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Alberta land trust 2009 03 3 of 6-dedicated stewardship funding


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  • 1. MODULE #3Dedicated Stewardship Funding Training Module April 2010This project is made possible through a grant from the Alberta Real Estate FoundationPrepared by: Sue Michalsky, Paskwa Consultants Ltd., Tel: 306-295-3696
  • 2. Dedicated Stewardship Funding Training ModuleLearning Outcomes: 1. Understand how dedicated funds can help the land trust uphold its responsibilities and the promises made to the public when accepting a conservation easement or acquiring a fee simple property. 2. Be able to determine the long term costs associated with monitoring and defending conservation easements. 3. Be able to determine how much funding will be needed to care for a fee simple property over time and meet your land trust’s goals. 4. Understand different methods for calculating stewardship fund contribution amounts based on easement stewardship costs 5. Be able to determine whether a steady source of operating income or a 1 designated fund(s) provides the best assurance of the financial resources your land trust needs to meet its property management responsibilities. 6. Know how to assess your current stewardship funding situation for adequacy and understand options for increasing it. 7. Know how to create a stewardship fund policy for your land trust.
  • 3. GLOSSARYAffirmative obligations - A clause in the restrictions section of the conservation easementthat requires the landowner or the land trust to conduct management in a certain manneror to meet a certain goal.Baseline Documentation Report - The legal record of the site and condition of the resource;included in the easement or deed package.Capital costs - A one-time cost to purchase a large physical asset, after which there will beonly recurring operational or maintenance costs.Conservation Easement - A legal agreement between a landowner and a qualifiedconservation organization or government agency that limits a propertys uses in order toprotect the propertys conservation values. It is a voluntary, written agreement that isregistered on title to the land in Alberta in accordance with the Alberta Land Titles Act. Itbinds current and future owners of the land.Day rate - A labour rate used in budgeting that incorporates salary, benefits, overhead tosupport the employee (both physical and labour), and time spent on associatedadministration. 2Dedicated Stewardship Fund - A dedicated, but not necessarily permanent, source of fundsfor a land trust to cover the costs of conservation easement monitoring and landmanagement. A dedicated fund may be an endowment or may be a fund from which theprincipal can be expended under certain circumstances.Encroachment - Extension of a structure, portion of a structure, or destructive activity ontosomeone elses property without permission.Endowment - A fund which is kept in perpetuity to provide interest and dividend earningsfor the benefit of a charitable cause.Financial model - A mathematical representation of key financial and operationalrelationships. Comprising of one or several sets of equations, it is used in analyzing how anorganization will react to different economic situations or events, and in estimating theoutcome of financial decisions before committing any funds.Infringements – Violation of another’s rights. Includes encroachment and violations.Liability - The responsibility of a land trust to ensure that negligence or inappropriateactions do not result in bodily injury or property damage.Monitoring - The act of observing and keeping a record of the activities and conservationvalues associated with a conservation property.Operating budget - A detailed projection of all estimated income and expenses based onforecasted revenue during a given period (usually one year). It generally consists of several
  • 4. sub-budgets, most important one being the revenue budget which is prepared first. Sincean operating budget is a short term budget, capital costs are excluded because they arelong-term costs.Operating reserve - An amount of money set aside because building components orequipment will wear out in a relatively short time and need to be replaced. Operatingreserves are often merely an accounting entry as a phantom expense item reducing netoperating income. This ensures the funds for replacement are available when required.Overhead - The ongoing administrative expenses of an organization which cannot beattributed to any specific business activity, but are still necessary for the organization tofunction. Examples include rent, utilities, and insurance.Reserved rights – rights of development specifically exempted in a conservation easementagreement, such as the right to replace or construct additions to buildings, which areotherwise restricted by the CE agreement.Stewardship budget - A detailed projection of estimated stewardship annual and capitalreplacement costs for a fiscal year. The budget often provides detail by property and isbased on estimated stewardship income.Stewardship endowment - A dedicated, permanent source of funds for a land trust to coverthe costs of conservation easement monitoring and land management in perpetuity.Violations - Breaking, breaching or contravening the restrictions and affirmativeobligations outlined in a conservation easement agreement to the detriment of the 3conservation values of a property.
  • 5. BACKGROUNDWhen a land trust accepts a fee simple property or conservation easement (CE), it promisesto ensure that the land’s conservation values remain protected forever. To fulfill thispromise to future generations, land trusts should analyze potential activities that couldoccur over time related to the CE or fee simple property following securement. Such ananalysis enables the land trust to determine their financial obligations into the future.To be responsible stewards of the land, land trusts need to understand the financialimplications of their long term stewardship obligations, have a plan to meet theseobligations and manage their financial resources prudently so that future staff andvolunteers are able to fulfill their commitments.Long term stewardship is important to the land trust community and the public over timefor the following reasons: • It allows the land trust to meet long term land conservation goals. • It maintains long term credibility in the community where the land trust works. 4 • It ensures long term securement tools have longevity. • It maintains public support which influences donor support, and therefore financial security into the future.The surest way to prepare for the costs of stewardship commitments is to set up adedicated fund that is managed separately from the land trust’s operating budget.However, there are many variations of funding stewardship costs including: • Funding at least a portion of annual stewardship costs from the income generated from a dedicated fund. • Paying stewardship costs from the annual operating budget and reinvesting the dedicated fund income to increase that fund’s growth until the fund reaches a certain targeted level. • Funding stewardship expenses from sources other than a dedicated fund, such as operating funds, membership income and/or dedicated government funding for land trusts.Stewardship costs associated with monitoring and managing CEs and fee simple propertiesare predictable and trackable from year to year. Therefore, it is possible to estimate thedollar amount required to fund stewardship activities well into the future. However, therewill also be times when a land trust needs to defend a CE or deal with legal encroachment
  • 6. on fee simple lands. These legal defence costs are irregular and unpredictable. For thisreason, the Best Practices Training Module for the Alberta Land Trust Alliancerecommends that stewardship and legal defence funds be established separately.Land trusts commonly use one of the two following dedicated fund models to prepare forstewardship and enforcement costs: 1. Combined Stewardship Fund and Legal Defence FundSome land trusts plan for major defence funding to come from the principal of thededicated stewardship fund. The income of the fund may be available for annualstewardship, but the principal is expended only in the case of a major legal defence action.As a result, such a fund is not a true “endowment,” because the principal may bewithdrawn. One problem with this approach is that the fund may be drained to address anexpensive legal challenge. If an organization finds itself in the unenviable position ofdefending two or more violations or potential violations simultaneously, it mightjeopardize the entire stewardship program by depleting the overall fund. 2. Separate Stewardship and Legal Defence FundsAlternatively, a land trust may establish a true stewardship endowment (from whichincome but not principal may be spent) to cover routine stewardship expenses, and set upa separate dedicated fund (from which income and principal may be withdrawn) for thedefence of CEs and liability associated with fee simple properties. Every land trust must be 5prepared to pay significant legal expenses at some point in time. Although it is difficult toproject actual costs or the frequency with which legal defence expenses will be incurred,the Land Trust Alliance in the US recommends that to fully fund an enforcement action orother litigation, a land trust needs a minimum of $50,000 in its legal defence fund. Themore fee simple properties or CEs a land trust holds, the larger the legal defence fundshould be.The distinction between a stewardship and a legal defence fund is not readily apparent.Land trusts must determine their own distinction. In most cases baseline documentationand monitoring fit clearly into stewardship while defending conservation agreements andconservation values in a court of law fit clearly into legal defence. In between those actionsis a gray zone of activities that can be allocated to either fund depending on the land trust’spreference. For example, some land trusts include any component of binding arbitration aslegal defence whereas other land trusts place mediation into stewardship.This training module addressed the requirements for a dedicated stewardship fund onlyand deals only peripherally with legal defence. For more detailed treatment of legal defencerequirements, see the work prepared by the Miistakis Institute of the Rockies on behalf ofthe Foothills Land Trust in Appendix A.
