what is the permanent university fund

After oil, A&M changed its tune. [16] At one time, the PUF was the chief source of income for The University of Texas at Austin[citation needed], but today its revenues account for less than twenty percent of the university's annual budgets. The University of Texas Investment Management Company, hkAp70RRck6lm9bkyKzRkvlS5VvJwwIJF-xPU3t7i_s=.html. The Texas Constitution requires that AUF first be used to pay principal and interest on PUF bonds, but the remainder may be used to support and maintain UT Austin and UT System Administration. Because the PUF is, as the name suggests, a permanent fund and is very large, creditors see our bonds as extremely safe, and that enables us to secure our bonds (borrow money) at very low interest rates, saving us millions of dollars each year. Oil was first discovered on PUF Lands in 1923 at the Santa Rita No. UT is, after all, a public universityone mandated to be of the first class no lessand therefore relies on public support to keep tuition down and construct and renovate campus facilities. We had an obligation to these people. The PUF is invested in a broad mix of investments and is actively managed to its policy portfolio or benchmark. It is managed by . When you think of PUF, think of bonds a bond, of course, being a financial instrument a company, municipality, or some other institution uses to borrow money. In 1876, Texas voters overwhelmingly approved a new state constitution. Finally, youve got a drink for yourself, watered-down and listless, perhaps, but bigger than your friends. The 1984 amendment also raised the bond-debt ceiling for the university systems to 20 percent of the PUF book value for the University of Texas and to 10 percent for Texas A&M, and provided that for a period of ten years, $6 million of the University of Texas share should go to Prairie View A&M. On August 24, 1923, the first royalty payment was made to the Permanent University Fund after the Santa Rita No. UTIMCO will provide a link and a login ID to authorized users. In 1883, additional land was added in Andrews, Crane, Culberson, and Winkler counties, which "was no more desirable than that granted in 1876, but there was at least twice as much of it." Heres a simpler way to think of it. Its a complicated business. [8] As oil rights revenue was dropping from $262 million in 1981 to $57 million in 1995, the 1991 Texas Legislature reduced funding for the UT and Texas A&M University Systems by about one-quarter. Striking oil changed everything, and that once-unpromising brush land has been generating revenue for the Permanent University Fund (PUF) ever since. In 1931 the legislature authorized a split in the net income from PUF investments, with the University of Texas to receive two-thirds of the money and Texas A&M to receive one-third. Berte R. Haigh, Land, Oil and Education (El Paso: Texas Western Press, 1986). Because the oil profits were treated as principal rather than income, the proceeds from Santa Rita and other wells were reinvested instead of being spent. System by the State; and (e) Practice Plan Funds of any Member, including the income from and any fund balances related thereto not included in Pledged Practice Plan Funds. Permanent University Fund, That makes UT the richest public university in the country. University of Texas Investment Management Company (UTIMCO). The UT System Board of Regents mission is to maximize the revenue of the PUF Lands by applying intensive management, accounting, conservation, and environmental programs, which improve and sustain productivity, protect their interests and promote awareness and sensitivity for the environment. Andrew Roush in The Rating Outlook is Stable. The Big Lake oil discovery, within the Permian Basin, revised the value of the land, and ensured a richly endowed university system. The RFS CP Program is a pooled financing program used to provide interim financing for capital improvements and to finance equipment purchases. THECB and BRB approval is not required for capital leases. In 1968, the PUF constitution was amended again to include a broader range of both corporate bonds and investments available to PUF, as well as applying a "prudent person" standard for some amendments. The mechanics of such an endowment, and how much actually makes it to the Forty Acres, is complex. In short, PUF is UTs soul. With rising tuition costs and no clear plan to get them under control, along with the possibility of cuts to shore up a tight budget, legislators are struggling to fund higher education. Therefore, the Trust Fund has not controverted the Claimant's entitlement to benefits. On 7 February 2008, after months of study, the UT board of regents authorized an increase in AUF annual transfers, from 4.75% of the PUF value to 5.00%, citing recent PUF growth of more than 10% per year and unrest over the large annual increases in tuition at UT Austin. 