BILL NUMBER: SB 436	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JULY 13, 2011
	AMENDED IN ASSEMBLY  JUNE 22, 2011
	AMENDED IN SENATE  MAY 31, 2011
	AMENDED IN SENATE  MAY 2, 2011
	AMENDED IN SENATE  MARCH 24, 2011

INTRODUCED BY   Senator Kehoe
    (   Principal coauthor:   Assembly Member
  Alejo   ) 
    (   Coauthor:   Assembly Member  
Chesbro   ) 

                        FEBRUARY 16, 2011

   An act to amend Section 65965 of,  to add Section 65969 to,
 and to add, repeal, and add Sections 65966, 65967, and 65968
of, the Government Code, relating to land use.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 436, as amended, Kehoe. Land use: mitigation lands: nonprofit
organizations.
   The Planning and Zoning Law authorizes a state or local public
agency, if the agency requires a property owner to transfer to the
agency an interest in real property to mitigate an adverse impact
upon natural resources caused by permitting the development of a
project or facility, to authorize a nonprofit organization to hold
title to and manage that interest in real property, provided that the
nonprofit organization meets specified requirements.
   This bill would revise these provisions and would, until January
1, 2022, authorize a state or local public agency to provide funds to
a nonprofit organization to acquire land or easements that satisfy
the agency's mitigation obligations, including funds that have been
set aside for the long-term management of any lands or easements
conveyed to a nonprofit organization, as specified. This bill would
require a nonprofit organization that holds funds on behalf of the
Department of Fish and Game for the long-term management of land to
comply with certain requirements, including certification by the
department, and oversight by the Controller under specified
circumstances. The bill would also state the findings and
declarations of the Legislature with respect to the preservation of
natural resources through mitigation, and would state that it is in
the best interest of the public to allow state and local public
agencies and nonprofit organizations to utilize the tools and
strategies they need for improving the effectiveness, cost
efficiency, and durability of mitigation for California's natural
resources.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) State and local laws protect a variety of natural resources,
and also require permits to be issued for the development of certain
projects or facilities.
   (b) In furtherance of these laws, state or local public agencies
may require a project proponent to transfer an interest in real
property to mitigate any adverse impact upon natural resources caused
by permitting the development of a project or facility.
   (c) It is a widespread practice that funds are set aside for the
long-term stewardship of the property protected for mitigation
purposes by the project proponent at the time the property is
protected.
   (d) Lands and real property interests that are protected to
achieve the mitigation may be held by public agencies, special
districts, nonprofit organizations, or other entities, including
for-profit corporations.
   (e) Many state and local agencies work with special districts,
nonprofit organizations, and property owners in valuable and 
cost effective   cost-effective  public-private
partnerships to identify properties that meet the mitigation
requirements and to hold and provide long-term stewardship of the
real property interests.
   (f) There are tools and strategies available for improving the
effectiveness, cost efficiency, and durability of mitigation for
California's natural resources.
   (g) Identifying mitigation needs on a regional basis may expedite
the planning and mitigation processes, as well as ultimately result
in consolidated mitigation areas that can be managed more
cost-effectively.
   (h) It is in the best interest of the public, project proponents,
and local communities to ensure that the public benefits of
mitigation are achieved and enduring.
   (i) It is in the best interest of the public to allow public
agencies, special districts, nonprofit organizations, and property
owners to utilize the tools and strategies they need for improving
the effectiveness, cost efficiency, and durability of mitigation for
California's natural resources.
   (j) It is important that entities that are qualified as to
experience, capacity, and knowledge hold and manage property for
mitigation purposes and any accompanying funds.
   (k) There are numerous benefits, including decreased financial
risk, creation of efficiencies, and maintaining partnerships, for the
real property and associated long-term funding to be held and
managed by the same entity.
   (l) The state recognizes that it is widespread practice for the
holder of a mitigation property to also hold and manage the long-term
funding dedicated to the property.
   (m) The state seeks strategies that allow and provide for this
practice to continue while providing appropriate standards and public
oversight to ensure that the funds endure for the long-term
stewardship of the protected property and its associated natural
resources.
