BILL ANALYSIS Ó
SB 436
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 436 (Kehoe) - As Amended: June 22, 2011
SENATE VOTE : 39-0
SUBJECT : Land use: mitigation lands: nonprofit organizations
SUMMARY : Authorizes a state or local agency to allow a
qualified and approved nonprofit organization or special
district to hold property and long-term stewardship funds to
mitigate adverse impacts to natural resources caused by a
permitted development project.
EXISTING LAW :
1)Allows a state or local public agency to authorize a nonprofit
organization to hold title to and manage an interest in real
property that was transferred by a project proponent to
mitigate adverse impacts upon natural resources caused by the
agency permitting the development of a project or facility.
The nonprofit organization, among other things, must have as
its principal purpose and activity the direct protection or
stewardship of natural land or 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.
2)Requires that if the state or local public agency determines
that the interest in real property that his held by the
nonprofit organization is not being held, monitored, or
managed for conservation purposes in the manner specified in
the recorded instrument or in the mitigation agreement between
the public agency and the nonprofit organization, the interest
in real property reverts to the public agency or another
approved nonprofit organization.
3)Requires a state or local public agency to exercise due
diligence in reviewing the qualifications of a nonprofit
organization to effectively manage and steward natural land or
resources.
4)Establishes the Fish and Game Mitigation and Protection
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Endowment Principal Account (Endowment Account) and Fish and
Game Mitigation and Protection Expendable Funds Account
(Expendable Funds Account) which consists of mitigation and
conservation funds received by the Department of Fish and Game
(Department) pursuant to (1) agreements or permits pursuant to
the Natural Communities Conservation Planning Act, (2)
conservation bank agreements, (3) habitat conservation
implementation agreements, (4) incidental take permits, (5)
legal or other written settlements, (6) mitigation agreements,
(7) streambed or lakebed alteration agreements, and (8) trust
agreements.
5)Places the Endowment Account and Expendable Funds Account in
the Special Deposit Fund within the Pooled Money Investment
Account but allows the Department to have the State
Treasurer's office transfer funds from the Pooled Money
Investment Account to another account within the State
Treasury system to increase earnings over time while providing
adequate liquidity.
THIS BILL :
1)Transferring Mitigation Property
a) Authorizes a state or local agency to allow a special
district or a nonprofit organization to hold title to and
manage mitigation property that is transferred by a project
proponent for the mitigation of adverse impacts on natural
resources caused by permitting the development of a project
or facility.
b) Defines "Special district" as any regional park
district, regional park and open-space district, or
regional open-space district formed pursuant to Article 3
of Chapter 3 of Division 5 of the Public Resources Code or
the Santa Clara County Open-Space Authority, which is
formed pursuant to Division 26 of the Public Resources
Code.
c) Requires a nonprofit organization, for the purpose of
holding title to and managing mitigation property, to meet
the following requirements:
i) The nonprofit organization shall be exempt from
taxation as an organization described in Section
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501(c)(3) of the Internal Revenue Code.
ii) The nonprofit organization shall be qualified to do
business in the state.
iii) The nonprofit organization shall be a "qualified
organization" as defined in Section 170(h)(3) of the
Internal Revenue Code.
iv) 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.
d) Authorizes the state or local agency to require the
special district or nonprofit organization to submit a
report not more than once every 12 months that details the
stewardship and condition of the property and accompanying
funds.
e) Requires that the recording instrument for the title of
the property include a provision that if the state or local
agency reasonably determines that the property in not being
held, monitored, or stewarded for conservation purposes,
the property shall revert to the state or local agency or a
qualified and approved special district or nonprofit
organization.
2)Transferring Accompanying Funds
a) Defines "accompanying funds" as the funds for the
long-term stewardship of lands that may be conveyed for the
long-term stewardship of a property.
b) Authorizes a state or local agency that allows a special
district or nonprofit organization to hold and manage
mitigation property to also allow the same special district
or nonprofit organization to hold the property's
accompanying funds.
c) Requires the state or local agency to determine that the
holder of the accompanying funds meets all of the following
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requirements.
i) The holder has the capacity to effectively manage
the mitigation funds.
ii) 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.
iii) 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.
iv) The holder will be able to ensure that funds are
accounted for, and tied to, a specific property.
v) The holder has an investment policy that is
consistent with the Uniform Prudent Management of
Institutional Funds Act.
d) Requires the mitigation agreement that authorizes the
funds to be conveyed to a special district or nonprofit
organization to include a provision that requires the
accompanying funds held by a special district or nonprofit
organization to revert to the state or local agency if any
of the following occurs:
i) The special district or nonprofit ceases to exist.
ii) The special district or nonprofit is dissolved.
iii) The special district or nonprofit becomes bankrupt
or insolvent.
iv) The state or local agency determines that the
accompanying funds are not being held, managed, invested,
or disbursed for conservation purposes in the manner
specified in the mitigation agreement.
e) Repeals, on January 1, 2022, the provisions regarding a
special district or nonprofit organization holding
accompanying funds.
