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 AB 2241 Page 2 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fee structure results in an increase in WA and FSZ contract rescissions from parties who would not otherwise have rescinded, total fee revenue would increase.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however, the revised fee structure results in a shift in WA and FSZ contract rescissions from parties who would have rescinded under the full fee structure (see comment 2 below) to the revised solar easement structure, total fee revenue would decrease.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 AB 2241 Page 3 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