   (n) California has a number of strong protections in place to
ensure that nonprofit organizations properly manage their charitable
resources and assets held in trust. These protections include, but
are not limited to, the state's Nonprofit  Corporations
  Corporation  Law that identifies the nonprofit
governing body's obligations to protect the assets and mission of the
nonprofit, and the provision that the governing body is jointly and
severally liable for any failure to do so. In addition, the Attorney
General has enforcement rights and obligations regarding
noncompliance, mismanagement, or misuse of endowment funds, including
the recovery of any endowment funds.
   (o) The management of endowment funds by California nonprofit
organizations is governed by the Uniform Prudent Management of
Institutional Funds Act (Part 7 (commencing with Section 18501) of
Division 9 of the Probate Code).
   (p) The Uniform Prudent Management of Institutional Funds Act
recognizes the distinction between permanently restricted funds and
temporarily restricted funds and imposes requirements for each. Both
types of funds are relevant to the management of funds for the
long-term stewardship of land.
   (q) The goal of managing funds held for the long-term stewardship
of land is to achieve intergenerational equity as embodied in the
Uniform Prudent Management of Institutional Funds Act and extensively
cited in the financial literature. Considerable guidance is provided
in the act about achieving this objective.
   (r) While nonprofit organizations must manage endowment funds
according to the Uniform Prudent Management of Institutional Funds
Act, to the extent feasible and permissible, the same principles and
guidelines, including the goal of managing for intergenerational
equity, should guide all holders of long-term endowment funds
including public agencies and special districts.
  SEC. 2.  Section 65965 of the Government Code is amended to read:
   65965.  For the purposes of this chapter, the following
definitions apply:
   (a) "Accompanying funds" means the funds for the long-term
stewardship of lands that may be conveyed for the long-term
stewardship of a property.
   (b) "Conservation easement" means a conservation easement created
pursuant to Chapter 4 (commencing with Section 815) of Title 2 of
Part 2 of Division 2 of the Civil Code.
   (c) "Department" means the Department of Fish and Game.
   (d) "Direct protection" means the permanent protection,
conservation, and preservation of lands, waters, or natural
resources, including, but not limited to, agricultural lands,
wildlife habitat, wetlands, endangered species habitat, open-space
areas, or outdoor recreational areas. 
   (e) "Exclusive department-named entity" means any entity chosen by
the department in a manner that excludes other entities from the
same activity or activities.  
   (f) 
    (e)  "Mitigation agreement" means a written agreement
between a public agency, the project proponent, and the special
district, nonprofit organization, or other entity that holds the
property. A mitigation agreement shall govern the long-term
stewardship of a property and accompanying funds, and shall specify
any reporting requirements or elements, including due dates of
reports. 
   (g) 
    (f)  "Project proponent" means an individual, business
entity, agency, or other entity that is developing a project or
facility and is required to mitigate any adverse impact upon natural
resources. 
   (h) 
    (g)  "Property" means fee title land or any partial
interest in real property, including a conservation easement.

   (i) 
    (h)  "Special district" means any special district
formed pursuant to Article 3 (commencing with Section 5500) of
Chapter 3 of Division 5 or Division 26 (commencing with Section
35100) of the Public Resources Code. 
   (j) 
    (i)  "Stewardship" encompasses the range of activities
involved in controlling, resource and compliance monitoring, and
managing for conservation purposes a property, or a conservation or
open-space easement, as defined by the terms of the easement, and its
attendant resources.
  SEC. 3.  Section 65966 is added to the Government Code, to read:
   65966.  (a)  Notwithstanding any other provision of law,
if   If  a local agency requires a project
proponent to transfer property to mitigate any adverse impact upon
natural resources caused by permitting the development of a project
or facility, the local agency may authorize a special district or a
nonprofit organization to hold title to and manage that property. If
the local agency authorizes a nonprofit organization to hold title to
and manage the property,  the  that 
nonprofit organization shall meet all of the following requirements:
   (1) The nonprofit organization shall be exempt from taxation as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.
   (2) The nonprofit organization shall be qualified to do business
in the state.
   (3) The nonprofit organization shall be a "qualified organization"
as defined in Section 170(h)(3) of the Internal Revenue Code.
