National Forum

Overcoming barriers to setting up a revolving fund: A South Australian perspective
Mr Jim McHugh

In November 1999, as a result of the Commonwealth's call for expressions of interest from non-government organisations to establish and manage a Bush for Wildlife Revolving Fund, the National Parks Foundation of South Australia Inc, now renamed Nature Foundation SA, lodged a submission with the Commonwealth, the only South Australian organisation to do so.

The Foundation had, at that time, been in existence for a period of eighteen years. Its purpose, as an independent community organisation, was to raise funds from the corporate sector, bequests and private donations to assist in:

acquiring land of high conservation value to be added to the State National Parks and Wildlife reserve system,
supporting biological research
assisting in the funding of endangered species projects,
promoting public education in the area of nature conservation,
supporting and enhancing park management.

For the Foundation, the call for offers of interest by the Commonwealth was timely. For some two years previously, the Foundation, through its President and co-author of this paper, David Moyle, had been attempting to interest the then Environment Minister and senior Departmental staff in just such a scheme. David found initial interest only luke warm and detected a degree of bureaucratic resistance to the concept of an NGO being empowered to carry out a task that did not fit into departmental planning or priorities. In enlisting support of the Victorian Trust for Nature, the then President of the Trust, Brian Whelan, was invited to South Australia to explain the purpose and operation of the Trust and to generate awareness and interest within the minds of South Australia's environmental bureaucrats, of which, I was one. That interest was generated and with the submission of the Foundation's expression of interest to the Commonwealth, finally went a supporting endorsement from the Department.

In response, the Commonwealth Minister indicated his interest in the Foundation pursuing their proposal and sought further indications of support from the South Australian Minister. The required indication of support was provided.

A change in State Minister at this stage was a fortuitous moment in the process of overcoming any remaining bureaucratic reservations on the establishment of a Revolving Fund The new Minister was attracted to the scheme and, with this, came a commitment to speed up implementation arrangements.

These arrangements originally centred on the development of new legislation, not a new Act, but proposed amendments to the National Parks and Wildlife Act 1972 to enable an NGO to have covenanting powers.

It was at this point that the path that we had been treading became more difficult.

David had earlier recognised that the essence of the success of the Trust for Nature operation, and more lately the National Trust of WA scheme, was that it was perceived by the community to be a self-funding, non-government program, dependent upon community support and goodwill. Differing from the Trust for Nature and the National Trust of WA, the Nature Foundation SA is a pure NGO without its own legislation incorporating covenanting powers. A way had to be found to give the Foundation covenanting powers and technical support without it becoming another statutory authority and arm of government.

As most of you will be aware, South Australia has, since 1983, had legislative controls in place to restrict the clearance of native vegetation and to apply conditions where approval is given to undertake clearance. These controls were, over the years refined, financial assistance provisions developed and provision made for voluntary covenants, called Heritage Agreements, to be applied to native vegetation as a means of pro-actively encouraging long term protection of vegetation, rather than relying on the punitive provisions of the Act applying in cases of non-approved clearance. Heritage Agreement holders receive rate relief for the Heritage Agreement area, fencing assistance and advice on managing their bushland.

The current control and covenanting arrangements are contained in the Native Vegetation Act 1991. Significant financial assistance is no longer provided.

WHAT WERE THE ISSUES FOR US IN TAKING ON THE REVOLVING FUND INITIATIVE IN SOUTH AUSTRALIA

I will start with the exploration into possible legislative arrangements

It was initially conceived that the National Parks and Wildlife Act 1972 would be amended to incorporate a new Part to that Act that would address the requirement to establish a non-government organisation as a revolving fund manager and set forth the arrangements under which the fund itself would be established and managed.

The legislation would also make provision for the revolving fund manager to apply covenants.

Advice from the Victorian Trust for Nature was that the revolving fund operation was not the main focus of their business and in fact relatively few properties were revolved each year. While the revolving fund, being the focus of the call for expressions of interest, seemed to be seen as the key initiative, it was merely a tool in a larger and more comprehensive biodiversity conservation program. The key focus for the Trust for Nature was the application of covenants on lands at the request of, or as a result of approaches to, existing owners.

As I indicated earlier, the State Government had, for many years, been operating a successful covenanting scheme to protect native vegetation on private property. The covenanting scheme, Heritage Agreements, was developed prior to 1980 and then utilised as a component of the vegetation clearance controls initiative when introduced in 1985.

From 1985, significant financial incentives (subject to a certain rules) were attached to covenants if applications for clearance were refused. Since 1991, these financial incentives have no longer been provided Approximately one third of new heritage agreements are the result of negotiations with landowners who have sought minor land clearance through the Native Vegetation Council. An owner might agree to place an area of sound remnant vegetation under Heritage Agreement and revegetate a further area as a trade off for gaining approval to clear some poor quality remnants for intensive agriculture. Such a trade-off should produce a net environmental benefit.

There is, however, a continuing and improving trend where Heritage Agreements are being sought voluntarily by landowners. Currently, about 30 voluntary Heritage Agreement applications are applied for each year. These landowner applicants are clearly interested in providing formal, ongoing protection for the native vegetation growing on their land. While these agreements are serviced by current arrangements, the Foundation sees itself in having an important role in promoting and encouraging this type of commitment.

There are now over 1200 Heritage Agreements covering 550,000 hectares of private land, mainly in agricultural areas. Nonetheless, significant areas of important vegetation on private land remain inadequately protected.

Given the success of the Heritage Agreements program, the Foundation made it clear, at the outset, that it did not propose to set itself up in competition but would work cooperatively with the Department in encouraging involvement in the Heritage Agreement scheme. It would, therefore, not become involved in applying covenants to land where there was no change in ownership.

