Funding an endowment
An endowment is an asset which can provide a source of income through careful investment. It could be a carefully managed cash investment, where income is earned through interest on the investment; or an endowment in property, where income is earned through management (e.g. leasing) of built assets.
An endowment could be built up to provide core funding for a charitable Parks Trust.
Benefits of an endowment include:
- A steady source of income based on the return on investment. This will help a Parks Trust to ride out fluctuations in other forms of income, for example, poor commercial returns
- Enabling organisations that benefit from parks to pay towards their future and have a stake in their management. This will help to deliver more public goods, for example, water management and health benefits
- Replacing the local authority subsidy by converting a one-off payment into a revenue stream.
There are many examples of successful endowments providing income, such as National Trust, Land Trust and Milton Keynes Parks Trust. The following video shows how the endowment model has worked for Milton Keynes Parks Trust.
Feedback shows that potential endowment contributors would be motivated by the following factors:
- Leadership – key figures from the local authority's leadership will need to be committed to the proposal. This is important to demonstrate that the Parks Trust is a serious and robust proposition.
- Local authority commitment - local authorities must be willing to put a substantial amount into the endowment to secure the investment of others
- Evidence of benefits – these could be financial, social or environmental benefits provided by parks, now or in the future
- Ringfenced structure - our research indicates that potential contributors to an endowment would only really consider contributing if the funding went directly to parks and was ring-fenced for this purpose
Sources of funding for the endowment will vary in each town or city. To identify potential contributors, you need to work out those who have most to lose from lost or dysfunctional parks and most to gain from well-managed and well-functioning parks and green spaces in the local area. Developing a set of Natural Capital Accounts can help to identify potential contributors (see below). The Endowment workshop activities below can also act as a prompt for discussion to identify potential sources for the endowment.
The Creating a financial model section will help you to work out the size of endowment that would support parks in your city.
Creating an endowment is likely to affect the legal structures that you need as not all legal entities can hold endowments. See the Legal structures section for suggestions.
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