BILL ANALYSIS Ó
SB 1020
Page 1
Date of Hearing: June 15, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
SB
1020 (Wieckowski) - As Amended April 19, 2016
SENATE VOTE: 38-0
SUBJECT: Land use: mitigation lands.
SUMMARY: Specifies an additional action that park and open
space districts may take in order to meet mitigation
obligations. Specifically, this bill:
1)Adds to existing law, which provides that, if a state or local
agency, in the development of its own project, is required to
protect property to mitigate an adverse impact upon natural
resources, the agency may take any action that the agency
deems necessary in order to meet its mitigation obligations,
including, but not limited to, a number of items. This bill
adds to this list of permissible activities, as follows: if
the local agency is a park, park and open space, or open space
district formed pursuant to Public Resources Code 5500, et al.
(5500 districts), it may possess budget reserves in excess of
the funds required to do all of the following:
a) Meet mitigation obligations;
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b) Retain permanent stewardship and maintenance staff to
manage the resource;
c) Maintain mitigation obligations consistent with permit
requirements; and,
d) Ensure that if the mitigations are not maintained, the
state will not incur any financial liabilities from the
lack of mitigation.
2)Finds and declares all of the following:
a) The Department of Fish and Wildlife (DFW) construes
Sections 65966 and 65967 of the Government Code to require
all entities, including public entities and private
businesses and nonprofit corporations, to set aside
restricted endowments to guarantee the stewardship of lands
where conservation easements have been required;
b) In the case of the East Bay Regional Park District
(EBRPD), which is a nonenterprise, independent special
district with its own taxing authority and elected board of
directors, whose sole purpose is to acquire and manage land
for open space, public recreation, and natural resource
protection, endowment requirements need additional
consideration. For the reasons set forth below, a special
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statute is necessary with respect to the EBRPD;
c) Requiring entities established pursuant to Section 5500
of the Public Resources Code, such as the EBRPD, which
employs permanent police, rangers, and stewardship staff,
to fund endowments effectively doubles the cost burden on
local taxpayers for managing specified habitat enhancements
or conservation lands;
d) Requiring this agency to mitigate for its own public
projects and permanently put local tax dollars in
restricted endowment accounts increases the costs and
taxpayer obligations by millions of dollars;
e) The EBRPD is specifically required to manage public
parklands consistent with its master plan, as well as state
and federal regulatory requirements;
f) Furthermore, the EBRPD's ability to manage land for the
benefit of protected species and habitat has been
recognized by DFW, which has authorized the EBRPD to hold
and manage mitigation lands for third parties and the
state;
g) Permanently obligating local taxpayer funding toward
endowment accounts will significantly reduce the funds
available to invest in stewardship staff and the
appropriate management of habitat sensitive public lands;
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h) Consistent with existing law, the Legislature affirms
the authority of DFW to require local agencies to establish
endowments for the ongoing care and maintenance of lands
and projects resulting from mitigation practices; and,
i) It is the intent of the Legislature that DFW, as part of
mitigation and resulting endowment practices, administer
Section 65967 of the Government Code so as not to
unnecessarily obligate public resources for activities
otherwise performed as part of an agency's ongoing
responsibilities and operations.
EXISTING LAW:
1)Requires, pursuant to the California Endangered Species Act
(CESA) and DFW regulations implementing CESA, DFW to find that
the taking of an endangered species has been fully mitigated
before DFW issues an incidental take permit. A permit
applicant must ensure adequate funding to implement the
mitigation measures required under the permit and to monitor
compliance with, and the effectiveness of, those measures.
2)Provides that, if a state or local agency requires a project
proponent to transfer property to mitigate any adverse impact
upon natural resources caused by permitting the development of
a project or facility, the agency may authorize a governmental
entity, special district, a nonprofit organization, a
for-profit entity, a person, or another entity to hold title
to and manage that property.
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3)Defines "endowment" to mean the funds that are conveyed solely
for the long-term stewardship of a mitigation property.
4)Requires a mitigation agreement to govern the long-term
stewardship of the property and the endowment.
5)Requires any conservation easement created as a component of
satisfying a local or state mitigation requirement to be
perpetual in duration, as specified.
