Rural System
 Sustained rural lands; sustained profits




Rural System Tracts

Past efforts to describe Rural System Tracts well have been difficult. Here I make another attempt at a very brief sketch. Rural System Tracts are private lands of owners managed under contract for them and the region by Rural System They are intensively managed since each is probably best fitted to achieve a select set of the objectives of the long list of enterprises. Absentee land owners often have their lands abused and have great needs for services as they seek to retain their lands for recreation, pride of ownership, an estate component, and improving long-term investment.

Many of these Rural System Tracts may be lands of corporations. Some are lands of absentee owners. Many may be Trust lands. Most are larger than 100 acres but there are likely to be a few exceptions. While many absentee land owners have forests, it is unreasonable to fail to manage such land as a total system of fields, forests, lakes, roadways, mines, and home and garden sites. Work together with many tracts allows the past disadvantages of too-small-scale to be overcome.

When a landowner adds his or her land to the Rural System Tracts, he or she responds to increasing interests of citizens in the wealth of resources in forests and in the total land system. People live in cities and suburbs have different needs and desires from those in the past and, even today, they are changing. The Rural System Tracts produce wood for many uses, but they also respond to studies showing increasing interest in (and economic demand) for:

There are no single solutions to these changing uses, demands, and interests and some are seen as problems. The staff of the Rural System Tracts treat them as changing challenges and opportunities. They are platforms from which ideas may emerge that allow sustained production of goods and services that produce lasting profits when within a total system. In some cases wood production may have to be reduced or delayed but when the emphasis is on assuring sustained profits over the long run, the source of the profit is largely irrelevant. As an example, curtailing wood production by $1000 in order to gain $1500 in income from recreation seems a reasonable adjustment. Harvest levels are changed and scheduled to achieve objectives from the total land system. Endangered species are protected, sound harvest techniques used, products certified for high profit, erosion reduced, water qquality enhanced, special environmental areas dedicated, water-side areas protected, views protected or enhanced, and training made available. Because emphasis is on the longrun (150 + years) and because the objective is sustained profit, the result is intensive land use with annual payments ... not the old-timey "plant trees, wait, and harvest ..." with income only once in 50-60 years. With invested annual income, the land at timber harvest, for example, has more than a double payoff.

Concentrating on forests, fallow fields, and lakes and ponds, the systems developed are to assist landowners to improve their " rural lands" (lands and waters, all resources), moving them into profitable, well-managed systems that benefit their families or corporations as well as all of the people of the region. Careful attention is given to owner objectives and the limits they may place (often resulting in failing to achieve full-scale profitability). Given the importance of forests, attention must be paid to the surrounding fields and pastures, to the lakes and ponds, even the potentials for pest-wildlife in gardens. Land as a " total system" is the view taken.

Fundamentally, the big difference between the Rural System Strategy and other types of forestry or wildlife management is that the landowner cooperator get annual income or its equivalent, rather than being the victim of the failed sequence of " plant, wait many years, and then cut timber" which has produced the boom-and-bust cycle of the private small woodland owner of the region. Rural System Tracts are private lands of owners who willingly join Rural System and who allow their lands and waters to be placed under superior management and use. Their taxes are paid, annual incomes are made, and their lands increase in value and environmental quality, and they participate in the development of the entire region. They are relieved of the difficulties, costs, arrangements, and required knowledge needed to protect and manage the resources of their lands for profit. "Handle it! Handle it!" and Rural System does so at no extra cost to the owner and demonstrates gains to the owner. It works for the owners ... and for the County, region, and its people.


Later in planning (June, 2005) the concept of the Powerbase in connection with US National Forests and other State and Federal land was developed.

Regional Powerbase

The Forest (The George Washington National Forest of Virginia and West Virginia as an example of state or federal public land) is seen as the good land, the fundamental public ownership, the new factory, the new working platform limited in productivity (and in many cases profits) only by our knowledge and creativity. The platform is one that must be well managed and tended very well for it to produce benefits forever.