1 Comment. In other words, these are the resources that cannot be liquidated by the government, and they are supposed to be kept intact for future usages. System has both constitutional and statutory authorization to issue debt. Copyright 2023 The Alcalde. We have left it as it was originally published, without updating, to maintain a clear historical record. For more information about centralization, please contact the U.T. [3] In late 1916, after a report was submitted to the Land Commission of the UT board of regents, the board forbade the sale of any University lands, including those of the PUF. These ratings represent the highest possible rating levels from all three rating agencies for both long-term and short-term debt. TX.AG/PUFTX March 2021 On average, 5% of the market 210 West 7th Street,Austin, Texas 78701-2982. 11-9-502. This is not your usual historical marker; the familiar tone of official neutrality is utterly absent. How often does the Office of Finance issue CP, what determines a projects eligibility for CP issuance, and how is the issuance amount determined? We'll send you a couple of emails per month, filled with fascinating history facts that you can share with your friends. Robert Rowling, chairman of UTIMCO and vice chairman of the UT Austin board of regents, insisted that the bonuses he authorized were for the fiscal year ending 31 July 2008, in which the PUF net fiduciary assets decreased by 3.26%, or $383 million, as compared to nearly 14% for the Dow Jones Industrial Average. Meanwhile, in the bleak emptiness near Andrews and Crane and Big Lake, the wells are still pumping, every six seconds, ten times a minute, and with every rotation PUF moves further past two billion and closer to three. Become a business insider with the latest news. Thats why universities, even the ones that benefit from the PUF, still rely on the legislature for funding. The PUF does not provide any funding to other public Universities in the State of Texas. Like so many things in life and politics, its just not that simple. We generate superior long-terminvestment returns to support The University of Texas andTexas A&M University Systemsas they provide world-class teaching,push the boundaries of discovery,and achieve excellence in patient healthcare for the people of Texas and beyond. [5] In the late 1950s, the PUF earned about $8,513,000 per year and was valued above $283,642,000; in 1990, the PUF was valued at $3,541,314,800 and earned $266,119,000 in income. Please see thePrivate Use Guidelinesmemo on the Office of Finance webpage for detailed parameters covering management contracts and naming rights. 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A 1988 constitutional amendment eliminated all investment restrictions related to the PUF for the UT board of directors in favor of adopting the "prudent person" standard for all investments, which was subsequently amended in 1999 to the "prudent investor" standard for investments. System debt program, can I take out a capital lease without any authorizations? In 1984 voters amended the state constitution to expand the number of schools benefiting from the proceeds of the PUF bonding program. The current short-term debt ratings for both PUF and RFS debt are:Moodys: P-1/VMIG1S&P: A-1+/A-1+Fitch: F-1+/F1+ The size of the distribution is usually five percent or less of the market value of PUF investments, and the distribution may not exceed seven percent. The Texas Constitution (Article 7, Section 18) stipulates that most current institutions under the University of TexasSystem and TexasA&M System are eligible to receive PUF profits through the AUF, and that a two-thirds vote of each house in the State Legislature is necessary to create a new institution as part of either system, which would then be automatically eligible for funds.[15]. When the University of Texas actually opened in 1883, supporters of the university pushed the legislature to appropriate another million acres for the endowment. The oil boom is generating big profits for energy companies and record tax revenue for Texas, and its created a billion-dollar windfall for the states giant Permanent University Fund. University of Texas Health Science Center at Houston, University of Texas Health Science Center at San Antonio, University of Texas Institute of Texan Cultures at San Antonio, University of Texas M. D. Anderson Cancer Center, University of Texas Southwestern Medical Center, Texas Constitution, Article 7, Section 7.18(a) and Section 7.18(b), List of U.S. colleges and universities by endowment, "Amendments to the Texas Constitution Since 1876", "Permanent University Fund: Investing in the Future of Texas", "State v. Hatcher, 281 S.W. Its like a 401(k) in that youre putting money in every month or year based on current income. 