  • 7. The following sections are dedicated to the provision of information and guidance for landtrusts seeking to build a dedicated stewardship fund. Much of the following information isextracted from the Land Trust Alliance’s “Determining Stewardship Costs and Raising andManaging Dedicated Funds”, and adapted for the Alberta Land Trust Alliance. 6
  • 8. WHAT VARIABLES INFLUENCE STEWARDSHIP COSTS?A land trust’s stewardship program should be tailored to the types of CEs and fee simpleproperties it holds, the land resources it protects and the partners with whom it works. Allland trusts must plan to fund the following major stewardship activities: 1. Baseline documentation (although many land trusts consider this item a transactional cost), 2. Regular, periodic monitoring, 3. Land management activities, 4. Maintaining ongoing landowner /partner / public relationships, 5. Administrative costs or overhead, and 6. Legal costs in response to liability, violations or encroachments.STEWARDSHIP COSTS FOR CONSERVATION EASEMENTSThe costs associated with CE stewardship programs will vary, depending on the methods a 7land trust uses for monitoring, whether staff or volunteers are involved, the complexity ofeasement provisions and land management requirements and the likelihood of violations,encroachments and liability. Using information from its stewardship program, a land trustcan determine costs for current activities and projects into the future. Costs for CEenforcement, including legal and other CE defence costs, should also be forecast.Some of the major costs associated with stewarding conservation easements include:Labour Costs: All land trusts, whether they currently use paid staff or volunteers foreasement stewardship, must consider labour costs. Volunteer-based land trusts need toconsider if and when the organization will need easement stewardship staff, even ifvolunteers complete the job today. Paid staff time almost always increases as easementstewardship programs mature. Even if the land trust continues to use volunteer monitorsas the volume of monitoring increases, staff will be required to manage volunteer trainingand scheduling.When evaluating the costs of staff time (salary and benefits) or volunteer time for routinemonitoring, a land trust should consider the following activities: • Preparing for and visiting the property during annual monitoring. Routine monitoring may require expert advice that is not available from staff or volunteers.
  • 9. Experts such as appraisers, agrologists, foresters, wetland ecologists or wildlife biologists may be called in for certain monitoring tasks or to answer questions that arise during monitoring.• Answering landowner questions; communicating with other interested parties, such as neighbours or the local governing body; reporting and keeping good records; and communicating with the board and staff about stewardship issues.• Following up on problems or questions that arise during the monitoring visit.• Additional monitoring visits when reserved rights are exercised. For example, CEs that allow subdivision or the construction of new residences are more costly to monitor than those that do not. If a land trusts accepts an easement that includes reserved rights or other activities for which land trust review and approval will be needed, it should factor in the cost of this time. In some cases, paid consultants, such as natural resource experts, architects, land use planners or legal advisors, may be needed as well. These visits allow the land trust to spot any possible misunderstandings or errors before construction is completed and can go a long way toward building landowner trust.• Extra monitoring if a CE involves affirmative obligations of the landowner for specific management activities.• Overseeing volunteer monitoring programs (e.g., arranging for training and supporting volunteers, tracking paperwork and following up on problems). 8• Maintaining good relationships with landowners can involve time and expense beyond the required monitoring functions, and the stewardship cost estimate should consider these extra costs. Strong relationships with landowners are based on person-to-person contact with the organization. Some land trusts work toward a more proactive relationship with easement landowners to foster good communication and land management. Some prepare and send regular newsletters to their easement landowners; others hold annual events to gather easement landowners for fun and education. These outreach activities can help keep landowners attentive to the easement and offer additional information or opportunities for collaborative resource improvement projects with the land trust or related organizations.• Land trusts should pay special attention to cultivating a relationship with the new landowner when a CE property changes hands. Land trusts that have experienced turnover to “second generation” landowners know that at this point enforcement challenges commonly begin. Most land trusts try to meet with a new landowner as soon as possible to review the easement, answer questions and head off potential conflicts. Land trusts should factor in extra time for cultivating relationships with new landowners. Timely, consistent education and treatment of landowner requests
  • 10. is often the best method for ensuring strong, constructive landowner relationships, and is often the best defence against possible violations.Office Overhead: Because organizations usually need an office and associated amenities torun a CE program, some land trusts add a factor for overhead into their easementstewardship cost calculation. Estimates may be based on a percentage of actual officeoverhead costs or on a percentage of estimated CE stewardship costs and then added on tothe stewardship estimate. If a land trust incorporates overhead into the CE stewardshipcalculation, it should be used consistently from easement to easement.Travel and Mileage: Depending upon the size of the land trust’s service area, travel costscan be anywhere from an incidental cost to a significant expense. Some larger land trustshold easements that are located more than a day’s drive from their headquarters. Inaddition to the mileage, accommodations and meals, travel time can become a substantialcost.Supplies and Equipment: Cost of supplies is usually a relatively minor component ofeasement stewardship costs. Consider, for example, the costs of cameras, image processing,GPS units, fireproof file cabinets, copying and mailing, along with any expenses unique to aprogram. Dedicated computers, vehicles and aerial imagery are examples of additionalcosts that can be incurred when CE programs become large.Storage and Records Management: Land trusts should consider storage and 9recordkeeping as part of the cost of a CE stewardship program. Costs associated withrecordkeeping include: • Direct costs (such as fireproof files, archival materials, etc.) • Labor costs (staff time involved in documentation of landowner contacts and other functions) • Administrative support (filing, mailing, database updates, etc.) This often- overlooked aspect of stewardship expense is one that becomes substantial once an organization has accepted a large number of easements.Legal Costs: Over time, monitoring activities inevitably result in legal questions about CEinterpretation, compliance issues, process and other points of law. Sometimes thesequestions come directly from the landowner as a request for easement interpretation,discretionary approval or amendment. For the CE holder, having ready access to anattorney is essential. Some land trusts keep an attorney on staff or on retainer and someseek advice from members of their board of directors who have a legal background. Theseapproaches can help keep legal costs down, but for some situations it may be necessary tohire outside counsel. CE holders should consider these predictable, ongoing legal expensesin their stewardship planning.Additional Management Costs with Affirmative Obligations: If a land trust acceptsaffirmative obligations in a CE, it must estimate these ongoing stewardship costs as well.
  • 11. While affirmative obligations are often supported by the original landowner, subsequentlandowners may be less enthusiastic about this level of “partnership” with the land trust.The land trust will need to calculate the time and resources necessary to implement theseprovisions into the future. These costs could include: • Habit management activities such as weed control, prescribed burns and species monitoring or inventories. Habitat improvement investments can range from one volunteer workday to a major, multiyear restoration project involving heavy equipment. The challenge, when factoring in this cost on an annual basis, is to be realistic. Land trusts frequently underestimate the true cost of these types of activities. • Opening land to the public can lead to additional stewardship expenses, particularly to resolve conflicting uses, maintenance issues and landowner concerns. For example, if a land trust accepts responsibility for trail maintenance on a CE property, it should plan for regular monitoring, maintenance to keep the trail up to acceptable standards and perhaps collaboration with public user groups on trail issues. • If a CE requires that educational activities are to take place on the protected land, the land trust will need to allocate sufficient time to ensure that these events are conducted. • Some land trusts include CE provisions that require cooperation with the landowner 10 to provide demonstration projects on the CE land — usually in a specific location or relating to a specific habitat improvement.
