Oregon has the nation’s most restrictive land-use regulatory system. Every square inch of Oregon has been zoned by government planners, with the result that development of any type is prohibited on most private land. In addition, 60% of Oregon’s total land mass is owned by the government, so there are relatively few parts of the state where real estate markets can function effectively. The result is a government-enforced cartel of landowners who own buildable land. The consequence of any cartel is to drive up the price of the regulated good to above-market levels. The high cost of land in Oregon is one reason why the price of housing is relatively high in Oregon’s largest cities.
The State of Oregon will sell 84,000 acres of the Elliott State Forest by March 2017, in order to make money for public schools.
However, the lands will not be auctioned to the highest bidder. In fact, they will not be auctioned at all. The State will set the price based on appraisals, and purchasers will pay that price.
If there is more than one offer, the tie will be broken based on which buyer promises the most “public benefits.” Those benefits are defined as public access to at least 50% of the property; preservation of old growth timber; protection of stream corridors; and the guarantee of at least 40 jobs for 10 years.
Evaluating competing offers promising “more jobs” versus “wider stream corridors” will be entirely subjective—in essence, a beauty contest. At a meeting last week for prospective buyers, the Department of State Lands was asked about the possibility of simply offering a higher bid. They responded that if someone bid even one dollar over the appraised value, it would be deemed a “non-responsive” offer and rejected.
Prospective buyers were stunned. The timber is likely to be worth somewhere between $300 million and $450 million, and a high bid could really help schools. But for the State Land Board, price doesn’t matter.
John A. Charles, Jr. is President and CEO of Cascade Policy Institute, Oregon’s free market public policy research organization.