RE: Spring Brook Farm Foundation, Inc., Declaratory Ruling #290, Findings of Fact, Conclusions of Law, and Order May 20, 1994 VERMONT ENVIRONMENTAL BOARD 10 V.S.A. Chapter 151 Re: Spring Brook Farm Foundation, Inc. Declaratory Ruling by Stephen Crampton, Esq. Request #290 Gravel & Shea P.O. Box 369 Burlington, VT 05402-0369 FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER This decision pertains to a request for a declaratory ruling filed by the Spring Brook Farm Foundation, Inc. (the Petitioner) on July 19, 1993, concerning whether there is jurisdiction pursuant to 10 V.S.A. Chapter 151 (Act 250) for the construction of a student dormitory on a 44.5 acre tract of land owned by the Petitioner and located in the Town of Reading (the Project). As is explained below, the Environmental Board concludes that the Project requires an Act 250 permit prior to the commencement of its construction. I. BACKGROUND On June 21, 1993 the District #2 Environmental Coordinator issued Advisory Opinion #2-83. The Coordinator advised that the Petitioner is required to obtain a land use permit prior to the commencement of the Project's construction. On July 19, 1993, the Petitioner appealed Advisory Opinion #2-83 to the Environmental Board as a petition for a declaratory ruling concerning whether there is Act 250 jurisdiction over the Project. Former Board Chair Elizabeth Courtney convened a prehearing conference in Reading on September 14, 1993. A prehearing conference report and order and memorandum of decision was issued on January 6, 1994. The Board granted adjoining landowner Helen Mayer party status pursuant to Board Rule 14(A)(3) and granted Helen Hamlin party status pursuant to Board Rule 14(B)(1)(a). On April 13, 1994, the Board convened an evidentiary hearing in Windsor, Board Chair Arthur Gibb presiding. The following parties participated in the hearing: The Petitioner by Stephen R. Crampton, Esq. Helen Mayer and Helen Hamlin by John D. Hansen, Esq. At the conclusion of the hearing, the Board recessed the proceeding pending the receipt of proposed findings of fact and conclusions of law and deliberation. On April 27, 1994, the Petitioner and Helen Mayer and Helen Hamlin, respectively, submitted proposed findings of fact and conclusions of law. The Board conducted a deliberative session on this matter on May 18, 1994. On that day, the Board reviewed the record, adjourned the hearing, and voted to issue this decision. To the extent any proposed findings of fact and conclusions of law are included below, they are granted; otherwise they are denied. II. ISSUES 1. Whether the Project is a development pursuant to 10 V.S.A. § 6001(3) and Board Rule 2(A)(2) because it constitutes the construction of improvements for commercial purposes, as commercial purpose is defined in Board Rule 2(L). 2. Whether the Project is a development pursuant to 10 V.S.A. § 6001(3) and Board Rule 2(A)(2) because it constitutes the construction of a commercial dwelling, as commercial dwelling is defined in Board Rule 2(M). III. FINDINGS OF FACT 1. The Petitioner is a not-for-profit corporation, incorporated under Section 402 of the Not-for-Profit Corporation Law of the State of New York. The Petitioner is admitted to do business in the State of Vermont. 2. The Petitioner is exempt from federal income tax under section 501(a) of the Internal Revenue Code (the Code) as an organization described in section 501(c)(3). Because the Petitioner is a newly created organization, the Internal Revenue Service has not made a final determination as to its foundation status under section 509(a) of the Code, but the Internal Revenue Service has determined that the Petitioner can reasonably expect to be a publicly supported organization described in sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code. 3. Pursuant to the Petitioner's Certificate of Incorporation, the purposes for which the Petitioner has been formed are as follows: To receive and administer funds for scientific, educational, and charitable purposes within the meaning of Section 501(c)(3) of the Internal Revenue Code of 1986, as now in effect or hereafter amended, and in this connection to bring underprivileged children to a rural setting and provide them with the opportunity [to] visit a working farm and observe animal husbandry, crop cultivation and harvesting and, indirectly, through this experience, to expose the children to usable, practical skills both in farming and related areas; to promote the study and improvement of agricultural methods; to fund and finance, through grants, community interest in agriculture; to provide financial aid to recognized charitable, educational, and scientific organizations which have been granted tax exemption under laws of the United States Government. 4. Pursuant to the Petitioner's Certificate of Incorporation, and in fulfillment of its corporate purposes, the Petitioner may: Solicit, collect, receive and hold any property, or any undivided interest therein, without limitation as to amount or value; to dispose of any such property and to invest, reinvest, distribute and disburse donations, subscriptions, gifts or bequests and other funds, or deal with the principal or the income in such manner as, in the judgement of the directors, will best promote the purposes of the [Petitioner]. 