  • 12. STEWARDSHIP COSTS FOR FEE SIMPLE PROPERTIESStewardship of fee-owned properties is a complex enterprise because of the wide range ofactivities land trusts may undertake, from simple monitoring to removing invasive speciesto managing public recreational use. Managing fee simple properties is an evolving fieldwithin the land trust community. Every property poses both typical and uniquemanagement challenges. Also, impacts on the land and uses of the land are not static, andmany of the challenges that land trusts will face in the future are not well defined or evencontemplated today.Costs will vary from land trust to land trust and property to property because stewardshipwill involve different activities on different properties. Stewardship activities range frombasic monitoring to ensuring that the property is secure and free of encroachments; toconducting detailed inventories of natural resources and ecological attributes, along withextensive management activities; to improving wildlife habitat, controlling invasivespecies, or generating income from agriculture, recreation or forestry. The land trust mustalso consider donor, neighbour and community expectations when determiningappropriate stewardship activities. If a land trust uses public or foundation money toacquire a property, the grant agreements may have conditions requiring certainstewardship activities designed to protect the investment of the funder and help achieve itsprogrammatic mission. Once a land trust determines its goals for a property and how to 11achieve them, it can then begin to put together estimates of costs for current and futurestewardship activities.In general, land trusts must plan for four types of stewardship costs: • Start-up costs • Annual costs • Capital expenses • Capital replacement costsStart-Up Costs: When the land trust first acquires a property, it needs to take some actionsimmediately. Start-up activities can include: • Holding a dedication ceremony • Contacting neighbours • Preparing lease agreements • Surveying and posting boundaries and hazards • Cleaning up garbage • Conducting natural and cultural resources inventories • Locating species at risk • Fencing • Installing gates at trailheads or to block roads • Constructing or repairing trail and parking areas
  • 13. • Removing buildings or known hazards • Erecting entrance signs • Purchasing or preparing maps and aerial photographs • Preparing a baseline documentation report and management plan • Preparing a property brochureThese expenditures begin transforming a property into a protected area. They may be one-time costs, or occasional recurring costs.Start-up costs are most often considered to be one-time, initial expenditures. They can becalculated early in a land acquisition project and be incorporated into that project’s budget.The cost of installing gates, signs and other structures can usually be easily calculatedbased on the cost of materials and staff or contractor time. It is generally not appropriateto pay for these costs from restricted endowments, because they are more properlyanalogous to capital costs, not operating costs. Therefore, land trusts should raise fundsspecifically for start-up costs, just as they would for capital costs, and not mix these fundswith those that are designed to generate annual income from interest on endowmentprincipal.Annual Costs: Most of a land trust’s stewardship costs are annual expenses for monitoringand managing the property. In calculating the amount needed for its stewardship fund, 12each land trust must remember that it needs to generate enough money from interest on itsfund to cover these annual costs (as well as additional interest to put back into the fund toat least keep the principal even with inflation). A comprehensive list of annual costsincurred in land ownership is outlined below, but it is not necessarily a complete list. Eachproperty, each locality, and each land trust may have unique needs. Before assumingresponsibility for a property, a land trust should make its best effort to factor in all theannual costs associated with that property, and budget accordingly. • The land trust’s property should be monitored regularly (see Stewardship Monitoring Training Module for detail on activities), according to the needs of a particular site. Most land trusts will want to budget for staff or a consultant’s time to do monitoring or to supervise volunteer monitors. • Signs, buildings, trails, roads, dams, bridges, walkways, docks, fences, gates, boundaries, registration boxes, parking areas, etc., need to be maintained. Costs may include material expenses and staff or consultant time. • The costs of purchasing (or renting) and maintaining equipment used in management should be considered in a project’s annual expenses. • Depending on the land trust’s conservation objectives for the property, a variety of resource management activities may be needed on a recurring basis. These might include for example, control of noxious weeds or other exotic species, mowing,
  • 14. prescribed burning, plantings, maintenance of scenic views, pest control, water quality monitoring, grazing or installing nesting structures. • There are a number of administrative activities a land trust must undertake as part of its overall stewardship program. These may not be attributable to a particular property but should be funded by the stewardship fund. These include staff time and other costs associated with overseeing the program, developing stewardship policies, public relations activities that are part of stewardship, maintaining records, annual budgeting, filing tax forms, hiring interns, coordinating volunteers and managing a computerized database, if applicable. • Each municipality has its own rules governing the payment of property taxes by nonprofit organizations. In some, land trusts have the option of applying for agricultural or open space classification, which greatly reduces their tax burden. • To protect itself from liability, every land trust should carry liability insurance sufficient to cover all properties and their structures. The cost of liability insurance varies substantially depending on the use of the property and other factors and may change over time. In addition, a land trust may wish to carry property damage and replacement insurance on any buildings or other structures associated with a fee simple property. • When a land trust owns a parcel of land, however small, the land trust becomes part of the local community. It now has neighbours with whom it should communicate its land management plans, even if that means leaving the property in its natural state. 13 The amount of staff time required to build and maintain these relationships and to process related paperwork is substantial. Public relations costs are particularly important if a property is considered a “cornerstone” of a local community and there are residents or groups that have a strong interest in its use and management.There are any number of leases into which a land trust may enter. All will require oversight. Building leases are common when a land trust acquires properties with buildings for which it has no programmatic use. Being a landlord carries with it substantial responsibilities for maintenance, tenant communications and occasionally unpleasant activities such as disputes and evictions. There are legal costs for preparing leases and rental agreements, and for resolution of disputes. Leasing agricultural land to farmers, recreational leases and other land resource leases are generally less complex to administer. If land or structures are leased to other parties by the land trust, the cost of having counsel review and renew the leases periodically should be considered.Replacement and Capital Costs: Normally, if the land trust must purchase or acquiremajor equipment to accomplish property maintenance (e.g., a tractor to mow fields), or isbuilding a structure or installing a new feature that costs more than a certain amount, thatexpense is considered capital. If capital equipment is purchased that can be used on morethan one property, the land trust can choose to allocate a portion of the cost to eachappropriate property or simply account for it in the overall stewardship budget. Knowing
  • 15. when a new property will require the land trust to purchase additional equipment isimportant so that fundraising goals can be adjusted to reflect the added expense to theorganization.If possible, capital needs associated with a property should be calculated up front as part ofthe land acquisition process. While a stewardship fund that covers routine annualmaintenance costs may be ideal, a land trust also needs to plan for occasional replacementcosts, larger capital improvements or other contingencies. These costs might includereplacement, repair or maintenance of the following: • Brochures • Trailhead or road barriers • Equipment purchase and maintenance • Signs and registration box • Boundary signs/brushing out boundaries • Bridges and walkways • Buildings, fences and other structuresAlthough capital costs should generally not be funded from a dedicated stewardship fund,the costs associated with replacement of those capital items should be calculated andextrapolated to an annual cost. A sufficient amount should be added to the property’sstewardship fund to generate the required annual return. If a property contains buildings, 14it is essential that the land trust be certain that its budget includes the costs associated withongoing maintenance and periodic capital improvements, utilities, property damageinsurance, etc.In some situations a substantial management activity (e.g., native grassland or forestrestoration or restoring water flow to a wetland) is needed early in the land’s ownership torestore the property to a desired natural condition; associated costs may be substantial. Inthis case, such expenses should be handled as capital costs or start-up costs.
  • 16. HOW ARE STEWARDSHIP ENDOWMENTS CALCULATED?Land trusts use a wide variety of stewardship protocols, depending on their staffing level,number and nature of fee simple properties and CEs held and overall organizationalcapacity. This diversity is one of the greatest strengths of the land trust community.However, it also means that there is no single right way to calculate long-term stewardshipcosts that apply to all organizations conserving land.When calculating the annual costs associated with land stewardship, it helps to imagine allpossible tasks, and then assign an average time factor and frequency for each. If a land trustalready has a stewardship program in place with 50 or more properties, it likely hasaccurate and useful information on stewardship costs at its fingertips. With these numbers,a land trust can see its total stewardship program costs and begin to evaluate patterns inthe overall management of CEs and fee simple properties.Carefully tracking costs per property will help predict future expenses and determinestewardship fund contribution amounts. Tracking data is extremely helpful in determiningwhat it will cost to steward a CE over time, and in building a program that is efficient, 15effective and sustainable. While it may not seem crucial to track volunteer time, doing so isuseful when calculating in kind contributions and when transitioning from volunteers topaid staff. Tracking is sometimes difficult in small, volunteer managed land trusts or invery large centrally managed land trusts. A compromise might be for relevant staff orvolunteers to track the time and tasks involved in stewardship.Land trusts need to consider the future as they establish funds for land stewardship.Creating separate funds for each fee property may make sense when a land trust owns onlya few properties, but over time, managing multiple funds can become an accountingnightmare. Most larger land trusts will want to consider having a general “LandStewardship Fund” from which income is drawn annually to cover stewardship andmanagement costs on the full set of properties owned by the organization.This tactic is less cumbersome than administering numerous separate endowments ordedicated funds, many of which could be subject to specific donor restrictions and limitsthat must be carefully reviewed and tracked before they can be spent.Once the start-up costs, capital costs and annual tasks and their associated costs have beendetermined, land trusts can use straightforward financial models to project what amount of
