From Walden to Wall Street: Frontiers of Conservation Finance available in Hardcover
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- Island Press
In the absence of innovation in the field of conservation finance, a daunting funding gap faces conservationists aiming to protect America's system of landscapes that provide sustainable resources, water, wildlife habitat, and recreational amenities. Experts estimate that the average annual funding gap will be between $1.9 billion and $7.7 billion over the next forty years. Can the conservation community come up with new methods for financing that will fill this enormous gap? Which human and financial resources will allow us to fund critical land conservation needs?
From Walden to Wall Street brings together the experience of more than a dozen pioneering conservation finance practitioners to address these crucial issues. Contributors present groundbreaking ideas including mainstreaming environmental markets; government ballot measures for land conservations; convertible tax-exempt financing; and private equity markets.
The creativity and insight of From Walden to Wall Street offers considerable hope that, even in this era of widespread financial constraints, the American conservation community's financial resources may potentially grow dramatically in both quantity and quality in the decades to come.
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About the Author
James N. Levitt is director of the Program on Conservation Innovation at the Harvard Forest, and research fellow at the Ash Institute for Democratic Governance and Innovation at Harvard's Kennedy School of Government.
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From Walden to Wall Street
Frontiers of Conservation Finance
By James N. Levitt
ISLAND PRESSCopyright © 2005 Lincoln Institute of Land Policy
All rights reserved.
Financial Innovation for Conservation An American Tradition
James N. Levitt
Though I do not believe a plant will spring up where no seed has been, I have great faith in a seed. Convince me that you have a seed there, and I am prepared to expect wonders. —Henry David Thoreau, Faith in a Seed
Why do we invest in conservation? Why do human beings invest their time, energy, and financial resources in the protection of land, plants, and animals?
We invest in conservation because it is an expression of our faith in the future.
Conservation investment is an expression of our faith in the future of natural systems that are essential to life on Earth. It is an expression of our faith in the future of deeply loved natural wonders. And it is an expression of faith in the future of our families and communities, whose lives will be immeasurably enriched by the living world that we are striving to sustain.
We also invest in conservation-oriented projects with increasing frequency because we have faith that, well into the future, such projects can provide us with respectable and low-risk economic returns on principal.
Our faith in the long-term efficacy of our conservation investments can, of course, be severely tested. The first five years of the twenty-first century have not been encouraging ones for U.S. land and biodiversity conservationists. At the local, continental, and global levels, the need to pick up the pace of conservation efforts remains urgent. In my home state of Massachusetts, for example, given the rapid pace of land development, the window of opportunity for the conservation of large parcels of land may close in the next several decades. On a continental scale, ecological forecasters can predict, with increasing levels of specificity, how the disruption of landscape-scale corridors over the next quarter-century will pose ever-greater threats to the amazing migrations of animals that travel thousands of miles each year to feed and reproduce. Recent global forecasts are no more optimistic. An assessment, published in 2004 in the Proceedings of the National Academy of Sciences, predicts that as many as a quarter of all bird species on Earth may face extinction by the year 2100. As technology and a growing global economy allow the spread of industrialization to every square kilometer of Earth's surface, habitat loss, compounded by pollution, human population growth, the spread of exotic species, and the landscape consequences of climate change, loom as increasingly important factors in discouraging dynamics.
The response of U.S. political leadership to such urgent reports, from state legislatures to international negotiations, appears to be tepid at best. At the state level, despite consistent voter approval of land protection ballot measures, several legislatures are cutting back on their commitments to conservation. In Maryland, for example, funding for Program Open Space, "the state's main program for conserving ecologically significant lands, threatened open spaces, forests and farmlands" was cut by 75 percent in 2004. At the federal level, after increasing budgets in 2001 and 2002, the U.S. Congress has recently trimmed allocations for traditional sources of conservation capital, such as the Land and Water Conservation Fund, in part because of growing federal budget deficits.
And, in contrast to its role as an international conservation and environmental leader throughout most of the twentieth century, the United States now has a conservation and environmental policy that is the object of pointed criticism from even our closest allies. As he prepared for his turn at presiding over the deliberations of the Group of Eight (G8) industrialized nations, British Prime Minister Tony Blair, in a prominent show of independence, commented on the U.S. refusal to take a leadership position on global climate change issues:
We need to act now ... Russian ratification of the Kyoto protocol means that we now have a new global treaty that is about to come into force. This is good news. But the level of change and ambition required will be far more than the Kyoto protocol is likely to provide. And with the United States, the world's largest emitter of greenhouse gases, refusing to sign up to the protocol, this makes measures we could secure through G8 even more vital.
On the surface, then, the U.S. conservation outlook is not bright. However, if you look beneath this discouraging surface, you will find that a tremendous amount of initiative and innovative spirit is alive and well in the conservation community, both in the United States and internationally. Entrepreneurial-minded conservationists in the public, nonprofit, private, and academic sectors are keeping the faith, coming up with a broad spectrum of ways to address the challenges that face them in a range of relevant disciplines, including science, education, habitat protection, and stewardship. They are buoyed by the work of their colleagues and have an admirable capacity to forge ahead even in the face of budgetary constraints. Nevertheless, nearly all of these innovators have the same question at the end of the day: How are we going to pay for it all?