5. Pursuant to the Petitioner's Certificate of Incorporation, the Petitioner has not been formed for pecuniary profit or financial gain. The Certificate of Incorporation further states: No part of the assets, income or profit of the [Petitioner] is distributable to, or shall inure to the benefit of, any member, trustee, director, or officer of the [Petitioner], or any private individual . . . and no member, trustee, officer of the [Petitioner], or any private individual shall be entitled to share in the distribution of any of the corporate assets on dissolution of the [Petitioner]. 6. James Hagedorn was an incorporator of the Petitioner and now serves as the President of its Board of Directors. Mr. Hagedorn is also the Executive Vice President of Stern's Miracle-Gro Products, Inc. 7. The Petitioner owns and operates Spring Brook Farm. Spring Brook Farm is a 569.5 acre farm located in the northeasterly area of Reading. The Petitioner purchased Spring Brook Farm from the Vermont Land Trust. The Petitioner also owns an adjacent 44.5 acre parcel of land upon which the Project is to be constructed. 8. The Petitioner operates the "Farms For City Kids" program (the Program). 9. The Program supplements the curriculum of the home schools of groups of inner-city children. Each group will live at Spring Brook Farm for one to three weeks, during which time the children will participate in the work of the farm and learn about agriculture, forestry, the environment and the natural world around them. 10. While at Spring Brook Farm, the Petitioner proposes to house the children at the Project. 11. The Project will be a two-story building containing 5,425 square feet. Included are six 4-person bedrooms for the students and two smaller single bedrooms to house teachers. Also included in the proposed Project is a kitchen, dinning room, bathroom facilities, an instruction room, and a common "noisy" room. 12. The Petitioner has not, nor will it, solicit or receive payments, tuition, fees, donations, contributions, or "other objects having value" from the students or their parents, the teachers, or the home schools or home school districts in exchange for attending the Program and staying in the proposed Project. 13. The Program will be operated and supported entirely through the efforts of the Petitioner acting as a public charity. While James Hagedorn and other members of his family have created the Petitioner and made significant financial contributions to it, the Board of Directors' goal is for the Petitioner to become self-supporting through contributions from the general public and business community, by receiving grants, and by the donation of services of individuals and corporations. IV. CONCLUSIONS OF LAW Act 250 jurisdiction only extends to those land uses which constitute "development." Development is defined, in part, as the "construction of improvements on a tract or tracts of land, owned or controlled by a person, involving more than 10 acres of land within a radius of five miles of any point on any involved land, for commercial or industrial purposes." 10 V.S.A. § 6001(3). The Board's rules also define development, in part, as the "construction of improvements for any commercial or industrial purpose, including commercial dwellings, which is located on a tract or tracts of land of more than one acre owned or controlled by a person." Board Rule 2(A)(2). If a municipality has adopted both permanent zoning and sub-division bylaws, then jurisdiction attaches only if the involved land is more than ten acres. The Board concludes, and the parties do not dispute, that the involved land of the Project is sufficient in amount to trigger Act 250 jurisdiction. The issue of contention, however, is whether the Project is for a commercial purpose under Board Rule 2(L) or is a commercial dwelling under Board Rule 2(M). Board Rule 2(L) defines "commercial purpose" as: The provision of facilities, goods or services by a person other than for a municipal or state purpose to others in exchange for payment of a purchase price, fee, contribution, donation or other object having value. Board Rule 2(M) defines "commercial dwelling" as: Any building or structure or part thereof, including but not limited to hotels, motels, rooming houses, nursing homes, dormitories and other places for the accommodation of people, that is intended to be used and occupied for human habitation on a temporary or intermittent basis, in exchange for payment of a fee, contribution, donation or other object having value. Board Rules 2(A)(2), 2(L), and 2(M) were ratified by the General Assembly in 1985 and therefore have the force and effect of a legislative enactment. 