RESOURCE PROTECTION
Resource Protection: List of Funding Mechanisms
Revenue Generated/Redirected: Estimate not known. Cost of planting trees is passed on to the development community and new homeowners. Description: The Forest Conservation Act (FCA,1991) and the Nontidal Wetlands Act (1989) each have requirements for mitigation under certain circumstances when forests or wetlands are impacted by development. Mitigation is preferred on-site, but may be performed offsite if an appropriate location is not available on-site, or if other criteria are met. Maryland's Department of Natural Resources (DNR) has created a wetlands mitigation banking program at the state level, but no formal mitigation banking system has yet been created for forestry. The program is regulated by DNR, and implemented by local governments for local projects. Carroll County is in the process of developing a forest mitigation bank, and at least one private firm has been formed to facilitate the mitigation requirements of developers by identifying appropriate mitigation sites, implementing the required mitigation, and maintaining the mitigated area. Mechanism: Private Initiative/Incentive. Action Needed: Legislative authorization would encourage the formation of county or watershed-based banks, and may be needed to create a state bank. Issues to Consider: Banks at both the state and county/watershed level are recommended. A state-wide bank should be created to provide mitigation opportunities for projects that impact state lands. This would also serve as a model for banks at the county/watershed level. County and watershed banks would be available to developers with projects impacting private lands. Buffers have been designated high priority areas for mitigation under the FCA. Existing regulations create a market for tree planting, but finding appropriate receiving sites is often difficult. Forest mitigation banks create a framework for matching those with mitigation requirements with those with suitable receiving sites. By facilitating the mitigation process, they can lower development costs as well as providing an incentive to private landowners to plant trees. The environmental community is concerned that banking can be a disincentive to protect forests on development sites. In addition, locating appropriate sites for mitigation can be staff intensive at the state or county level.
Revenue Generated/Redirected: Estimate not known. Description: TDRs compensate landowners in "sending areas" (usually agricultural or resource lands) for the equity in their land by using private money. This technique has been a proven success in a number of communities. However, TDR programs are often difficult to establish because receiving communities are reluctant to accept higher density development. Providing adequate incentives for receiving areas will increase their availability for TDRs, thereby increasing interest in purchasing development rights from agricultural and forested lands. Mechanism: Private Initiative/Incentive. Action Needed: Identify sending and receiving areas in the comprehensive plan consistent with development and preservation goals. Establish receiving areas in development districts with enough capacity to absorb the development rights from the sending areas. Develop flexible zoning and design standards in the receiving areas. Streamline the TDR administrative process. Issues to Consider: Possible incentives include access to public transportation or other amenities. Some of these will require additional funding; others could be accommodated by giving receiving areas a high priority in transportation and other planning processes. Case Example: page 105
Revenue Generated/Redirected: Does not generate new funds; would administer funds provided through other sources. Description: A PDR/TDR bank could be developed and funded with transfer tax revenues, general obligation bonds, and local government contributions. Such a bank could be formed by a state and local government partnership, a nonprofit entity, or some combination. In any jurisdiction in the state with a purchase or transfer of development rights program (or both), the bank would purchase the development rights of agricultural or resource land. The bank could either extinguish the rights or sell them as TDRs to developers to raise money to purchase more rights. Mechanism: Public/Private Partnership. Action Needed: Requires legislative action. Issues to Consider: A bank provides a central market for TDR purchases and sales and would lend credibility to TDR programs. It would also help stabilize fluctuations in TDR prices, and could be a ready buyer of TDRs in hardship cases. A bank would help provide a mechanism for TDRs, but needs to be coupled with incentives for receiving areas. Case Example: page 105
Revenue Generated/Redirected: Estimate not known ($15 million in Kansas; $44 million in Washington State). Description: This idea draws on the example of dedicated Funds that have been established in several states for a wide variety of conservation practices. These Funds may be funded through a variety of mechanisms. In Washington State, $21 million is collected from the statewide real estate tax, $19 million from solid waste fees, and $4 million from water and sewer fees collected from utilities. This Fund is used to provide low-interest loans to local governments to repair leaking sewer lines, build stormwater facilities, and other projects which remove a significant threat to public health. Kansas has a State Water Plan Fund, a dedicated fund shared by seven state agencies involved in maintaining and restoring water quality. The Kansas Fund is fed by general fund appropriations, lottery proceeds, municipal, industrial and agricultural water use fees, pesticide and fertilizer use fees, and environmental fines. Mechanism: Usually a combination of mechanisms. Action Needed: Identify sources of revenue for the Fund; create administrative procedures to facilitate interagency cooperation. Issues to Consider: A large Fund has the resources to undertake necessary projects, as well as the flexibility to address the most critical needs first. To be effective, it must have one or more reliable sources of funding, many of which are discussed elsewhere in this document. Without new revenue, the Fund would likely divert some money from existing environmental efforts.
