BILL NUMBER: SB 436 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 26, 2011
AMENDED IN ASSEMBLY JULY 13, 2011
AMENDED IN ASSEMBLY JUNE 22, 2011
AMENDED IN SENATE MAY 31, 2011
AMENDED IN SENATE MAY 2, 2011
AMENDED IN SENATE MARCH 24, 2011
INTRODUCED BY Senator Kehoe
(Principal coauthor: Assembly Member Alejo)
(Coauthor: Assembly Member Chesbro)
FEBRUARY 16, 2011
An act to amend Section 65965 of, to add Section 65969
to, and to add, repeal, and add Sections 65966, 65967, and 65968 of,
the to add Sections 65966 and 65967 to, and to add and
repeal Sections 65968 and 65968.01 of, the Government Code,
relating to land use.
LEGISLATIVE COUNSEL'S DIGEST
SB 436, as amended, Kehoe. Land use: mitigation lands: nonprofit
organizations.
The Planning and Zoning Law authorizes a state or local public
agency, if the agency requires a property owner to transfer to the
agency an interest in real property to mitigate an adverse impact
upon natural resources caused by permitting the development of a
project or facility, to authorize a nonprofit organization to hold
title to and manage that interest in real property, provided that the
nonprofit organization meets specified requirements.
This bill would revise these provisions and would , until
January 1, 2022, authorize a state or local public agency
to provide funds to a nonprofit organization to acquire land or
easements that satisfy the agency's mitigation obligations, including
funds that have been set aside for the long-term management of any
lands or easements conveyed to a nonprofit organization, as
specified. This bill would , until January 1, 2022,
require a nonprofit organization that holds funds on behalf of the
Department of Fish and Game , or a special district or nonprofit
organization that holds funds on behalf of a state or local agency,
for the long-term management of land to comply with certain
requirements, including certification by the department, and
oversight by the Controller under specified circumstances. The bill
would also state the findings and declarations of the Legislature
with respect to the preservation of natural resources through
mitigation, and would state that it is in the best interest of the
public to allow state and local public agencies and nonprofit
organizations to utilize the tools and strategies they need for
improving the effectiveness, cost efficiency, and durability of
mitigation for California's natural resources.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) State and local laws protect a variety of natural resources,
and also require permits to be issued for the development of certain
projects or facilities.
(b) In furtherance of these laws, state or local public agencies
may require a project proponent to transfer an interest in real
property to mitigate any adverse impact upon natural resources caused
by permitting the development of a project or facility.
(c) It is a widespread practice that funds are set aside for the
long-term stewardship of the property protected for mitigation
purposes by the project proponent at the time the property is
protected.
(d) Lands and real property interests that are protected to
achieve the mitigation may be held by public agencies, special
districts, nonprofit organizations, or other entities, including
for-profit corporations entities .
(e) Many state and local agencies work with special districts,
nonprofit organizations, and property owners in valuable and
cost-effective public-private partnerships to identify properties
that meet the mitigation requirements and to hold and provide
long-term stewardship of the real property interests.
(f) There are tools and strategies available for improving the
effectiveness, cost efficiency, and durability of mitigation for
California's natural resources.
(g) Identifying mitigation needs on a regional basis may expedite
the planning and mitigation processes, as well as ultimately
result resulting in consolidated mitigation
areas that can be managed more cost-effectively.
(h) It is in the best interest of the public, project proponents,
and local communities to ensure that the public benefits of
mitigation are achieved and enduring.
(i) It is in the best interest of the public to allow public
agencies, special districts, nonprofit organizations, and property
owners to utilize the tools and strategies they need for improving
the effectiveness, cost efficiency, and durability of mitigation for
California's natural resources.
(j) It is important that entities that are qualified as to
experience, capacity, and knowledge hold and manage property for
mitigation purposes and any accompanying funds.
(k) There are numerous benefits, including decreased financial
risk, creation of efficiencies, and maintaining partnerships, for the
real property and associated long-term funding to be held and
managed by the same entity.
(l) The state recognizes that it is widespread practice for the
holder of a mitigation property to also hold and manage the long-term
funding dedicated to the property.
(m) The state seeks strategies that allow and provide for this
practice to continue while providing appropriate standards and public
oversight to ensure that the funds endure for the long-term
stewardship of the protected property and its associated natural
resources.