The Foundation recognised, however, that some landowners had little interest or understanding of the need for adequate protection of native vegetation. In these cases, it saw that it had a role in facilitating the transfer of valuable, conservation land from uninterested owners to those keen to protect biodiversity. The Foundation would buy land, apply a covenant, establish a property conservation management plan and would resell the property to owners interested in conservation.

Given the fact that;

South Australia had a long-standing and successful covenanting scheme, and
that scheme provided for statutory covenants to travel with the title to the land, and
that, based on the Victorian experience, only a handful of properties could be expected to be revolved each year,

creation of new legislation was not justified.

While this argument was compelling enough in its own right, the spectre of enshrining financial arrangements between the state government and an NGO in the legislation tended to drain the blood from the faces of lawyers and prudential managers alike.

At the heart of this concern were the significant legal difficulties with ascertaining and describing the status of a body that would have , in effect, a dual personality, i.e. one that is, on the one hand, an independent community association under the Associations Incorporation Act and, on the other hand, a statutory authority with roles and functions established under legislation. A situation would therefore be created where public funds were being administered by a non-government body.

While this type of arrangement is not unmanageable, it still needs to be tightly prescribed, the result of which, is to encumber the Minister and the Department with significant, additional administrative responsibilities.

It has therefore been agreed that existing legislation can serve the Foundation's purpose in managing a revolving fund.

Moving now to the financial arrangements:
In discussions with the Commonwealth, South Australia was advised that there was some reticence about nominating the quantum of the Commonwealth's contribution to the South Australian revolving fund. It has indicated that the preferred position would be to not to propose a level of contribution to be matched by the State or administering body. Rather, the Commonwealth saw the size of the fund, with all contributions, being an amount with which the State and the fund manager were comfortable, having regard to the level of business that was likely to be generated. The Commonwealth would then contribute up to half of this amount.

Given its commitment to the existing Heritage Agreement scheme and concerns about Departmental funding priorities, the State was initially apprehensive about providing a substantial grant to the Foundation for subsequent matching by the Commonwealth. It was proposed, initially, to bankroll properties on a case by case basis with the proceeds being returned to the Government upon sale. Such a scheme however would require the establishment of complex accounting and legal arrangements as the proposal would, essentially, constitute the extension of mortgages to the Foundation.

For the Foundation's part, it had always expressed severe reservations about such a proposal seeing it as one that would effectively hamstring the independent financial management of the land trust by not having a single fund of money available for investment.

Consideration is now being given to making a initial grant, albeit of significant size. A grant makes the governance and prudential management issues less complex and more routine.

Turning to a brief comment on the administration of the scheme
In view of the procedures that has been established for the administration of the South Australian Heritage Agreement scheme, it was seen that the best use of the resources of an NGO was in face to face dealing with the landowner, not the establishment of a duplicate assessment and administrative arrangements. Sponsors would rather see their funds directed at on ground outcomes than administration processes.

It is necessary to ensure that the NGO receives quality and timely service from Government in any partnership arrangement. In South Australia, this will be ensured through an MOU with the Minister.

How Useful will this new initiative be?
Several perspectives on the differences particularly between South Australia and the Eastern mainland States, including the ACT caused some initial apprehension within the Department for Environment and Heritage about the potential success of a revolving fund.

Dealing firstly with covenanting arrangements In Victoria, a single organisation has statutory responsibility for both buying land for the purposes of applying covenants and for applying covenants to lands where there is no change of ownership.

Under the proposed South Australian arrangements, each of these mechanisms will be undertaken by separate organisations, by the Foundation, in the first case and by the Department in the second. Notwithstanding that, private landowners have a right to expect an essentially similar product, whichever organisation is the sponsor. That will not necessarily be the case but arrangements will be put in place to limit the differences.

These arrangements are;

The Department will conduct the habitat value assessments for the properties the Foundation proposes to purchase, taking into account the important difference from its normal assessments in that the resale value of the land is an important aspect of the decision in terms of the revolving fund maintaining its value.
The Department will advise the Native Vegetation Council that the property meets pre-agreed biodiversity value standards so that the Council may recommend to the Minister (a statutory requirement) that a Heritage Agreement covenant be placed on the property (pursuant to the Native Vegetation Act) through the Foundation. It would be clearly indicated that the agreement was a Nature Foundation Heritage Agreement.
In the event that the Foundation's capacity to maintain the scheme is lost, the Government will be able to provide ongoing support to covenants sponsored by the Foundation. (This would not necessarily have been possible under separate legislation)

Finally what are the prospects for reselling the land
The environmental associations existing within South Australia are largely quite different to the tall woodlands that surround Melbourne, Sydney and Brisbane. While it is understandable that a farmer in the Murray Mallee, say just 100 kms from Adelaide would be prepared to enter into a Heritage Agreement to protect a stand of mallee vegetation on her or his property, this type of area is less attractive to an urban dweller seeking to buy a bush block for both biodiversity conservation and for personal, cultural reasons.

The most prospective areas for a revolving fund in South Australia are those with high property resale value and where interest in these type of conservation covenants are high. From the perspectives of topography and vegetation type, these areas are in the higher rainfall areas of the Mt Lofty Ranges, Kangaroo Island and the South East. Distances are however likely to limit interest to some degree.

Notwithstanding the apprehensions that arose, it is clear that the arrangements with the Foundation are now seen as an additional tool in the toolkit to secure protection of further private land for biodiversity conservation. The ability to buy land, apply a covenant and then return it to the private sector for ongoing management is beyond the charter of the Government and is more likely to be successfully carried out by a respected community organisation such as the Nature Foundation SA.