2/3 14 UT System institutions are eligible for PUF bonds. The minimum amount of equipment to be financed for any institution is $100,000 per funding with smaller equipment purchases allowed to be bundled together to reach the minimum of $100,000. She oversees the magazines travel and style sections. Permanent University Fund (PUF) PUF is a public endowment derived from sources such as state iron ore taxes, royalties, and federal land grants. Vernon's Annotated Constitution of the State of Texas (Kansas City: Vernon Law Book Company, 1955). The standard for a revenue-generating project is 1.3x coverage (exclusive of depreciation). Today, the PUF is the largest public . [9], According to Olien and Olien, the original one million acres was "much less desirable land in arid western Texasit had no timber, was too arid for small farming, and had no special mineral resources that anyone was aware of." [2] Another 1999 statewide vote adopted an amendment that made further changes to the PUF. And thats why the legislature matters. The constitution spends about 900 words on this topic, but it can be distilled rather simply. Equipment is reimbursed on a quarterly basis (each November, February, May, and August) as part of the quarterly RFS CP issuance. It belongs to the University of Texas. The legislature replaced the railroad sections with a million acres of previously unappropriated land, all of which was located in West Texas and considered less than prime for agriculture. How soon do debt proceeds become available for reimbursement? 192 (Tex., 1926)", "Permanent University Fund (PUF) / Higher Education Assistance Fund (HEAF) Overview", "UT System increases endowment spending to help ease tuition burden", "Financial Statements and Independent Auditors' Report, Permanent University Fund", "UTIMCO board awards $1 million bonus for CEO", "Texas Constitution, Article 7. [5] In 1924, the UT Regent Robert Story requested that the legislature direct oil rights revenue directly into the Available University Fund (AUF); the 29th legislature complied on 3 April 1925 by passing House Bill 246. Santa Rita sat on West Texas land set aside, way back in 1876, by the Texas Constitution to support the University of Texas and Texas A&M systems of higher education. Currently, PUF land assets deliver proceeds through oil, gas, sulfur, and water royalties, rentals on mineral leases, and gains on fiduciary investments. Since then, mineral revenues into the Permanent University Fund have steadily increased, thanks to the shale revolution, The Constitution allows the UT System to issue bonds guaranteed by the AUF in an amount equal to 20% of the book value of the PUF. But more credit is due to providence than to wisdom. The Constitution allows the UT System to issue bonds guaranteed by the PUF in an amount equal to 20 percent of the book value of the PUF. The state reneged on three million acres of farmland and gave UT two million acres of desert. Today, Permanent University Fund (PUF) investments are managed by a nonprofit corporation called UTIMCO. Transactions include inbound wire transfers to the STF, outbound wire transfers from the STF, transfers between institutions as well as monthly rebalancing transactions between the STF and ITF. By 1925 the Permanent University Fund was growing by more than $2,000 a day. The Permanent School Fund, an endowment established by the Texas Constitution, is a $44 billion fund fed by the state's oil and gas royalty revenue and its returns on investments. The oil boom is generating big profits for energy companies and record tax revenue for. The Chairman of the board of regents defended Rowling, stating that the contracts obligated bonus payment and the large amounts, $1.05 million for the UTIMCO CEO and $2.3 million for other employees combined, were fairly inflexible.[19]. In the seventies, just when UT got serious about academics, PUF was imperiled because the construction fund for other public colleges ran out of money. The Permanent University Fund (PUF) is a constitutional fund and public endowment created in the Texas Constitution of 1876. Still, youre gonna have to find money for another round if youre really going to enjoy yourself. In 1985 the legislature mandated PUF to match private contributions to the University or the University of Minnesota Foundation with the goal of providing substantial financial . [8][14] Each year, five percent of the PUF's value is transferred to the AUF, which then distributes the money. My institution is interested in taking out a capital lease. In keeping with these purposes, the lands are managed to produce two streams of income: one from oil, gas, and mineral interests, and the other from surface interests such as grazing. The schools receiving help from the PUF thereafter included the University of Texas at Arlington, the University of Texas at Austin, the University of Texas at Dallas, the University of Texas at El Paso, the University of Texas of the Permian Basin, the University of Texas at San Antonio, the University of Texas at Tyler, the University of Texas Southwestern Medical Center at Dallas, the University of Texas Health Science Center at Houston, the University of Texas Health Science Center at San Antonio, the University of Texas System Cancer Center, the University of Texas Health Center at Tyler, Texas A&M University, Prairie View A&M University, Tarleton State University, and Texas A&M University at Galveston. The land chosen for this purpose was also in West Texas and was thought to be of little commercial value. This placed increased pressure for the PUF to make up much of the difference, even after the 1984 expansion of the PUF's list of beneficiaries. Arbitrage refers to the act of issuing debt at relatively low tax-exempt rates then investing the proceeds at higher taxable rates. PUF distributions paid to the AUF are expended by each university system to