6)Requires, if an endowment is conveyed or secured at the time
the property is protected, all of the following to apply:
a) The endowment shall be held, managed, invested, and
disbursed solely for, and permanently restricted to, the
long-term stewardship of the specific property for which
the funds were set aside;
b) The endowment shall be calculated to include a principal
amount that, when managed and invested, is reasonably
anticipated to cover the annual stewardship costs of the
property in perpetuity; and,
c) The endowment shall be held, managed, invested,
disbursed, and governed, as specified, and consistent with
the Uniform Prudent Management of Institutional Funds Act.
7)Requires, if a local agency holds the endowment, the local
agency to do all of the following:
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a) Hold, manage, and invest the endowment, as specified;
b) Disburse funds on a timely basis to meet the stewardship
expenses of the entity holding the property; and,
c) Utilize accounting standards consistent with standards
promulgated by the Governmental Accounting Standards Board
or any successor entity.
8)Provides, if a state or local agency, in the development of
its own project, is required to protect property to mitigate
an adverse impact upon natural resources, the agency may take
any action that the agency deems necessary in order to meet
its mitigation obligations, including, but not limited to, the
following:
a) Transfer the interest, or obligation to restore and
enhance property, to a governmental entity, special
district, or nonprofit organization that meets specified
requirements;
b) Provide funds to a governmental entity, nonprofit
organization, a special district, a for-profit entity, a
person, or other entity to acquire land or easements, or to
implement a restoration or enhancement project, that
satisfies the agency's mitigation obligations; and,
c) Hold an endowment in an account administered by an
elected official provided that the state or local agency is
protecting, restoring, or enhancing its own property.
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FISCAL EFFECT: None
COMMENTS:
1)Bill Summary. This bill attempts to create an alternative to
endowments that EBRPB can use as a financial security to meet
its requirements when development on its lands requires
environmental mitigation. The bill adds to an existing code
section that states that, if a state or local agency, in the
development of its own project, is required to protect
property to mitigate an adverse impact upon natural resources,
the agency may take any action that the
agency deems necessary in order to meet its mitigation
obligations, including, but not limited to, a number of items.
This bill adds to this list of permissible activities,
providing that, if the local agency is a park and open space
district (5500 district), it may possess budget reserves in
excess of the funds required to do all of the following:
a) Meet mitigation obligations;
b) Retain permanent stewardship and maintenance staff to
manage the resource;
c) Maintain mitigation obligations consistent with permit
requirements; and,
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d) Ensure that if the mitigations are not maintained, the
state will not incur any financial liabilities from the
lack of mitigation.
The bill makes a number of findings and declarations regarding
the impact of endowment requirements on EBRPD and declares the
intent of the Legislature that DFW, as part of mitigation and
resulting endowment practices, administer existing law
governing mitigation requirements so as not to unnecessarily
obligate public resources for activities otherwise performed
as part of an agency's ongoing responsibilities and
operations. This bill is sponsored by EBRPB.
2)Author's Statement. According to the author, "In recent
years, open space and parks districts have been required to
set aside endowment funds for the long-term management of
mitigation lands. Endowment funds are secured in a 'lock-box'
and essentially serve as a guarantee that land will be
permanently protected. Requiring these districts to spend
general fund monies to steward and operate public lands in
addition to setting aside permanent endowment funds is
inefficient and does not further the purpose of preserving
open space and is duplicative of the districts' sole purpose
for existing.
"In cases such as the East Bay Regional Park District, which
has an over 80 year history
of responsible fiscal and environmental governance and a
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dedication policy to steward parklands in perpetuity, it is
unreasonable to require districts to set aside mitigation
funds which could be better used for staffing to actually
manage protected land."
3)Background. Under existing law, public agencies that conduct
or approve projects that have significant environmental
impacts are required to obtain permits from various government
agencies. As a condition of receiving the permits, the public
agency is required to mitigate for the environmental impacts.
The mitigation may take the form of setting aside other
resource conservation lands. When lands are set aside in
mitigation, the law requires that the mitigation lands be
protected in perpetuity.
An endowment provides a means of ensuring that funding will be
available to provide for the long-term stewardship of the
mitigation lands in perpetuity. Typically, the interest on
the principle is used to fund the annual management costs.