   (4) The nonprofit organization shall have as its principal purpose
and activity the direct protection or stewardship of land, water, or
natural resources,  or cultural or historic resources,
 including, but not limited to, agricultural lands, wildlife
habitat, wetlands, endangered species habitat, open-space areas, and
outdoor recreational areas.
   (b) If a local agency, in the development of its own project, is
required to protect property to mitigate an adverse impact upon
natural resources, the agency may do either of the following:
   (1) Transfer the interest to a special district or to a nonprofit
organization that meets the requirements set forth in subdivision
(a).
   (2) Provide funds to a nonprofit organization or special district
to acquire land or easements that satisfy the agency's mitigation
obligations.
   (c) A local agency shall exercise due diligence in reviewing the
qualifications of a special district or nonprofit organization to
effectively manage and steward land, water, or natural resources, as
well as the accompanying funds. The local agency may adopt guidelines
to assist it in that review process, which may include, but are not
limited to, the use of or reliance upon guidelines, standards, or
accreditation established by a qualified entity that are in
widespread state or national use.
   (d) The local agency may require the special district or nonprofit
organization to submit a report not more than once every 12 months
and for the number of years specified in the mitigation agreement,
that details the stewardship and condition of the property and the
accompanying funds. The mitigation agreement shall specify any
reporting due dates and the elements of the report.
   (e) The recorded instrument that places the title of the property
with a special district or nonprofit organization pursuant to
subdivision (a) or (b) shall include a provision that if the local
agency or its successor agency reasonably determines that the
property is not being held, monitored, or stewarded for conservation
purposes in the manner specified in that instrument or in the
mitigation agreement, the property shall revert to the local agency,
or to another public agency, special district, or nonprofit
organization qualified pursuant to subdivision (a) and approved by
the local agency.
   (f) (1) If the local agency authorizes a special district or
nonprofit organization to hold the property, the state agency may
allow the accompanying funds to be held by the same special district
or nonprofit organization that holds the property subject to this
subdivision and to subdivision (a) of Section 65968. Except the
special district or nonprofit organization that is holding the
property or the local agency, no other special district, nonprofit
organization, or entity may hold the accompanying funds if the
property is held by a special district or nonprofit organization. The
special district or nonprofit organization shall hold, manage,
invest, and disburse the funds in furtherance of the long-term
stewardship of the property for which the funds were set aside.
   (2) The local agency shall determine that the holder of
accompanying funds meets all of the following requirements:
   (A) The holder has the capacity to effectively manage the
mitigation funds.
   (B) The holder has the capacity to achieve reasonable rates of
return on the investment of those funds similar to those of other
prudent investors over the life of the agreement.
   (C) The holder utilizes generally accepted accounting practices as
promulgated by the Financial Accounting Standards Board for
nonprofit organizations or the Governmental Accounting Standards
Board for public agencies.
   (D) The holder will be able to ensure that funds are accounted
for, and tied to, a specific property.
   (E) The holder has an investment policy that is consistent with
the Uniform Prudent Management of Institutional Funds Act (Part 7
(commencing with Section 18501) of Division 9 of the Probate Code).
   (3) The mitigation agreement that authorizes the funds to be
conveyed to a special district or nonprofit organization pursuant to
paragraph (2) shall include a provision that requires the
accompanying funds held by a special district or a nonprofit
organization to revert to the local agency, or to a successor
organization identified by the agency and subject to paragraph (2),
if any of the following occurs:
   (A) The special district or nonprofit organization ceases to
exist.
   (B) The special district or nonprofit organization is dissolved.
   (C) The special district or nonprofit organization becomes
bankrupt or insolvent.
   (D) The local agency determines that the accompanying funds held
by the special district or nonprofit organization, or its successor
entity, are not being held, managed, invested, or disbursed for
conservation purposes in the manner specified in the mitigation
agreement between the local agency and the special district or
nonprofit organization. If the funds are taken by the local agency,
the agency may also take the land pursuant to subdivision (e). If the
special district or nonprofit organization chooses to relinquish the
property, the local agency shall take title to the property or
identify an approved special district or nonprofit organization to
take title to the property.