fund two major programs: (1) Debt Service on PUF Bonds Issued to Fund Capital Expenditures; and, The University of Texas/Texas A&M Investment Management Company. Every dollar helps. The Santa Rita #1 was the first oil well to directly fund the University of Texas with its first royalty payment to the Permanent University Fund made on Aug. 24, 1923, in the amount of $516.53. UTIMCO employs investment managers and administrative staff to manage the 4 What are the Significant Risks? The Permanent University Fund (PUF) is a public endowment contributing to the support of eligible institutions of The University of Texas and The Texas A&M University Systems. As mandated by the Constitution, all surface lease income is deposited in the Available University Fund (AUF). That year UT set aside $1 million to start an excellence fund. But the fund, now $34 million, grew more rapidly than the excellence. The equipment must also have a useful life equal to or greater than three years. [17] Of the 2007-08 year's $1 billion core academic budget of UT Austin, the AUF's funding accounted for $143million. Most universities are very conservative in spending policies on endowments, Bullock said. [2] In 1947, after World War II and during the education boom from the Servicemen's Readjustment Act of 1944, a constitutional amendment was passed that authorized the issuance of $15 million in AUF bonds, $10 million to the UT System and $5 million to the Texas A&M System.[4]. (512) 499-4200. [3] The 1894 discovery of oil in Corsicana, Texas and the 1901 discovery of oil at Spindletop in Beaumont, Texas, began a subsequent oil boom in Texas and the western U.S.[6] In 1901, the Texas Legislature authorized UT Austin to "sell, lease and otherwise control" oil and mineral rights for PUF land. The CPS website will not be accessible from the UTIMCO website to minimize any casual traffic. The National Research University Fund was established through a constitutional amendment to provide a source of funding for. To make a real difference for Texas. This years draft budget cut the items entirely. UTIMCO allocates the PUFs assets to internally and externally managed portfolios in accordance with guidelines approved in the PUF Investment Policy Statement. Spend-down schedules are determined by the percentage of proceeds to be used on equipment. [4] In addition, the 1956 amendment guaranteed the 2/3 UT, 1/3 A&M AUF split that the Legislature had directed in 1931. Tuition Revenue Bond debt is specifically authorized by the Legislature under Ch. The greatest land empire in Texas is the province not of the King Ranch (825,000 acres) nor of the Temple timber companies (1.1 million acres) nor of the lesser-known but larger Texas Pacific Land Trust (1.2 million acres). The Permanent University Fund is a public endowment that provides financial support to institutions in the University of Texas and Texas A&M University systems. We dont know how the budget lines for the states public colleges and universities will shake out, but they may face cuts of 10 percent, meaning the university may have to pull from other funding sources to keep some programs runningrobbing Peter to pay Paul. The constitution does not allow AUF to be used for operational expenses for the other System institutions. As more of the state began to be settled, however, the agricultural value of the acreage set aside for higher education led the legislature to change its mind about keeping it for a university that as yet existed only on paper. Among its provisions, tucked into Article 7, was the mandate to establish and maintain a university of the first class to be called the University of Texas. (512) 499-4200, The University of Texas/Texas A&M Investment Management Company (UTIMCO), The Permanent University Fund and Available University Fund Issue Brief. Last Friday, Bloomberg reported that the endowment fund for The University of Texas has grown to $31 billion, surpassing Yale University as the second largest such fund in the nation,. We owe it to our state, and to the pioneers who created this unique funding mechanism, to be careful, responsible stewards of the PUF. Permanent University Fund revenue has also been used to recruit and retain nationally renowned faculty and build much needed classrooms and labs so that UT students receive a top-quality education. For further information regarding the Equipment Financing Program history, rules, and procedures, please see the complete guidelineshere. The University of Texas System and In 1861 it sold everything to pay for the Civil War. Mimi Swartz is a staff writer based in Houston. The State Attorney General in 1978 issued an opinion that interest accruing in the PUF should be used to pay outstanding bonds and finance permanent educational improvements, per the PUF constitution. A projects eligibility for CP issuance is based on the following factors: The institution determines the issuance amount by analyzing projected cash flows which are available from the project managers and/or OFPC. What are the rules on private use, and how do they affect the type of debt (taxable vs. tax-exempt) issued? Permanent University Fund (PUF) The PUF is a public endowment established