BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1266 (Corbett) - Resource conservation lands: appraisal
process
Amended: April 23, 2012 Policy Vote: NRW 6-2
Urgency: No Mandate: No
Hearing Date: April 30, 2012 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1266 would require that all acquisitions
proposed to use more than $1 million of state dollars have an
appraisal conducted by the acquisition agency or project
partner, reduce the threshold at which an acquisition is
considered "major" and thereby triggering specific requirements,
and establish additional criteria for any appraisal prepared for
the purchase of land by an acquisition agency.
Fiscal Impact:
Costs of $20,000 to $30,000 annually, most likely from
various bond funds (General Fund) for agencies to commission
an independent appraisal and appraisal review required for
major acquisitions.
Minimum costs between $30,000 and $90,000 annually, most
likely from various bond funds (General Fund) for agencies
to commission an appraisal to replace a landowner
commissioned appraisal.
Background: The state has an interest in acquiring and
maintaining lands for conservation purposes in order to support
wildlife, maintain and restore habitat, and provide public
access, recreation, and other purposes. From 2000 - 2009, the
state spent $2.7 billion to purchase 1.5 million acres of
conservation lands in fee title and easements. Current law
requires an "acquisition agency," defined as the Wildlife
Conservation Board (WCB), the Department of Parks and
Recreation, and all state conservancies, to take certain actions
before approving a "major acquisition," including contracting
for at least one independent appraisal, subjecting that
appraisal to review for particular criteria, and disclosing
specific information to the public. A "major acquisition" is
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defined as an acquisition proposing to use more than $25 million
of state funds. The appraisal must be conducted by a qualified
licensed member of the Appraisal Institute in a manner
consistent with the Uniform Standards of Professional Appraisal
Practice. Additionally, all acquisitions considered by the WCB
must be reviewed by the Department of General Services (DGS)
(FGC §1348.2).
SB 1285 (Corbett) Chapter 711/ 2008, in response to public
concern and a report from the Legislative Analyst's Office,
required DGS to convene a workgroup to develop and adopt
standards for appraisals of conservation acquisitions, subject
to the approval of the Natural Resources Agency. The workgroup
was directed to consider elements of the appraisal where
additional requirements and supporting information were likely
to improve the justification of the valuation, as well as
facilitate oversight. On February 22, 2012, DGS incorporated the
workgroup's recommendations into regulation (Title 2, California
Code of Regulations 1880).
Proposed Law: This bill would:
Lower the threshold for the definition of a "major
acquisition" from $25 million to $15 million.
Require that the appraisal for any acquisition proposing to
involve more than $1 million of state funds be conducted at
the request of the agency or the project partner.
Defines "project partner" as a public agency or nonprofit
seeking state funding from an acquisition agency for an
acquisition of conservation lands.
Codify recent regulations regarding the content of all
appraisals - including that the review must contain a thorough
description of the property including maps and pictures,
verifiable data on the development potential of the land, and
a statement indicating land title conditions investigated and
considered in the appraisal.
Staff Comments: From 2000-2010, there were 14 acquisition
projects that the state contributed between $15 million and $25
million. Recognizing that bond availability is decreasing for
the near future compared to the last decade, staff feels it is
reasonable to expect that that lowering the threshold of a
"major acquisition" from $25 million to $15 million could affect
one to two acquisitions a year. If an acquisition is defined as
major, the acquisition agency or project partner would be
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required to contract for an independent appraisal of the land as
well as an appraisal review. The cost to conduct an appraisal
and appraisal review can vary widely based on the size and
characteristics of the property and whether there are "specialty
interests" in the land including timber and water rights. As an
illustration, appraisals for the State Coastal Conservancy can
range from approximately $5,000 to $100,000 with reviews varying
from $1,000 to $20,000. While appraisals for larger acquisitions
are more likely to be on the higher end, the Wildlife
Conservation Board estimates that an "average" appraisal and
appraisal review costs together is in the range of $20,000 -
$30,000. This cost may be borne by the agency, in which case the
funding source is most likely bond funding (GF), although the
project partner may share the cost and may also work with the
landowner to pass on costs.
This bill also would require any acquisition in which more than
$1 million of state funds are proposed, to receive an appraisal
that is contracted by the project agency or project partner
opposed to the landowner. According to the author, most of the
appraisals rejected by DGS are commissioned by the landowner.
Therefore the intent of this provision is to require all
significant acquisitions to be evaluated by a non-landowner
commissioned appraisal. This provision of the bill may have a
widely variable effect on acquisition agencies, depending on how
often landowner commissioned appraisals are seen by a particular
agency and whether or not a landowner would be allowed to
jointly contract for the appraisal. Landowners occasionally want
to be a party to the appraisal contract in order to share in the
costs but also to sometimes avoid the perception of bias, the
same reason the state agency wants to be the commissioning
party. While appraisals commissioned by the landowner (either
solely or jointly) appear to represent a small portion of
appraisals, the larger acquisition agencies (such as WCB and the
Coastal Conservancy) may each need to commission an appraisal
for one to three additional projects a year at a total cost of
$30,000 to $90,000. Staff notes that this cost can be
substantially higher should landowners not be able to jointly
commission an appraisal or if landowners cannot share in the
cost of the appraisal (as nonprofits often do not have the cash
flow to commission appraisals without the landowner agreeing to
share in the costs).
This bill also establishes criteria which must be addressed in
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an appraisal used by an acquisition agency. While this criteria
may raise appraisal costs, this criteria is already required by
existing regulations thus these provisions will not impose a new
cost to the state.
Recommended Amendments: Staff recommends that the bill be
clarified as to the allowable role of the landowner in
contracting for an appraisal.