A thoughtful response to that question is the focus of this volume. The authors offer an array of highly inventive ideas for gaining access to financial resources in the public, private, and nonprofit sectors. Successful implementation of these ideas could significantly increase the flow of capital into land and biodiversity conservation in coming decades.
The work of these modern-day conservation innovators is very much in the American tradition. From the earliest days of English colonization of North America—nearly four hundred years ago—our emergent democratic culture has repeatedly come up with novel methods for finding the financial, human, and physical resources to protect open space and wildlife, even in times of deep national crisis. The stories of these innovations involve several of the most intriguing personalities in U.S. history. The list includes John Winthrop, Thomas Jefferson, Abraham Lincoln, Theodore Roosevelt, and Aldo Leopold. My own guess, strongly bolstered by the advances in conservation finance described in this book, is that this tradition of innovation in conservation finance will continue well into the future. Great women and men, as well as an army of unsung conservation heroes, are likely to innovate for many centuries to come, allowing the United States and the global community of nations to continue to face up to daunting challenges that threaten natural systems.
John Winthrop and the Boston Common in 1634: Self-Taxation for Land Protection
In the center of the city of Boston, Massachusetts, is a roughly fifty-acre patch of open space that has been called "sacred" and an "invaluable blessing" by local residents. That space, the Boston Common, is the oldest public open space in the United States. Indeed, it is very likely the oldest public open space in the English-speaking world. At the time of the Boston Common's creation in 1634, there were other commons existing in England—for example, the New Forest created by William the Conqueror in 1079. Such places, however, were established and regulated by feudal authority. None had been established by a self-governing group of people by and for themselves.
What distinguishes the Boston Common as a public open space is the way the land purchase was financed and how the regulation of the new open space was established. That process was tightly intertwined with the emergence of autonomous local democracy in the New World. The Puritan residents of the town of Boston were participants in a unique experiment in which they asserted, because of the nature of the corporate charter under which they operated, the right to govern themselves. Their elected leader, John Winthrop (see figure 1.1), trained in the law at Cambridge University, was instrumental in devising a system in which local freemen (essentially, local homeowners who had taken an oath of loyalty) voted in town meetings on matters of importance to the town.
Early in the life of the community, the town was offered a piece of property by the Reverend William Blackstone. Blackstone had originally extended an offer to Winthrop's Puritan followers to come to the Shawmut peninsula, where an excellent source of freshwater could be found. After four years of living among Winthrop's group, Blackstone decided to leave the area for Rhode Island and sought payment for his large parcel of land. What happened at that point is the subject of a 1684 deposition taken from John Odlin and several other elderly residents of Boston from then-governor Simon Bradstreet.
The inhabitants of Boston, led by Winthrop, negotiated a sale price with Blackstone of thirty pounds. They agreed that each householder should pay at least six shillings for this purpose into a collection, with some households paying considerably more. The sum was collected and paid to Blackstone, who, in turn, sold to the inhabitants, their heirs, and assigns the rights to the land. The town then laid out a military training field and allowed cattle to graze on the property. Within twenty years, the Common was also used for recreation, when ladies and gentlemen would take their evening stroll. Land use regulations regarding the Common were self-imposed by town meeting members in the 1640s and 1650s, as they made rules, for example, regulating cattle grazing practices on the land, as well as forbidding home building on the land without the consent of a majority of the inhabitants of the town.
What is described here is a landmark in conservation finance and regulation: it is the first example that we know of in the English-speaking world in which a self-governing people agreed to tax themselves to raise money to purchase open space that would provide multiple public and private benefits. The newly purchased open space enhanced private wealth as individual householders grazed their cattle on the Common; the public as a whole benefited from the provision of a public training field for the militia, as well as the provision of a publicly accessible recreational resource.
What has been the return on this investment? Conventional time-value-of-money calculations are not relevant for a 371-year period, particularly when the direct and indirect benefits of the Boston Common have not been systematically compiled. Suffice it to say that Blackstone was paid thirty pounds for his land, which in Massachusetts in 1642 had an official value (at a rate of 4 shillings per bushel of wheat, and 20 shillings per pound) equal to that of 150 bushels of wheat. In 2005, 150 bushels of wheat could be purchased, at about $3 per bushel, for $450 on Chicago commodities markets. In contrast, the Boston Common today is of enormous civic and economic value, and is surrounded by many billions of dollars of real estate, ranging from multimillion-dollar residential condominiums to the Massachusetts State House.
What started in Boston in 1634, nearly four centuries ago, provides a precedent for the vast number of land conservation initiatives funded with the consent of taxpayers in the United States and around the world, which continue to this day. Considerable additional potential remains to be addressed. In chapter 4, Ernest Cook and Matt Zieper illustrate how, using policy frameworks such as the one now employed in New Jersey, local and state governments can build on the strong conservation financing levels already realized through conservation-oriented ballot measures at the local and state levels. Like the Boston Common, the value of such taxpayer investments is likely to be proven time and again in years to come.
