Forest Landowner (published by Forest Landowners Association)
May/June 1996

THE FOREST MANAGEMENT PLAN: A BLUEPRINT FOR THE FUTURE
By Wm. C. Humphries, Jr., ACF

Let’s imagine a real estate developer launching into a major renovation and remodeling project on a valuable historic office building by calling up carpenters, plumbers, electricians, roofers, brick masons, and sending them to remodel the building with instructions to each contractor; “Do the right thing, do it as cheap as you can, and finish your work right away ‘cause I’ve got tenants ready to move in and start paying rent”?!! Sound crazy? Don’t be too quick to pass judgment. We still have some landowners that attempt to manage their forest land by calling loggers, tree planters, bulldozer drivers, herbicide applicators, and expect each to do the right thing, do it cheaply, and do it quickly. Fortunately, most of the South’s forest landowners are a lot smarter than this. Now, let’s back up a minute.
The prudent developer first engages a few planning advisors including an architect who is charged with studying the structure and developing a plan or blueprint of the project and advising on the feasibility of various possibilities. A forest property similarly can be developed more efficiently with a blueprint or a Forest Management Plan (“FMP”) to guide planning and development consistent with the owner’s objectives and budget constraints.

Some important advantages of operating a forest through a Forest Management Plan include:

• Encourages Study and Conscious Decisions. Landowners engaged in developing a FMP with their forester are forced to consider short and long-term personal objectives, evaluate alternate uses for the property, aesthetics, impacts on his/her estate plans, and in general, concentrate on understanding the opportunities and issues of forest business management. This process eliminates many potential mistakes.
• Increases Income. A well-designed FMP increases productivity and overall long-term timber income and/or quantifies losses or trade-offs associated with managing for other purposes such as wildlife and recreation. Often with advance planning, there are no serious trade-offs and multiple benefits can be achieved simultaneously that compliment each other.
• Encourages Continuity of Management. Unlike owners and managers, the life of a forest is often infinite. A FMP in progress serves as a platform from which heirs or a new manager can continue to operate. In fact, it is often a good idea to involve children in the management process to help insure continuity when property is passed by gift or inheritance. Involved and educated heirs are far better stewards than those who suddenly own property by will or inheritance without previous involvement and without a master plan to guide operations. Our personal experience with generations of owners confirms that a FMP with reliable income projections is a strong motivator for retention and continued management.
• Provides Control and Serves as a Monitor of Manager’s Performance. The FMP becomes the ultimate monitor of the forest manager ’s capability and performance. As with the owner, the process of preparing the FMP forces the forester to draw upon his knowledge and experience, consider alternatives, and develop a logical, workable, operational plan and budget. The forester will be more careful in its preparation if he is subsequently expected to live with and implement the budget and prescriptions recommended. Various so-called natural resource professionals may write a plan laced with the latest eco-buzz words, present color computer images, and prescribe idealistic but often impractical plans. The true test for a forest manager is designing a plan that is cost effective, efficient, workable, and endures by meeting landowner objectives within the budget.
• Supports Tax and Estate Planning. According to a national survey of private landowners, sixteen percent (16%) of landowners in the Southern Region with thirteen (13%) of the land base own their property primarily for aesthetic enjoyment and recreation. In other words, their land is owned and operated as a hobby. Seventeen percent (17%) of owners with thirty-nine percent (39%) of the land base own their land primarily for investment and timber production. The survey indicates that other economic reasons for ownership also exist.

For those owning land for economic reasons, it is important to show that profit is an objective. A FMP serves to support the intention to manage for a profit. Otherwise, the IRS may classify the ownership as a hobby, thereby disqualifying otherwise legitimate forest activity expense while taxing any income derived.

Because a good FMP will include current value as well as projected future income and expense, the plan is vital to tax efficient estate planning. It also will include sufficient timber volume stocking information over time to permit the maintenance of reliable accounting records.

What should be included in a Forest Management Plan?

The size of the ownership and owner’s goals and objectives will dictate the extent of the plan. A plan for 2,000 acres will obviously be more complex and consider more alternatives than a plan prepared for a 50-acre tract. A small tract FMP may only be in letter form consisting of a couple of pages, possibly a cruise, and a boundary map with conditions and cover types delineated. Even less may be sufficient. The owner and his/her forester should be the judge of sufficiency.

The following items should be considered, and on large ownerships, most likely included in the plan.
• A Statement of Landowner Objectives and Purpose for the Plan
• Complete Timber Inventory by Product Classes
• Stand Classification including Species, Age, Site Index, Stocking, Origin - All information required for optimization analysis and projecting future harvest levels.
• Projected Annual Income/Expense by Year
• Silvicultural Prescriptions for each Stand, Operating Area/Unit or other logical defined areas
• Current Valuation (Plan Year)
• Ending Valuation (Final Year of Plan)
• Maps showing Stand Types, Operating Area/Unit, Boundaries, Etc.
• Flexibility - The plan will, from time to time, require amendments and alterations as technology and markets change.
• Other - It may also be appropriate to include in the Appendix a glossary of terms, copies of articles or other informative documents. The knowledge of the owner and purpose for the plan will dictate the extent of such supporting material. (A 3-ring notebook is usually more useful than other forms of binding since additions, deletions, notes, and correspondence can be filed more conveniently.)

SUMMARY
The cost may range from approximately $5.00 per acre to $15.00 per acre. A simple and limited plan may be at the lower end of the range while a complex plan for a larger ownership may reach the upper half of the range. Some of the benefits of a well-designed plan have been described. Generalizing about the dollar value benefits of a FMP can be misleading, but as I said, you are entitled to an answer. From actual case studies by our firm, the improved cash flow ranges from ten percent (10%) to twenty-five percent (25%) of the current value of the timber. So, if your timber is worth $1,000 per acre, it is reasonable to anticipate an enhancement in value of $100 to $250 per acre (present value of added future cash flow). So, the value added by good management planning is ten to twenty times the cost. Most of the other previously described benefits are a no-cost bonus. If you do not have a plan, call your forester and get started. Time’s a waste'n --- and money is being lost.

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Billy Humphries, a third generation timberland owner and forester, is Chairman of the Board of Forest Resource Consultants, Inc. in Macon, Georgia, and has been a consultant to private timberland owners for over 35 years.