husband are ready, they will try to conceive naturally. But if it doesn’t work, she said, “we have a backup plan.”

Ghadir, of the Southern California Reproductive Center, told the group that he had children and had not anticipated the expense, time and energy of parenting. Freezing eggs can help women have children on their own timeline, he said.

“If I was doing this at the wrong time in my life, it would have been a disaster,” he said. “Doing things at the right time, when you know you are ready … is one of the most important reasons to freeze your eggs.”

This story was produced by Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.

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The Article was originally published on Sip Wine And Chat About Postponing Motherhood — At An ‘Egg Social’.