   (4) If the local agency holds the accompanying funds, the local
agency may hold, manage, and invest the accompanying funds pursuant
to subparagraph (D) of paragraph (2) and shall disburse funds in a
timely basis for the stewardship expenses of the special district or
nonprofit organization holding the property.
   (g) The local agency may contract with or designate an independent
third party to do any of the following:
   (1) Review the qualifications of a special district or nonprofit
organization to effectively manage and steward natural land or
resources pursuant to subdivisions (a) and (c).
   (2) Review the qualifications of a special district or nonprofit
organization to hold and manage the accompanying funds pursuant to
paragraph (2) of subdivision (f).
   (3) Review reports or other performance indicators to evaluate the
stewardship of lands, resources, or funds, and compliance with the
mitigation agreement.
   (h) (1) If a local agency authorizes a special district or
nonprofit organization pursuant to subdivision (a) or (b), the local
agency may require an administrative endowment from the project
proponent for costs associated with reviewing qualifications,
approving holders, and regular oversight of compliance and
performance. The administrative endowment shall be held, managed, and
invested to produce an annual revenue sufficient to cover the costs
of reviewing qualifications, approving holders, and ongoing
oversight.
   (2) The local agency may require a project proponent to provide a
one-time payment that will provide for the initial stewardship costs
for not more than five years while the endowment begins to accumulate
investment earnings. This one-time payment will be conveyed to the
holder of the accompanying funds by the project proponent.
   (i) This section shall remain in effect only until January 1,
2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date.
  SEC. 4.  Section 65966 is added to the Government Code, to read:
   65966.  (a)  Notwithstanding any other provision of law,
if   If  a local agency requires a project
proponent to transfer property to mitigate any adverse impact upon
natural resources caused by permitting the development of a project
or facility, the local agency may authorize a special district or a
nonprofit organization to hold title to and manage that property. If
the local agency authorizes a nonprofit organization to hold title to
and manage the property,  the   that 
nonprofit organization shall meet all of the following requirements:
   (1) The nonprofit organization shall be exempt from taxation as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.
   (2) The nonprofit organization shall be qualified to do business
in the state.
   (3) The nonprofit organization shall be a "qualified organization"
as defined in Section 170(h)(3) of the Internal Revenue Code.
   (4) The nonprofit organization shall have as its principal purpose
and activity the direct protection or stewardship of land, water, or
natural resources,  or cultural or historic resources,
 including, but not limited to, agricultural lands, wildlife
habitat, wetlands, endangered species habitat, open-space areas, and
outdoor recreational areas.
   (b) If a local agency, in the development of its own project, is
required to protect property to mitigate an adverse impact upon
natural resources, the agency may do either of the following:
   (1) Transfer the interest to a special district or to a nonprofit
organization that meets the requirements set forth in subdivision
(a).
   (2) Provide funds to a nonprofit organization or special district
to acquire land or easements that satisfy the agency's mitigation
obligations.
   (c) A local agency shall exercise due diligence in reviewing the
qualifications of a special district or nonprofit organization to
effectively manage and steward land, water, or natural resources, as
well as the accompanying funds. The local agency may adopt guidelines
to assist it in that review process, which may include, but are not
limited to, the use of or reliance upon guidelines, standards, or
accreditations established by a qualified entity that are in
widespread state or national use.
   (d) The local agency may require the special district or nonprofit
organization to submit a report not more than once every 12 months
and for the number of years specified in the mitigation agreement,
that details the stewardship and condition of the property and the
accompanying funds. The mitigation agreement shall specify any
reporting due dates and the elements of the report.
   (e) The recorded instrument that places the title of the property
with a special district or nonprofit organization pursuant to
subdivision (a) or (b) shall include a provision that if the local
agency or its successor agency reasonably determines that the
property is not being held, monitored, or stewarded for conservation
purposes in the manner specified in that instrument or in the
mitigation agreement, the property shall revert to the local agency,
or to another public agency, special district, or nonprofit
organization qualified pursuant to subdivision (a) and approved by
the local agency.
   (f) The local agency may contract with or designate an independent
third party to do either of the following:
   (1) Review the qualifications of a special district or nonprofit
organization to effectively manage and steward natural land or
resources pursuant to subdivisions (a) and (c).