From the U.S. Forest Service Foundation: "However, it is important to understand that the word "partnership" also has a more precise meaning according to federal policy. Federal policy defines partnerships as "arrangements that are voluntary, mutually beneficial, and entered into for the purpose of mutually agreed upon objectives." In this definition, "mutual benefit" specifically means that each partner shares in the benefits the project provides."

Production is not viewed as classical plant or animal growth but as outputs of benefits by several enterprises. These may include classical production but to them we add ideas, manufactured products, computer software, artistic expressions, safety and security operations, and services such as offices, warehouses, and motor pools and parking. It must do so now or soon, conspicuously. That message must be clear. It will be most clear when costs are reduced, benefits increased, and jobs (throughout the diverse enterprises of the public-private enterprise) are announced. The Forest can be a place producing profits, not exclusively from logging and its related activities. That message will be seen clearly in the graphs of the sustained ecosystem index, Q, along with graphs of growth in local taxes and employment.

One logger was told about the proposed conglomerate. He was told about the private owner of timberland who could elect to enter his land with the conglomerate. He summarized, "all you seem to be doing is providing an annual income!" He was right, for lack of it is a major reason for owners not investing in forest land, reforesting, and managing land well for superior financial gains over the longrun. That affects the owner, logger, and region.

We have a vision of the Forest as an area on which a grand experiment is developed and studied, that of the Forest as a natural resource and rural business powerbase. This is a modern-world vision, not of a national forest or the George Washington National Forest with the simplistic identity as "a place with trees (and other resources)." This not the classical idea of National Forests helping the economy of a region by logging and mill work. It is not the general glossary definition of an area having "Social and Economic Elements. The variety of tangible and intangible uses, values, products, services, opportunities, and benefits provided by National Forest System lands."

The vision is that of a unified system of resources, people, knowledge, and expert performance. It is that of the likely center of high regional quality of life, an entrepreneurial "commons," a core of economic presence and development. This is the place for a new public / private partnership, one between the Forest and either a new company (e.g., Rural System), an ad hoc local committee of stock holders, or a unique not-for-profit corporation, and they with affiliates. The Forest encourages use of its land in legal and supervised ways. The new partnership grows with employee-owned and citizen-owned principles. Over 50 small businesses are suggested, all working together from a single unit, incubator like, the headquarters of a new conglomerate. Employment is stabilized, the tax base is increased, and by agreement, part of the "profits" is allocated to maintaining and improving the resource base of the Forest. The developing enterprise works with the forest, but also for the betterment and maintenance of the Forest. The businesses are those of the Forest but also of the surrounding private lands and other supported enterprises. The collective businesses, the total conglomerate, work as a diverse stock portfolio, diverse and profitable. Educated crews with designed equipment, for example, do contract logging. There are jobs for guides, services, foods, computer work, equipment sales, etc.

New commitments are sought from other agencies and commissions (e.g., the Alleghany Foundation, the Appalachian Regional Commission, the National Forest Foundation, and state rural and economic development offices) and they are encouraged to join. Wildlife management and a modern fishery (described later) is practiced by the partnership, as approved, on the Forest and throughout the region, avoiding the instabilities of license sales and other state-agency game and fish problems. It brings entrepreneurial control over the full range of responsibilities assigned by law to the Forest but now clouded by past arrangements, letters of intent, memoranda of understanding, and pronouncements.

This new Forest and its region are much more than a place, a landscape.

Preliminary Financial Thoughts

Depending on inventory, adopted accounting procedures and policies, and the planning horizon, the estimated costs of system development can be paid over 6 years, with difficulty, exclusively from funds derived from the office-based groups. This is exclusive of the recruitment of Rural System Tracts and development of other groups. With Rural System Tracts in the conglomerate, profits are more assured. Demonstrated below, profits from invested annual income from Tracts can likely far exceed the value of any managed wood harvested at the end of a long investment period on that tract. We are not asking for "charitable contributions from landowners" as someone suggested. The net annual financial gains for Rural System are pooled from:

First efforts seem to favor cooperative work with existing enterprises. Simultaneously we shall seek a specialized grant, one for a line of credit and later payback. We'll eke additional funding sources (donations, grants, contracts, bequeaths) and develop fully the concepts here, including expansions into other areas.

