Public Finance Aspects of Conservation Finance

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• Public Finance Aspects of Conservation
  Finance
• Presentation to the Yale University
• Conservation Finance Camp
• Daniel Patrick OConnell
  June 17, 2008

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Whats Wrong with Cash?

• Annual funding insufficient for
  multi-year programs
• Leverage accelerates purchases
• Debt for preservation good for
  credit ratings

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Tools in Preservation Toolbox

• Bonds or other loans
  Use proceeds to pay
  cash
• Seller financing Pay purchase price, interest
  over term
• Pensions Pay after retirement, with
  value increasing until then

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New Jerseys Open Space Bonds
Beginning in 1961,
taxpayers supported
1.55 billion of bonds
for open space in nine referenda.
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New Jerseys Farmland Bonds
In 1981, taxpayers expanded support to farmland
preservation 200
million of bonds
in four
referenda.
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Impact Uneven Funding
Preservation programs bounced from referendum to
referendum, with inconsistent levels of funding.

1961
1971
1978
1983
1989
1995
1992
Average Annual Available Funds 1961-1998
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Effect on Programs

• Hesitation to dedicate funds
  and invest in staff
• Uncertainty by non-profits to expand for multiple
  projects
• Delays for selling landowners

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98 Million Annual Sales Tax Dedication
On November 3, 1998, voters approved
constitutional amendment dedicating 98 million
annually for 10-year preservation program
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Garden State Preservation
Trust

• State agency funding program
• 98 million in sales taxes annually
• 1.15 billion in AAA-rated bonds
• 2 billion over 10 years
• 60 open space, 40 farmland

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Lessons from GSPT

• Revenue source Dedicate funds from large
  and growing source
• Upfront borrowing Lock in interest rates, force
  spending
• Prime pump Assured state match encourages local
  funding

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History of SRFs

• Created by 1987 Amendments to
  Clean Water Act
• Clean Water State Revolving Funds 80 EPA grant,
  20 state match, 30 billion since 1987
• Annual EPA grants 1.35 billion

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Functioning of SRFs

• Loans to governments, nonprofits at below-market
  rates for 20 years
• Repaid loans used for new loans funds revolve
• Loan cashflow leveraged with bonds

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Leveraging SRFs

• Debt capacity determined by assets, cashflow
• Rating agencies review default scenarios
• Willingness based on demand

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Leverage of SRFsin Northeast
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Uses for SRFs

• Designed to finance sewage treatment plants
• 40 of pollution is NPS
• Use for land preservation determined by state
  statute

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NPS Use of SRFsin Northeast
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SRF Loans for Preservation

• CA 8 mm (TNC) for wetlands, 25 mm (TCF) for
  timberland
• NY 27 mm (NYC) for watershed protection
• OH 24 mmm (TPL) for wetlands and stream
  corridors

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