QEII covenantors invest millions in covenant management

Media Statement

Embargoed till 9 May 2017

Study shows QEII covenantors invest millions in covenant management every year

A study by the University of Waikato Institute for Business Research has found that QEII National Trust covenanting landowners are together spending an estimated $25 million of their own money every year to protect native species, forests, wetlands, and other special areas in their QEII covenants.

These landowners, the majority of which are farmers, have made an overall financial commitment of around $1.1 to $1.3 billion to protect these special areas of private and leased land since the
QEII National Trust was set up forty years ago.

The study was released today at an event hosted by Rt Hon David Carter at Parliament’s Grand Hall. The event was organised by the QEII National Trust as part of its 40th anniversary programme of events.

Working in partnership with the QEII National Trust, covenanting landowners have invested to establish over 4,300 covenants protecting around 180,000 ha since the National Trust was established in 1977. This works out at an average of two new covenants established every week since that date.

The area being protected by covenants is still growing with a further 115 on track to be registered this year alone.

The study was commissioned to provide a framework for estimating the cost effectiveness of conservation activity facilitated by Queen Elizabeth II National Trust, and to quantify the financial commitment made by National Trust covenantors in their covenanted land for the public good.

‘This is the first time the National Trust has undertaken research of this nature and it has given us a clear indication of the huge investment landowners around New Zealand have made in covenants since the National Trust was set up 40 years ago,’ Trust Chair James Guild says.

‘With the release of this report we acknowledge the hard work, philanthropy, generosity, and passion of the thousands of landowners who have voluntarily elected to covenant special places on their land with the National Trust.

‘Together they are making a very significant contribution towards the protection and enhancement of our threatened ecosystems and biodiversity on private land to ensure New Zealand’s uniqueness is protected forever,’ he says.

The QEII National Trust partners with private landowners wanting to permanently protect special natural and cultural features on their land with covenants. QEII (open space) covenants are legally binding agreements that are registered on the land title and protect the associated land and its natural values forever. The covenanting landowner and subsequent owners retain ownership of and management responsibilities for the protected land.

The QEII National Trust is the perpetual trustee to ensure the purpose and objectives of the covenant are achieved by monitoring the covenant and providing advice and other support to the landowner.

Analysis of data collected for the study has shown:

· Waterway protection (20%), restoration planting (19%), wetland restoration (18%), weed control (15%), pest control (7%) and fence maintenance (7%) are the major contributors to total maintenance costs for QEII covenants.

· The total estimated maintenance expenditure on covenants is $25 million per year and has a net present value of $387 million (calculated over 30 years). That equates to an average of just under $6,000 per covenant per year or $150 per hectare of covenanted land.

· 53% of covenanted areas would have had an alternative economic use (for example, grazing, residential development, exotic forestry) that is foreclosed by the decision of the landowner to covenant the land to protect its natural values. Grazing is the most common economic use foreclosed by the covenant, followed by housing and exotic forestry.

· The total opportunity costs (the loss of potential income from other alternative uses due to development and use restrictions) associated with the covenants that had alternative uses foreclosed is estimated to be in the range of $443 million to $638 million. That equates to approximately $105,000 per covenant or $2,657 per hectare of covenanted land (calculated over 30 years with a 5% discount rate).

· The total estimated expenditure on covenant establishment up until June 2016 was around
$205 million. That is approximately $50,000 per covenant on average, or $1,228 per hectare of covenanted land.

· The biggest cost for landowners establishing covenants is fencing the covenanted areas to exclude livestock (30%) followed by initial weed control (18%), restoration planting (10%) and wetland restoration work (10%).

· Calculated over a 30-year period with a 5% discount rate, the annual maintenance expenditure on covenants adds up to an investment in the order of $92,000 per covenant or $ 2,300 per hectare of covenanted land.

· The estimated net present value of the total commitment by land owners across the nation in
QEII open space covenants is estimated to be in the range of $1.1b to $1.3b, or over $260,000 per covenant.

· It should be noted that despite virtually all QEII covenants running in perpetuity, the maintenance costs and revenue foregone has been estimated only over a 30 year period with a 5% discount rate.

The full report can be accessed on line at www.openspace.org.nz or a hard copy can be requested by writing to the QEII National Trust, PO Box 3341, Wellington.

ENDS

QEII National Trust website
www.openspace.org.nz

More information

Investment in covenant land conservation report

Report prepared for Queen Elizabeth II National Trust

Authors: Frank Scrimgeour, Vijay Kumar, and Glenn Weenink, from Waikato University’s Institute for Business Research

Report dated: February 2017

Purpose of the report

· To quantify the financial commitment made by National Trust covenantors towards the protection of their land as a legacy for present and future generations. This financial commitment relates to:

· The cost incurred by landowners to establish legal protection of their land by covenant.

· The annual and ongoing investment landowners are making into covenant maintenance, management and enhancement following covenant establishment

· The opportunity cost foregone by the landowner due to the restrictions on use and development of the land due to their decision to covenant.

The Method

· This study used a stratified representative sample of 124 covenantors across 16 regions of New Zealand plus four in-depth case studies to estimate the average cost of covenant establishment and maintenance and the opportunity costs foregone by covenant.

· These results were then applied to all registered QEII National Trust covenants (4,226) as at

1 July 2016.

The Results

· The estimated net present value of the total financial investment across the nation in QEII open space covenants is in the range of $1.1 billion to $1.3 billion for 4,226 covenants, or over $250,000 per covenant.

· 53% of covenants in the survey had an alternative economic use that had been foreclosed by the decision of the land owner to covenant to protect this land and its special values. Most common alternative economic uses included stock grazing, housing, exotic forestry etc.

· The total opportunity costs (the loss of potential gain from other alternative uses due to development and use restrictions) associated with covenanted land in New Zealand is estimated to be in the range of $443 million to $638 million (calculated over a 30-year period with a 5% discount rate). That equates to approximately $105,000 per covenant or $2,657 per hectare of covenanted land.

· The total estimated establishment expenditure on covenants up until June 2016 (adjusted for inflation) was estimated at $271 million. That is approximately $64,100 per covenant on average, or $1,625 per hectare of covenanted land.

· The total estimated maintenance and/or enhancement expenditure on covenants is $25 million per year and has a net present value of $387 million. That equates to just under $6,000 per covenant annually, or $150 per hectare of covenanted land annually.

· Calculated over a 30-year period (with a 5% discount rate), the annual maintenance expenditure on covenants adds up to a net present investment in the order of $92,000 per covenant or
$ 2,300 per hectare of covenanted land.

Some other key findings regarding covenantors’ commitment (from the sample of 124 respondents)

· Fencing constitutes 30% of total establishment costs, but is only 6% of non-cash (labour in kind) establishment costs. It is considered highly likely the non-cash contributions are understated.

· Waterway protection (20%), restoration planting (19%), wetland restoration (18%), weed control (15%), pest control (7%) and fence maintenance (7%) are the major contributors to total maintenance costs.

· 49% of covenanted areas provide access for low impact recreation, 10% of covenanted areas provide full access, 22% of covenanted areas do not provide for access.

· Covenants vary in size from 0.1 ha to 22,000 ha. In the sample the mean size of covenants was 14ha. For all covenants the mean size is 39.4 ha.

· 61% of covenants are still owned by the original covenantors.

· 69% of covenants were established on land where the surrounding land use was being farmed.

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