BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair SB 618 (Wolk) Hearing Date: 05/16/2011 Amended: 05/11/2011 Consultant: Mark McKenzie Policy Vote: G&F 9-0 _________________________________________________________________ ____ BILL SUMMARY: SB 618 would authorize a city or county and a landowner to simultaneously rescind a Williamson Act contract on marginally productive or physically impaired lands and enter into a solar-use easement that restricts the use of land to photovoltaic solar facilities. Among other things, this bill would: Define "marginally productive" as parcels not used for agricultural purposes for the previous six years and consisting predominantly of soil with significantly reduced agricultural productivity due to chemical or physical limitations, as specified. Define "physically impaired land" as land with severely adverse soil conditions that are detrimental to continued agricultural cultivation and production, as specified. Require a designation of marginally productive or physically impaired to be based on substantial evidence and approved by the Secretary of Food and Agriculture. Require the term of a solar use easement to be at least ten years and specify that the contract automatically renews each year unless notice of nonrenewal is given by either party. Upon nonrenewal, the solar-use easement would continue for the balance of the term. The land must be restored to its original condition by the landowner if he or she initiates nonrenewal of a solar-use easement. Require any lead or responsible agency to expedite the review and issuance of any necessary permits for solar photovoltaic facilities located on marginally productive, physically impaired, or specified disturbed land. Authorize the Department of Conservation to adopt regulations necessary for the implementation of the bill. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund Cancellation fees Unknown, significant loss of cancellationGeneral/ SB 618 (Wolk) Page 1 fees (see staff comments) Special* Property reassessments Likely increase in property tax revenuesLocal/ related to reassessments (see staff comments) General DFA determinations unknown, potentially significant costs toGeneral make determinations of marginally productive or physically impaired lands DOC regulations one-time costs, likely exceeding $200Special* ____________ * Soil Conservation Fund _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. Existing law, the California Land Conservation Act of 1965 (Williamson Act), authorizes landowners to sign ten-year contracts with counties, agreeing to restrict a property's use to agriculture, open space, or compatible uses. In return for the agreement to keep the land out of development, the landowner benefits from reduced property tax assessments based on the property's use rather than its market value. These contracts renew automatically each year, unless the contract is ended through nonrenewal, cancellation, or termination. Under nonrenewal, either the landowner or the county may provide notice to not renew the contract. When the term of the contract runs out after nine years, the property is reassessed at its market value and land restrictions end. County officials can cancel a Williamson Act contract at a landowner's request if the board of supervisors finds that cancellation is consistent with the Act's purpose or in the public interest. A contract ends immediately upon cancellation and payment of cancellation fees by the landowner to the state in an amount equal to 12.5% of the property's unrestricted value. A contract can be rescinded when a board of supervisors cancels a Williamson Act contract and the SB 618 (Wolk) Page 2 landowner simultaneously enters into an agricultural conservation easement on other land of an equal or greater value. SB 618 would assist in efforts to meet the state's target of generating 33% of energy from renewable sources in the next decade by providing large parcels of land that may be better suited for installation of solar photovoltaic facilities than agriculture or open space, while continuing the core mission of the Williamson Act by protecting prime farmland from development. This bill would provide for the rescission of a Williamson Act contract on marginally productive or physically impaired lands if a landowner simultaneously enters into a solar-use easement that restricts the use of land to photovoltaic solar facilities. Under current law, if a landowner wished to install photovoltaic solar facilities on land restricted by a Williamson Act contract, the landowner must request cancellation of the contract and pay any cancellation fees. For example, Kern County recently cancelled a Williamson Act contract on 6,047 acres of fallow agricultural land for the construction of the Maricopa Sun Solar Complex, a 700 megawatt solar photovoltaic project near Taft, requiring the landowner to pay $755,714 in cancellation fees. Staff notes that cancellation fees are deposited in the state General Fund, and approximately $2.5 million in cancellation fees are transferred to the Soil Conservation Fund to cover the Department of Conservation's (DOC) costs to administer the Williamson Act. As such, the contract rescission provided by the bill would result in foregone General Fund revenues because absent the bill, a landowner would pay cancellation fees in order to build solar photovoltaic facilities on land previously under a Williamson Act contract. The magnitude of this revenue impact is unknown and would depend upon the amount of land converted from Williamson Act contracts to solar-use easements that would otherwise go through the cancellation process, and the unrestricted value of that property. Existing law provides for an exclusion from the definition of new construction for active solar energy systems in the assessment of property for tax purposes. SB 618 affirms that the construction of solar photovoltaic facilities on land subject to a solar-use easement would qualify as an active solar energy system for purposes of the property tax exclusion. When the Williamson Act contract is rescinded pursuant to this bill, SB 618 (Wolk) Page 3 the property would be subject to reassessment. The Board of Equalization indicates that the assessed value of the property would likely increase, but probably not to full unrestricted fair market value because of the enforceable restriction on the use of the property due to the solar-use easement; the use of the property would be limited to the installation of solar facilities and the assessor would consider the restricted use when determining the value of the property. The magnitude of any property tax increase is unknown. Any benefit accrued to schools as a result of the increase in property tax revenues would provide relief to the state General Fund. SB 618 would authorize the Department of Conservation to adopt regulations to implement the bill. Considering the level of analysis related to determinations of what constitutes marginally productive or physically impaired land, and the detail involved in a new type of Williamson Act contract rescission, it is likely that DOC would adopt these regulations. DOC would likely incur costs exceeding $200,000 for legal, scientific, and administrative staff to carry the regulations package though the full Administrative Procedures Act process. The bill would also require the Secretary of Food and Agriculture to approve determinations that particular parcels qualify as marginally productive or physically impaired, as specified. Department staff indicates that it does not currently have staff with the scientific knowledge to make some of the determinations specified in the bill, such as soil and chemical analysis. The department would likely contract out for these services, or enter into an interagency agreement with another state agency, such as DOC, to provide staff necessary to make the required determinations. Staffing costs related to this provision are unknown and would depend upon the number, size, and location of parcels proposed for determination as marginally productive or physically impaired. Staff estimates these costs could be in the low hundreds of thousands annually. Lastly, the bill would require lead agencies and responsible agencies to expedite the review and issuance of any necessary permits for solar photovoltaic facilities. This provision would result in unknown cost pressures on various state agencies responsible for issuing permits related to the installation of these facilities by prioritizing these permits over other applicants. SB 618 (Wolk) Page 4