If an entity fails to meet its mitigation obligations, the
land and the cost of maintaining it revert to the state.
4)DFW and Incidental Take Permits (ITPs). Existing law grants
DFW the authority to issue ITPs for species listed under CESA
that will be affected by a development project only if certain
criteria are met. These criteria include, among others, that
the impacts of the authorized take are minimized and fully
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mitigated; and, that adequate funding is provided to implement
the required minimization and mitigation measures and to
monitor compliance with and the effectiveness of the measures.
Existing law grants DFW the authority to determine the terms
and conditions of the permit, which must ensure that the
criteria for issuing ITPs are met.
Measures to minimize the take of species covered by an ITP and
to mitigate the impacts caused by the take will be set forth
in one or more attachments to the ITP. This attachment will
generally be a mitigation plan prepared and submitted by the
permittee in coordination with DFW staff. The mitigation plan
should identify measures to avoid and minimize the take of
CESA-listed species and to fully mitigate the impact of that
take.
These measures vary from project to project, and often include
endowments for management of the lands in perpetuity. While
applicants may propose alternative strategies for minimizing
and fully mitigating impacts, DFW must be able to conclude
that the project's impacts are fully mitigated and the
measures, when taken in aggregate, meet the full mitigation
standard.
If all mitigation and monitoring will not be completed prior
to the start of activities that will affect CESA-listed
species, a trust account or other form of security acceptable
to DFW must be established to ensure that funding is available
to carry out mitigation measures and monitoring requirements
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in the event the applicant fails to complete these activities.
DFW generally requires that the performance security be in
the form of an irrevocable letter of credit, surety bond, a
bank trust (or escrow) account, or another form of security
approved in writing in advance by DFW's Office of General
Counsel.
5)Recently-Listed Species and Impact to EBRPD. Approximately
five years ago, a species of salamander (the California tiger
salamander) was added to CESA's listing of threatened species.
Last year, DFW issued an ITP for that species (and the
Alameda whipsnake) for a project that will restore ponds and
construct recreational facilities in the district's Vargas
Plateau Regional Park. To mitigate this take, the permit
allows EBRPD to either purchase covered species credits from a
DFW-approved mitigation or conservation bank, or to
permanently protect and manage habitat management lands. The
latter option requires EBRPD to establish an endowment fund.
There is an apparent disagreement between DFW and EBRPD
regarding the necessary amount for this particular endowment,
which the ITP estimates at approximately $47,700, but EBRPD
estimates at $600,000. According to EBRPD, the amount is
still being negotiated between the parties and an endowment
has not been established to date.
In addition, there is dispute regarding EBRPD's anticipated
endowment requirements during the next five years, which the
district has calculated at $9.75 million for 16 projects
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(including the Vargas Plateau project).
6)Policy Considerations. The Committee may wish to consider the
following:
a) Ongoing Discussions. According to the sponsor and
opponents, discussions are ongoing between them and DFW to
determine an alternative funding mechanism that is
agreeable to all parties. A coalition letter from the
California Council of Land Trusts, the Center for Natural
Lands Management, Defenders of Wildlife, the Nature
Conservancy, and the Wildlife Heritage Foundation dated
June 10 states, "DFW made a commitment (last month) to
convene a working group to consider and develop a
longer-term solution while working with the sponsors to
resolve their specific issue. It is our understanding DFW
has recently taken steps to fulfill these commitments?(A)
number of concepts exist that would directly address the
issue raised by the proponents.
"The endowment issue is complex in terms of financial
tools, assurances, legalities, enforcement, criteria,
eligibility, authorities of different types of entities,
short- and long-term resources, how to bind future
governing bodies of an agency, and how enforcement of legal
defense are funded in the absence of endowments. These
complexities cannot be addressed within the few remaining
months of this legislative session. In a further
expression of faith on this issue, DFW committed to a
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short-term commitment to annual management funding (instead
of an endowment) for the sponsor for up to a two-year
period to provide the parties sufficient time to secure a
longer-term fix." Given these ongoing discussions, the
Committee may wish to consider whether this bill should
proceed concurrently, or whether it is premature to enact
legislation on this issue.
b) Endowments and Alternatives. The purpose of endowments
is to ensure guaranteed funding for the perpetual
stewardship of mitigation lands. Endowments are generally
accepted as the most conservative, secure funding source
when compared to other funding sources for mitigation
lands. The Committee may wish to consider whether
alternatives to endowments provide adequate financial
protections to ensure that mitigation requirements will be
fulfilled in perpetuity and not become responsibilities
of the state.
c) Slippery Slope. The proponents of this bill argue that
parks and open space districts, because of their mission
and goals, should not be required to set aside endowments.
