Meanwhile apparently there will be some meetings this week to try and deal with the financial situation of TLC. Overall the financial situation of TLC certainly seems to be in a crisis and the future of TLC is in my opinion very much in doubt. This doubt places all the protected lands under threat.
I wish I had more detail to work with but I will try to explain where I think things are at. The Land Conservancy has past financial statements online but the last set dates from April 30th 2011.
TLC is capital rich but that does not really tell you the story. It had on its books as of April 2011:
- $32,543,652 in conservation lands
- $12,657,222 in conservation covenants - these are registered interests in land that restricts the use of the land.
This amounts to 96.8% of the assets of TLC. I raise this because these capital assets are the whole point of TLC. To have them within the financial statements can make people think things are better off than they really are, there really should be a better accounting system for an organization like a land trust than is used now. The remaining capital assets are also not really available as an asset, one example is $400,000 is an endowment fund. The amount of free and clear capital assets TLC has to work with is very small. Meanwhile the amount of long term debt and short term liabilities places TLC rather deeply into the negative.
As of April 2011 TLC carried liabilities of $7,447,635 of which $3,123,301 in long term debt and $4,028,495 due in fiscal 2012. It is not common for a land conservancy to hold debt and typically if there is debt it is very short term to complete a land transfer. TLC has mortgages on various properties that are supposed to be protected. By having mortgages TLC is placing the properties at serious risk should they not be able to meet their commitments.
In comparison, the Nature Conservancy carries smaller debts even though it has assets more than ten times as large as TLC. The Nature Conservancy has more than $100 million in assets that are not conservation lands. The Nature Conservancy also has a deferred contribution fund to represent monies that are restricted for land purchases.
TLC relies on annual donations for much of its revenue ever year. Most of their fundraising is based around campaigns to protect specific properties. People feel that a donation to protect property X is going towards buying that property and not being used for other purposes. The problem is that the money raised has to cover not only the properties but also the ongoing operations of TLC.
The ongoing operations of TLC includes a lot of costs and as far as I can tell it has cost in the range of $4 million a year to operate TLC. Due to the type of donations and various grants TLC has received over the years, it is not always entirely clear to me how much it really costs to operate TLC and how much they receive in free and clear cash donations.
The salary costs of TLC has seemed a bit high, close to 50% of the cash revenues have been dedicated to salary costs. The average cost of salaries has been a bit more than $2 million a year over the last five years. Reports say this dropped by 30% in the latest fiscal year and will be reduced a further 50% this year. That would indicate to me the salary costs will be around $750,000 in future years, but we will not know that till September 2013 at the earliest. My best guess is that the bare minimum needed by TLC for operations and financing is $4.5 to $5.0 million this fiscal year and $2.25 to $2.5 million in fiscal year ending April 30th 2014.
With a significant reduction in salary costs TLC would have to raise a less money each year to survive. A problem TLC has that is often fallen short of the money needed to buy a property and made up the difference with debt. Without current urgent campaigns to protect more lands donations will not be as significant as they have been in the past. It will be interesting to see the financial statement for TLC this fall to see where the organization is at.
I have to wonder how TLC will achieve some of the current conservation campaigns it is working on. As an example, TLC still needs to raise $369,000 to protect Sansum Point. TLC, along with the Cowichan Land Trust, committed to providing $495,000 towards the cost of the land. We already know that TLC has missed their commitment to the CRD in protecting the Western Forest Product lands out near Jordan River. They had committed to providing $2.75 million more. Will the costs of protecting these lands fall on local government? That is how it looks to me at the moment, I certainly do not see any plan or accounting for how this debt will be dealt with by TLC. I also have to wonder if any local government or regional land trust is going to partner with TLC in the future.
With fewer urgent campaigns there will be fewer donations, very possibly less than $2,000,000 a year in unrestricted funds. Even if TLC were to get significant amounts of their long term debt forgiven, I am not sure that this would be enough to reduce the costs low enough to ensure the financial sustainability of the organization. Getting people to donate money to save the organization because of self induced financial problems is going to be very, very hard. Harder when various past larger donors are feeling burned or are being asked to convert their loans into donations.
So what is the future of TLC? I can not see how TLC can continue as it is now without selling lands. How much land will they have to sell? That is very hard to say because any divestment of land that was supposed to be protected will seriously harm fundraising. There is a danger of a death spiral if lands are sold. The Land Conservancy board of directors needs to recognize they are in an unsustainable position and need to be open to radical options.
I think the single best answer is for TLC to seek to merge with either the Nature Conservancy of Canada or The Nature Trust of BC. I think both organizations are healthy enough that they could take on the financial problems of TLC and ensure the lands are protected. I think the lands are a better fit with the Nature Trust of BC, but I think the Nature Conservancy of Canada is financially better off and could absorb the debts better. In both cases the organizations have enough of an infrastructure in place that they could take on the lands with only small increases in their existing operational costs.
The lands TLC has acquired are worth saving and that should be the only consideration, if that means an end to TLC that is fine. It is the land that matters not the organization.