  • 17. funding needs to be set aside into a stewardship or endowment fund to generate incomethat will pay for the stewardship program into perpetuity.Land trusts use a variety of methods to develop the per-property estimate of costs andstewardship contribution. The more common are case-by-case, flat fee, and hybrids ofthese two.Case by case calculations involve predetermining the tasks and cost estimates associatedwith each property and estimating how much endowment funding is need to produce thatamount of income annually at a given minimum or average interest rate.Benefits of the case-by-case approach include: • Tasks are identified in advance, and cost estimates can be based on known data. • The stewardship contribution amount can be tailored to reflect the actual property particulars, as needed, placing fair burden on the properties that will be most expensive to steward. • It is easy to explain and understand and provides excellent background for prospective project funders when the land trust makes its case for why a stewardship contribution is needed. 16Challenges with the case-by-case approach include: • It takes time and experience to develop an effective formula. • The land trust needs to regularly review the formula’s assumptions, which involves tracking expenses. • The formula must be used by knowledgeable staff or volunteers who are able to interpret the complexity of each property and apply the assumptions of the formula consistently. • It can require difficult risk assessment for particular CE clauses or land management activities. For example, if grassland restoration is a stipulation of a conservation easement or a management action for a fee simple property, the risk that the initial seeding is unsuccessful should be incorporated into the cost for this property.Flat fee models are based on average CE and fee simple stewardship costs. Some landtrusts determine a flat fee amount by creating a model line-by-line calculation of cost for an“average” property. Better yet, land trusts that have good internal cost tracking data maydetermine the flat fee amount by dividing their actual overall annual stewardship expensesby the number of properties held.Benefits of the flat fee approach include:
  • 18. • The calculation is simple to understand, can be adjusted as expenses increase and can be easily explained to the public. • The flat fee allows the land trust to say “our stewardship contribution is X dollars per property secured,” thereby limiting lengthy negotiations over funding amounts. • It is consistent with all landowners in a service area and may limit the conversations among neighbours as to why stewardship contributions varied from property to property. • It works well in land trusts where property tend to be similar in nature and size, and/or the conservation easements use fairly standard clauses.Drawbacks of the flat fee approach include: • Solid cost information for the entire stewardship program, preferably for at least a few years, is needed. • Land trusts may have widely varying conservation easements or fee simple properties with different complexities and “risk-related” clauses or activities which makes it difficult to adapt this model to their work. • Because this model uses averages costs, the land trust has less of an incentive to track and assess the true costs of certain CE clauses or types of management activities that are time consuming or risky from a stewardship perspective. If actual stewardship costs are not tracked, a significant risk exists that stewardship will be 17 underfunded over time.The flat fee model is used by many Alberta land trusts. Stewardship fees per propertyrange from $10,000 to $45,000.Some land trusts have developed “hybrid” models that combine the advantages of the case-by-case and flat fee models. These hybrids start with a base stewardship contributionamount thatcovers standard cost elements for an average CE or fee simple property and then adjuststhe contribution amount upward to reflect factors that may make stewardship moredifficult or time consuming to monitor. Such factors may include: • Reserved rights associated with a CE, such as subdivision and building rights • Public access • Affirmative obligations of the land trust or of the landowner for specific types of management such as restoration activities • Detailed monitoring requirements • Reporting requirements to funders • Distance from land trust office • Property size
  • 19. Developing a hybrid formula can allow land trusts to keep most stewardship contributionrequests to potential funders relatively straightforward, while requiring properties withgreater stewardship challenges to have better funding.Some land trusts calculate stewardship contribution amounts based on the easement’svalue or the overall property value. In this method, a portion of the easement or propertyvalue is sought as a one-time contribution to the stewardship fund. Several Alberta landtrusts use this model and stewardship fees range from 10 to 15% of property or CE values.In many cases, percentage of value models do not lead the land trust to stewardship fundcontribution amounts that accurately reflect their ongoing financial responsibilities for CEor fee simple properties. Land trusts that use this method may run into problems becausethe costs of stewardship are not related to the initial value of the conservation easement orthe land. Organizations that choose to use this approach should regularly assess whetherthe inputs to the stewardship fund are adequate to support their long-term stewardshipobligations. The percentage of value approach can be most problematic for a land trust thatworks in an area with wide variation in property values. 18
  • 20. SOME GUIDELINES FOR ESTIMATING STEWARDSHIP COSTSSome rules of thumb are provided below to help with calculating stewardship costs anddedicated fund requirements.• 5% is a commonly used interest rate (see documents in Additional Resources section for examples) for calculating long term investment of endowments• As a guideline for planning labour needs, consider that one full-time trained staff person or volunteer may be able to oversee the stewardship of 50–100 CEs in a year as determined by the experience of members of the Land Trust Alliance. However, this figure is highly dependent upon CE program variables and should be carefully evaluated on a case-by-case basis. Actual ratios vary depending on the depth of the relationship the land trust wishes to develop with the landowner, the complexity of the CE, the travel time to and between properties and the size of properties.• US land trust experience shows that up to 5% of CE properties may change hands annually, although this number varies by region and type of property.• The desired stewardship funding for fee lands is often higher than for conservation easements, because there are generally many more responsibilities associated with fee land ownership than conservation easement stewardship. 19• For land trusts with staff, an hourly or daily rate should be established that covers the actual salary of the staff involved, plus benefits and overhead. Alberta land trust day rates for staff vary between $400 and $600/day. This rate should be budgeted, if not for each property, in a combined “property stewardship” budget. If the land trust uses volunteers to perform most or all of its stewardship work, the number of work days dedicated to each property or to the land trust’s overall property stewardship activities should be documented. Then, if future tasks are reassigned to paid staff, there is a way to estimate the cost.• Each land trust needs to assess if it will incorporate a portion of its organizational overhead (rent, electricity, records storage, insurance, equipment rental or purchase, telecommunications costs, supplies, heat, etc.) into the calculations for the costs of its stewardship program. There are a number of ways to budget overhead. It can be factored by adding a figure equal to a percentage of the staff time allocated to stewardship activities. Alternatively, the land trust’s overhead costs can be calculated from its total annual operating budget and assigned to each part of the organization as a percentage of the overall budget.• Public access to land trust property almost always adds complexity to stewardship. How much complexity and cost is a function of how much and what type of public recreation is allowed. Most of the costs fall under administrative costs, staff time, start-up costs, insurance, maintenance, equipment costs, public relations, etc., but
  • 21. the land trust should have a public use policy for its lands and a specific plan for each property, based on the capacity of the land to accommodate these uses and the land trust’s capacity to manage them. Larger land trusts sometimes categorize their ownerships into various types, with some being identified for more intensive recreational use, and therefore investment, and others for lower intensity use. It is generally safe to assume that if public use is allowed or encouraged, that use will continue to grow over time and demand a greater investment of financial resources.• It’s relatively easy to determine the annual maintenance costs for items that require only periodic maintenance. To calculate the amount of stewardship funding required for periodic, but not annual, maintenance (e.g., roof replacement, paving, painting), determine their costs, and then amortize the amounts over the time period between their completions. For example, assume a sign must be painted every five years. To determine the amount of endowment funding needed to cover the cost, assume one fifth of the cost will occur annually. Then determine the amount of endowment needed to generate this amount of income on an annual basis.• Land trusts should define what level of expense (e.g., > $1,000) is large enough to be classified as a capital expense, and define when such an expense is considered “capital” versus “maintenance.” Smaller equipment purchases (saws, tools, work clothing, etc.) are generally budgeted as annual equipment expenses, especially if the equipment is subject to wear and tear and must be replaced regularly. 20• There are other items that can add to stewardship costs, including wildlife control, emergency and natural disaster response, etc. To ensure that all potential costs associated with stewarding a property have been considered, a land trust should take the time to prepare a management plan, develop a budget and carefully consider every possible event or activity that might occur over the course of the land trust’s ownership. Not every item will need to be budgeted for in every year, but anticipating potential surprises is a lot better than actually being surprised. It is a good idea to include a contingency line in your budget, even if it is only 5–10 percent of the property or organizational stewardship budget, to allow for unforeseen events.A detailed stewardship calculator has been developed for the Foothills Land Trust bythe Miistakis Institute for the Rockies. See the Additional Resources section forinformation on where to obtain this resource.
  • 22. HOW MUCH IS ENOUGH?It can be difficult and daunting to determine the size of dedicated stewardship fundingnecessary to steward land trust properties and CEs into perpetuity. Not only is eachproperty unique in terms of stewardship requirements, but costs will vary depending onwhether land trusts use staff, volunteers, contractors or partners to undertakestewardship. The guidelines below are based on stewardship budgets that include onlyannual and periodic costs and exclude start-up, capital costs and major legal defence funds.It is desirable for a land trust to have an endowment or dedicated fund (yielding a 5percent rate of return) sufficient to cover between 75 and 100 percent of its annualstewardship costs; or If the land trust does not calculate its annual stewardship costs, tohave an endowment or dedicated fund sufficient to generate enough income to cover anannual cost of between $500 and $750 per property (equal to an endowment/dedicatedfund amount per property of $10,000 to $15,000)It is acceptable for a land trust to have an endowment or dedicated fund that covers less 21than 75 percent of its annual stewardship costs (or that has less than a minimum of$10,000 per property) if: A. There is some other dedicated and secure source of income; B. A credible fundraising plan that enables the land trust to raise the desirable funds within five years; and C. The funds required to be raised each year do not exceed 50 percent of the land trust’s annual budget.It is least desirable for a land trust to have no stewardship endowment or dedicated fundor for a land trust to have an endowment or dedicated fund that covers less than 75 percentof its annual stewardship costs (or that has less than a minimum of $10,000 per property)and the land trust is lacking either A, B or C, above.
  • 23. ARE THERE ALTERNATIVES TO A DEDICATED STEWARDSHIP ENDOWMENT?It can be discouraging to realize that the income from an endowment does not cover theannual costs of land stewardship. However, this situation is common. In these cases, theland trust is, in fact, subsidizing these activities through its operating budget, and someland trusts have consciously decided that this is an appropriate way for them to operate.For many older land trusts, early acquisitions came with minimal stewardship funding orthe anticipated costs of stewardship were exceeded by the actual expenses as timeprogressed and costs increased. As a result the choice is to continue to subsidizestewardship or take steps to increase the dedicated fund.As a guide, if there is no dedicated stewardship fund, a land trust should have: • A strong operating reserve, a long history of member contributions to these causes or dedication of special event money to stewardship, and fairly low stewardship expenses compared to the overall budget, or 22 • A strong operating reserve supplemented by income generated from the property or other sources.