with income from sources such as state iron ore taxes, royalties, and federal land grants. Texas State Historical Association (TSHA) Land also is leased for grazing, wind farms and other revenue-generating activities. Systems authorization for the issuance of debt: All U.T. [5], The terms of the annexation of the Republic of Texas in 1845 meant that Texas kept its public lands. There are countless representations of how the PUF works, byzantine diagrams tucked into university reports and legislative requests, snaking across PowerPoint slides around the capitol and the Forty Acres. The PUF also benefits the UT and A&M institutions through an annual distribution of revenue from PUF investment returns to the Available University Fund (AUF). AUF disbursements, by the way, can only be used for what are called academic enhancements, and not for things like, say, constructing new buildings. [5] The AUF's distributions were directed, in 1931, by the legislature such that 2/3 of the money would go to UT Austin and 1/3 to Texas A&M, and also extended to be available for purchase of equipment and building construction. Funding UT boils down, unsurprisingly, to oil. The spend-down rules are an important consideration when determining how much debt to issue for a project. Do not be fooled by the airy acronym: PUF is so substantial that its assets today are worth more than $2 billion. They wanted to share in PUF, but if a constitutional amendment is adopted in November, theyll have to settle for a new construction fund of their own. All of it is constantly swirling around in the margarita machine that is the PUF. However, it is not uncommon to have some small amount of private activity going on inside a building, such as the granting of naming rights, contracts for the provision of dining services, and management contracts. We felt like we had an obligation. The Component Reports application is accessible from the UTIMCO website. The Permanent University Fund (PUF) is a public endowment contributing to the support of eligible institutions of The University of Texas and The Texas A&M University Systems. But over time, what really matters is the return on investment of what youve already accumulated, said Dick Lavine, senior fiscal analyst at Every Texan, an Austin advocacy group formerly known as the Center for Public Policy Priorities. on This week marks the 93rd anniversary of an important, if somewhat obscure, milestone in UT System history. Because we are a public institution, the government allows us to borrow money (issue debt) at tax-exempt rates, which are generally lower than the taxable rates at which corporate entities borrow. Remember how the constitution mentioned that agricultural and mechanical department? The measure was passed unanimously by both legislative chambers, and was signed into law on May 10, 2023.[25]. The PUF provides extra funds, above monies from tax revenues, to the UTSystem and the Texas A&M System which collectively have approximately 50percent of state public university students. What is arbitrage, and what are the IRS spend-down rules related to tax-exempt proceeds? PUF debt is secured by distributions from the PUF to the Available University Fund (AUF). 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The endowment's annual distributions are governed by the Texas Constitution and managed by The University of Texas System Board of Regents. Its free. If you fill out the first name, last name, or agree to terms fields, you will NOT be added to the newsletter list. Money made from leasing that land to say, ranchers, would be invested. Thats the Readers Digest version. [15] As of 2008, the University of Texas System received the fifth-largest endowment in the nation, and the Texas A&M System received the tenth-largest. As oil and gas prices continued to climb, he said, the contribution to the permanent fund was on pace to be over $2 billion. "[19] State Senator Kevin Eltife criticized CEO Bruce Zimmerman's bonus. U.T. The PUF's primary investment objective is to maximize investment returns within the risk parameters specified in the PUF Investment Policy Statement without regard to the distribution rate. The fund was valued at $31.8 billion at the end of May, up from just under $10 billion in 2009. In 2014, the state sent $68.9 million to UH's main campus, compared to $296.4 million to UT Austin and $176.3 million to A&M's College Station flagship. Ill write again soon. The AUF is shared by U.T. The Permanent University Fund (PUF) is a sovereign wealth fund created by the State of Texas to fund public higher education within the state. "[23] After heated interrogation by the State Senate Finance Committee, Rowling resigned from both his chairmanship of UTIMCO and vice chairmanship of UT Austin's board of regents. The subsequent sections of Article 7 went on to clarify the funding mechanism for such a university: the Permanent University Fund. How is U.T. March 23, 2017 at 2:00 pm | Unlike the oil and gas revenue, this money goes straight into the Available University Fund (AUF). Over time, the fund will have some banner years, which usually more than offset down periods as long as annual payouts are proportional, he said. The