BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2241
                                                                  Page  1

          Date of Hearing:   April 9, 2014

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                AB 2241 (Eggman) - As Introduced:  February 21, 2014 

          Policy Committee:                              
          AgricultureVote:6-0
                       Local Government                 Vote: 9-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              No

           SUMMARY  

          This bill changes the rescission fees charged for property  
          subject to a Williamson Act (WA) contract or a Farmland Security  
          Zone (FSZ) contract if parties to the contract mutually agree to  
          rescind and enter into a solar-use easement.  Specifically, this  
          bill:  

          1)Raises, from 6.25% to 10%, the rescission fee for exiting a WA  
            contract to enter into a solar-use easement.

          2)Lowers, from 12.5% to 10%, the rescission fee for exiting an  
            FSZ contract to enter into a solar-use easement.

          3)Allows counties to keep 50% of the amount of the rescission  
            fee for exiting a WA or FSZ contract instead of depositing  
            100% to the state's General Fund as is currently required.

           FISCAL EFFECT  

          1)  Fee Revenue.   Unknown effect on fee revenue to the Department  
            of Conservation and the state General Fund.  Fees generated by  
            WA and FSZ contract cancellations vary widely from year to  
            year depending on the number of cancellations and changes to  
            the fair market value of land subject to WA and FSZ contracts.  
             Between FY 1999-00 and FY 2012-13, rescission fees ranged  
            from a low of $106,811.51 in FY 2010-11 to a high of  
            $26,172,009.12 in FY 2005-06.  The average annual fees  
            collected over the period was $7,775,458.66.

            According to the Department of Conservation, the solar-use  








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            easement cancellation rate has thus far attracted one  
            applicant.  The remaining WA and FSZ contract rescissions were  
            subject to the full rescission fees, including those intending  
            to engage in solar projects.

            If the revised fee structure results in an increase in WA and  
            FSZ contract rescissions from parties who would not otherwise  
            have rescinded, total fee revenue would increase.  If,  
            however, the revised fee structure results in a shift in WA  
            and FSZ contract rescissions from parties who would have  
            rescinded under the full fee structure (see comment 2 below)  
            to the revised solar easement structure, total fee revenue  
            would decrease.

            For illustrative purposes only, assuming 5% of all WA land is  
            subject to an FSZ contract and 10% of full fee rescissions  
            over the above 14-year period had switched to the new solar  
            easement fee structure, the average annual fee revenue impact  
            would have been a total decrease of $183,811.85 in fees  
            collected, and a decrease in fees paid to the General Fund  
            (after accounting for 50% retained within the counties) of  
            $480,678.86.

          2)  Costs.   No costs to the Department of Conservation for  
            administration of the changes in fee structure.

           COMMENTS  

          1)  Purpose.   According to the author, "the implementation of  
            solar use easements has not been widely embraced.  WA contract  
            cancellations continue on prime farmland and one county has  
            decided to allow utility scale solar developments as a  
            compatible use based solely on the county's determination of  
            the soil capability, regardless of its soil classification or  
            the WA's definition of prime farmland."

            "AB 2241 proposes to change the rescission fee for solar use  
            easements to 10% for both WA and FSZ contracts and allows the  
            counties to retain half of the fee.  This would provide a  
            significant financial incentive for counties to implement the  
            solar use easement program."

          2)  Williamson Act Rescission Generally.   Current law allows  
            parties to a WA or FSZ contract to mutually agree to rescind  
            the contract, subject to a rescission fee collected by the  








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            county and deposited in the state General Fund.

            Under the current fee structure, the county must charge the  
            property owner a rescission fee of 12.5% of the fair market  
            value of the property at the time of the rescission if the  
            property was under a WA contract, and 25% of the fair market  
            value of the property at the time of the recession if the land  
            was under a FSZ contract.

          3)  Existing Solar Easements.   Current law allows parties to a WA  
            or FSZ contract covering marginally productive or physically  
            impaired agricultural land to mutually agree to rescind the  
            contract in order to simultaneously enter into a solar use  
            easement, subject to a lower rescission fee collected by the  
            county and deposited in the state General Fund.

            Under the current fee structure, the county must charge the  
            property owner a rescission fee of 6.25% of the fair market  
            value of the property at the time of the rescission if the  
            property was under a WA contract, and 12.5% of the fair market  
            value of the property at the time of the recession if the land  
            was under an FSZ contract.  Fees collected are deposited in  
            the state General Fund.

          4)  Staff Comment.   The author may wish to consider clarifying  
            whether cities rescinding a WA contract should be entitled to  
            retain 50% of the rescission fees as counties currently do.   
            There are currently several cities with Williamson Act  
            contracts.  Under the previous solar easement rescission law,  
            the county treasurer collected and deposited the rescission  
            fees.  This bill would effectively leave half of those fees  
            with the country treasurer even in cases where a city was the  
            contracting party.

           Analysis Prepared by  :    Joel Tashjian / APPR. / (916) 319-2081