  • 24. WHAT ARE THE POTENTIAL SOURCES OF FUNDING FOR LONG TERM STEWARDSHIP?Stewardship funding should be obtained at or before securement of a conservationproperty, whether CE or fee simple. If funding cannot be secured at that time, the land trustshould have a plan to obtain those funds. Some land trusts plan to fund stewardshipthrough their operating budgets and secure funding from appropriate sources annually.Capital campaigns, grants, sales of nonconservation real estate, timber sales, agriculturalleases, recreational leases and cooperative management agreements are all tools that havebeen successfully employed to ensure funds for proper long-term stewardship.Some land trusts prefer to raise all the funds needed to provide an endowment of sufficientsize to generate annual income for all stewardship needs, while others have crafted plansthat depend on an endowment (or dedicated fund) along with annual income.The following funding sources are those most commonly tapped by land trusts: 23Landowner Contributions: Many land trusts ask their easement and property donors toconsider making a contribution to the stewardship fund, either as a one-time gift or as acontribution made over time. Landowners can also assist with local fundraisingparticularly for fee simple purchases or in CE situations where neighbours may benefitfrom the values conserved in some way.Income from the Property: Income can be generated from fee simple properties whichmay offset some of the many expenses. For example, the property could be leased foragricultural, forestry or recreational use. The income from leases should, at a minimum, bedesigned to cover the costs of administering the lease and ideally to generate income tocover other stewardship costs. Rarely will leases cover all of a property’s stewardshipcosts. Costs for administrating leases should be rolled into staff time budgets, legal expensebudgets and perhaps administrative overhead.Local Fundraising: Land trusts can seek stewardship funds from neighbours,municipalities and other project partners. Some create fundraising drives or events. Whenland or conservation easements are purchased, land trusts commonly mount a campaign toraise acquisition funds, rolling transaction costs and the stewardship contribution intooverall fundraising goals.Major Donors: Land trusts may cultivate major donors by educating them about theimportance of stewardship and the challenges of raising stewardship funds.
  • 25. Grant Support: Certain public and private grant programs support land stewardshipfunds. For purchased land or conservation easements, grants may be an excellent sourcefor stewardship funds when the stewardship fund contribution is presented as part ofoverall project costs.Transfers from the Organizational Operating Budget: Some land trusts have built theireasement stewardship funds using occasional and/or routine transfers from the operatingbudget. For example, some organizations have started their dedicated stewardship fundswith a significant transfer of funds from the operating budget or from surplus funds. Othersmake an annual contribution based on a percentage of the operating budget so that all theland trust’s members and financial supporters share in long-term stewardship.Planned Giving: Land trusts may seek planned gifts from major donors for the dedicatedstewardship fund. Such gifts can include bequests of land and money, gifts of cash andsecurities, and noncash gifts that can be liquidated. This technique has been usedsuccessfully by land trusts that are “catching up” their stewardship endowment.Conservation Buyer Programs: Donated lands protected by a conservation easement andsold to a conservation friendly purchaser is another way to raise funds for a dedicatedstewardship fund.Profit Making Business Arm: Some land trusts develop an affiliated subsidiary ororganization that undertakes profitable ventures relating to the work of the land trust anddonates or grants the profits from that business back into the land trust. The Land 24Conservancy of BC is an example of a land trust that undertakes fundraising through abusiness arm. TLC operates gift shops, mail and web order catalogues, tea rooms, heritagefacility rentals, holiday cottage rentals, boat cruises and holiday programs.The following table is taken from the Edmonton and Area Land Trust Business Plan 2006 -2010 and provides a guideline for land trusts of potential funding sources that may berelevant to Alberta.
  • 26. 25In addition to fundraising, there are also methods to reduce funding requirements over thelong term. Some of these techniques are summarized below: • Consistent and regular communications with landowners improves and enhances relationships with CE landowners and landowners neighbouring land trust properties. Stewardship and education of landowners reduces the likelihood of CE violations and encroachment onto fee simple lands. It can also reduce costs associated with securing neighbouring properties. • CE restrictions associated with wildlife habitat, affirmative obligations and reserved rights are more likely to result in CE violations. Fee simple properties that allow public access, especially in the absence of an onsite steward, are more likely to suffer illegal damage or encroachment. Drafting CE agreements and property management plans to avoid high risk clauses or activities can significantly reduce stewardship and legal defence costs.
  • 27. What If Stewardship Funds Are Not Available at Closing?Most land trust professionals find that it is preferable to have all of the stewardship fundingin hand before a property is secured. However, there will be circumstances in which it isnot possible to have the funds at closing, and flexibility is appropriate. If a land trustchooses to close without the necessary funds, it should have a solid plan for how they willbe obtained, ideally within five years, and a board policy committing the funds for thispurpose. Such plans may draw upon a variety of techniques, for example: Create andimplement a long-term plan to raise stewardship funds from other sources. Someorganizations determine that, overall, only a portion of their stewardship funding will comefrom landowners and acquisition-related fundraising at securement. These organizationsmake a policy decision to raise the balance over time from other sources. Fundraising fromsources such as grants, bequests and operating budget transfers can be implemented over aperiod of years, supplementing contributions made at the time of easement acquisition andcompleting overall fundraising goals. Many land trusts that have substantial stewardshipfunds have built them over time using these alternative sources. In fact, most land truststhat are satisfied with the current size of their stewardship fund have used major gifts as asignificant part of reaching their funding goals. 26
  • 28. RULES AROUND STEWARDSHIP ENDOWMENTS AND DEDICATED FUNDSTo comply with CRA regulations with respect to disbursement quotas for charitableorganizations, all donations made to a true stewardship endowment must be accompaniedby a direct statement from the donor stating that the donation is to be held in trust by theLand Trust for a minimum of ten years in order to meet the enduring property definition inthe Income Tax Act ( In a fundraising campaign for the securement of a specific property, it is important tospecify in all public campaign literature, letters to donors and communications with thepublic that funds received will be used for both acquisition costs and stewardship costs.These funds then become restricted to these uses and cannot be expended for any otherpurpose. If a land trust establishes a fundraising campaign exclusively for land stewardshippurposes, it must decide whether to ask for funds only for a select property or properties,or for a general land stewardship fund. Either way, once those funds are donated, if theland trust has told a donor that his or her contribution will be used for a specific purpose,then those funds must be accounted for separately and used as specified. 27Similarly, if a land trust raises funds for land stewardship and tell donors that the funds willbe used exclusively for an endowment, the land trust must have an endowment policy thatincludes investment guidelines, spending guidelines and a specific list of activities that canbe supported by income from the endowment. Tracking donations to either “unrestricted”(board-designated) stewardship funds or “restricted” stewardship endowments isessential.Stewardship funding must be accounted accurately and periodically audited in order forthe land trust to meet its responsibility to use its funds as it promised donors.
  • 29. HOW DOES A LAND TRUST BUILD A DEDICATED STEWARDSHIP FUND?When a land trust acquires a fee simple property or enters into a CE agreement, itessentially promises the landowner, land trust members and funders, the community, theCRA and the general public that it will fulfill its obligations to conserve that property inperpetuity. Making such promises requires the land trust to prepare on many levels,including financially. A land trust should create and implement a written policy thataddresses how stewardship will be funded into perpetuity. The steps and policies forbuilding a dedicated stewardship fund include: 1. Identify the wide array of tasks, and the associated time and expenses, needed to monitor, defend and administer each conservation easement it holds. 2. Identify the wide array of activities and the associated time needed to monitor, manage, and administer each fee simple property it owns. 3. Annually review its stewardship responsibilities, and make a determination as to how it will meet those needs. 4. Hold periodic discussions with the board to discuss organizational funding needed to run the stewardship program. 28 5. Track costs and staff and/or volunteer time spent on all aspects of easement stewardship, not only monitoring time and expense. 6. Periodically revise the budget for stewardship expenses based upon the past experience of the organization. 7. Determine the long-term stewardship and enforcement expenses for each property before it is secured. 8. Secure funds sufficient to cover these expenses at the time of securement (or have a plan to secure these funds and a policy committing funds to this purpose). 9. Have dedicated and separate funds or other sources of funds to support stewardship and enforcement. 10. Monitor how stewardship expenses are funded in the organizational budget, and proactively assess and evaluate if any adjustments need to be made. (Monitoring expenses is particularly important if part or all of the stewardship funding comes from operating or project income.) 11. Periodically assess current thinking and knowledge regarding this topic from the larger land trust community, as land trusts across the country grow in their understanding and sophistication of stewardship and its associated financial implications. 12. Have a written stewardship fund policy.
