Presentation to the OLTA Gathering October 29, 2010 5A - Funding Stewardship Costs Using Stewardship Fees Stewardship Fees Presenter: Barbara Heidenreich Natural Heritage Coordinator Ontario Heritage Trust Learning objectives 1. Basic understanding of the range of fundraising options available to land trusts; 2. Familiarity with one tool in this fundraising kit ….“transfer fees”, preferably known as …. transfer fees , preferably known as “stewardship fees” 3. Stewardship Fees: advantages, challenges, how to make them defensible; 4. The importance of knowing what it costs to steward your properties!
Sources of Stewardship Funds …see OLTA Stewardship, Monitoring and Costing Guide , 2010 p. 21 Definition: Transfer Fees = Stewardship Fees A revenue generating mechanism that pays a percentage of the price of a parcel of land to the land trust when the parcel is sold. …… Story Clark in A Field Guide to Conservation Finance. Island Press, 2007 p. 162 … a proven but underutilized way for land trusts to generate ongoing revenue by binding present and future owners to paying to the CEA holder a percentage of the sale price of the land each time the property is sold. …… Story Clark in A Field Guide to Conservation Finance. Island Press, 2007 p. 162 Annotated Sample Conservation Agreement – October 2008 p. 11 of 31 Article 6 Owner’s Obligations and Indemnity [ 6.3 Below - Optional and by Agreement of the Landowner ] 6.3 No less than ten (10) days in advance of a transfer of the fee simple title to or a possessory interest in the whole or any part of the Property, the Owner shall pay to the Conservation Body two (2) percent of the sale price or make shall pay to the Conservation Body two (2) percent of the sale price or make alternative arrangements for such payment to the satisfaction of the Conservation Body. A lease of less than five (5) years total duration and all transfers by bequest, by right of survivorship, or for no or nominal consideration up to a value of fifty (50) dollars are exempt from this provision. Any failure to make such payment shall be a debt with interest at the rate of five (5) percentage points above the prime rate of interest from time to time charged by the Bank of Canada and shall be a charge upon the whole Lands enforceable in the same manner as a mortgage, and shall be recoverable by the Conservation Body in a court of law. OLTA’s annotation follows……
“Transfer fees”, also known as “stewardship fees”, as currently applied in the US and Canada have been in the magnitude of 2% to 10% of the sale price. They are optional. The latter (10% ) has been used on public land that is being transferred to the private sector. I f agreed to by the owner, the usefulness of the “transfer fee” provision is manifold: (a) I t helps the conservation body to assume agreements on properties where an endowment is not possible, thus assisting them to meet their mission and commitment to protecting the property while providing some assistance regarding long term stewardship costs; (b) I t provides a degree of comfort to landowners who may question how the recipient organisation is going to have the funds for stewardship in perpetuity; p g g g p p p y; (c) It ensures that the conservation agreement holder is made aware of property ownership transfers and provides immediate funds for a landowner contact meeting to discuss the terms of the easement and to prepare and have signed off a new monitoring report. (d) Transfer fees act as an automatic inflation hedge since they are tied to the underlying real estate value. They may burden people to a nominal degree, but the people they burden are those that benefit from the resource that is protected and stewarded. Ultimately the fees can generate major dollars with very little pain that has the potential to build up a considerable endowment for each property or at least significant operating revenues for stewardship. Advantages: • Has been successfully applied in the USA and Canada and has built substantial stewardship and defence revenue for the land trust community; • Builds as land appreciates; • Landowners often offer less resistance to a future fee than cash now; • Does not appear to impact marketability Does not appear to impact marketability Challenges: • Timing is not predictable; • Not tax deductable for the landowners as this is a contractual obligation • enforceability has risks and is being challenged by future landowners ( see U.S.A. case: French & Pickering v Natale ) Defensible applications of Stewardship Fees: An unsecured promise to pay a sum of money must be directly related to the land bound by the CEA to be binding on the future owners who did not make contractual obligation……this means that you must know and document what it costs to steward the CEA on that parcel: Examples of LT stewardship costs … see OLTA Stewardship, Monitoring and Costing Guide 2010 p 18-19) Costing Guide , 2010. p. 18-19) • LT provides on-site monitoring to ensure compliance with the CEA covenants; • LT is obligated to investigate reports of possible violations and exercise enforcement rights; • LT provides services by reviewing a proposed action by the landowner and by providing a discretionary “waiver, release or variance” letter” (OLTA template s. 4.3) to MNR; cont’d… … … .
cont’d………. • time spent with brokers, prospective purchasers explaining and interpreting the CEA, how it operates and what its effect may be; •LT provides a “certificate of compliance” on sale of property; • LT may be paying an annual premium for CEA defence insurance; y p y g p ; • the LT furthers regional conservation objectives through education, restoration and acquisition….revenues that support land management and educational programs for the common good rather than a particular lot in order to benefit all lot owners. Projects on other lands will run to the advantage of the burdened property as well. RECAP: some Best Practices to maximize collection payouts: A “stewardship fee” to be enforceable must ensure the payment arrangement seeks funds dedicated to a purpose that has a direct connection to the parcel of land burdened by the CEA. There must be fairness and reasonableness within the charge of EQUITY. The fee must be transparent by either: (a) placing a “Notice” up front on the CEA, or (b) Making the stewardship fee a separate “conservation funding covenant” [ that may be discharged without discharging the CEA] registered on title and linked to the CEA Think about other appropriate methods of seeking Stewardship Fees using a contractual payment method if the donor cannot donate at time of registration of the CEA: • fixed sum on sale; • capped funding that may take 1 to two sales to discharge; if capped u d g a ay a e o o sa es o d sc a ge; capped see about securing it as a mortgage lien; • annual payment based on monitoring costs IMPORTANT …………………………………………… !!! If you are not willing to collect a stewardship fee, do not put it in the CEA or as a separate conservation funding covenant
Thank you! Contact I nform ation: Barb Heidenreich Natural Heritage Coordinator Ontario Heritage Trust 416-314-4918 Barbara.Heidenreich@heritagetrust.on.ca
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