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Taking Salamanders to the Bank
July 10, 2006
West Sacramento, Calif. — It’s not your average, security guard at the door, friendly teller behind the counter, wait in line for 20 minutes on Friday kind of bank, but it is a true bank nonetheless. Except that this bank stores dirt, trees, bushes and even salamanders, instead of cash.
The new Fulton Mitigation Bank is nonprofit Burbank Housing Development Corporation’s (BHDC) first foray into the land banking business. Land banks, or “mitigation banks,” are a fairly new phenomenon conceived as a way to help developers mired in environmental regulations.
A bevy of federal wetland and animal habitat preservation regulations are often time-consuming and costly for developers and builders who must preserve equal amounts of natural lands and habitats for each acre they pave over.
BHDC — an organization that has built more than 2000 units of affordable housing since its inception in 1982 — is the first nonprofit developer in the state to create its own mitigation bank, doing so with the help of a $1 million loan from Rural Community Assistance Corporation (RCAC).
The loan for this unusual 24-acre project was also a first for RCAC, a certified Community Development Financial Institution (CDFI) whose Loan Fund specializes in helping small communities and nonprofit organizations that often can’t obtain financing from traditional lenders.
“The loans we make to small communities and nonprofit organizations generally support affordable housing and environmental infrastructure projects,” said Mike Flanagan, RCAC’s Loan Fund director. “However, our ultimate goal is to encourage affordable housing and other projects that help communities. This is an atypical loan for us, but the project definitely fit the bill.”
The project “fits the bill” because BHDC is located in Santa Rosa and most of its affordable housing projects are built between that city and Petaluma — an area rich in (or notorious for, depending on your viewpoint) wetlands.
The region is also home to the California Tiger Salamander (CTS), an endangered species that has been “emergency listed” by the U.S. Department of Fish and Wildlife. Because wetlands and the salamander are federally protected, both nonprofit and for-profit developers must compensate — on a one-to-one or even a two-for-one basis — for any of these habitats their projects destroy.
Enter mitigation banks. Savvy capitalists, developers and now a nonprofit agency create land banks by buying property adjacent to or near the area they wish to develop. The area becomes a kind of privately-owned preserve. Following soil testing, animal and plant documentation and a long list of other federal requirements, the area is assessed by the federal Mitigation Bank Review Team.
The team, made up of representatives from various state and federal environmental agencies, decides if the preserve passes federal muster. If it does, it is assigned a number of mitigation “credits.” These credits can then be purchased from the mitigation bank by developers needing to replace the natural habitats they destroy when building new homes, shopping malls, various businesses or, in this case, affordable housing.
Burbank Housing will actually purchase mitigation credits from its own land bank. The advantage? Purchasing its own credits will be far less expensive than buying them from a forprofit mitigation bank.
“A CTS credit in this area can cost as much as $135,000 per mitigation acre,” said Pascal Sisich, director of acquisitions for BHDC. “We will buy the credits from our own bank for substantially less. Ultimately, that will allow us to reduce the cost of building affordable housing.”
The group is likely to save even more by purchasing its own wetlands credits, which can cost upwards of $500,000 per acre on the open market.
It will take Sisich and his team an estimated 18 months to comply with federal mitigation bank regulations, submit necessary paperwork and go through required inspections. But by the end of 2007, BHDC officials hope to have their mitigation depository open for business, and the endangered California Tiger Salamander along with the wetlands it loves will be banked away safely inside.
“This is an unusual project for us, but one that will truly help us in furthering our cause to build the affordable housing that is needed so desperately in this area,” said Sisich. “It’s fair to say we couldn’t have done this without RCAC and their willingness to look past the unusual nature of the loan to see the way it will help the people of this community in the future.”
Headquartered in West Sacramento, California, and serving 13 Western states, RCAC is a nonprofit agency providing technical assistance and training to rural communities seeking to develop a wide range of local services including, among other things, community facilities, affordable housing and water treatment facilities. The organization operates a loan fund with $63 million in lending capital that provides low interest loans and grants to further these communities’ goals. RCAC maintains field offices in San Marcos and Ukiah, California.
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