Management Policy and Estimated Returns on School Trust Lands |
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Authors: | Mark A Sunderman Ronald W Spahr |
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Institution: | (1) Department of Economics and Finance, University of Wyoming, Laramie, WY 82072, USA;(2) Department of Finance, Insurance and Real Estate, Fogelman College of Business and Economics, University of Memphis, Memphis, TN 38152-3120, USA |
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Abstract: | Every state entering the Union since 1803 received land grants from the federal government for the support of their respective
public school systems. Inherent in this federal grant is the fiduciary duty to prudently and effectively manage these assets
for the beneficiary, their school systems. We develop a framework that measures the present value of the beneficiary’s economic
benefits to assist managers of school trust lands in determining future management policy. Using this framework, we assess
whether managers of state school trust lands are currently meeting their fiduciary responsibilities of “maximum economic benefit”
for their beneficiaries or whether changes in management policy are needed. The present value of realized economic returns
from grazing lease revenues and capital appreciation are compared with the present value of income streams that may be generated
from alternative investments available to the land trustees if the land were sold and the proceeds reinvested in U.S. Treasury
securities. Market values and capital appreciation for school trust lands in Wyoming are estimated using hedonic models formulated
from ranch sales data. Because we are comparing a risky return on land investments with a riskless return on Treasury bonds,
we observe, in most cases, that the sale of land andreinvestment of proceeds will increase economic benefits on school trust
lands.
Accepted for Publication in The Journal of Real Estate, Finance and Economics. |
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Keywords: | State trust land Maximum economic benefit Grazing lease Agricultural land valuation School trust lands |
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