Land Trust Bankruptcy

First the airlines... now the land trusts. San Diego based The Environmental Trust has filed for federal bankruptcy protection. According to the San Diego Union Tribune the trust controls 90 properties around San Diego County... most of them donated by developers to offset other projects.
...But the trust's leaders faltered badly, driving one of the region's oldest land-conservation groups into an unusual bankruptcy.
The shaky finances that caused the trust's collapse raise questions about the long-term stability of land trusts, which own and manage open areas across the United States.
At a hearing Thursday, a federal judge in San Diego will discuss divvying up about 4,000 acres owned or managed by the trust, including the Carlton Oaks preserve in Santee, vernal pools in the county and wetlands in Chula Vista.
"We have two problems – what to do with these particular parcels of land and . . . how to prevent a similar (failure) in the future," said Mike Kelly, manager of the San Diego Conservation Resources Network, formed last year to promote preservation of open space through land trusts.
The article talks about the general concern about Trusts... but it seems as though the problems with The Environmental Trust seem to be similar of any business that goes under... taking on too much without enough resources to pay for it. This sounds like a classic example of bad management and wishful thinking.
San Diego State University biology professor Don Hunsaker II formed The Environmental Trust in 1990, figuring that development soon would overrun some of the region's most ecologically important lands.
"We could see the building booms that were coming," he said.
Hunsaker, now retired, said his primary goal was to protect sections of open land until government agencies took them over or provided an ongoing funding source. But the trust's tax filings said the aim was to "preserve this land in perpetuity."
"Way down deep, I think that all of (the trust backers) knew that perpetuity is a very long time," Hunsaker said. "It was a business model that was built on an expectation that never came to fruition."
By 1998, the trust's assets, including its land holdings and investments, surpassed $18 million, IRS records show. That year, the trust paid Hunsaker $5,918 for working 30 hours a week as the organization's president, according to tax documents.
At the state Department of Fish and Game in San Diego, senior biologist David Mayer watched the expanding outfit win one land-management project after another.
"They were in some cases significantly underbidding their competition, and other firms who were doing good jobs weren't getting some properties," Mayer said.
Hunsaker said he envisioned "passive management," which sometimes boiled down to visiting properties a few times a year to make sure they hadn't burned. "We felt like we were watching over it pretty well," he said.
For the past decade, however, other San Diego conservationists have harbored doubts.
Biologist Scott McMillan said he studied trust land in the Otay Mesa area as part of his master's thesis in the 1990s. McMillan said he tried to help the string of students that The Environmental Trust hired but eventually got burned out because he saw little effort by the organization's officials.
"In many cases, students who had no real work experience were managing these areas that were the most important in San Diego County," he said. "It was guaranteed to fail."
......Because of the trust's unusual circumstances and incomplete record-keeping, its financial picture appears murky. Court records show the trust has about $3.7 million in assets, including $3.1 million in an endowment fund to pay for land-management obligations.
With the exception of three parcels, the trust's lands have no market value because they can't be developed, said Michael Breslauer, the trust's bankruptcy lawyer. He said it was unclear why previous trust managers reported assets seemingly greater than their actual value.
The trust's liabilities were reported at just more than $13 million. Breslauer said that number also appears to vastly overstate the case because previous trust managers did not adequately record the retirement of secured debts.
At this point, the trust aims to offer its parcels to developers, local governments, state and federal wildlife agencies, and finally to other nonprofit conservation groups. Failing any takers, the properties would revert to the state.
"The land stays protected," Breslauer said. "The bankruptcy case is not being used to . . . transform protected habitat into developable property."
Keith Greer, deputy planning director for the city of San Diego, said some parcels within the city are "no-brainers" for acquisition while others are not high-quality conservation parcels.
The state Department of Fish and Game seems even less interested, particularly because the trust's remaining endowment is viewed by most experts as being far below what it will take to manage the lands.
This is a big warning for all Land Trusts. You aren't immune to the natural cycles of business life. Is your trust really financially prepared to survive into perpetuity? Do you have an endowment that will allow you to weather downturns in donations and downturns in the stock market? Be warned, if you don't, this could be your fate.