Fundamentals of Development Presented by Jack Butler, Vice President, Keystone Conservation Trust Vollie Melson, Director of Major Gifts, Chesapeake Bay Foundation Nancy Stansbery, Chief Development Officer, Wildlands Conservancy

Giving USA 2008 Recipients: Religion – 33% Education – 12% Human Services – 9.7% Health – 7.6% Arts & Humanities – 4.5% International – 4.3% Environment & Animals – 2.3%

Fundraising Fundamentals Organization with defined mission and realistic goals – ideally a strategic plan – that leads to a clear, compelling case for support 100% Board Participation Know your audience & what motivates them, segment and personalize People give to people who ask them. Thank donors and report on how donations used

Basic Techniques –Ongoing: Annual Fund/Membership – unrestricted and every year. Identifies donors, establishes a habit of giving Multi-year grants or annual grants you can count every year

Basic Techniques Episodic –Special Events –Restricted gifts or grants –Special Gifts/Planned Gifts

Basic Techniques Other – for long-term viability of organization –Capital vs. Comprehensive Campaigns –Endowment Campaigns –Planned Giving

Moving your small and/or less established development program forward

Benchmark where you are Do SWOT Analysis Rate return on investment Make a plan with clear and realistic goals

Comprehensive Program Annual/Membership Special Events Communications and Marketing Major Donors/Planned Giving Cultivation and Stewardship Corporate Program Database Foundation & Grants

Remember the Three Basic Types of Gifts The Annual Gift----Habitual The Special Gift—Significant, Episodic, Tied to an Opportunity The Ultimate Gift---Your organization is elevated to “family status”

Escaping the Annual Gerbil Wheel Race Investing in a planning and visioning process Envisioning the potential of your organization, your donor base, and your development program Building capacity (internally and externally) to achieve the vision What’s Needed: Honest Assessment about the Time and Resources to Make the Jump

CAPITAL CAMPAIGN One time efforts such as new programs, buildings, endowment, etc. Benefactors are frequently asked to make a commitment to a capital campaign in addition to their ongoing annual support. Membership and annual gifts for operations are not included in either the campaign ask or recognition.

COMPREHENSIVE CAMPAIGN Strategic goals are clear and focused on aligning all resources toward sustainable operating support and long-term financial stability for a specific and well defined goal. All gifts and commitments, restricted and unrestricted, during the campaign period are counted toward the revenue goal. Membership Establishing long-term affinity and lifetime commitment to the cause Predictable source of funding A pipeline for major gifts Major Donors Develop an affinity for the organization through personal contact and a shared vision Provide significant and sustained support for the institution Identified and acquired through research, discovery calls, and upgrades from the membership base

ACTIONS Private Phase Conduct feasibility study Develop campaign publications and case statement Develop campaign management reports Recruit leadership and campaign volunteers Secure leadership commitments On-going major gift solicitation Are you ready to move forward---60% rule

Keystone Conservation Trust May, 2009

Millions of dollars in gifts are achievable

Due Diligence –Determine if you will hold (conservation value or other reasons) –Description of Property (deed) –Boundary Survey –Title Search (determine outstanding liens) –Home inspections –Phase 1 Environmental review –Appraisal –Develop Exit strategy if not holding long term –Determine carrying Costs –Work to meet Seller’s financial needs

Sale prior to Gift –Gift of sale proceeds (no due diligence) –Income tax deduction only on cash value of sale proceeds - net of sale costs and taxes –No avoidance of capital gains tax (can deduct sales expense from capital gain) –Transaction handled by Donor –Easy for Non Profit but not the best tax strategy for Donor

Outright Gift –Gift of entire property (Due Diligence) –Income tax deduction for appraised fair market value –Avoidance of capital gains tax –High transaction cost for Non Profit – appraisal, title, insurance, property inspection, and closing costs –Non Profit must decide whether to hold or sell

Undivided Interest –Donor gives a percentage of ownership to Non Profit (Due Diligence) –Shared ownership with Donor as Tenants in Common –Donor and NP own an undivided interest in the whole property –Each party can only sell their percent interest –Income tax deduction on percentage of fair market value donated –Capital gains tax decrease proportional to gift –Potential problem – reaching agreement on property management and use

Charitable Remainder Trust –Establish a Trust funded with Real Estate –Two basic types: Unitrust (CRUT) and Annuity Trust (CRAT) –Each pays annual income to beneficiary: Unitrust - variable income Annuity Trust - fixed income –Income tax deduction for appraised fair market value – IRS tables apply –Capital gains tax avoidance –Complicated instrument – Wealth Advisor Expertise recommended

Bargain Sale –Part gift and part sale to Non Profit –Same due diligence as an outright gift –Non Profit pays less than fair market value –Gift amount is the difference between fair market value and amount paid to Seller –Charitable income tax deduction on gift –Capital gains tax avoidance on the gift amount –Non Profit must have money to pay Seller discounted purchase price in lump sum or payments

At the time a property is sold, there is an opportunity to create a gift –Modified Bargain Sale Gifts can be created at no expense to the Seller (basic transaction) or gifts can be enhanced Reduced income taxes and savings on capital gains taxes produce the gifts Basic transactions yield gifts of 3-5% of sales price

Board member / major donor created single large gift from sale of summer home (second home) Charitable couple created gifts to multiple conservation organizations from sale of primary residence

IRS modified bargain sale technique –Donation of property to KCT (Due Diligence) at appraised value with a promissory note from KCT at reduced value; the difference creates the gift –KCT sells the property at appraised value –Income tax benefit on gift amount –Reduced capital gains tax No charge to Non Profit or donor –KCT retains 2% of sale price when property is sold to a third party Two tracks: Examples –Basic transaction (‘no cost’) yielding 3 – 5% of price –Philanthropic transaction (donative intent)

Donation split among KCT, Non Profit, and other charities of the donor’s choice Basic (No cost) Gift: –50-50 split Non Profit & KCT (KCT retains minimum 2% of sales price) Larger gift: –2% to KCT –Balance to Non Profit and other charities of the donor’s choosing

Proactively communicate the opportunity Identify potential prospects Test for interest, then hand off to KCT for trust building, education, and analysis KCT handles logistics, and keeps Non Profit informed

Run customized scenarios –Four inputs: fair market value, basis, mortgage amount and income tax bracket Review by supporter and their advisors Donation agreement –Before signing with buyer! Donation, resale, and gifts

Piggyback on Non Profit existing development activities Profile of best prospects –Transition, transaction and trust –Downsizing (less need for all cash from transaction) –High tax bracket –Small or no mortgage on home (equity build up) –Higher value properties or properties other than primary residence (second homes)

Drawing attention to the opportunity: “Drip” marketing –Goal: build awareness, acceptance (and funds!) –On-line on KCT and Non Profit websites –Print media – brochure, newsletter, targeted letter to owners of conservation easements –Discussions with Non Profit Board, staff, donors, realtors, financial advisors, attorneys Follow up with more information, as needed

Keystone Conservation Trust 336 King of Prussia Road Radnor, PA Jack Butler Vice President