BILL ANALYSIS Ó SB 1266 Page 1 Date of Hearing: June 19, 2012 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair SB 1266 (Corbett) - As Amended: May 25, 2012 SENATE VOTE : 31-8 SUBJECT : Resource conservation lands: appraisal process. SUMMARY : Lowers the expenditure threshold amount from $25 million to $15 million before an independent appraisal is required for state conservation land acquisitions, and specifies appraisal reporting requirements. Specifically, this bill : 1)Revises the definition of a major acquisition by lowering the expenditure threshold amount from $25 million to $15 million before an independent appraisal is required to determine fair market value (FMV) for conservation lands to be acquired by the Wildlife Conservation Board (WCB), Department of Parks & Recreation (DPR), or a state conservancy. 2)Requires the acquisition agency or project partner to contract for the independent appraisal. 3)Requires, for any proposed conservation land acquisition exceeding $1 million by the WCB, DPR or a state conservancy, that the acquisition agency or project partner contract for an appraisal. Permits the landowner or project partner to contribute to the costs of the appraisal and be identified as the intended user of the appraisal, and, until January 1, 2015, to be named as the co-client of the appraiser. 4)Requires all appraisals to meet specified statutory requirements and to conform to the Uniform Standards of Professional Appraisal Practice. 5)Requires appraisal reports for conservation land acquisitions to include specified information, including: a) Property photographs and maps, and market data; b) Data on development potential for any valuations; SB 1266 Page 2 c) A description of any development requirements; d) Evidence of market demand for development; and, e) Land title conditions and related appraisal reports. 6)Deletes obsolete provisions in existing law requiring the Department of General Services (DGS) to convene a working group to make recommendations on standards for the acquisition of conservation lands. 7)Defines "project partner" to mean a public agency or non-profit organization that is seeking state funding for itself or for another public agency or non-profit organization, from an acquisition agency for the acquisition of conservation lands. EXISTING LAW : 1)Requires an independent appraisal, contracted for by the acquisition agency, to determine the FMV in major acquisitions of conservation lands. Defines a major acquisition as an acquisition that costs $25 million or more in state funds. 2)Requires the acquisition agency, for major acquisitions, to hire a qualified independent appraiser to both review the independent appraisal and prepare an independent appraisal review report that shall be made publicly available at least 30 days prior to a public hearing to authorize a major acquisition of conservation lands. Requires that the appraisal and other relevant documentation be made publicly available not more than 10 working days after the close of escrow. 3)Prohibits the purchase price for any real property acquired by the WCB from exceeding the FMV of the property, as determined by an appraisal prepared by a licensed real estate appraiser and approved by the DGS. 4)Requires the DGS to convene a working group to develop and adopt standards for the acquisition of conservation lands. FISCAL EFFECT : Unknown COMMENTS : SB 1266 Page 3 Purpose of this bill . According to the author's office, "This bill establishes best practices for the state purchase of lands for conservation purposes. In doing so, this bill ensures that potential purchases are thoroughly and uniformly reviewed and the state gets the best value for its dollar." Background . From 2000 through 2009, the state spent $2.7 billion on acquisitions to purchase 1.5 million acres of conservation land and easements. These purchases help to meet state goals for wildlife habitat conservation, public recreation, and other ecosystem benefits. Current state law requires an appraisal that is reviewed and approved by DGS for each acquisition to determine FMV. Additional requirements for independent appraisals and independent appraisal reviews apply to major acquisitions that involve expenditure of over $25 million in state funds. This bill would revise the definition of major acquisitions by lowering the expenditure threshold amount to instead apply to land expenditures of $15 million or more. This bill also provides best practices for the preparation and review of appraisals for state purchases of conservation lands. This bill also requires that appraisals for all acquisitions involving state expenditure of $1 million or more be contracted for by the acquisition agency or the project partner. According to the Assembly Water, Parks and Wildlife Committee, the purpose of this requirement is to remove landowners from commissioning appraisals. The DGS reports that the single factor most common to rejected appraisals is that the appraisal was commissioned by the landowner. This bill would continue to allow landowners to contribute toward the cost of the appraisal, but would require that the appraisal be commissioned and contracted for by the agency or a project partner other than the landowner. This bill would also allow landowners to continue to be a co-client of the appraiser for a two-year period until 2015, so as to not disrupt existing agreements that are already under consideration by state acquisition agencies and for which the appraisal may already have been completed. This bill also deletes obsolete provisions of existing law requiring DGS to convene a working group to develop recommendations on standards for the acquisition process pursuant to SB 1285 (Corbett), Chapter 711, Statutes of 2008. The DGS adopted those recommendations on appraisal report SB 1266 Page 4 requirements for conservation lands acquired by WCB, DPR, or state conservations through the regulatory process in February 2012, and this bill codifies those regulations. On May 31, 2012, WCB recently adopted a policy that exceeds this bill's requirements by requiring independent appraisals, appraisal reviews, and a 30-day public notice of those reviews prior to the public meeting where the project will be considered, for WCB acquisitions that either cost $5 million or more, or are 5,000 acres or larger. The WCB policy also includes criteria for what must be included in an appraisal review report and the WCB will report on this policy after one year. The WCB indicates that the purpose of the policy is to provide additional disclosures and transparency with respect to acquisitions, and to demonstrate that the WCB conducts business in accordance with prescribed statutory requirements, professional industry standards, and with fiscal responsibility and accountability. Previous Legislation . SB 1285 (Corbett), Chapter 711, Statutes of 2008, added DPR and state conservancies to the acquisition agencies subject to the major acquisition requirements, and required DGS to convene a working group to develop recommendations on standards for the appraisal process. Support . According to the sponsor, the California Council of Land Trusts, "SB 1266 ensures appraisals contain all the necessary information for the state to conduct a comprehensive review of the potential purchase and determine a strong, competent and defensible value for the property. In addition, it makes other changes where there are opportunities to improve the appraisal process. By raising the standards and putting them in law, SB 1266 protects taxpayers' money and makes sure when the state undertakes conservation land purchases, the money is well spent." According to the Nature Conservancy, "This legislation will ensure that appraisals for acquisitions by the WCB, DPR, and the state conservancies contain the necessary information to permit these agencies to determine FMV and ensure the prudent expenditure of public dollars. SB 1266 seeks to raise the standards for the appraisal of conservation lands, thereby allowing for a comprehensive review of conservation real estate acquisitions. All parties benefit from strong, competent, and defensible valuations of real property. SB 1266 appropriately SB 1266 Page 5 seeks to build public confidence in transactions designed to advance conservation goals and provide a framework for fiscal accountability. In addition, the state will realize cost savings in the acquisition of conservation lands by continuing to allow 'project partners' to contract for appraisals." REGISTERED SUPPORT / OPPOSITION : Support California Council of Land Trusts (sponsor) Big Sur Land Trust Bodega Land Trust California Waterfowl Association Land Trust of Santa Cruz County Marin Agricultural Land Trust McKingleyville Land Trust Mendocino Land Trust Ojai Valley Land Conservancy Pacific Forest Trust Peninsula Open Space Trust Redwood Coast Land Conservancy Rocky Mountain Elk Foundation Save Mount Diablo Save the Redwoods League Sierra Foothill Conservancy Solano Land Trust The Conservation Fund The Nature Conservancy Wildlife Heritage Foundation Opposition None on file. Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916) 319-3301