The Committee may wish to consider whether an exemption
from endowment requirements for park and open space
districts is merited, and whether it will invite other
agencies to seek similar or identical exemptions.
d) Drafting Questions. This bill adds language to an
existing section in the Government Code that states
(emphasis added):
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"If a state or local agency, in the development of its own
project, is required to protect property to mitigate an
adverse impact upon natural resources, the agency may take
any action that the agency deems necessary in order to meet
its mitigation obligations, including, but not limited to,
the following:
i) Transfer the interest, or obligation to restore and
enhance property, to a governmental entity, special
district, or nonprofit organization that meets specified
requirements;
ii) Provide funds to a governmental entity, nonprofit
organization, a special district, a for-profit entity, a
person, or other entity to acquire land or easements, or
to implement a restoration or enhancement project, that
satisfies the agency's mitigation obligations; and,
iii) Hold an endowment in an account administered by an
elected official provided that the state or local agency
is protecting, restoring, or enhancing its own property.
It is not clear that existing law, or this bill, abrogates
any permittee from its "mitigation obligations" as required
by a permitting agency. If existing law does allow an
agency to meet its mitigation requirements by taking "any
action that the agency deems necessary...including, but not
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limited to" the three existing options, this bill is
unnecessary. On the other hand, if existing law allows
these listed items to be pursued only if they meet the
agency's mitigation obligations, this bill would not
nullify an agency's obligations to meet the requirements of
a permit. The Committee may wish to consider whether this
bill, as drafted, achieves the intent of the proponents.
7)Previous Legislation. AB 1799 (Gordon) of 2014, would have
exempted a governmental entity or special district from the
requirement to provide an endowment for long-term stewardship
of mitigation lands if the entity provided evidence that it
possessed an investment-grade credit rating and provided a
resolution or contractual agreement to enforce the mitigation
requirements. AB 1799 was held in the Assembly Appropriations
Committee.
SB 1094 (Kehoe), Chapter 705, Statutes of 2012, as a technical
clean-up to SB 436, modified provisions related to mitigation
agreements and the entities that may hold endowments dedicated
to mitigation lands, and expanded the eligible entities
authorized to hold title, manage property, and hold endowments
related to mitigation lands.
SB 436 (Kehoe), Chapter 590, Statutes of 2011, authorized a
state or local agency to allow a qualified and approved
nonprofit organization or special district to hold property
and long-term stewardship funds to mitigate adverse impacts to
natural resources caused by a permitted development project.
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AB 484 (Alejo) of 2011, was substantially similar to AB 444
(Caballero) and passed this Committee on a 9-0 vote. AB 484
was subsequently amended to address a different subject.
AB 444 (Caballero) of 2009, would have clarified that funds
set aside for long-term management of mitigation lands
conveyed to a nonprofit organization may also be conveyed to
the nonprofit, and would have authorized the nonprofit to
hold, manage, invest, and disburse the funds for management
and stewardship of the land or easement for which the funds
were set aside. AB 444 was vetoed by Governor Schwarzenegger
because of the lack of adequate fiscal assurances.
AB 2746 (Blakeslee), Chapter 577, Statues of 2006, and AB 1246
(Blakeslee), Chapter 330, Statutes of 2007, clarified the
authority of state and local agencies to allow nonprofit land
trusts to accept and hold mitigation lands.
SB 1011 (Hollingsworth) of 2007, would have allowed DFG to
authorize a local public entity or a nonprofit to hold and
manage mitigation endowment funds, subject to specified
conditions. SB 1011 was held in the Senate Appropriations
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Committee.
AB 2916 (Water, Parks and Wildlife Committee) of 2006, would
have authorized the Department of Fish and Game (DFG - now
named DFW) to enter into agreements with eligible nonprofit
organizations to hold and manage endowment accounts, subject
to specified standards. AB 2916 was held in the Senate
Appropriations Committee.