(n) California has a number of strong protections in place to
ensure that nonprofit organizations properly manage their charitable
resources and assets held in trust. These protections include, but
are not limited to, the state's Nonprofit Corporation Law that
identifies the nonprofit governing body's obligations to protect the
assets and mission of the nonprofit, and the provision that the
governing body is jointly and severally liable for any failure to do
so. In addition, the Attorney General has enforcement rights and
obligations regarding noncompliance, mismanagement, or misuse of
endowment funds, including the recovery of any endowment funds.
(o) The management of endowment funds by California nonprofit
organizations is governed by the Uniform Prudent Management of
Institutional Funds Act (Part 7 (commencing with Section 18501) of
Division 9 of the Probate Code).
(p) The Uniform Prudent Management of Institutional Funds Act
recognizes the distinction between permanently restricted funds and
temporarily restricted funds and imposes requirements for each. Both
types of funds are relevant to the management of funds for the
long-term stewardship of land.
(q) The goal of managing funds held for the long-term stewardship
of land is to achieve intergenerational equity as embodied in the
Uniform Prudent Management of Institutional Funds Act and extensively
cited in the financial literature. Considerable guidance is provided
in the act about achieving this objective.
(r) While nonprofit organizations must manage endowment funds
according to the Uniform Prudent Management of Institutional Funds
Act, to the extent feasible and permissible, the same principles and
guidelines, including the goal of managing for intergenerational
equity, should guide all holders of long-term endowment funds
including public agencies and special districts.
SEC. 2. Section 65965 of the Government Code is amended to read:
65965. For the purposes of this chapter, the following
definitions apply:
(a) "Accompanying funds" means the funds for the
long-term stewardship of lands that may be conveyed for the
long-term stewardship of a property.
(b) "Conservation easement" means a conservation easement created
pursuant to Chapter 4 (commencing with Section 815) of Title 2 of
Part 2 of Division 2 of the Civil Code.
(c) "Department" means the Department of Fish and Game.
(d) "Direct protection" means the permanent protection,
conservation, and preservation of lands, waters, or natural
resources, including, but not limited to, agricultural lands,
wildlife habitat, wetlands, endangered species habitat, open-space
areas, or outdoor recreational areas.
(e) "Mitigation agreement" means a written agreement between a
public agency, the project proponent, and the special district,
nonprofit organization, for-profit entity, or other entity
that holds the property. A mitigation agreement shall
govern governs the long-term stewardship of a
property and accompanying funds, and shall specify any reporting
requirements or elements, including due dates of reports.
(f) "Project proponent" means an individual, business entity,
agency, or other entity that is developing a project or facility and
is required to mitigate any adverse impact upon natural resources.
(g) "Property" means fee title land or any partial interest in
real property, including a conservation easement.
(h) "Special district" means any special district formed pursuant
to Article 3 (commencing with Section 5500) of Chapter 3 of Division
5 or Division 26 (commencing with Section 35100) of the Public
Resources Code , or any resource conservation district organized
pursuant to Division 9 (commencing with Section 9001) of the Public
Resources Code .
(i) "Stewardship" encompasses the range of activities involved in
controlling, resource and compliance monitoring,
and managing for conservation purposes a property, or a conservation
or open-space easement, as defined by the terms of the easement, and
its attendant resources.
SEC. 3. Section 65966 is added to the
Government Code , to read:
65966. (a) Any conservation easement created as a component of
satisfying a local or state mitigation requirement shall be perpetual
in duration, whether created pursuant to Section 51075 of this code
or Section 815 of the Civil Code, and shall be deemed to be
"voluntarily created" and "conveyed" as those terms are used in
Sections 815.2 and 815.3 of the Civil Code.
(b) Any local or state agency that requires property to be
protected pursuant to subdivision (a) or (b) of Section 65967 shall
identify how the funding needs of the long-term stewardship of the
property will be met. If funds are set aside at the time the property
is protected, all of the following shall apply:
(1) The accompanying funds shall be held, managed, invested, and
disbursed solely for the long-term stewardship of the specific
property for which the funds were set aside.
(2) The accompanying funds shall be calculated to include a
principal amount that, when managed and invested, will produce
revenues that are reasonably sufficient to cover the annual
stewardship costs of the property in perpetuity.
