BILL ANALYSIS
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2009-2010 Regular Session |
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BILL NO: SB 1446 HEARING DATE: April 13, 2010
AUTHOR: Correa URGENCY: No
VERSION: As Introduced CONSULTANT: Bill Craven
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: Endangered and threatened species: incidental take
permits.
BACKGROUND AND EXISTING LAW
The California Endangered Species Act generally prohibits
activities that will "take" species that are listed as
candidate, threatened, or endangered as determined by the
California Department of Fish and Game (DFG) and California Fish
and Game Commission. One of the most significant exceptions to
this prohibition are lawful activities that obtain an
"incidental take" permit which establishes conditions and
mitigation when the take of listed species is necessary.
Section 2081 of the Fish and Game Code provides that as a
condition of an incidental take permit that the project
proponent must minimize and fully mitigate their impacts on
listed species. The section also requires project applicants to
ensure adequate funding to implement necessary mitigation and
monitoring. The precise mechanisms to provide adequate funding
are not specified.
DFG policy now emphasizes the importance of long-term funding of
the maintenance and management of the mitigation lands. This
long-term funding has often been secured through endowments, a
method of obtaining financial assurances that has generated some
opposition at the local level. Local governments have been
required to deposit cash into California's "special deposit
fund" to fund a perpetual endowment that generates sufficient
interest to ensure the long-term maintenance of the mitigation
lands.
In other contexts, state law provides for mechanisms other than
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endowments to provide financial assurances that a regulatory
mitigation plan is adequately funded. Examples include landfills
and surface mines, among others.
PROPOSED LAW
The purpose of this bill is to establish the process by which
specified local governments could set aside funds on an annual
basis (as opposed to funding an endowment) to pay for its
obligations under the state endangered species act. The level of
annual funding would be called a "maintence of effort."
Eligible public agencies include those without a termination
date and which certify to the department all of the following:
(1) That its accounting adheres to generally accepted accounting
practices; (2) That it has not had a budget deficit of greater
than 5 percent in either of the two immediately preceding fiscal
years; (3) That it is not in default on any outstanding general
obligation bonds; (4) That its bond rating is not lower than BBB
(if rated by Standard and Poor's) or Baa (if rated by Moody's).
If those criteria are met, then the public agency could certify
to DFG that it would appropriate sufficient money through its
annual budget process to fund its obligations under Section 2081
and the costs of monitoring compliance with and effectiveness of
those measures. The public agency would annually appropriate
funds necessary to maintain that level of funding.
The certification to DFG would be required to include the period
of time that the maintenance of effort would be in effect, the
amount that would be provided, a provision for termination or
modification of the funding to respond to materially changed
circumstances, and a separate certification that the maintenance
of effort is consistent with the agency's obligations under
these provisions of the state endangered species act.
ARGUMENTS IN SUPPORT
This bill, sponsored by Orange County, is not intended to reduce
the mitigation required for an applicant's projects. The author
and the sponsors have made it clear that legislation is only
intended to address a new fiscal arrangement for funding
mitigation. The problem, from the perspective of the sponsor, is
that it is not reasonable for a public agency to create an
endowment which is the estimated amount needed to generate
annual interest equivalent to the anticipated maintenance costs
in perpetuity. Orange County does not believe that it is
fiscally prudent to reserve such large sums for purpose of
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generating interest when those funds could be put to other
public purposes. In other words, the sponsors believe that
public agencies should be allowed to budget on an annual basis
for their costs to satisfy their mitigation obligations under
the state endangered species act.
Orange County estimates that it could potentially be required to
establish endowments for as much as $54 million for future road
and flood control projects, and $6.9 million for future waste
and recycling projects. It believes that negotiations with DFG
have delayed two public works projects in the county valued at
$31 million.
The California State Association of Counties believes that while
it may be appropriate for private entities to be required to
fund a mitigation endowment, that public agencies should be able
to budget annually for these costs.
In an example offered by the Association of General Contractors,
in support of the bill, it states that $20,000 worth of annual
maintenance work could lock up $400,000 in an endowment that
generates a 4% interest rate.
The California State Council of Laborers is concerned that even
though mitigation costs are carried out for many years, that
local governments must currently absorb much of those costs up
front, with out the ability to consider these expenses on an
annual basis.
The Southern California Contractors Association believes that SB
1446 provides an alternative way to create acceptable long term
financial assurance arrangements. It says that the endowment
requirement by DFG is delaying at least one project.
ARGUMENTS IN OPPOSITION
Opposition from conservation organizations does not dispute that
state law could improve the law with regard to how mitigation is
funded. However, these organizations have several problems with
the version of the bill now in print.
The California Native Plant Society believes the bill would
weaken the statutory commitment to ensure adequate funding for
mitigation by substituting "a promise of future funding."
