BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
444 (Caballero)
Hearing Date: 07/13/2009 Amended: 06/23/2009
Consultant: Mark McKenzie Policy Vote: L Gov 5-0
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BILL SUMMARY: AB 444 would authorize state and local agencies
to transfer any funds set aside for long-term management of land
acquired as environmental mitigation related to a development
project, if the interest in the land is transferred to a
qualified nonprofit organization (land trust). The bill would
also authorize a state or local agency to provide funds to a
land trust to acquire land or easements that satisfy the
agency's mitigation obligations.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Mitigation fund shift unknown, potentially significant shift of
Special*
funds from state to nonprofit
organizations
DFG regulations and $100 $200 $200 General/
ongoing administration
Special**
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* Special Deposit Fund in the PMIA
** Fish and Game Preservation Fund or General Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law allows the state and local governments to impose
conditions on developers during the permitting process to
mitigate the environmental impact of a development project,
which may include the transfer property to the public entity for
preservation purposes to offset the conversion of other property
for a development purpose. Rather than owning and maintaining
these lands, existing law authorizes the public entity to turn
the property over to nonprofit groups to manage the land, such
as public land trusts that meet specified qualifications. State
and local officials are required to review the qualifications of
nonprofits prior to transferring title to the property.
Existing law 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 Principal Account or the Fish and Game Mitigation and
Protection Expendable Funds Account, which are part of the
Special Deposit Fund within the State's Pooled Money Investment
Account (PMIA). The interest earned on endowment funds is to be
used, upon appropriation by the Legislature, to fund long-term
management of mitigation lands. SB 1538 (Steinberg), Chapter
411 of 2008, authorizes these funds to be moved to another
account within the State Treasury system to allow longer-term
investments, with the goal of increasing earnings over time, as
determined by DFG. That bill also authorizes DFG to retain
appropriate investment advisors acceptable to the State
Treasurer's Office to develop and maintain an investment
strategy.
Page 2
AB 444 (Caballero)
While existing law clearly authorizes a state or local agency to
transfer land or conservation easements to a nonprofit entity to
manage the property, there is no explicit authority to also
transfer any corresponding endowment funds that are dedicated
for management of the property. Despite this lack of explicit
statutory authority, Legislative Counsel has opined that the
authority to manage a real property interest that a state or
local public agency may grant to a nonprofit organization
includes both the authority to control and direct ongoing duties
related to the direct protection or stewardship of that real
property interest and the authority to control or direct funds
set aside for those purposes.
AB 444 would provide explicit authority for a state or local
public agency to convey any corresponding endowment funds to a
land trust when mitigation land or easements are transferred to
that entity. This bill would also authorize a state or local
agency to provide funds to a nonprofit organization to acquire
mitigation lands or easements, if that public agency is required
to protect an interest in real property to mitigate
environmental impacts related to its own project. The public
agency would be required to determine that a nonprofit has the
capacity to effectively manage the mitigation funds and achieve
a reasonable investment return, utilizes generally accepted
accounting practices, and has adopted an investment policy
consistent with the Uniform Management of Institutional Funds
Act. The public agency may require a report detailing the
management and condition of the property and accompanying funds,
and may also review the nonprofit's accounting documents or
require an audit, if the report indicates that conditions of the
mitigation or funding agreement have been violated. Any funds
would revert to the state or local agency if the nonprofit
ceases to operate, dissolves, goes bankrupt, or fails to perform
its duties. Staff notes a concern that funds that may have been
improperly spent would be unrecoverable.
To the extent that DFG shifts deposits of mitigation funds from
the State Treasury to nonprofit organizations pursuant to the
provisions of this bill, the Fish and Game Endowment and
Expendable Funds in the Special Deposit Fund of the PMIA would
see reductions in revenues and corresponding interest revenues.
There would also presumably be a corresponding reduction in DFG
workload associated with the management of the mitigation lands
and funds. Staff notes, however, that DFG would have the new
responsibility of negotiating and reviewing agreements and
monitoring the activities of nonprofits' activities related to
the management of these lands and endowment funds. DFG would
also need to update regulations to establish requirements and
procedures related to the management of the funds. DFG
indicates that initial costs would be approximately $770,000
over two years, with ongoing workload costs of approximately
$670,000 annually. These identified costs may be related to the
establishment and management of the entire program for
transferring mitigation lands and funds to nonprofits. Staff
estimates costs to update regulations would be in the range of
$100,000, while ongoing costs could be approximately $200,000
annually.
Staff notes that funds transferred to a nonprofit entity would
not be subject to the same restrictions and requirements imposed
on public agencies in the investment of public funds, which may
affect risk and returns associated with nonprofits' investments.