BILL ANALYSIS Ó
AB 484
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Date of Hearing: March 22, 2011
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Jared Huffman, Chair
AB 484 (Alejo) - As Introduced: February 15, 2011
SUBJECT : Mitigation Lands: Long-term management funds
SUMMARY : Clarifies that funds set aside for the long-term
management of mitigation lands conveyed to a nonprofit
organization may also be conveyed to the nonprofit, and
authorizes the nonprofit to hold, manage, invest, and disburse
the funds for management and stewardship of the land or easement
for which the funds were set aside.
EXISTING LAW :
1)Allows a state or local agency to authorize a nonprofit
organization to hold title to and manage an interest in real
property that:
a) The agency requires a property owner to transfer to
the agency to mitigate for adverse impacts on natural
resources caused by a project permitted by the agency, or
b) The agency is required by law to transfer to
mitigate an adverse impact upon natural resources caused
by the agency's own project.
2)Requires project proponents to mitigate for adverse
environmental impacts which may include a requirement for
funds to be set aside to cover costs of long term management
of mitigation lands.
3)Requires funds received by the Department of Fish and Game
(DFG) for management of mitigation lands to be deposited in
the Fish and Game Mitigation and Protection Endowment Account
or the Fish and Game Mitigation Expendable Funds Account,
which are held in the State Special Deposit Fund. Requires
interest generated on endowment funds deposited in the former
account to be made available to DFG, upon appropriation by the
Legislature, to fund long-term management of habitat lands.
Funds other than endowment funds received by DFG and deposited
in the latter account are continuously appropriated to DFG for
expenditure for management of lands set aside for mitigation.
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FISCAL EFFECT : Unknown
COMMENTS : The author has introduced this bill to facilitate
environmental review and permitting of transportation
infrastructure projects. The author notes that currently an
agency proposing construction of a major transportation
infrastructure project that will result in habitat loss is
typically required to purchase and manage in perpetuity land or
conservation easements to offset the project's environmental
impacts. The permit and certification process can be lengthy
and add unknown costs to the project as the cost of the
mitigation is tied to land values at the time of purchase.
Under current law, lands that are required to be set aside as
mitigation can be transferred to a nonprofit organization for
management as a result of legislation enacted in 2006 (AB 2746
(Blakeslee)) but the law lacks clarity as to whether the
endowment funds for that long-term management can also be
conveyed to the nonprofit.
The author cites a specific example in Monterey County - the US
101/Prunedale Improvement Project - which is awaiting
determination of the amount of an endowment needed to manage
lands required to be protected as part of the project's habitat
mitigation requirements. The author believes that this bill, by
authorizing the management funds to be held by a nonprofit
organization, would help expedite these kinds of projects.
This bill is substantially similar to AB 444 (Caballero) of 2009
which passed this committee on a unanimous vote with amendments
but was later vetoed by the Governor. This bill would allow
nonprofits, if authorized to do so by a state or local agency,
to hold funds dedicated for the long-term management of land or
easements the organization has accepted through the mitigation
process. While the law allows nonprofits to hold and manage the
lands, current law does not expressly address whether the
nonprofit may also hold and manage the endowment funds set aside
for long-term management of the property. While it has been
common practice in the past for many public agencies to allow
the nonprofit to manage the funds, there is no existing statute
providing explicit affirmation of this practice.
Does this bill change the law or simply clarify existing law ?
Legislative Counsel opined in a written opinion requested by
this committee in 2006 that existing Government Code Section
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65965, which this bill would amend, already allows the state to
authorize nonprofit organizations to hold and manage funds set
aside for the purpose of long term management of mitigation
lands. They reached this conclusion by analyzing both
Government Code Section 65965 and Fish and Game Code Section
13014. Counsel concluded that the authority to "manage"
property under the existing language of Section 69565 implicitly
includes the authority to control and direct funds set aside for
those management purposes. Second, they concluded that Section
13014, which requires mitigation funds received by DFG to be
deposited in the Special Deposit Fund, only requires that
mitigation funds actually received by DFG be deposited in the
Fund, but that DFG may enter into an agreement authorizing a
third party to hold and manage the funds as long as the funds
are not actually "received" by DFG. Therefore, in Legislative
Counsel's opinion, existing law already allows a state agency,
including DFG, to enter into an agreement authorizing a
nonprofit organization to hold and manage mitigation funds set
aside for the long term management of the property.
Nevertheless, the lack of express authorization in the statute,
and the lack of clarity in the existing codes has led to
reluctance on the part of some state agencies, most notably DFG,
to allow third parties to hold and manage mitigation funds.
Requiring that the funds be held in the State Deposit Fund has
also created challenges to effective stewardship of conservation
lands for a number of land managers. The monies in these
accounts are invested through the State's Pooled Money
Investment Account. Since endowment funds are designed to be
non-wasting accounts, where only the interest earned is
available for expenditure, the inability of the Pooled Money
Investment Account to earn higher rates of return has in the
past limited the amount of funds available for land management.
Land managers have also experienced delays in reimbursement
payments of up to six months to a year in some cases. The
investment limitations of the Pooled Money Investment Account
were potentially remedied to some extent by the passage of SB
1538 (Steinberg) in 2008, which allowed DFG some fund investment
flexibility by requiring the State Treasurer, at DFG's request,
to transfer endowment account funds from the Pooled Money
Investment Account to another account within the State Treasury
system to increase earnings over time while providing adequate
liquidity. SB 1538 also authorized DFG to retain investment
advisers to develop and maintain the investment strategy for
these accounts. The intent is that these funds would thus be
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able to generate yields more comparable to those achieved by
third party nonprofits, however the provisions of SB 1538 have
not been fully implemented to date.
The Governor's veto message on AB 444 was as follows:
Although I am supportive of this bill's effort to allow
non-governmental entities to manage funds set aside for the
long-term
management of lands and easements, authorizing them to hold
funds
without adequate fiscal assurances, as this bill would
provide, is
unacceptable.
I am directing the Department of Fish and Game to work with
the
Author and interested parties toward developing an
alternative that
provides sufficient protections for the financial and
environmental
resources subject to third-party agreements.
DFG Pilot Project : Since AB 444 was vetoed, DFG has proposed the
implementation of a pilot project that would give applicants two
options for the management of endowment funds required under a
California Endangered Species Act (CESA) incidental take permit.
The two options being recommended by DFG would be to either, a)
have the funds held in the State Deposit Fund, or b) have the
funds held and managed by a single third party endowment manager
as an alternative to the State Deposit Fund. The single third
party endowment manager being proposed by DFG to manage CESA
endowment funds is the National Fish and Wildlife Foundation.
DFG has cited lack of sufficient infrastructure and expertise
within DFG to handle demand and provide effective oversight of
multiple third parties seeking to be certified to hold
endowments as the primary rationale for its proposal to approve
only one third party entity to do so. It should be noted,
however, that this bill does not require DFG to approve other
nonprofit entities to hold and manage endowments but rather
would clarify they are authorized to do so.
Suggested Amendments : When AB 444 was heard in this committee,
the committee required that bill be amended to add a requirement
that the nonprofit entity comply with prudent investor
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standards, file an annual report as required by the authorizing
agency, authorize the agency to require audits, and establishing
a process for reversion if necessary. If the committee choses
to approve this bill, staff recommends that similar provisions
be added to this bill as well (see attached).
REGISTERED SUPPORT / OPPOSITION :
Support
Transportation Agency of Monterey County (sponsor)
Opposition
None on file.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096