Revenue Generated/Redirected: $5-10 million. Description: Mini-bonds are bonds issued in small denominations (e.g. $500) available for purchase by the general public. Additional $10 million debt authorization specified for Bay related projects to be issued in the form of Bay mini-bonds. Mechanism: Bond. Action Needed: State policy decision and legislation needed. Issues to Consider: The cost of issuing the bonds can be a significant barrier to their use. Typically, the cost of issuance per $1,000 of bond is $6-8. In 1990, the state-issued mini-bonds cost $11.80 per $1,000, and in 1991, the cost was $17.10. These costs include the bond counsel fee, charges by rating agencies, and administrative expenses of printing and distributing financial statements. Administrative costs are the largest component due to the large number of bond holders. These costs could be potentially reduced by soliciting donations of time and services from bond service departments of banks and bond counsels. A stable funding source is needed to repay the bonds. In the past, bonds were repaid from General Funds. Suggested ideas for repaying Bay mini-bonds included funds from the income tax check-off, the Bay license plates, or a lottery. Using funds from the tax checkoff or the license plate would divert funds currently used by the Chesapeake Bay Trust for environmental education and resource protection projects. "Bay bonds" would probably be politically popular, and would increase public awareness of Bay issues. Their influence could also be expanded if purchasers were asked to sign an "agreement" to adopt environmentally friendly practices; or if environmental education information was sent out with Bay bond materials.
Revenue Generated/Redirected: Estimate not known. Description: The Community Re-investment Act (CRA) was passed by Congress in 1977 in response to the poor record of many banks in making loans and providing services in low income neighborhoods. The CRA requires banks to be rated annually to ensure that minimum community re-investment standards are met. However, although 89% of banks pass these ratings, Congress still feels that banks continue to fall short in providing services to the community. Current federal CRA requirements are very general, but the State could pass legislation with more specific guidelines about activities that are eligible under the CRA. These guidelines could include environmental projects, such as redevelopment and in-fill development to encourage concentrated growth; urban forestry; stream restoration; best agricultural management practices; etc. Mechanism: Public/Private Partnership. Action Needed: State legislation. Issues to Consider: The Community Reinvestment Act represents a new, previously untapped source of potential funds for environmental projects. Using banks for this purpose could potentially divert funds from other community needs, such as low-income housing. However, if environmental activities are offered as one of several eligible areas for CRA investment, banks could choose which activities they prefer to focus on. New York State proposed its own CRA, which includes a checklist of eligible activities (NY's does not focus on environmental investment). An alternative to a checklist would be to require banks to develop an Environmental Re-investment Program, whose activities would be reviewed by an existing or specially appointed commission.
