Revolving Loan Fund strengthens Great Lakes land conservation

Since 2001, the Mott Foundation has granted $7.5 million to capitalize the Great Lakes Revolving Loan Fund. Created by The Conservation Fund to provide short-term financing for the protection of ecologically significant freshwater sites in the U.S. portion of the Great Lakes basin, the revolving loan fund has made almost $21.5 million in loans to date. These 18 loans have helped to protect more than 20,500 acres valued at more than $62.3 million. Under the provisions of the revolving loan fund, short-term loans are made to public agencies and nonprofit land trusts. Funds are available for two primary types of transactions: direct loans to land trusts or advance purchase of land on behalf of public agencies or nonprofits. Over the past few months, the revolving loan fund has helped three local conservancies in Ohio and Michigan protect more than 150 acres of property and retain public access to these sites in perpetuity.

“We’ve put $3 million into three great projects,” said Michael Kelly, who has managed the fund since its inception. Because the average wait for public funds or private fundraising campaigns takes 18 to 24 months, the bridge funding provided by the loan fund can make a tremendous difference, he continued. Prior to heading up the revolving loan fund, Kelly worked for The Conservation Fund administering the Saginaw Bay Watershed Initiative Network and other regional programs.

Kelly is supported by a team of environmental, legal and financial specialists located at The Conservation Fund’s main office in Arlington, Virginia. All loans ultimately must be approved by the Fund’s board of directors. “The Great Lakes Revolving Loan Fund is one of our first geographically dedicated funds,” Kelly said. “It was specially designed to provide loans to land trusts, and the model can be replicated elsewhere in the country where funding is made available.”

Recently, Kelly spoke with Charles Stewart Mott Foundation Communications Officer / New Media Ann Richards from his office in Bay City, Michigan, about how the fund works and why it is such an important tool to conservancies throughout the Great Lakes states.

Mott: What prompted the creation of the Great Lakes Revolving Loan Fund?

Michael Kelly: The landscape around the Great Lakes is changing at a dramatic pace. From development that threatens critical habitats along the Great Lakes shorelines, to wholesale divestiture of forest land by major timber companies — not to mention land use activities that threaten important headwater streams — the region faces threats to the ecosystem that are unparallel in recent history. Fortunately, there exists a broad regional network of land conservation organizations that are working to protect these special places. The missing piece — the critical piece of the conservation puzzle — is funding. How do organizations raise short-term funds to acquire these properties? That is where the loan fund plays an important and unique role.

Mott: How does the fund work? How much time do you spend investigating the request? Is there a limit to the amount of money the fund can lend and how quickly must participating conservancies repay the loan?

Kelly: The fund works much like a bank. That is, in its simplest form, an organization makes application to the fund and we deliver the financing for a qualifying project. Typically, the process begins with a conversation with me or a representative of our national loan team. From that initial conversation, we can usually determine if a project will qualify; the property must be located in the Great Lakes basin and loan funds must be used to protect high quality natural habitats. From there, a relatively simple application is submitted, along with a variety of supporting material, organizational background, appraisals and so on. This packet of material moves on to our loan committee for a final decision. We can typically do most projects in about 30 days. Sometimes less, if it is particularly urgent … and some are.

We can generally lend up to $2 million and conservancies are given up to two years to repay the loan. We typically make loans at 70% of the prime rate.

Mott: Can you provide some examples of large and small loan investments and their outcomes?

Kelly: A good example of a small loan was one that we did along Michigan’s Saginaw Bay with a great partner — the Saginaw Basin Land Conservancy. A $40,000 loan was used to acquire some important coastal wetlands along with some upland areas. Those uplands were under threat of development and there was some concern that development there would adversely affect the wetland areas. The conservancy was able to negotiate a purchase, but it had to be done quickly. That was when they came to us.

A good example of a large loan was a recent project with the Leelanau Conservancy in Michigan. A property at the very tip of the Leelanau Peninsula became available, but had to be acquired quickly. A $2 million loan to the conservancy made that project happen. The acquisition of land will result in a significant addition to the Leelanau State Park.

Mott: Is there a land acquisition or conservation easement deal that has been particularly exciting or complicated, or has there been property of extreme environmental value saved?

Kelly: A couple … one that comes to mind is the acquisition of North Bass Island in Ohio. Situated in Lake Erie, North Bass had been used as a vineyard for a number of wine companies since the 1800s. After many years of consolidation, the new owners of the island decided that they were in the business of making wine, not growing grapes — it was more efficient for them to buy grapes on the open market from other states — and they decided that North Bass was not a piece of real estate that they needed. The State of Ohio was interested in acquiring the 400-acre island as an addition to their Lake Erie Islands State Park system, but they didn’t have the funding available. The owners wanted to move quickly, and another buyer had designs on developing the island. The state came to us and we used the Great Lakes Revolving Loan Fund to acquire the island, hold it for a year, and then transfer it to the State of Ohio when funding became available.

We worked on another exciting project with the Western Pennsylvania Conservancy. We made a loan to them to acquire a magnificent piece of property along Lake Erie from a power company that was divesting its land holdings. It was a highly desirable property for home development. But, using the loan fund, the Conservancy was able to acquire the property and later transfer it to the Pennsylvania State Park system. It now is Pennsylvania’s newest state park — Lake Erie Bluffs State Park.

Mott: In general, are these deals difficult to negotiate? How much time is spent negotiating?

Kelly: We have a saying at The Conservation Fund — “every deal is like a snowflake.” It just means that every deal is different. But overall, the negotiating process does take some time. Helping land owners structure the deal is a critical part of all of the acquisitions. There often are tax considerations, estate planning issues and other financial decisions that need resolution. Because we work within the marketplace, we deal with land conservancies that sometimes are in competition with private buyers. Thankfully, we have an excellent team of professionals that can usually develop a win-win situation for us, our partner and the seller. As part of the revolving loan fund package, we also provide whatever support we can to our land conservancy partner to help them get their deals done — and to build their long term capacity to do more deals.

Mott: What has been the most surprising or gratifying experience for you as the loan fund administrator?

Kelly: We’ve worked with our partners to protect — in perpetuity — some spectacular and one-of-a-kind properties. But, as loan administrators, we often work in the background on many of these deals. Nevertheless, it is extremely gratifying to see our partners pull together both simple and complex deals that result in some extraordinary conservation. It’s a good feeling to know we’ve helped them conserve property and at the same time, build their own capacity for future work. Anytime that we can strengthen the land conservation movement in the USA while at the same time protect and conserve important lands, we feel extremely proud.