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3)Other Funds
a) Authorizes a state or local agency that allows a special
district or nonprofit organization to hold and manage
mitigation property to require an administrative endowment
from the project proponent for costs associated with
reviewing qualifications, approving holders, and regular
oversight of compliance and performance.
b) Authorizes a state or local agency to 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.
4)The Department
a) Requires, if the Department is the state agency, the
following conditions to apply to the holding, managing,
investment, expenditure, disbursement, and oversight of the
accompanying funds:
i) 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, and provides that the Department
shall not certify more than 10 special districts or
nonprofits to hold accompanying funds.
ii) 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.
iii) 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, who
may annually review independent audit or financial
statements, tax filings, or any other documents or
reports the Controller determines are necessary to verify
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the sound financial management of funds.
iv) All costs incurred by DFG or the Controller shall be
paid by the administrative endowment.
b) Repeals, on January 1, 2022, the provisions that are
specific to the Department.
FISCAL EFFECT : Unknown
COMMENTS :
1)Background. Under various laws, including the California
Environmental Quality Act and California Endangered Species
Act, a private party seeking a development permit may be
required to transfer an interest in real property, such as fee
title or a conservation easement, to a public agency to
mitigate the development's adverse environmental impacts. A
public agency in the development of its own project may also
be required to protect lands to mitigate adverse environmental
impacts. Existing law allows a public agency to authorize a
nonprofit organization to hold title to and manage mitigation
properties. Existing law, however, is silent on whether a
public agency may authorize a nonprofit organization to hold
and manage funds dedicated to mitigation activities on
mitigation land.
According to the author, there are many public agencies that
allow nonprofit organizations to hold funds for mitigation
lands. The Office of Legislative Counsel wrote an opinion in
2006 explaining that the Department is not prohibited from
authorizing a third party to hold and manage funds that are
set aside for the purpose of operating and managing mitigation
lands. This bill would expressly allow a public agency to
transfer funds to a nonprofit organization or special district
for the long-term stewardship of mitigation land. If funds
are transferred to a nonprofit organization or special
district, they shall revert back to the public agency or a
qualified organization if, among other things, the funds are
not being held, managed, invested, or disbursed for
conservation purposes in the manner specified in the
applicable mitigation agreement.
2)Similar Legislative. Similar legislation was introduced in
2006 (AB 2916, Assembly Water, Parks and Wildlife Committee),
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2007 (SB 1011, Hollingsworth), and 2009 (AB 444, Caballero).
AB 2916 and SB 1011 were both held on the Senate Appropriation
Committee's suspense file. AB 444 passed both houses with no
"no" votes; however it was vetoed by the governor with the
following veto message:
I am returning Assembly Bill 444 without my signature.
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.
For this reason I am unable to sign this bill.
AB 484 (Alejo), which is currently in the Senate Committee on
Natural Resources and Water, is substantially similar to this
bill.
3)Suggested Amendments. The author and committee may wish to
consider amendments that (1) delete the definition for
"exclusive department-named entity," which serves no purpose
in the current version of the bill, (2) delete the reference
to "cultural or historic resources" (see #1(c)(iv) of "THIS
BILL" in this analysis) since the property and funds in the
bill are only for the purpose of mitigating adverse impacts to
natural resources; (3) require an annual fiscal report that,
at a minimum, is the equivalent of a filed Internal Revenue
Service Form 990; (4) delete "notwithstanding" provisions in
the bill that may lead to overly broad interpretations; and
(5) clarify that monies received by the Department and
deposited into the Endowment Account and Expendable Funds
Account may be transferred to a nonprofit organization or
special district.
REGISTERED SUPPORT / OPPOSITION :
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Support
California Council of Land Trusts (sponsor)
Amargosa Conservancy
American Land Conservancy
American River Conservancy
Bay Area Open Space Council
Big Sur Land Trust
California Association of Local Agency Formation Commissioners
Catalina Island Conservancy
Center for Natural Lands Management
East Austin Creek Conservation Bank
Eastern Sierra Land Trust
Elkhorn Slough Foundation
Lake County Land Trust
Land Conservancy of San Luis Obispo County
Land Trust for Santa Bara County
Land Trust of Santa Cruz Councy
Marin Agricultural Land Trust
Mendocino Land Trust
Monterey County Board of Supervisors
Muzzy Ranch Conservation Company
Pacific Forest Trust
Palos Verdes Peninsula Land Conservancy
Placer Land Trust
Redlands Conservancy
Redwood Coast Land Conservancy
Sacramento Valley Conservancy
Sanctuary Forest
San Joaquin River Parkway and Conservation Trust
Save Mount Diablo
Sequoia Riverlands Trust
Sierra-Cascade Land Trust Council
Solano Land Trust
Southern California Open Space Council
The Nature Conservancy
The Trust for Public Land
T. J. Nelson & Associates, Inc.
Transition Habitat Conservancy
Transportation Agency for Monterey County
Tri-Valley Conservancy
Wildlife Heritage Foundation
Opposition
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Analysis Prepared by : Mario DeBernardo / NAT. RES. / (916)
319-2092