Description: Extending the SRF to finance private sector capital projects and nonpoint source pollution control projects would make funds available to the private sector for activities such as stream restoration and structural shore erosion controls (see page 26 for full description). Mechanism: Loan and Redirection of Existing Program. Action Needed: Amend the Maryland Water Quality Financing Administration Act to permit loans to the private sector. In addition, changes must be made in the federal Clean Water Act to allow for private loans for point source projects. Issues to Consider: The public sector would now compete with private and public/private borrowers for available SRF funds, unless a portion of the SRF program was dedicated only to public sector borrowers. Loans to private parties would reduce the amount of federal and state funds available to be leveraged with tax-exempt bonds. Case Example: pages 92, 93
Revenue Generated/Redirected: Revenue neutral. Would increase access to existing program. Description: Currently, the structural shore erosion control program administered by the Department of Natural Resources (DNR) requires landowners applying for a zero-interest, 30-year loan to be in a designated shore erosion control district. This restriction was created in order to target shrinking funds, and to help ensure a consistent erosion control approach along a given stretch of shoreline. However, the current restriction limits access to the program, and may hamper the program's ability to target on the basis of environmental concern. Mechanism: Loan and Redirection of Existing Program. Action Needed: Change in state policy. Issues to Consider: Will speed implementation and increase access to program although this will also increase competition for limited funds. In addition, by increasing the pool of applicants, enables program to target priority areas more effectively.
Revenue Generated/Redirected: National Wildlife Federation charges $20 for an "adopt-a-whale" kit. Assuming the cost to produce and market the materials is $10 per kit, selling 5,000-20,000 kits would raise $50,000-200,000. Description: This idea is based on the "adopt-a-whale" program created by the National Wildlife Federation and others. Individuals would be solicited to "adopt" a Bay creature. For a fee, participants would receive educational materials about their Bay creature. Mechanism: Public/Private Partnership. Action Needed: Assess cost-effectiveness of program; promotional effort. Issues to Consider: This initiative ties in well with educational efforts. It may be best suited to an organization with existing public outreach efforts, such as the Chesapeake Bay Trust. In California, public/private partnerships have been formed around the "Adopt-a-beach" Program, which has focused on education, beach cleanup, and pollution prevention. Relies upon private donations, which may vary from year to year. Could have significant administrative costs. Case Example: page 102
Revenue Generated/Redirected: The maximum generated through the Bay plates has been approximately $1 million per year. Description: The existing Bay plate program could be expanded to create a new commemorative plate each year in order to increase sales. Currently, $12 of the total $20 cost of plates goes to the Chesapeake Bay Trust for environmental education and conservation projects. Limited edition plates are also available for $100-500. Restrictions on the use and issuance of commemorative plates are set by legislation. However, the recipient of funds generated by the plates is designated by the Governor. Under current law, the recipient may not be a state agency. Mechanism: Private Initiative/Incentive. Action Needed: Currently, the law allows only one design at a time for plates. Designs are authorized for two years, and may be renewed. The current Bay plate is authorized until July 1996. Legislative authorization would be required to allow multiple or annual commemorative plates. Issues to Consider: The Bay plate has been a very successful fundraising tool over the past few years. The plate provides visibility for Bay restoration efforts, as well as funding. There are differences of opinion as to whether a new plate (or multiple plates) would increase sales. Other states, such as Virginia and Florida, have multiple plates, but they are not believed to be as successful as the Bay plate. Other "causes" are interested in using commemorative plates for other issues, so there is likely to be competition for the right to issue a commemorative plate. In addition to commemorative plates, which are the "official" state plate and are marketed by the Motor Vehicle Administration, private groups may issue special plates. The cost of these plates (such as those issued by Ducks Unlimited or Towson State University) is set by the benefiting group, and is marketed by the group, not MVA. Special plates could be created for each tributary to fund local tributary activities.