1985 Vt. Laws No. 52 § 5; In re Spencer, 152 Vt. 330, 336 (1989). Common to the definition of "commercial purpose" and "commercial dwelling" is the element of an exchange of services for something of value. The provision of facilities, goods or services by the Petitioner to the participants in the Program is done expressly in exchange for the contributions and donations made by third persons. The latter makes the former possible. Based upon the Petitioner's status as a not-for-profit, federally tax-exempt corporation, contributors to the Petitioner know that their contributions are made in exchange for the Petitioner's duty to fulfill its corporate purpose, which, in this case, is the rendering of services at no charge to the participants in the Program. Fundamental to the Petitioner's incorporation as a not-for-profit corporation, and its exemption from federal taxation under section 501(c)(3) of the Code, is that the Petitioner must use the funds it receives as charitable contributions to render services in fulfillment of its corporate purposes. This quid pro quo is the basis for the preferential tax treatment given to the Petitioner under section 501(c)(3) and to the contributors under section 170 of the Code. A significant portion of the Petitioner's corporate purpose is the operation of the Program. The Program will be supported entirely through the efforts of the Petitioner acting as a publicly supported organization. The Petitioner contends that the key issue is whether something of value is received by the person providing the services in return for providing those services to others. In other words, does the Petitioner receive something of value in return for sponsoring the Program and providing services to inner-city school children? The Petitioner concludes it does not. The Board, however, concludes that the Petitioner does receive something of value in return. In fact, even before the Petitioner renders the services to the Program participants, it has received something of value in exchange for its duty to provide such services: the contributions and donations with which to fulfill its mission of charity. Part of the services to be provided to the Program participants are the dormitory accommodations which will be made available by the construction of the Project. The Project is a key component to the operation of the Program. The Project's construction, and its use as a dormitory, is also done expressly in exchange for the contributions and donations made by third persons unrelated to the participants in the Program. Board Rules 2(L) and 2(M) do not require that the exchange of value be a direct exchange between the service provider and the recipient of the services. Rather, the payment of a purchase price, fee, contribution, donation or other object having value by one person can be for the benefit of another person, or class of persons, who receives the services. Therefore, the Board concludes that there is an exchange of services for contributions and donations within the meaning of "commercial purpose" under Board Rule 2(L), and that the Project is intended to be "commercial dwelling" as defined by Board Rule 2(M). Our decision is consistent with the Vermont Supreme Court's decision in In re Baptist Fellowship of Randolph, Inc., 144 Vt. 636 (1984). In Baptist Fellowship, the Court held that the construction of a church building was done for a commercial purpose within the meaning of Board Rule 2(L) because there was a de facto exchange of the church's facilities and services for donations and contributions from its members. The Court stated: Act 250 speaks to land use and not to the particular institutional activity associated with that land use; to exclude a church from the provisions of Act 250 simply because of its evangelical services could not be justified on environmental grounds. Under 10 V.S.A. § 6001(3) there are certain land uses that are expressly excluded from the definition of development; neither religious nor other nonprofit uses, such as hospitals, are so excluded. Id. at 639. Likewise, in this case, the Petitioner's Project is a land use on more than ten acres which is of the type and scale which has the potential for environmental impacts under the Act 250 criteria. The exclusion of the Project from Act 250 jurisdiction can not be justified simply because third-party contributions and donations are given to the Petitioner in exchange for the Petitioner's fulfillment of its corporate purpose, especially when this arrangement satisfies the definition of commercial purpose under Board Rule 2(L) and commercial dwelling under Board Rule 2(M). V. ORDER The Project is a development pursuant to 10 V.S.A. § 6001(3) and Board Rules 2(A)(2), 2(L), and 2(M). As such, the Project requires an Act 250 permit prior to the commencement of its construction. Dated at Montpelier, Vermont, this 20th day of May, 1994. ENVIRONMENTAL BOARD \s\s\Arthur Gibb Arthur Gibb, Chair John Ewing Steve Wright Rebecca Day Anthony Thompson Members dissenting: Lixi Fortna Bill Martinez Dissenting opinion attached. Dissenting opinion of Board members Fortna and Martinez: We dissent with regard to the Board's conclusion that the Project is for a commercial purpose and that is a commercial dwelling. Contributors to the Petitioner do not receive services in exchange for their contributions. While the Petitioner accepts contributions and is under a legal duty to fulfill its charitable purpose, the contributors do not choose who are the specific beneficiaries of their contributions. Therefore, the contributors do not receive anything in exchange for the contributions made to the Petitioner. The common sense meaning of "commercial purpose" or "commercial dwelling" is that the payor is, or decides who is, the specific beneficiary of the services being paid for. c:\ccm\decision\dr290Y.spr (d5)