UI's endowment-farm policy has deep roots

UI's endowment-farm policy has deep roots

Farms donated to the University of Illinois generate more than $2 million each year for student scholarships, 4-H, Allerton Park or agricultural programs.

Just who gets to farm them, and for how long, has been a sore subject with the state's farming community for the past decade.

Now, some longtime critics are applauding a change in the way the UI chooses operators for its 10,000 acres of farmland — one that favors long-term stewardship rather than the highest bidder.

The university will no longer routinely open leases for bidding, allowing operators like Champaign County's Jeff Fisher to continue farming land that was in his family for decades until the UI acquired it in the 1970s.

"It's long overdue," Fisher said.

President Tim Killeen recently announced the "fresh approach" to a policy instituted in 2006 by UI trustees, who wanted to maximize the UI's profits from its farming operations.

"When that change occurred, it just upset a lot of people," said Chris Magnuson, spokesman for the Illinois Farm Bureau. "I'd say there would be strong support for how this change is being made."

Magnuson and others credit Kim Kidwell, dean of the College of Agricultural, Consumer and Environmental Sciences since last November, for changing the process, along with Chancellor Robert Jones.

"To their credit, they looked into it and thought it didn't serve the university well," Magnuson said.

 

'There was a lot of pushback'

Before the 2006 policy was adopted, farms were run the way they had been since the UI acquired its first donated farmland in 1923. Farmers were given long-term leases and shared any costs, profits and risks with the university.

The idea was that farmland is a unique "living asset," and the UI wanted to give farmers an incentive to manage it for the long haul, rather than short-term gain, said Jonathan Norvell, director of agricultural property services. If a farmer retired, or there was another "natural break" in that process, the UI would advertise the farm for rent, conduct interviews and choose a new farmer, he said.

But around 2005, former UI Trustee Robert Vickrey, who owned farmland, suggested putting the leases up for bid every few years. Vickrey said he had noticed that the UI's net per-acre income was a fifth of what he was earning on his farms.

"We kind of had a meeting of raised eyebrows," he said Thursday. "It seemed pretty logical to me we needed to change this. And there was a lot of pushback."

Trustees eventually approved the change, over the objections of the Farm Bureau and farm managers at the College of ACES.

The leases were put out for bid every three years, and some operators who had farmed UI land for generations lost out. In the initial round, 12 of 16 renewed their leases, with three submitting winning bids and nine others matching the highest bidder. Four declined. All but one of the bidders were from Illinois.

Vickrey noted that income went up "substantially" the first year — from about $1.8 million to $2.5 million, according to the UI — though corn and soybean prices were also on the rise. Income leveled off after that, he said, and last year totaled $2.27 million.

"Farming's a business," he said, noting that the Illinois Department of Natural Resources used the same approach. "It's the only really straight-up way to do it."

But Magnuson said the policy disrupted the traditional relationship between landowners and farmers that is designed to promote long-term sustainability and investment in the land.

 

The family business

One was Fisher, who farms 156 acres next to Willard Airport in Savoy, which the UI acquired through eminent domain in the early 1970s to expand a runway. His grandparents, C.J. and Margaret Fisher, had owned the land since the 1930s.

C.J. Fisher continued to farm it for the UI until he retired in the early 1980s, when his son, Gary, took it over. When the university decided to move to cash-rent bidding, Gary Fisher wanted no part of it and decided not to bid.

But Jeff Fisher wanted to keep the family involved in the farm where he spent so much time as a child, working and playing in the barn and livestock buildings.

So he matched the top bid — and lost money on the operation.

"You get some ridiculously high bids that people can't possibly make a profit" on, typically from larger operators who want to increase their acreage, he said.

That was in 2008, and Fisher had to bid for it again in 2013. By then, the UI had moved to a more flexible arrangement, with rents fluctuating with farm prices, making it easier to keep the lease.