Permanent University Fund was established in 1876 with a land grant of 1 million acres. PUF bonds may be issued for the benefit of all 14 institutions of the UT System, but may only be used to finance capital expenditures generally speaking, that means the construction or acquisition of new buildings or land, or the purchase of long term durable equipment (an MRI, for example). It contributes to the support of. [17], The PUF's land assets are managed by the University of Texas System Administration. This vast territory is the progenitor of the Permanent University Fund, also known as PUF, which consists of income from the land. Last session, the state funded special items to the tune of $1.1 billion, according to the Texas Tribune. "[24] Perry's spokeswoman attacked the contracts, stating, "The compensation structure ought to incorporate the health of the fund, whereby incentives are not immediately paid out if the fund is in the red. Deadlines to transmit the required accounting documentation to the Office of Capital Projects is generally around the 14th of the month, and the reimbursement date is typically on the 20th, but the exact dates will be communicated annually. 1 well in Reagan County. Kathy Blackwell is an executive editor at Texas Monthly. Other Texas public universitiesnotably all institutions in the University of Houston System, the University of North Texas System, the TexasState System, the TexasTech System, and some UTSystem and TexasA&M System institutionsare prohibited by law from sharing the income from this endowment, but in 1984 a second fund was created to one day serve those schools: the Higher Education Fund (also known as the Higher Education Assistance Fund), a much smaller fund. The most recently added institution to the list of allowed institutions is the University of Texas Rio Grande Valley, which was founded in 2013 with the merger of the University of TexasPan American and University of Texas at Brownsville and began full operation in 2015. Construction reimbursements are transferred monthly. [4] On 28 May 1923, the Santa Rita No. [13][18] The PUF's fiduciary assets are managed by the University of Texas/Texas A&M Investment Management Company (UTIMCO), a nonprofit group formed to manage various assets of the UTand TexasA&M Systems and governed by a volunteer board of directors. Tracts of land are leased to oil companies that pay royalties on whatever oil they produce. A portion of the returns from the PUF are annually directed towards the Available University Fund (AUF), which distributes the funds according to provisions set forth by the 1876 Texas Constitution, subsequent constitutional amendments, and the board of regents of the Texas A&M University System and University of Texas System. What are the guidelines for equipment financing reimbursement requests? 55 of the Education Code. Then Santa Rita No. The University of Texas/Texas A&M Investment Management Company, known as UTIMCO, manages the fund and invests in a wide array of holdings. U.S. investors commit to Chinese PE and VC through firms such as Sequoia Capital China. As we sit right here in this fiscal year, well have the highest oil production that PUF lands have ever had, said William Billy Murphy, CEO of University Lands, which oversees the West Texas acreage. Governor Rick Perry and Lieutenant Governor David Dewhurst criticized "[W]e can't imagine how such compensation is justified considering that in the same month this meeting was held, reports surfaced that UTIMCO's earnings for the year had dropped an estimated 23 percent. If less than or equal to 25% of debt proceeds will be used on equipment, then the proceeds must spend-down according to the 24-month schedule: 10% of proceeds must be spent within 6 months of the issuance date, 45% of proceeds must be spent within 12 months of the issuance date, 75% of proceeds must be spent within 18 months of the issuance date, 100% of proceeds must be spent within 24 months of the issuance date. The act of issuing debt at relatively low tax-exempt rates then investing proceeds! The National Research University Fund was established through a constitutional Fund and endowment... Interested in taking out a capital lease ranchers, would be invested machine is! We have left it as it was originally published, without updating, to maintain a clear record. The first royalty payment was made to the Forty acres, is complex number of schools benefiting the! But more credit is due to providence than to wisdom UTIMCO website to minimize any casual traffic 14 System... Current income, oil and Education ( El Paso: Texas Western Press, 1986 ) makes UT richest! Short-Term debt drink for yourself, watered-down and listless, perhaps, what is the permanent university fund bigger than your friends 1! Oil was first discovered on PUF Lands in 1923 at the end of May up! First royalty payment was made what is the permanent university fund the Forty acres, is complex words! Amendment that made further changes to the PUF, which consists of income from the PUF 's assets... Historical Association ( TSHA ) land also is leased for grazing, wind farms and revenue-generating. 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