Thomas Jefferson and the Natural Bridge in 1773: Personal Investment and Public Trust
Three years before he authored the Declaration of Independence, Thomas Jefferson, then a young lawyer, landowner, and entrepreneur, made a personal investment to acquire a natural wonder. The place he purchased from the Crown was in a remote location to the west of Virginia's settled communities. The parcel of land had on it a remarkable natural feature known as the Natural Bridge, a huge natural stone arch that spans a picturesque stream (see figure 1.2). Jefferson wrote about the Natural Bridge in his only book, Notes on the State of Virginia, calling it "the most sublime of Nature's works." He sensed that the place could leave an indelible impression on visitors. Indeed, throughout his life, Jefferson consistently invited women and men to the site to impress them with the vast potential and awe-inspiring nature of the American land.
Jefferson did, on occasion, try to make a financial return on his investment in the Natural Bridge. In the early 1800s, he leased a portion of the property to entrepreneurs who used it to manufacture rifle shot and saltpeter; he also considered selling it to a man named William Jenkings in 1809. Nevertheless, in a letter to William Caruthers in 1815, Jefferson wrote that he had no interest in selling the Natural Bridge and that he had come to see his property "in some degree as a public trust." He emphasized that he would not permit it to be "injured, defaced, or masked from public view." After changing hands several times following Jefferson's death, the land remains in private ownership today. At present, the site does not entirely conform to Jefferson's wishes: a wooden fence, for example, obscures the public's view from the top of the Natural Bridge. Nevertheless, the site, which has official status as a National Historic Landmark, does host a tourist destination complex that includes a hotel and conference center, several museums, and the Natural Bridge itself, billed as an "awesome natural wonder."
In effect, Jefferson enunciated in 1815 an idea that twenty-first-century U.S. citizens still find intriguing—namely, that privately owned landscapes could provide public benefits as well as private financial return and personal enjoyment. The land trust movement, for example, has in recent decades used such a framework to help protect millions of acres from development. In chapter 8, Philip M. Hocker gives a close-up account of how new financial resources, through the use of transferable tax credits, are being made accessible to landowners in Jefferson's Virginia (as well as other states, such as Colorado) who are prepared to put conservation easements on their land. Such programs help private landowners dedicate their property, at least in part, to provide public benefits. As we consider future public and private investments to provide essential ecosystem services and to protect the nation's irreplaceable land and biodiversity resources, we will do well to remember Jefferson's early example.
Abraham Lincoln and the Railroads in the 1860s: Transportation and Scenic Wonders
During his presidency, Abraham Lincoln was well aware of the multifaceted impacts that the completion of the Union Pacific railroad would have on the nation. In addition to a personal interest in railroads stemming from his experience as a lawyer for the Illinois Central in the 1850s, Lincoln received numerous communications during his term underscoring the importance of the transcontinental link. The president of Union Pacific wrote to Lincoln in 1863, emphasizing "the vastness of the enterprise, and its probable influence upon the political and commercial prosperity of the country."
President Lincoln was also very likely impressed by the many paintings, photographs, and literary accounts of Western natural wonders that the new railroad would make accessible. Among such words and images, seen widely in Boston, New York and Washington, D.C., were Carleton Watkins's photographs, described by the New York Times in 1862 as "indescribably unique and beautiful." The paintings of Yosemite by Albert Bierstadt, as well as the essays written by Fitz Hugh Ludlow that were published in The Atlantic Monthly, probably also came to Lincoln's attention. The work of both men was sponsored, at least in part, by the Union Pacific, which in 1863 provided Bierstadt and Ludlow with free transportation to Yosemite. The railroad, which had five members of its board of directors appointed by Lincoln himself, was apparently interested in promoting the wonders of the West to potential tourists, immigrants, and investors.
Excerpted from From Walden to Wall Street by James N. Levitt. Copyright © 2005 Lincoln Institute of Land Policy. Excerpted by permission of ISLAND PRESS.
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Table of Contents
Foreword Preface Chapter 1. Financial Innovation for Conservation: An American Tradition Chapter 2. Conservation Finance Viewed as a System: Tackling theFinancial Challenge Chapter 3. Contours of Conservation Finance in the United States at theTurn of the Twenty-First Century Chapter 4. State and Local Government Funding of Land Conservation:What is the Full Potential? Chapter 5. External Revolving Loan Funds: Expanding Interim Financingfor Land Conservation Chapter 6. Employing Limited Development Strategies to Finance LandConservation and Community-Based Development Projects Chapter 7. Expanding the Frontiers of Conservation Finance Chapter 8. Transferable State Tax Credits as a Land ConservationIncentive Chapter 9. Payrolls Versus Pickerels Redux: A Story of EconomicRevitalization and Timberland Conservation Using New Markets Tax Credits Chapter 10. Mainstream Environmental Markets Chapter 11. The Gray and the Green: The Built Infrastructure andConservation Investment Chapter 12. Financing Private Lands: Conservation and ManagementThrough Conservation Incentives in the Farm Bill Bibliography About the Contributors Index