20220439 Ver 1_Financial Assurances and Long Term Management_20190815

From: Browning. Kimberly D CIV USARMY CESAW (US)
To: Preziosi, Christian
Cc: Tugwell, Todd J CIV USARMY CESAW (US); Jessop. Jordan E CIV USARMY CESAW (US); Haupt, Mac; Davis. Erin
B; Mickey Sugg
Subject: [External] Financial Assurances and Long Term Management (UNCLASSIFIED)
Date: Thursday, August 15, 2019 2:15:51 PM
Attachments: Long Term Management Cost Estimate Template.pdf
LTM examole.docx
Monitoring Perf Bond.pdf
Financial Assurance.odf
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Hi Christian, It was nice finally meeting you yesterday. As a follow-up to our discussion in the field, I wanted to
include some information on casualty insurance and long term management funding. I'm sure you're aware of this
since LMG has dealt with Wilmington District banks for a while, but just wanted to offer the information for review.
In short, casualty insurance should cover the entire cost of both the construction and monitoring. These two
calculations should be separated out and itemized in the mitigation plan. You can reduce the insurance once the post
construction is approved to only cover monitoring. I realize that this is just the prospectus stage and that you'll have
a firmer grasp on these amounts in the draft mit plan.
Some additional thoughts on financial assurances and long term management:
* Details for FA should be spelled out in the mitigation plan and accounted for. Construction and monitoring
should be set up separately. Monitoring can be reduced over time based on success.
* See attached White Paper on Financial Assurances, Casualty Insurance (2.5.4). Please note that the 05-01 regal
with the template example is incorrect, as is the Mitigation Rule. It came out before everyone realized that USACE
cannot accept or direct funds so we cannot act as oblige - we cannot accept those funds. You will need to name a
third party to accept the funds. Often times the conservation easement holder is named as the party to receive funds.
* We (Jordan) will need the original copy of the bond/letter of casualty insurance for our records.
* Endowment amounts -it needs to be enough that the site can be stewarded into perpetuity based on the level
of stewardship proposed. (Monitoring, walking the boundaries, boundaries marked, check for encroachment,
prescribed burning if applicable, invasive control rarely, means for legal defense of easement, stewardship
complexities.)
* The mitigation plan should provide a list of the annual long term management activities and associated annual
costs. To estimate if you are providing an adequate endowment, you can take the total annual amount required and
divide it by 0.04 (cap rate). For example, if the total annual costs were $500 and you divide by 0.04 then you should
have at least $12,500 to cover the long term management. (A 0.04 capitalization rate is the minimum rate we will
allow) Keep in mind that this does not include funding to cover any potential legal costs. You should include
additional monies for a legal fund.
* The endowment should be fully funded at least one year prior to closeout so that the long-term steward does
not have to draw on the principal. It is often advisable to include this as a performance standard.
Feel free to give me or Jordan a call if you have any questions.
Thanks
Kim
Kim Browning
Mitigation Project Manager, Regulatory Division I U.S. Army Corps of Engineers
3331 Heritage Trade Dr, Ste. 105 I Wake Forest, NC 27587 I 919.554.4884 x60

BUILDING STRONG (r)
CLASSIFICATION: UNCLASSIFIED