Revenue Generated/Redirected: Estimate not known. Description: Currently, the Department of Natural Resources (DNR) sells duck stamps, which are issued as a hunting license. Many people buy additional stamps for artwork. Maryland's duck stamp is selected on a competitive basis each year, which serves to increase the visibility of the program. This approach could be expanded to other activities requiring licenses (e.g. boats, fishing), or could be issued solely as collector's items to benefit conservation efforts (e.g. habitat, non-game species). Mechanism: Fee. Action Needed: Legislative action may be required. Issues to Consider: DNR licensing staff believe that there is a limited market for additional stamps because there are so many available at the federal and state level. In the past, DNR has offered deer stamps, trout stamps, and a Chesapeake Bay stamp. All have been discontinued (the trout stamp will be discontinued after this year) due to limited sales. Case Example: page 106
Revenue Generated/Redirected: Would pass on tree planting costs to private sector by giving companies an incentive to plant trees to meet existing regulatory requirements. Description: Under the Clean Air Act, companies pursuing activities that will increase particular air pollutants that are currently exceeding clean air standards in that area will be required to provide "offsets" for their polluting activities. Such "offsets" could include tree planting, as trees sequester carbon from the air. Mechanism: Private Initiative/Incentive. Action Needed: Could be part of Clean Air Act trading scheme, licensing requirements for new plants, or renegotiation of licenses for existing plants. Possible policy, legislative or regulatory changes needed. Issues to Consider: If proven practical, could be incorporated into Clean Air banking system now being developed by Maryland Department of the Environment. Need to investigate potential regulatory/legal barriers. Trees provide multiple benefits (e.g. nutrient reduction, habitat), in addition to carbon storage, but do not address other significant air pollutants. Market-driven; cost effective method of offsetting carbon emissions. Also provides good public relations for utilities and others who plant trees. Could be potentially difficult to allocate carbon credits to tree planting. Program administration (e.g. tracking tree planting projects, tree survival, etc.) could be complex. However, this approach has been done on a voluntary basis. In 1989, a New England utility donated the cost of planting thousands of trees as part of a CARE reforestation project in Guatemala. The trees were planted to "offset" the additional carbon emissions created by the utility's expanded capacity. Currently, American Forests, a nonprofit organization (202/667-3300) coordinates a national program which assists corporations in planting trees where they are needed.
Revenue Generated/Redirected: Please see page 52, "Environmental Trust Fund," for possible source of funds. Description: Existing program administered by Department of Natural Resources (DNR) Forest Service provides one-time incentive payment to landowners to plant trees along rivers and streams. Forested buffers along streams filter nutrients from upland areas, as well as improving stream habitat by providing shade, food sources, and bank stability. Mechanism: Private Initiative/Incentive. Action Needed: Legislative action. Issues to Consider: Current incentive payment ($300/acre) is not sufficient to offset the loss of income to the landowner when land along streams is taken out of agricultural production in order to plant forested buffers. In past years, $500 per acre payment has been an effective incentive. Program funding has been unstable, and has been unable to guaranty funds for potential clients. Increased participation in program will increase overall costs and may require additional technical assistance.
Revenue Generated/Redirected: Estimate not known. Description: A privately run endowment fund could be established through contributions from the private sector (possibly organized through the Chambers of Commerce). Interest from the fund would be used to pay for environmental restoration projects. The fund would coordinate with state agencies to target high priority areas. Mechanism: Public/Private Partnership. Action Needed: Private initiative to establish and run; creation of mechanisms to coordinate with state efforts. Issues to Consider: draws upon desire of business community to be associated with environmental stewardship, creating a public/private partnership for resource protection. Could be coordinated with environmental education efforts to provide volunteer labor for projects. Funding may be unstable from year to year, and could compete with other nonprofits for corporate funds.
Revenue Generated/Redirected: Estimate not known. Description: A major credit card could be issued to benefit a new or existing environmental organization. For each "affinity card," a fixed amount per card, and a small percentage (on the order of 0.5%) of the spending on the card is donated to the organization. The organization is generally partially responsible for marketing the card. Mechanism: Private Initiative/Incentive. Action Needed: Organization must work with bank to issue credit card. Issues to Consider: Has been successfully used by many organizations. As a result, there may be considerable competition within this market. If successful, this is a good way to increase public awareness as well as raising funds. (The Chesapeake Bay Foundation already has issued an affinity card, so new efforts need to be distinguished from this one.) In the past, checks with scenes of the Chesapeake Bay have been issued by a bank to raise funds for environmental efforts. A premium is charged for the checks, and the money is donated to environmental causes. |
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