These gains include carefully calibrated timber logging returns from Tracts described above. The owners of Rural System Tracts receive 50 percent of the profits of the entire enterprise. Based on the acres (a potential-production-weighted acreage based on an index (including site index, ponds, streams, roads, etc.)) within the participating land ownership, the owner shares in a proportion of the annual profits. The more money made, the more both enterprise and owners benefit, all subject to the constraints of sustained profitability and those imposed by the land and climate.

Assuming the last option, initially, 10% will go to an enterprise building fund for 5 years. Afterwards, 40 percent remaining after disposition of 50 percent of profits to the owners of tracts will be distributed by System Central. (This is tentative and based on the description herein.) The percentages of the residual 40% will be distributed as follows:

Cost Management

The advantages of the unusual organization also create problems. All groups have a common accounting service within System Central. There are real dangers characteristic of the "Tragedy of the Commons." Each group is independently managed and very distinctive. General leadership is offered; there is group process, but each manager is autonomous. Rather than building an enterprise, as in many other businesses, each manager is building profits since these bring group and personal rewards. The costs of System Central (for the entire enterprise including repayments, described later) are large. After a few years, all groups within the enterprise share these proportionally (above a fixed amount). An additional 20% of that amount is charged as cost and spent on approved costs of group enhancement and growth for each of the first 6 years. Salaries and benefits are high and represent the major costs within each group. Merit raises are one of the expected cost increases. (Additional salary incentives are from the funds outlined above.) Each group pays direct costs for supplies, raw materials, and special services. The gross income minus these costs is the fund distributed by System Central (as indicated above).

Line of Credit

Development capital is needed to implement all of the units or enterprises within the first two years for stability and continuous development. We believe that there will be individual investors having specialty interests in many of the groups, so a large single-source investment suggested as being needed may be misleading. Long-term low-interest loans or a line of credit are desired.

Similarly, incentives from a "line of credit" allow work to progress in these new ways with speed and reduced interest charges. (A slowly developed, less profitable, and more uncertain venture may be discussed and options will be developed. The intent of this Design and Overview, perhaps considered a first-phase Business Plan, is to display the entire concept, its potentials, and expected future conditions and gains for the people of the region.). (Several people have said: write a business plan! Fifty separate ones are needed, then several more for versions of the total business.)

We may cautiously add funds from the various properties and activities (intensive use of forests, pastures, facilities, and creative development of ancillary operations). Driven by incentives, the shared profits will build the enterprise. Most groups within the enterprise must be started at the same time or the unique, essential advantages of interactive work will not be gained and the enterprises will probably fail.

Nevertheless, modest, rather than total, development might be selected. Such a start reduces risks in managerial skills but increases the risks of the total system failing to perform at expected levels. It delays the development of the total system by many years. Estimates provided herein are based on all units being operational. Making estimates for unknown combinations and permutations of the presented enterprise units is impossible. An evident strategy of picking the sub-units or groups from Table 1 that have the highest returns and lowest costs will not work, any more than creating an organism by combining a heart, a lung, and a nose. Of course special combinations of the enterprises will work! Exploratory work seems reasonable.

Estimates of both costs and gains are very difficult. Some groups, at least by the middle of the second year, will be profitable. Conservative estimates of the profits from each unit are shown. These are strongly influenced by the assumption of there being an effective System Central, itself an unusual concept in natural resource management, and by supportive ancillary units being developed well. Complete failure of any unit (though difficult to imagine) does not jeopardize the success of Rural System, Inc.
Perhaps you will share ideas with me
about some of the topic(s) above at

RHGiles@RuralSystem.com.

Maybe we can work together
... for the good of us all
... for a long time.

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