   (2) Review reports or other performance indicators to evaluate the
stewardship of lands, resources, or funds, and compliance with the
mitigation agreement.
   (g) (1) If a local agency authorizes a special district or
nonprofit organization pursuant to subdivision (a) or (b), the local
agency may require an administrative endowment from the project
proponent for costs associated with reviewing qualifications,
approving holders, and regular oversight of compliance and
performance. The administrative endowment shall be held, managed, and
invested to produce an annual revenue sufficient to cover the costs
of reviewing qualifications, approving holders, and ongoing
oversight.
   (2) The local agency may require a project proponent to provide a
one-time payment that will provide for the initial stewardship costs
for not more than five years while the endowment begins to accumulate
investment earnings. This one-time payment will be conveyed to the
holder of the accompanying funds by the project proponent.
   (h) This section shall become operative on January 1, 2022.
  SEC. 5.  Section 65967 is added to the Government Code, to read:
   65967.  (a)  Notwithstanding any other provision of law,
if   If  a state agency requires a project
proponent to transfer property to mitigate any adverse impact upon
natural resources caused by permitting the development of a project
or facility, the state agency may authorize a special district or a
nonprofit organization to hold title to and manage that property. If
the state agency authorizes a nonprofit organization to hold title to
and manage the property, the nonprofit organization shall meet all
of the following requirements:
   (1) The nonprofit organization shall be exempt from taxation as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.
   (2) The nonprofit organization shall be qualified to do business
in the state.
   (3) The nonprofit organization shall be a "qualified organization"
as defined in Section 170(h)(3) of the Internal Revenue Code.
   (4) The nonprofit organization shall have as its principal purpose
and activity the direct protection or stewardship of land, water, or
natural resources,  or cultural or historic resources,
 including, but not limited to, agricultural lands, wildlife
habitat, wetlands, endangered species habitat, open-space areas, and
outdoor recreational areas.
   (b) If a state agency, in the development of its own project, is
required to protect property to mitigate an adverse impact upon
natural resources, the agency may do either of the following:
   (1) Transfer the interest to a special district or to a nonprofit
organization that meets the requirements set forth in subdivision
(a).
   (2) Provide funds to a special district or nonprofit organization
to acquire land or easements that satisfy the agency's mitigation
obligations.
   (c) A state agency shall exercise due diligence in reviewing the
qualifications of a special district or nonprofit organization to
effectively manage and steward natural land or resources, as well as
the accompanying funds. The state agency may adopt guidelines to
assist it in that review process, which may include, but are not
limited to, the use of or reliance upon guidelines, standards, or
accreditation established by a qualified entity that are in
widespread state or national use.
   (d) The state agency may require the special district or nonprofit
organization to submit a report not more than once every 12 months
and for the number of years specified in the mitigation agreement,
that details the stewardship and condition of the property and the
accompanying funds. The mitigation agreement shall specify the
reporting due dates and the elements of the report.
   (e) The recorded instrument that places the title of the property
with a special district or nonprofit organization pursuant to
subdivision (a) or (b) shall include a provision that if the state
agency, or its successor agency, determines that the property is not
being held, monitored, or stewarded for conservation purposes in the
manner specified in that instrument or in the mitigation agreement,
the property shall revert to the state agency, or to another public
agency, special district, or nonprofit organization qualified
pursuant to subdivision (a) and approved by the state agency.
   (f) (1)  If   Notwithstanding Section 13014
of the Fish and Game Code, if  the state agency authorizes a
special district or nonprofit organization to hold the property, the
state agency may allow the accompanying funds to be held by the same
special district or nonprofit organization that holds the property
subject to this subdivision and to subdivision (a) of Section 65968.
Except the special district or nonprofit organization that is holding
the property or the state agency, no other special district,
nonprofit organization, or entity may hold the accompanying funds if
the property is held by a special district or nonprofit organization.
The special district or nonprofit organization shall hold, manage,
invest, and disburse the funds in furtherance of the long-term
stewardship of the property for which the funds were set aside.
