Financing Your Project

• Grant Amount and Eligible Expenses
• Calculating the Value of the Property
• Calculating Property Values (Chart)
• Sponsor Match
• A Caution About Using Government Funds for Sponsor Match
• Mortgages and Land Contracts?

Grant Amount and Eligible Expenses

The Stewardship grant covers up to 50% of eligible acquisition costs (the “state share”). Eligible acquisition costs include the certified value of the property, plus reasonable transaction costs relating to the purchase of the property, including:

• Land surveys
• Appraisals (If the property is over $200,000, two appraisals are needed; the NCO must pay for the first, the Department the second. If a third appraisal is needed, each will pay 50% of the cost.)
• Relocation payments
• Title evidence
• Recording fees
• Phase 1 Environmental Assessment Reports (Environmental inspections completed by NCO staff or volunteers are not eligible for funding)
• Historic and cultural assessments if required by the Department
• Legal fees, up to $1,000 per grant for the state share

Expenses not covered by the grant include environmental clean-up costs, brokerage fees paid by the buyer, demolition of buildings, real estate transfer taxes, and other costs not identified above.

Calculating the Value of the Property

The statutes for the Knowles-Nelson Stewardship Program have specific requirements as to how land and easements shall be valued for the purpose of calculating the amount of a grant. In most cases, the value is based on an certified appraisal that meets Department appraisal standards. However, there are circumstances in which the value is based on what the landowner paid for the property. In these cases, an appraisal may not be needed. See the chart Calculating Property Values to determine what valuation method is appropriate for your project.

Please note that while appraisals are not always necessary, they are required in most cases, and when they are required, you must follow DNR appraisal procedures. These procedures are described in detail in the publication Land Acquisition Guidelines for Nonprofit Organizations. Also note that the Department must order a second, independent appraisal if the fair market value of the property is over $200,000.

Because property valuation methodology can be complicated, we recommend that you talk with your CSS before ordering an appraisal. During this discussion, be sure to indicate whether part of your sponsor match is being provided by the federal government. The federal program may have different valuation and appraisal review requirements than the Stewardship Program.

Sponsor Match

Sponsor match is that portion of the acquisition costs not funded by the state. The sponsor must provide at least 50% of project costs. Sponsor match may be cash, in-kind contributions or a combination of the two. Eligible sources of sponsor match include:

• Cash from the project sponsor
• Cash from a third party, such as a business, foundation, private individual
• Funds from a local unit of government or the federal government
• Property contributions from a third party, if the contribution is made within 3 years of the acquisition
• Property acquired by the sponsor within 3 years of the acquisition if the property was not purchased with state funds
• Property value donated by the property owner (as in a bargain sale)

Using the value of donated property as sponsor match instead of cash is an excellent way for project sponsors to include the contributions of private landowners in the Stewardship Program. The sponsor retains title to the donated property or remains the holder of a conservation easement, but the property becomes part of the Stewardship Program.

There are some limitations on using property donations for sponsor match:

1. The donated property must be eligible for the same Stewardship Program as the parcel being acquired. For instance, if a NCO is receiving a grant under the Natural Areas Program to purchase a parcel of land, any property the NCO uses for sponsor match must also be eligible for the Natural Areas Program
2. The NCO cannot receive more in grant funds than the amount of cash it actually needs for the purchase. If the value of the donated property is more than the amount of cash needed for the purchase, then any residual value from the donation that is left over may be used in subsequent applications if they are submitted in the same fiscal year or the next one
3. The value of the donated property must be determined by an appraisal that meets DNR standards
4. All donated property used as sponsor match becomes part of the Stewardship Program and is covered by a Stewardship grant contract which encumbers the property in perpetuity
5. Land must be donated within three years prior to the date of application
6. Land to be donated must be in “private” ownership and not previously dedicated to conservation purposes or public outdoor recreation
7. Lands obtained through a subdivision parkland dedication ordinance are not eligible for donation purposes

The rules surrounding property donations can be confusing at first glance and you will want to discuss your particular situation with your CSS. Here is an example that might help you understand this concept:

An NCO purchases a piece of land for $8,000, but the land is appraised at $12,000. The landowner has donated $4,000 in property value to the NCO. This is called a "bargain sale." The Stewardship grant is based on appraised value, not purchase price, so the grant amount would be $6,000 which is 50% of the appraised value of the property. The sponsor match would be $2,000 in cash from the NCO plus $4,000 in property value, which was donated by the landowner.

Let’s also assume the NCO wants to use another parcel of land, which was donated to it as part of its sponsor match. The appraised value of the donated parcel is $20,000. Assuming both properties qualify for the Natural Areas program, here's how the grant amount would be calculated: the total appraised value of the two properties is $32,000 ($20,000 for the donated parcel and $12,000 for the purchased parcel). The state match would normally be $16,000, which is 50% of the combined appraised value of the two properties. But because only $8,000 was actually spent to purchase the land, and since a grant in excess of that amount would constitute a profit to the NCO, the state share is reduced to $8,000. The remaining $8,000 in donated property value may be used by the NCO in subsequent applications in that fiscal year or the next.

A Caution About Sponsor Match

• Funds from other state funding sources cannot be used as sponsor match.
• Funds from the federal government or a local government may be used, but the total amount of funding from all government sources cannot exceed 100% of the cash needed for the project.
• If funding from other government sources exceeds 50% of the funding that is needed, then Stewardship funding will be reduced accordingly.

All sources of Sponsor match should be fully disclosed on the application form. If you learn about a government grant after you have applied for a Stewardship grant, you must advise your CSS. If it is found that a project sponsor has received more than 100% of project costs the cash needed from government sources, the Department will seek an appropriate remedy.

Mortgages and Land Contracts?

The Department is not able to subordinate the state's interests to the prior interests of a mortgage holder; therefore we cannot award a grant for property on which you have a mortgage or land contract. NCOs have on occasion transferred a mortgage to another property they own that is not under the Stewardship program or to a portion of the Stewardship property not covered by the grant.

If you have the funds needed for sponsor match, but are working with a landowner who wishes to extend payment over several years for tax reasons, it is possible to arrange scheduled payments through an escrow or annuity payment account.

If an NCO has a mortgage on a property, but since incurring the debt, has raised the additional funds necessary to pay off the mortgage, the DNR may release the grant payment if other requirements have been met. In such cases, the NCO must provide the DNR with evidence that the mortgage has been satisfied within 30 days of the grant payment.