  • 30. A written stewardship fund policy that a land trust follows is useful for a number ofreasons: • The policy provides direction to volunteers, staff and board members in its stewardship funding decisions. • It ensures continuity over time as individuals involved with stewardship funding enter and leave the organization. • It explains the land trust’s stewardship fund(s) expectations to donors, members and the general public. • It demonstrates to land donors that the land trust is committed to manage every property that it acquires responsibly. • It assures the land trust community, government entities and the media that the land trust is acting responsibly to care for the land assets for which is has been entrusted.The components of a stewardship fund policy could include the following considerations: 1. Land trust philosophy: Why is a stewardship fund necessary? 2. Purpose of the fund: What stewardship costs will the fund cover? Will it be used to support monitoring expenses for CEs only, or enforcement as well? Will it be used to cover monitoring and management expenses for fee simple properties or will it also cover capital expenditures? Are there separate funds for different purposes? 29 3. Managing the Fund a. Building the fund: What methods are used to secure funds with the easement, and what sources are used? What is the target amount per easement or fee simple property to be deposited to the fund? How is the target amount calculated? Under what circumstances will the land trust secure a property without an accompanying stewardship contribution? How will the land trust add appropriate funding later? b. Fund management goals and guidelines: Can all of the income be used, or will part of it be reinvested to grow the fund? What are the rules for spending income? Is it a true endowment, in which principal cannot be invaded? If it is not a true endowment and principal can be withdrawn, what are the criteria for principal drawdown? Is specific board approval required for principal drawdown? How much can be withdrawn? Earnings or growth only? How will it be replenished? c. Authority governing management of the fund: Who is in charge of securing contributions, investing and managing the fund, and making decisions? Who has authority to withdraw from the fund? 4. Review: What is the process by which the policy will be reviewed and updated?
  • 31. ADDITIONAL RESOURCESA Stewardship, Monitoring and Costing Guide for Natural Heritage ConservationAgreements: A manual developed to assist land trusts in owning natural heritageproperties and holding conservation agreements. Draft 2009. Ontario Heritage Trust andthe Ontario Land Trust Alliance. By Barbara Heidenreich.Conservation Capacity and Enforcement Capability: A research report. 2007. The LandTrust Alliance. By Sylvia BatesConservation Easement Stewardship. 2008. Standards and Practices Curriculum. TheLand Trust AllianceConservation Easement Stewardship Endowments. 2008. Land Trust Alliance Fact Sheet.2 p.Determining Stewardship Costs and Raising and Managing Dedicated Funds. 2007. 30The Land Trust Alliance. By Paul Doscher, Brenda Lind, Ellen Sturgis, and Chris WestISBN 978-0-943915-22-7Stewardship Calculator & User Manual. 2010. Prepared for the Foothills Land Trust bythe Miistakis Institute for the Rockies. www.foothillslandtrust.orgTen Most Frequently Asked Endowment Questions. 2008. Hamilton CommunityFoundation. 2 p.The Conservation Easement Handbook, 2nd Edition by Byers, Elizabeth and KarinMarchetti Ponte
  • 32. APPENDIX A: ENFORCEMENT AND LEGAL DEFENSE: PREPARED FOR FOOTHILLS LAND TRUST BY MIISTAKIS INSTITUTE FOR THE ROCKIESIntroductionA land trust holding conservation easement agreement (CEA) is responsible for ensuring the purpose of theeasement is maintained by monitoring for violations, enforcing the CEA when a violation occurs and defending theCEA in the event of a legal challenge. Enforcement and defense are essential components of a land trustsstewardship system. Enforcement is the result of the discovery of a violation and the resolution of the violation in amanner that upholds the purpose of the CEA. There are many tools at a landowner’s disposal to help settle violationsamicably, although in rare cases a land trust may be in a situation where to uphold the purpose of the CEA litigationbecomes necessary. Legal defense is a response by a land trust when the CEA is challenged by legal action from alandowner, neighbor or a third party, usually to modify or terminate the CEA.A CEA is a legally binding contract between the landowner and a land trust that holds the CEA. Ideally thisrelationship is one that is cultivated and maintained over time and is initiated as soon as possible with new 1landowners. However, it is likely inevitable that over time disagreements may arise between the land trustresponsible for upholding the terms of the CEA and the landowner. The issue may be a disagreement in interpretingthe CEA restrictions, an intentional or accidental violation to the CEA by the landowner, neighbor or third partyand/or a legal challenge to the CEA. The risk of a land trust having to defend an easement due to violations or alegal challenge is real and acquiring financial resources or putting plans in place to address legal defense is a keycomponent to a land trusts long term financial planning. A land trust must ensure they have the funds to enforce anddefend a CEA should they need to.How common are violations?It is difficult to calculate the risk a land trust faces in holding CEA’s, especially in Canada where the CEA is arelatively new tool (the oldest CE legislation in Canada is only 15 years old). There are no official statistics inCanada on how often minor or major violations occur, the number of cases settled out of court or cases that havegone to trial. These statistics are important for land trusts to cost out the expenses associated with enforcement andlegal defense. However, lessons can be drawn from the United States where CEA have been used as a conservationtool for over 100 years.The majority of easement violations are caused by the landowner or a third party who did not understand theeasement restrictions or were not aware of the conservation easement. A 2007 research project by the LTA suggeststhat for every 20 CEA held by a land trust; the land trust should expect one violation to some degree annually. TheLTA suggests as a guide, “a land trust can expect 1 litigated easement violation over a 10-year period for every 300easements it holds. A land trust can also expect 1 easement enforcement action (not necessarily litigated) costingmore than $2,500 to resolve, over a 10-year period, for every 100 easements it holds.” A review of this guideline byLand Trusts suggested easement violation rate will increase in the future and the above guidelines are modest.
  • 33. Interestingly, a 2008 conservation defense insurance survey reported an increase in the rate of easement violationsover previous years, this was likely due to a recent increase in land transfers to a next generation of landowners.In most cases landowners are willing to correct the mistake. However sometimes this is not the case and a land trustresponsible for resolution of the violation may need to use a series of approaches, such as communication andeducation, letters, amendments to CEA, mediation and in extreme cases, legal action to uphold the CEA. In 2004, aConservation Easement Violation and Amendment Study tracked the results of 75 major violations in the US, 52were resolved outside of court while 23 were resolved by the courts. Major violations included boundary disputes,timber harvest and/or structures being built outside CEA designated building envelopes. Of the 23 reported casesthat were decided by the courts 20 had good conservation results.The most common major violations included: • prohibited surface alterations, • prohibited cutting of vegetation, and • construction of prohibited or unauthorized structures.From these cases land trusts learned they needed to change polices and documentation including: • documenting the landowner’s intent at the signing of the CEA, • very clear language in easement documents, • a notification process for new landowners, • increased efforts to maintain open and communicative relationship with landowners and • more frequent monitoring.Variables influencing violation ratesThere are a number of variables that can influence a land trusts easement violation rate, many of which the land trustcan control.The Land Trust Alliance (LTA) has identified a number of variables that may influence risk to a land trust: • Number of CEA’s held by a land trust (more easements = more risk) • Types of restrictions (affirmative obligations = more risks), • Quality of CEA, baseline agreement and monitoring reports (clearly written CEA, baseline and monitoring report that follow a consistent policy = less risk) • Consistency in monitoring (regular monitoring = less risk) • Record keeping (well kept, clearly written records = less risk), and • Relationship with landowner (open and communicative relationships with landowner = less risk).Many of these variables can be influenced by land trusts to reduce the risk associated with a CEA. A land trust canreduce the risk of easement violations and increases its ability to defend an easement by maintaining healthyrelationships with the landowner, ensuring good record keeping and developing a violation resolution policy andprocedure to guide enforcement of conservation easements.Maintain healthy landowner relationsLand trust experts consulted in Canada and the Land Trust Alliance literature stress the importance of building andmaintaining healthy landowner relationships. Violations and challenges are often associated with second or thirdgeneration landowners who did not enter into the CEA with the land trust. A policy geared toward new landowners,such as meeting and reviewing the CEA with new landowners as soon as possible is important. Surveys in the USindicate violations by new landowners often occur prior to meetings held with the land trust holding the easement.Often, land trusts are not notified hand of an owner change and many land trust do not have a mechanism to benotified when threre is a new owner. Regular communication with the landowner will help to increase the likelihoodthat a land trust is aware of an ownership change. Regular communication with the landowner is the first line of
  • 34. enforcement and legal defense and should be considered a high stewardship priority. Many land trusts work withlandowners on habitat management projects (weed pulls, fence mending, and water systems), publish newslettersand host workshops to help communicate best management practices. Outreach activities with the landowner helpto strengthen the relationship between landowners and land trusts and also establish communication channelsreducing the risk of violations and challenges to the CEA.Clarity of language and Record KeepingOther areas where a land trust can help to reduce risk relates to the development and implementation of protocolsaround CEA, baseline documentation and monitoring reports. All of these documents may be needed to help upholdthe easement in court. A land trust needs to consider all official documents as lines of defense and therefore removeall vague language from templates and protocols, ensure the intent or purpose of the CEA is well defined, maintaingood records of all communications with landowners and maintain clear, consistent baseline and monitoring reports.It is highly advised that landowners and land trusts sign baselines and monitoring reports to help documentcommunication and agreement over the condition of the land.The wording of easement restrictions should be carefully considered . A landowner should be able to easily interpretthe restrictions to increase likelihood of compliance. In addition, a land trust needs to have detailed documentationon how they are monitoring the property to determine if restrictions have been violated. Some CEA have affirmativeobligations, whereby a clause in the CEA outlines management goals or conditions that need to be met. For examplean affirmative obligation may be that range health condition must be maintained at a certain score. A land trust withaffirmative obligations needs to consider how they will monitor and measure the clause to ensure property is incompliance.Developing protocols for maintaining, storing and destroying records also represents an important line of defense fora land trust.Creating a Conservation Easement Violation PolicyIt is advisable for a land trust to develop a conservation easement violation policy and outline a procedure forresponding to violations (see Handling Violation below). Conservation easement violation policies typically revolvearound two key premises, a land trust seeks to communicate and address violations with a landowner in a nonadversarial way and a land trust seeks to address violations quickly to uphold and protect the purpose of theeasement. The policy includes information about who within the land trust - staff, volunteer or board member, isresponsible for reporting the violation and communicating with the landowner. In addition the land trust shouldoutline a procedure for resolving violations that would include at which point in the process a land trust contacts anattorney or seeks legal advice.All violations are not created equally and it is advisable that a land trust be able to rate the severity of the violationin relation to the CEA purpose or intent. To assist in rating the severity and scope of a violation the LTA hasidentified different types of violations, such as minor, moderate and major.A minor violation includes activities that negatively impacts the CEA purpose but can be restored to originalcondition at minor costs or activities where a slight amendment to the CEA to accommodate the violation wouldhave little to no effect on the overall purposes of the CEA. For example a minor violation may include a buildingthat occurs only slightly outside the permitted building envelope. Minor amendments can provide the land trust withmore flexibility for resolving a violation but the land trust needs to be aware of Environment Canada requirementsfor amendments when the CEA was first granted under the Eco-gift program.A moderate violation includes activities that negatively impact the purpose of the CEA, but can often be mitigatedand may occur on a small area, such as prohibited improvements to a road. A major violation includes activities thathave a significant negative impact on CEA purpose and are often relatively permanent. For example construction ofa house that is not permitted within the CEA agreement or subdivision of the land when it is not permitted.
