BILL ANALYSIS
AB 444
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Date of Hearing: April 14, 2009
ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE
Jared William Huffman, Chair
AB 444 (Caballero) - As Introduced: February 24, 2009
SUBJECT : Mitigation lands: long-term management funds
SUMMARY : Clarifies that funds set aside for long term
management of mitigation lands conveyed to a nonprofit
organization may also be conveyed to the nonprofit, and
authorizes 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.
EXISTING LAW :
1)Allows a state or local agency to authorize a nonprofit
organization to hold title to and manage an interest in real
property that:
a) the agency requires a property owner to transfer to
the agency to mitigate for adverse impacts on natural
resources caused by a project permitted by the agency, or
b) the agency is required by law to transfer to
mitigate an adverse impact upon natural resources caused
by the agency's own project.
2)Requires funds to be set aside to cover costs of long term
management of mitigation lands.
3)Requires funds received by the Department of Fish and Game
(DFG) for management of mitigation lands to be deposited in
the Fish and Game Mitigation and Protection Endowment Account
or the Fish and Game Mitigation Expendable Funds Account,
which are held in the State Special Deposit Fund. Requires
interest generated on endowment funds deposited in the former
account to be made available to DFG, upon appropriation by the
Legislature, to fund long-term management of habitat lands.
Funds other than endowment funds received by DFG and deposited
in the latter account are continuously appropriated to DFG for
expenditure for management of lands set aside for mitigation.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose : The author and sponsor have introduced this bill to
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clarify and affirm that nonprofits and special districts, if
authorized to do so by a state or local agency, may hold funds
dedicated for the long-term management of land or easements the
organization has accepted through the mitigation process. While
existing law allows nonprofits to manage the lands, current law
does not expressly address whether the nonprofit or special
district may also hold and manage the endowment funds set aside
for management of the property. According to the sponsor, the
California Council of Land Trusts, while it is common practice
of many public agencies to allow the nonprofit or special
district to hold the funds, there is no existing statute
providing explicit affirmation of this practice.
Does this bill change the law or simply clarify existing law ?
Legislative Counsel opined in a written opinion requested by
this committee in 2006 that existing Government Code Section
65965, which this bill would amend, already allows the state to
authorize nonprofit organizations to hold and manage funds set
aside for the purpose of long term management of mitigation
lands. They reached this conclusion by analyzing both
Government Code Section 65965 and Fish and Game Code Section
13014. Counsel concluded that the authority to "manage"
property under the existing language of Section 69565 implicitly
includes the authority to control and direct funds set aside for
those management purposes. Second, they concluded that Section
13014, which requires mitigation funds received by DFG to be
deposited in the Special Deposit Fund, only requires that
mitigation funds actually received by DFG be deposited in the
Fund, but that DFG may enter into an agreement authorizing a
third party to hold and manage the funds as long as the funds
are not actually "received" by DFG. Therefore, in Legislative
Counsel's opinion, existing law already allows a state agency,
including DFG, to enter into an agreement authorizing a
nonprofit organization to hold and manage mitigation funds set
aside for the long term management of the property.
Nevertheless, the lack of express authorization in the statute,
and the lack of clarity in the existing codes has led to
reluctance on the part of some state agencies, most notably DFG,
to allow third parties to hold and manage mitigation funds.
Requiring that the funds be held in the State Deposit Fund has
also created challenges to effective stewardship of conservation
lands for a number of land managers. The monies in these
accounts are invested through the State's Pooled Money
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Investment Account. Since endowment funds are designed to be
non-wasting accounts, where only the interest earned is
available for expenditure, the inability of the Pooled Money
Investment Account to earn higher rates of return has in the
past limited the amount of funds available for land management.
Land managers have also experienced delays in reimbursement
payments of up to six months to a year in some cases.
Prior Related Legislation : This committee in 2006 sponsored a
similar bill, AB 2916, that would have authorized DFG to enter
into agreements with eligible nonprofit organizations to hold
and manage endowment accounts, subject to specified standards
and conditions, including annual audit and reporting
requirements. Among other things, AB 2916 as amended would have
required DFG to adopt eligibility standards and guidelines for
fund managers, required that the funds be held in a non-wasting
endowment account, required fund managers to comply with
generally accepted accounting principles and to follow the
Uniform Prudent Investor Act, required the filing of an annual
audit and budget statement, and required that the agreement
include provisions for nonperformance and a successor process.
AB 2916 passed this committee on a bipartisan vote of 18-0, and
passed the Assembly on a vote of 79-0, but was ultimately held
on the Senate Appropriations Committee suspense file.
In 2007, SB 1011 (Hollingsworth) similarly proposed to allow DFG
to authorize a local public entity or nonprofit to hold and
manage mitigation endowment funds, subject to specified
conditions, including that the entity obtain department approval
of a plan for management and investment of the endowment funds
with preservation of the principal, maintain accurate records
and provide specified reports and annual audits, comply with the
Uniform Prudent Investor Act, and provide for funds to revert to
the state in the case of nonperformance. SB 1011 passed the
Senate Natural Resources and Water Committee on a vote of 9-4,
but was held on the Senate Appropriations Committee suspense
file.
AB 2046 (Blakeslee) in 2006 and AB 1246 (Blakeslee) in 2007
clarified the authority of state and local agencies to allow
nonprofit land trusts to accept and hold mitigation lands. Both
of these bills were enacted with unanimous bipartisan support.
Standards : As currently drafted, the only requirements AB 444
would place on nonprofit entities is that they be exempt from
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taxation under Section 501(c)(3) of the Internal Revenue Code
(IRC), and meet the requirements of a "qualified organization"
as defined in IRC Section 170(h)(3). A qualified organization
is a 501(c)(3) organization that also receives a substantial
part of its support from a governmental unit or in contributions
from the general public, meets the public support test, or is
controlled by an organization that meets those tests. In
addition, AB 444 would require that the organization have as its
principal purpose and activity the direct protection or
stewardship of natural, cultural or historic resources,
including, but not limited to, agricultural lands, wildlife
habitat, wetlands, endangered species habitat, open-space areas,
and outdoor recreational areas. Finally, this bill requires
that the agency exercise "due diligence" in reviewing the
qualifications of the nonprofit organization to manage the
funds, and authorizes but does not require the agency to adopt
guidelines to assist in that process. The committee may wish to
consider whether amendments should be added to also require that
the nonprofit entity comply with prudent investor standards,
file an annual report as required by the authorizing agency,
authorize the agency to require an audit, and provide a process
for a successor if necessary.
Arguments in Support : Supporters assert that passage of this
legislation will have the following beneficial affects: 1) will
strengthen and enhance habitat conservation efforts and the
resources available for long-term stewardship and management of
lands set aside for environmental mitigation, 2) will enable
better fiscal management, higher rates of return, more timely
disbursement of funds needed for land management, and reduced
administrative costs to state agencies, 3) will be mutually
beneficial for both land trusts and state agencies, by reducing
the administrative burden on agencies for day to day management,
and allowing them to focus instead on oversight and annual
review of management activities, 4) affirm a practice already
widespread in California, and 5) give local and state agencies
the discretion but not require that they follow this practice.
REGISTERED SUPPORT / OPPOSITION :
Support
California Council of Land Trusts (Sponsor)
Green California
California Coastal Coalition
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California League of Conservation Voters
California Outdoor Heritage Alliance
California State Parks Foundation
Defenders of Wildlife
Planning and Conservation League
Trust for Public Lands
Opposition
None on file.
Analysis Prepared by : Diane Colborn / W., P. & W. / (916)
319-2096