"Otherwise, I would have lost it," said Fisher, who farms a total of about 1,000 acres in Philo and Tolono townships.

Robert Klemm, who operated the 80-acre Campbell farm for the UI near Waynesville, in DeWitt County, was among those who eventually lost his lease.

The UI land is next door to his property, and when he still farmed it, he installed a new drainage system that also ran through his land.

But those kinds of improvements weren't considered when the university moved to the cash-rent system in 2006, Klemm said.

"It was strictly how much are you willing to pay in cash rent to be able to farm this land," he said.

Klemm and his son, who was just getting into farming, bid what they thought was an appropriate rent, enough to ensure a small profit. But they were substantially outbid by a large farm operator who lived outside the county.

That also meant any income from the farm was removed from the local economy, Klemm said.

"The larger operations, they buy their seed, fuel and chemicals far away. The grain doesn't go to the local elevators," Klemm said. "It has an effect on the whole community."

 

Taking the 'long-term view'

When farmers know they will be working for the landowner long-term, they'll suggest investments that pay off in the long run — cover crops, no-till farming or fertilizer plans that protect the health of the soil, drainage systems that may take years to pay off, Magnuson and others said.

"Farmers are willing to do those things because they look at it as helping the asset, improving the quality of the land," Magnuson said. "If you don't know if you're going to farm it for more than a couple of years, you're not apt to have that long-term view."

The Farm Bureau also warned that the 2006 change could affect future gifts of farmland to the UI. Some landowners who had planned to donate their property either changed their minds or donated it elsewhere, he said.

"We have not received gifts of land at the rate we were receiving them before the policy change was made," Kidwell said Thursday. "In many ways, I think that's telling."

Kidwell and Jones, a former crop researcher, were approached about revisiting the policy at their first Illinois Farm Bureau meeting last November.

Kidwell started inquiring about it and found that officials from the university, ACES and UI Foundation had already been reviewing the policy and tweaked it several times over the years.

"They've done a lot of the groundwork," she said.

Kidwell consulted with Jones and Killeen, and "we decided to make a change," she said.

The UI had already moved to a "risk-sharing cash rent" approach, Norvell said. The rent is now based on gross farm revenue, so it can fluctuate with farm prices, he said. Farmers also get five-year leases with the potential for a five-year renewal.

What's changing now is that the UI will no longer open up those leases for bidding unless a farmer retires or there's another natural transition, as long as the farm is meeting the UI's objectives, Norvell said.

Killeen said the new approach will emphasize "selecting the most qualified operator rather than just the highest bidder." The UI will assess applicants based on farming experience, record of land stewardship and technology use and how it fits the land.

"The most qualified applicant will then be offered the operating contract at a predetermined rate based on local market conditions," he said.

 

'Sending the right message'

The UI doesn't plan to change any leases at the moment, and it's still contacting farm operators about the change.

Klemm, who aired his complaints at a trustees meeting several years ago, called the change "a very good step" for the university and the farm economy.

"It's sending the right message to potential donors as well," he said.

Vickrey characterized it differently, saying, "Don't buy that Kool-Aid."

"Those who have influence get to stay in the game. They get to continue to run the farms over and over and over," he said. "And the guy across the street who would like to bid on the farm doesn't get a chance. Everybody should get a chance, all taxpayers. With the state in the financial throes that it's in, every dollar is important."

Norvell said it's hard to evaluate whether the 2006 bidding policy was more profitable, as farm income has more to do with record prices for corn and soybeans in that period.

"Maybe in the short run there were more gains, but over the long run, the way we're doing it now will be of more value to the university," he said. "We're looking at the value of the land, the local community relations and everything which is truly our fiduciary responsibility — which is more than just getting the last dollar in this year's rent."

Kidwell said farming is "as much about relationships as it is about the financial piece. In communities, farmland is a sacred entity. There's legacy built around it. It is the essence of the whole experience in farming — how we treat that land, and honor the relationship that people have with it ... is really crucial."