  • 35. There are also violations where the terms or purposes of the CEA are not impacted by the violation; these are oftenreferred to as technical lapses. For example, a landowner may replace a structure as permitted in the CEA but fail tonotify the land trust as per the agreement. In this case there is no impact to the conservation value of the propertyand the intent of the CE is upheld.The conservation easement violation policy can be designed to address violations according to their level of severityand scope.Another factor to consider when developing a conservation easement violation policy is if the landowner is requiredto reimburse the land trust in the event of a violation requiring remediation. Some land trusts have clauses in theCEA whereby the landowner is required to reimburse the costs associated with enforcement by a land trust,Handling ViolationsThe LTA suggests seven steps for addressing violations: 1. identify a potential violation (through monitoring), 2. document the potential violation, 3. review documentation, 4. determine if it is a violation and the severity of violation in relation to the purpose of the easement, 5. identify potential mitigation factors and choose the appropriate action, 6. work with the landowner to address violations, and 7. record the final resolution and lessons learned.The goal for a land trust is to implement a violation resolution with the landowner that ensures the purpose of theCEA is upheld. There are a number of violation resolution tools that a land trust can employee to help resolve aviolation, such as education, negotiation, remediation, amendments, mediation or judicial. Likely a land trust willuse a combination of these tools to address each situation and the line between these tools is often blurred.Violations are typically caused by landowners, who do not understand or have misinterpreted the CEA. Having apositive conversation with the landowners about their goals and needs and engaging in creative problem solvingwith the landowner can help to build relationships. If the violation is a result of a misinterpretation it may help towalk through the CEA with the landowner again.It is important that a land trust have a person they trust negotiate with the landowner to resolve the violation.Negotiation involves understanding the landowners needs and goals and working with them to develop a solutionthat remediate the violation. Remediation is a process for ensuring the conservation value of the property is restoredshould the violation have negative impact. It is important for the land trust to be flexible when developing solutions,for example, a violation where a landowner builds outside of the building envelop may be resolved throughmitigation or offsets else where on the property, such as giving up an areas where development was permitted in theCEA. This resolution would require amending the CEA to remove the building areas from the CEA and permitactivity in the building envelope where the violation occurred. Over all the intent or purpose of the CEA is upheld. Ifthe CEA is part of the Ecogift program, the land trust may need to seek advice from the program to ensure theamendment is acceptable.If a resolution between the landowner and land trust can not be reached, an independent third party mediator may beappropriate. Mediation is not binding, so if a resolution is not achieved, the land trust may consider litigation.Litigation is a tool of last resort, when all other options to work with a landowner have failed. Taking a landowner tocourt is costly, time consuming and damaging to relationship building. However, in rare cases there may be noother options.
  • 36. Many land trusts have developed flowcharts on how to handle easement violations that assist the land trust inaddressing the violation. In addition, some have developed procedural templates for dealing with violations (forexamples of these templates refer to Managing CE in Perpetuity published by the LTA). Procedures for addressingviolations should consider who determined the best course of action and who in the land trust organization should bein contact with the landowner to present a resolution. For violations deemed major, land trusts should consider legaladvice before approaching a landowner.A land trust should also identify who pays for the costs of addressing violations, in some cases the landowner isrequired to pay the costs back to the land trust associated with enforcement of easement violations or legal defense.However some land trusts prefer not to charge the landowner if a violation is settled through communicationbetween a landowner and land trust as a way of maintaining good relations. However, many land trust have a clausein the CEA that requires the landowner pay for the legal costs associated with a law suit.Amending a CEAA land trust may recognize that an amendment to a CEA may strengthen the CEA or improve the ability of a landtrust to defend the CEA. Usually a land trust has a policy that all amendments result in a neutral or positive changeto the conservation value of the property. For example a landowner may want to remove the building rights from aCEA or change the location of a building envelope and it does not result in a negative impact to the intent of theCEA. The landowner in this case may request an amendment to the CEA. Most land trusts will face the issue ofhaving to amend an easement to clarify language or intent of CEA or resolve a violation where there is no loss ofconservation value to CEA. Amending a CEA is an evolving field and requires each situation to be assessed in thecontext of the CEA, local law and requires a balance approach of upholding the conservation interests of theproperty and maintaining good landowner relations.Within the land trust community there is some disagreement on how often a land trust should consider anamendment; from almost never (it should always be discouraged), to amend at will. A land trust needs to engage indiscussion with the board to decide on their philosophy and develop an amendment policy to guide future decisions.External RisksIn addition to variables the land trust can control, a survey by the University of Wisconsin (Betterley RiskConsultants, 2008) highlights some external variables influencing the risk to a CEA being challenged legally, suchas, • Increasing real estate prices as a result of alternative land uses, • Conversion rate: changes in surrounding land use, such as development pressure or cultivation • Sales of conserved land to successor owners, and • Third party trespassA land trust may not be able to control external variables, but understanding these variables in the context of thelocal setting can assist a land trust in assessing the risk to a CEA. For example, although not a common occurrence,a property’s value for development may become so high, it becomes a possibility that a developer may purchase theland and try to terminate the CEA in court. The amount a developer could make from a development on the CEAproperty would enable the developer to justify the expense of litigation. Even though it is likely the CEA would beupheld, the land trust would need to have a substantial amount of funding available for legal defense in this case.Therefore a CEA associated with areas where land prices and land use conversion rates are high are at a higher riskand need more attentive monitoring and communication with landowners than other CE properties.Risk also increases with landowner succession, therefore a land trust should have a mechanism in place wherebythey know when land exchanges hands and are able to communicate and meet with the new landowner to review the
  • 37. CEA as soon as possible. Land trusts have identified higher levels of violations associated with new landownersespecially where communication between the landowner and land trust didn’t occur in a timely fashion.In addition, there are cases where a third party trespasses and violates an easement, such as a neighbor, oil and gasdevelopment and/or utility company removing vegetation or trees. Many land trusts stress the importance of gettingto know neighbors to CEA properties they hold. This can be done through meet and greet events or workshopshosted by the land trust. In addition, designing best practice manuals and working with the landowner and utilitiesor resource extraction companies can help to reduce the impact on the conservation value of the CEA.How much is enough for enforcement and legal defense.The costs to a land trust of addressing a violation is difficult to determine, the LTA suggests a land trust can expectto 1 violation per 20 conservation easements annually. The costs associated depend on a variety of factors, severityand scope of violation, relationship with landowner and tool used to resolve the violation. It is prudent that a landtrust think about incorporating some funds into their stewardship calculations to cover enforcement of violations thatare settled out of court. Guidelines from the LTA suggest that a land trust should have $5000 put away forenforcement actions (not litigation) and an addition 150-300 per easement once the land trust holds more than 15easements.Although a land trust aims to avoid going to court, sometimes to enforce a CEA or defend against a challenge a landtrust may find it has no other choice. This can be costly for a land trust. A review in 2005 of US land trusts indicatedthat the average litigation costs “range from $25,000 to $250,000 for a typical trial in a typical jurisdiction. Theaverage historic cost of all claims was $38,000 including those that did not go to a full trial. This does not capturethe risk of an appeals process.” Although these are average costs, there are several examples where land trusts spentwell over $250,000 on outside litigation fees to protect or enforce an easement.The Land Trust Alliance has a guideline for legal defense for litigation purposes, whereby a land trust acquires at aminimum amount of $50,000. After a land trust has acquired fifteen CEA an additional $1,500-3,000 should beadded to the fund for each CEA.A land trust should consider costs associated with enforcement and legal defense as components of its stewardshipprogramming. Many land trusts have developed dedicated stewardship funding to cover the costs of managing a landtrust in perpetuity which includes funding for enforcement and defense. Most of the costs associated withstewardship can be accurately estimated, while costs associated with enforcement and legal defense are difficult toassess. If a land trust uses the principle of a stewardship fund to pay for legal defense, they need to have a plan inplace to replenish it. Alternatively, a land trust may create a separate legal defense fund and institute a defense fundpolicy on how the money can be spent. There is some consideration that a dedicated legal defense fund may help todeter legal challenges by landowners.There are various mechanisms for generating funds for defense funding and likely a combination of fundraisingapproaches can be used (refer to Module 3 for fundraising ideas). The Ontario Heritage Trust moves some of theinterest generated annually from their stewardship endowment for each property (5 %) and transfers it to a legaldefense fund to help the fund grow over time.Defense Fund PolicyIt is recommended that a land trust develop a policy around legal defense funding, that highlights how funds areacquired, identifies a financial model and when a land trust accesses legal defense funding. If a land trust developsseparate stewardship and legal defense funds, there needs to be clarity on when an activity is considered stewardshipvs. legal defense. Through consultation with individuals running land trusts in Alberta, the general consensus wasthat minor, moderate and major violations resolved between the land trust and landowner and legal council relatingto interpretations of the CEA, amendments to the CEA are all considered stewardship. When an enforcement actionrequires mediation or litigation, or if the land trust is challenged legal defense funding is utilized.