8)Arguments in Support. The East Bay Regional Park District,
sponsor of this measure, states, "Mitigation for habitat
impacts and endowments are important tools for ensuring proper
stewardship of California's natural resources. For 82 years,
EBRPD has been trusted with the responsibility to manage
habitat and parklands for the benefit of the public. EBRPD
has been a strong partner with the state in ensuring proper
mitigation, and actually holds endowments for projects in the
East Bay.
"EBRPD's ability to manage land for the benefit of protected
species and habitat has been recognized by the CDFW, which has
authorized EBRPD to hold and manage mitigation lands for third
parties and the state. CDFW asserts, however, that when EBRPD
implements a project on its own land (i.e. a three acre
staging area) it must mitigate, manage the mitigation AND lock
up general fund operational dollars in an endowment.
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"Requiring Public Resource code 5500 entities - such as the
EPRPD, which employs permanent police, rangers and stewardship
staff - to fund endowments would effectively double the cost
to local tax payers for managing specified habitat
enhancements or conservation lands. It would increase tax
payer obligations by millions of dollars AND significantly
reduce the funds available to actually carry out proper
stewardship and appropriate management of the very sensitive
habitats we are all seeking to protect. Permanently
restricting funds in endowments also limits the District's
overall ability to fund critical infrastructure projects and
open space acquisitions. It is the fiduciary equivalent of
robbing Peter to pay Paul.
"EPRPD is looking forward to working with committee, staff and
members of the Legislature to explore solutions which
encourage the CDFW, as part of mitigation and resulting
endowment practices, to exercise discretion and creativity in
administering this section of law. As stewards of the
public's financial resources, the Legislature has an
obligation to ensure tax dollars are wisely used by Public
Resource Code districts to fulfill their ongoing
responsibilities and operations."
9)Arguments in Opposition. The California Council of Land
Trusts, Center for Natural Lands Management, Defenders of
Wildlife, Sequoia Riverlands Trust, Sierra Foothill
Conservancy, Solano Land Trust, the Nature Conservancy, and
the Wildlife Heritage Foundation, in opposition, write,"?our
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strong objection to this bill is that it inevitably opens the
door to a myriad of exceptions for every agency not wishing to
meet mitigation endowment requirements - a policy that has
been rejected on three previous occasions in both houses of
the California Legislature.
"Decades of state policy have resulted in the basic principle
of mitigating the loss of, or damage to natural resources when
a project is developed. One typical result is the setting
aside of land that is equivalent in size and natural resources
quality as the land being lost or damaged. The issuance of a
building or other permit is based on the mitigation being
performed and continuing to exist in perpetuity. In order to
provide the funds necessary for the longterm stewardship of
that mitigation land, the project proponent can be required by
the permitting agency requiring the mitigation to convey funds
that are managed as an endowment...
"SB 1020 will inevitably exempt public agencies, including
special districts such as water or parks districts, from
permitting agencies imposing obligations to ensure the ongoing
management of mitigation lands. Annual budgets by entities
within these categories can, and do, vary dramatically from
yeartoyear. Additionally, statutorily providing this
exemption creates an unlevel playing field in which one class
of project proponents is treated differently from other
project proponents.
"Government Code Section 65966(b), which was enacted into law
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four years ago by SB 1094 (Chapter 705, Statutes of 2012),
expressly provides that other methods of funding for the
longterm stewardship of the property shall not be precluded as
funding options (such as performance bonds, for example) for
the longterm stewardship of the mitigation property. Yet, SB
1020 jumps completely past other funding mechanism options to
completely exempt selected public parties from any form of
dedicated financial assurance for mitigation lands."
10)Double-Referral. This bill is double-referred to the Water,
Parks and Wildlife Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
East Bay Regional Park District [SPONSOR]
Santa Clara Valley Water District
Save Mount Diablo
Opposition
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California Council of Land Trusts
Center for Natural Lands Management
Defenders of Wildlife
Sequoia Riverlands Trust
Sierra Foothill Conservancy
Solano Land Trust
The Nature Conservancy
Wildlife Heritage Foundation
Analysis Prepared by:Angela Mapp / L. GOV. / (916)
319-3958