   (2) The state agency shall determine that the holder of
accompanying funds meets all of the following requirements:
   (A) The holder has the capacity to effectively manage the
mitigation funds.
   (B) The holder has the capacity to achieve reasonable rates of
return on the investment of those funds similar to those of other
prudent investors over the life of the agreement.
   (C) The holder utilizes generally accepted accounting practices as
promulgated by the Financial Accounting Standards Board for
nonprofit organizations or the Governmental Accounting Standards
Board for public agencies.
   (D) The holder will be able to ensure that funds are accounted
for, and tied to, a specific property.
   (E) The holder has an adopted investment policy that is consistent
with the Uniform Prudent Management of Institutional Funds Act (Part
7 (commencing with Section 18501) of Division 9 of the Probate
Code).
   (3) The mitigation agreement that authorizes the funds to be
conveyed to a special district or nonprofit organization pursuant to
paragraph (2) shall include a provision that requires the
accompanying funds held by a special district or a nonprofit
organization to revert to the state agency, or to a successor
organization identified by the agency and subject to paragraph (2),
if any of the following occurs:
   (A) The special district or nonprofit organization ceases to
exist.
   (B) The special district or nonprofit organization is dissolved.
   (C) The special district or nonprofit organization becomes
bankrupt or insolvent.
   (D) The state agency determines that the accompanying funds held
by the special district or nonprofit organization, or its successor
entity, are not being held, managed, invested, or disbursed for
conservation purposes in the manner specified in the mitigation
agreement. If the funds are taken by the state agency, the state
agency may also take the land pursuant to subdivision (e). If the
special district or nonprofit organization chooses to relinquish the
property, the state agency shall take title to the property or
identify an approved special district or nonprofit organization to
take title to the property.
   (4) If the state agency is the department, the following
conditions apply to the holding, managing, investment, expenditure,
disbursement, and oversight of the accompanying funds:
   (A) A special district or nonprofit organization shall not hold
funds unless it is certified by the department. The department shall
adopt regulations for a process to certify special districts or
nonprofit organizations to hold accompanying funds. The
                                      department shall not certify
more than 10 special districts or nonprofit organizations to hold
accompanying funds under this section.
   (B) The department may contract with the Controller to provide
fiscal expertise for the evaluation of a special district or
nonprofit organization to hold accompanying funds.
   (C) A special district or nonprofit organization that holds
accompanying funds for the long-term stewardship of land may be
subject to oversight by the Controller. The Controller may annually
review independent audit or financial statements, tax filings, or any
other documents or reports the Controller determines necessary to
verify the sound financial management of funds held by a special
district or nonprofit organization.
   (D) All costs incurred by the department or the Controller under
this subdivision shall be paid by the administrative endowment
established pursuant to paragraph (1) of subdivision (h).
   (5) If the state agency holds the accompanying funds, the state
agency may hold, manage, and invest the accompanying funds pursuant
to subparagraph (D) of paragraph (2) and shall disburse funds in a
timely basis for the stewardship expenses of the special district or
nonprofit organization holding the property.
   (g) The state agency may contract with or designate an independent
third party to do any of the following:
   (1) Review the qualifications of a special district or nonprofit
organization to effectively manage and steward natural land or
resources pursuant to subdivisions (a) and (c).
   (2) Review the qualifications of a special district or nonprofit
organization to hold and manage the accompanying funds pursuant to
paragraph (2) of subdivision (f).
   (3) Review reports or other performance indicators to evaluate the
stewardship of lands, resources, or funds, and compliance with the
mitigation agreement.
   (h) (1) If a state agency authorizes a special district or
nonprofit organization to hold property protected for mitigation
purposes, the state agency may require an administrative endowment
from the project proponent for costs associated with reviewing
qualifications, approving holders, and regular oversight of
compliance and performance. The administrative endowment shall be
held, managed, and invested to produce an annual revenue sufficient
to cover the costs of reviewing qualifications, approving holders,
and ongoing oversight.
   (2) The state agency may require project proponents to provide a
one-time payment to provide for the initial stewardship costs for up
to five years while the endowment begins to accumulate investment
earnings. This one-time payment will be conveyed to the holder of the
accompanying funds by the project proponent.