  • 38. Funding Legal DefenseLand trusts address enforcement and legal defense through different methods, such as 1. Self insuring- A land trust secured fund specifically set aside for legal defense. 2. In-house counsel 3. Retained and/or pro bono counselA common practice is for a land trust to self insure whereby they set up a fund for legal defense. However, a surveyof the US land trust community in 2005 noted that many land trusts did not currently have adequate funding putaside to address legal defense. Only 19% of interviewed land trusts had sufficient funds to address one major legaldefense resulting in a trial (based on $70,000 as a conservative cost for going to trial). It is important to considerhow the land trust plans to raise funds for legal defense and how they might reimburse the funds should the funds beused.Larger land trusts will usually have legal council on staff to provide advice and address challenges and enforcementissues. Smaller land trusts may consider acquiring board members that can provide some legal council pro bono.A small land trust may not have the resources to adequately address legal defense. The LTA has been investigatingcommunity approaches for addressing and learning about enforcement and legal defense.Community Approach to Legal DefenseThere is some concern, that in the future there will be an increase in the risk of challenges to CEA’s as land pricesincrease, there is an increase in the number of second generation landowners, and/or land uses in the area change tobe less conducive to conservation. These factors may contribute to a CEA being challenged in court as a landownerattempts to modify or overturn the CEA. A land trust needs to be in a position to legally defend and uphold aneasement. It can be difficult for a land trust to build the resources to defend an easement, especially if the potentialfinancial gain by the landowner is greater than what the land trust is able to contribute toward defense.Research projects in the US have explored community approaches to reduce the burden of legal defense. Some ofthe activities include forums for sharing knowledge and lessons learned, relying on third party assistance ordevelopment of communal defense insurance. Discussion on communal approaches is less developed amongCanadian land trusts likely because CEA are a newer conservation tool, landowners who signed the CEA are still onthe property and cases of litigation in Canada are rare. Regardless, it is advisable that the land trust communityprepare itself for the possibility of a challenge. The ideas explored below are to instigate discussion within the landtrust community. Communal approaches have not been fully explored in the Canadian legal context.Legal Defense Learning CentreThe LTA has developed a legal defense learning centre, whereby land trusts can review documents, reports andresults of court cases to help inform their practices and reduce the risk of challenges. A Canadian equivalentwhereby land trusts can share lessons learned from enforcement and challenges will help the community proactivelyreduce the risk of challenges.Third Party AssistanceThere are examples where a third party may help a land trust defend a CEA, such as government support, non-profits designed to protect conservation interests (e.g. Ecojustice),or pooled legal advice from law schools or lawfirms.In the US, a number of states actively protect the intent of a CEA because it represents a public service. Forexample, the state of Massachusetts provides legal defense support to conservation easements, as all CEA are
  • 39. approved by the state, which has a vested public interest in upholding easements. A research paper by Jessica Jay(2007), noted that “Massachusetts prepared to step into its first enforcement action in 1997, when the AttorneyGeneral wrote to landowners violating their conservation easement and indicated the Attorney General’s intent tobecome involved in the case. The landowners settled out of court shortly thereafter and it is thought that theperceived threat of government involvement in the enforcement action was enough to encourage these landowners toresolve the issue out of court.” Although this has proven to be an effective mechanism for protecting CEA,government involvement may scare some private landowners into entering an agreement or it may not be an optionin many regions.Another possibility is the exploration of pooled defense approach; this could take on many forms, but one approachcould include land trust pooling resources and fundraising as a community to generate a fund to be used for legaldefense. This type of approach would require the development of a set of criteria to enable the community to decideon when and the funds would be dispersed.Additionally, groups such as Ecojustice (formally Sierra Legal Defense) could be approached to assist with legaldefense cases.Their ability to help would depend on timing, how precedent setting the case is and Ecojustice’scapacity.Communal Defense InsuranceThe LTA has investigated a communal insurance program, whereby land trusts pay a fee per easement per year toensure protection against challenges and assistance with enforcement of CEA when violations occur. The risksassociated with these activities are often very difficult to assess and commercial insurance companies in the US werenot interested in providing group insurance. The LTA is in the process of establishing its own captive insuranceprogram and are currently seeking commitment from membership to proceed with a national communal defenseprogram.Some of the concerns expressed by land trust experts in Canada include the variability in standards betweendifferent land trusts (tying one’s fate to another), a smaller number of land trusts and CEA’s to contribute toward acommunal defense approach and different insurance and CEA legislation between provinces. Therefore, acommunal approach to legal defense are likely best explored by provincial / regional alliances aimed at supportingthe land trust community.Given the lessons learned from the US experience, it would seem prudent that the land trust community in Canadaproactively explore options to assist the community to enforce and defend conservation easements in the future.ReferencesAldrich, R. and J. Wyerman. 2005. National Land Trust Census Report. Land Trust Alliance.Bates, Sylvia. 2007. Conservation Capacity and Enforcement Capability. Land Trust Alliance.Betterley Risk Consultants Inc. 2008. An Analysis of Historic Data Relating to Easement Violations, LandProtection and Defense Insurance Feasibility. Land Trust Alliance.Canadian Land Trust Alliance. 2005. Canadian Land Trust Alliance: Standards and Practices. Modified by theCanadian Land Trust Alliance from Land Trust Standards and Practices © 2004 by the Land Trust Alliance withpermission from the Land Trust Alliance.
  • 40. Doren, J.V. 2004. onservation Easement Violation & Amendment Study: Major Violation Follow-Up Questionnaire.Land Trust Alliance.Doscher, P., B. Lind, E. Sturgis and C. West. 2007. Determining Stewardship Costs and Raising and managingDedicated Funds. The Land Trust Alliance.Heidenreisch, B. Draft 2009. A Stewardship, Monitoring and Costing Guide for Natural Heritage ConservationAgreements. Ontario Heritage Trust and Ontario Land Trust Alliance.Michalsky, S. 2010. Dedicated Stewardship Funding Training Module 3. Alberta Land Trust Alliance.Rately- Beach L. 2009. Managing Conservation Easements in Perpetuity: Fulfilling the Promise of Permanencethrough Keeping Records, Managing Amendments and Upholding Conservation Easement Integrity. Land TrustAlliance.Watkins, M.J. 2007. The Management of Private Conservation Lands by Land Trusts in Canada. Faculty ofGraduate Studies, University of Guelph.