Implicit in its letter is the notion that a promise of an annual
commitment in the budget is not the same as a commitment to
fully fund the mitigation. It is willing to co-operate with the
author in finding an acceptable approach that provides certainty
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that the mitigation will be fully funded.
A coalition of the California Council of Land Trusts, Audubon
California, Defenders of California, Trust for Public Land, and
the Planning and Conservation League made a similar point, as
well as raising additional issues.
This coalition opposes a funding mechanism that could be
dependent "solely upon a jurisdiction's certification that it
will provide funding, year in and year out, from now into the
indefinite future." As the coalition put it, "preferences,
priorities, and needs change over time and there are severe
limitations on constraining future decisions by local
officials."
Additionally, this coalition believes that the modification
provisions are too open-ended and should include an approval
process by DFG and a commitment for the project applicant to
continue to fund ongoing mitigation when it may want to
terminate or modify the agreement. The coalition is also
concerned with other "structural obstacles" that may exist in
public agencies that make the management of mitigation lands a
low priority. The coalition also expressed its willingness to
work with the author on acceptable language.
COMMENTS
The sponsors and Committee staff have had a series of
discussions about this bill. The sponsors have agreed to
consider alternatives to the language presently in the bill, and
consistent with that commitment, have proposed a concept to the
Committee that could provide the basis for new language.
At the same time, the sponsors have had a series of discussions
with the Department of Fish and Game. As a result, the
Department has nearly finished developing a pilot project that
would allow the county and other eligible public entities to
fund their mitigation obligations with an alternative to an
endowment that would provide funding for a period of three
years, according to technical background information it provided
the Committee. The purpose of the three year period is to
provide adequate time for the Department to remedy any default
by the local government without requiring the local government
to provide more funding than is necessary. The department's
pilot project proposal and concept described below which was
proposed by Orange County have similar content in many respects,
and contains several criteria that are in SB 1446.
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The concept as proposed by Orange County would allow a public
agency to establish a fund specifically designated to
temporarily finance all its long term habitat mitigation
maintenance measures in the event the public agency defaults and
does not perform those obligations itself as required by the
terms of a permit. The fund would not be used to fund
construction of a mitigation project but instead would be
available to fund management and monitoring actions after the
mitigation project has been completed or established.
The county proposes that the fund be based on a formula that
considers the geographic size of the local government and its
population. It proposes a formula of $0.15 per acre up to 2.6
million acres and $0.025 per resident in the service area of the
local government. Its concept is that a single pool of funds
would be sufficient to address the local government's long term
maintenance obligations for any project on which it fails to
perform the required maintenance.
Orange County's conceptual framework also includes a mechanism
by which DFG could access these funds upon default: When DFG
believes the local government is in default, it and the affected
local agency would jointly select a biologist who would report
on whether the mitigation requirements are or are not in
compliance with the permit requirements. If the report concludes
that the public agency is not in compliance, DFG would formally
notify the local government of the default and require
corrective actions. The local agency would have 30 days to
negotiate and resolve the list of deficiencies with DFG. The
corrective actions must be taken within 120 days unless an
extension is agreed to by the parties. If the local government
has not completed or is not diligently prosecuting the cure, DFG
would then be able to file a written demand that the local
government pay from the funding pool a sum sufficient to
complete the cure to the extent that the local government had
not done so during the 120 period. The funds would be paid
within 7 days and DFG would use those funds to complete the
cure.
The purpose of including the Orange County conceptual amendments
is not to signify a staff endorsement, but to indicate the
sponsor's commitment to continue working on a solution.
The suggested amendments, if acceptable to the Committee, would
provide a platform for continuing the work on this bill. Any
amendments would clearly be subject to review by the Committee.
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SUGGESTED AMENDMENTS
AMENDMENT 1
Delete existing text in bill.
AMENDMENT 2
It is the intent of the Legislature to establish one or
more optional alternatives for public agencies that would
ensure that those agencies fully fund their obligations on
an ongoing basis for habitat mitigation and the maintenance
and monitoring of that mitigation under Section 2081 of the
California Endangered Species Act. Such alternatives may
include, but are not limited to, options based on a formula
that considers the geographic size of the public entity and
its population, a letter of credit, a memorandum of
agreement, and other arrangements for financial assurances.
Any alternative must, at a minimum, provide a mechanism to
establish when a default of a public agency's mitigation
obligation has occurred, provide a mechanism for access to
the funds in the event of a default, and provide a
mechanism for the modification of any agreement that would
be approved by the department.
SUPPORT
Associated General Contractors of California
California State Association of Counties
California State Council of Laborers
League of California Cities
Los Angeles County Flood Control District
Orange County Board of Supervisors
Orange County Employees Association
Orange County Transportation Authority
Southern California Contractors Association
OPPOSITION
Audubon California
California Council of Land Trusts
California Native Plant Society
Defenders of Wildlife
Planning and Conservation League
Trust for Public Land
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