   (i) This section shall not apply retroactively to endowment funds
held by the state in the Pooled Money Investment Account as of
January 1, 2012.
   (j) This section shall remain in effect only until January 1,
2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date.
  SEC. 6.  Section 65967 is added to the Government Code, to read:
   65967.  (a)  Notwithstanding any other provision of law,
if   If  a state agency requires a project
proponent to transfer property to mitigate any adverse impact upon
natural resources caused by permitting the development of a project
or facility, the state agency may authorize a special district or a
nonprofit organization to hold title to and manage that property. If
the state agency authorizes a nonprofit organization to hold title to
and manage the property, the nonprofit organization shall meet all
of the following requirements:
   (1) The nonprofit organization shall be exempt from taxation as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.
   (2) The nonprofit organization shall be qualified to do business
in the state.
   (3) The nonprofit organization shall be a "qualified organization"
as defined in Section 170(h)(3) of the Internal Revenue Code.
   (4) The nonprofit organization shall have as its principal purpose
and activity the direct protection or stewardship of land, water, or
natural resources,  or cultural or historic resources,
 including, but not limited to, agricultural lands, wildlife
habitat, wetlands, endangered species habitat, open-space areas, and
outdoor recreational areas.
   (b) If a state agency, in the development of its own project, is
required to protect property to mitigate an adverse impact upon
natural resources, the agency may do either of the following:
   (1) Transfer the interest to a special district or to a nonprofit
organization that meets the requirements set forth in subdivision
(a).
   (2) Provide funds to a special district or nonprofit organization
to acquire land or easements that satisfy the agency's mitigation
obligations.
   (c) A state agency shall exercise due diligence in reviewing the
qualifications of a special district or nonprofit organization to
effectively manage and steward natural land or resources, as well as
the accompanying funds. The state agency may adopt guidelines to
assist it in that review process, which may include, but are not
limited to, the use of or reliance upon guidelines, standards, or
accreditation established by a qualified entity that are in
widespread state or national use.
   (d) The state agency may require the special district or nonprofit
organization to submit a report not more than once every 12 months
and for the number of years specified in the mitigation agreement,
that details the stewardship and condition of the property and the
accompanying funds. The mitigation agreement shall specify the
reporting due dates and the elements of the report.
   (e) The recorded instrument that places the title of the property
with a special district or nonprofit organization pursuant to
subdivision (a) or (b) shall include a provision that if the state
agency, or its successor agency, determines that the property is not
being held, monitored, or stewarded for conservation purposes in the
manner specified in that instrument or in the mitigation agreement,
the property shall revert to the state agency, or to another public
agency, special district, or nonprofit organization qualified
pursuant to subdivision (a) and approved by the state agency.
   (f) The state agency may contract with or designate an independent
third party to do any of the following:
   (1) Review the qualifications of a special district or nonprofit
organization to effectively manage and steward natural land or
resources pursuant to subdivisions (a) and (c).
   (2) Review reports or other performance indicators to evaluate the
stewardship of lands, resources, or funds, and compliance with the
mitigation agreement.
   (g) (1) If a state agency authorizes a special district or
nonprofit organization to hold property protected for mitigation
purposes, the state agency may require an administrative endowment
from the project proponent for costs associated with reviewing
qualifications, approving holders, and regular oversight of
compliance and performance. The administrative endowment shall be
held, managed, and invested to produce an annual revenue sufficient
to cover the costs of reviewing qualifications, approving holders,
and ongoing oversight.
   (2) The state agency may require project proponents to provide a
one-time payment to provide for the initial stewardship costs for up
to five years while the endowment begins to accumulate investment
earnings. This one-time payment will be conveyed to the holder of the
accompanying funds by the project proponent.
   (h) This section shall not apply retroactively to endowment funds
held by the state in the Pooled Money Investment Account as of
January 1, 2012.
   (i) This section shall become operative on January 1, 2022.
  SEC. 7.  Section 65968 is added to the Government Code, to read:
   65968.  (a) Any local or state agency that requires property to be
protected pursuant to subdivisions  
subdivision  (a) or (b) of Section 65966 or 
subdivisions   subdivision  (a) or (b) of Section
65967 shall identify how the funding needs of the long-term
stewardship of the property will be met. If funds are set aside at
the time the property is protected, all of the following shall apply:

   (1) The accompanying funds shall be held, managed, invested, and
disbursed solely for the long-term stewardship of the specific
property for which the funds were set aside.
   (2) The accompanying funds shall be calculated to include a
 principle   principal  amount that, when
managed and invested, will produce revenues that are reasonably
sufficient to cover the annual stewardship costs of the property in
perpetuity.
   (3) The  principle   principal  amount
shall be defined and managed as permanently restricted funds.
   (4) Any one-time payment, pursuant to paragraph (1) of subdivision
(h) of Section 65966 or paragraph (1) of subdivision (h) of Section
65967, and earnings from the  principle  
principal  , shall be managed as temporarily restricted funds.
   (5) The accompanying funds shall be held, managed, invested, and
disbursed consistent with the Uniform Prudent Management of
Institutional Funds Act (Part 7 (commencing with Section 18501) of
Division 9 of the Probate Code).
   (b) A property that has been previously protected for conservation
purposes, including the placement of a conservation easement on the
property, may not be used for mitigation purposes.
   (c) Any conservation easement that is used to satisfy a local or
state mitigation requirement shall be permanent in duration.
   (d) If a property conserved pursuant to subdivision (a) or (b) of
Section 65966 or subdivision (a) or (b) of Section 65967 is
condemned, any funds received for the condemnation of the property
shall be used for the purchase of a replacement property with similar
natural resource characteristics as the original mitigation was
intended to protect, or as near as reasonably feasible. Any
accompanying funds held for the condemned property shall be held for
the long-term stewardship of the replacement property.
   (e) This section shall remain in effect only until January 1,
2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date.
  SEC. 8.  Section 65968 is added to the Government Code, to read:
   65968.  (a) Any local or state agency that requires property to be
protected pursuant to  subdivisions  
subdivision  (a) or (b) of Section 65966 or 
subdivisions   subdivision  (a) or (b) of Section
65967 shall identify how the funding needs of the long-term
stewardship of the property will be met. If funds are set aside at
the time the property is protected, all of the following shall apply:

   (1) The accompanying funds shall be held, managed, invested, and
disbursed solely for the long-term stewardship of the specific
property for which the funds were set aside.
   (2) The accompanying funds shall be calculated to include a
 principle   principal  amount that, when
managed and invested, will produce revenues that are reasonably
sufficient to cover the annual stewardship costs of the property in
perpetuity.
   (3) The principle   principal  amount
shall be defined and managed as permanently restricted funds.
   (4) Any one-time payment, pursuant to paragraph (1) of subdivision
(g) of Section 65966 or paragraph (1) of subdivision (g) of Section
65967, and earnings from the  principle  
principal  , shall be managed as temporarily restricted funds.
   (5) The accompanying funds shall be held, managed, invested, and
disbursed consistent with the Uniform Prudent Management of
Institutional Funds Act (Part 7 (commencing with Section 18501) of
Division 9 of the Probate Code).
   (b) A property that has been previously protected for conservation
purposes, including the placement of a conservation easement on the
property, may not be used for mitigation purposes.
   (c) Any conservation easement that is used to satisfy a local or
state mitigation requirement shall be permanent in duration.
   (d) If a property conserved pursuant to subdivision (a) or (b) of
Section 65966 or subdivision (a) or (b) of Section 65967 is
condemned, any funds received for the condemnation of the property
shall be used for the purchase of a replacement property with similar
natural resource characteristics as the original mitigation was
intended to protect, or as near as reasonably feasible. Any
accompanying funds held for the condemned property shall be held for
the long-term stewardship of the replacement property.
   (e) This section shall become operative on January 1, 2022.
   SEC. 9.    Section 65969 is added to the  
Government Code   , to read:  
   65969.  A special district or a nonprofit organization that holds
funds pursuant to this chapter, including, but not limited to,
accompanying funds, moneys to acquire land or easements, or moneys
for initial stewardship costs, shall provide the local or state
agency with an annual fiscal report regarding the funds that contains
at least the same information as is required by Internal Revenue
Service Form 990.