(3) The principal amount shall be defined and managed as
permanently restricted funds.
(4) Any one-time payment, as defined by subdivision (f), and
earnings from the principal shall be managed as temporarily
restricted funds.
(5) The accompanying funds shall be held, managed, invested, and
disbursed consistent with the Uniform Prudent Management of
Institutional Funds Act (Part 7 (commencing with Section 18501) of
Division 9 of the Probate Code).
(c) If a state or local agency holds the accompanying funds, the
state or local agency shall do all of the following:
(1) Hold, manage, and invest the accompanying funds consistent
with subdivision (b) to the extent allowed by law.
(2) Disburse funds on a timely basis to meet the stewardship
expenses of the entity holding the property.
(3) Utilize accounting standards consistent with standards
promulgated by the Governmental Accounting Standards Board.
(d) A special district or a nonprofit organization that holds
funds pursuant to this chapter, including, but not limited to,
accompanying funds, moneys to acquire land or easements, or moneys
for initial stewardship costs, shall provide the local or state
agency with an annual fiscal report that contains at least the same
information as required by Internal Revenue Service Form 990
regarding the funds.
(e) If a state or local agency authorizes a special district or
nonprofit organization to hold property pursuant to subdivision (a)
or (b) of Section 65967, the agency may require an administrative
endowment from the project proponent, as a one-time payment for
reasonable costs associated with reviewing qualifications, approving
holders, and regular oversight of compliance and performance. The
administrative endowment shall be held, managed, and invested to
produce an annual revenue sufficient to cover the costs of reviewing
qualifications, approving holders, and ongoing oversight.
(f) A state or local agency may require a project proponent to
provide a one-time payment that will provide for the initial
stewardship costs for up to three years while the endowment begins to
accumulate investment earnings. The funds for the initial
stewardship costs are distinct from the funds that may be conveyed
for long-term stewardship, construction, or other costs. If there are
funds remaining at the completion of the initial stewardship period,
the funds shall be conveyed to the project proponent.
(g) The state or local agency may contract with or designate a
qualified third party to do any of the following:
(1) Review the qualifications of a special district or nonprofit
organization to effectively manage and steward natural land or
resources pursuant to subdivisions (c) and (d) of Section 65967.
(2) Review the qualifications of a nonprofit to hold and manage
the accompanying funds that are set aside for long-term stewardship
of the property.
(3) Review reports or other performance indicators to evaluate the
stewardship of lands, natural resources, or funds, and compliance
with the mitigation agreement.
(h) If a property conserved pursuant to subdivision (a) or (b) of
Section 65967 is condemned, the net proceeds from the condemnation of
the real property interest set aside for mitigation purposes shall
be used for the purchase of property that replaces the natural
resource characteristics the original mitigation was intended to
protect, or as near as reasonably feasible. Any accompanying funds
held for the condemned property shall be held for the long-term
stewardship of the replacement property.
(i) Unless prohibited by law, no provision in this chapter is
intended to prohibit for-profit entities from holding or acquiring
property for mitigation purposes.
SEC. 4. Section 65967 is added to the
Government Code , to read:
65967. (a) 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 special district or a
nonprofit organization to hold title to and manage that property.
(b) 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 do either of the
following:
(1) Transfer the interest to a special district or to a nonprofit
organization that meets the requirements set forth in subdivision
(c).
(2) Provide funds to a nonprofit organization or special district
to acquire land or easements that satisfy the agency's mitigation
obligations.
(c) If a state or local agency authorizes a nonprofit organization
to hold title to and manage the property, that nonprofit
organization shall meet all of the following requirements:
(1) The nonprofit organization shall be exempt from taxation as an
organization described in Section 501(c)(3) of the Internal Revenue
Code.
(2) The nonprofit organization shall be qualified to do business
in this state.
(3) The nonprofit organization shall be a "qualified organization"
as defined in Section 170(h)(3) of the Internal Revenue Code.
(4) The nonprofit organization shall have as its principal purpose
and activity the direct protection or stewardship of land, water, or
natural resources, including, but not limited to, agricultural
lands, wildlife habitat, wetlands, endangered species habitat,
open-space areas, and outdoor recreational areas.
(d) A state or local agency shall exercise due diligence in
reviewing the qualifications of a special district or nonprofit
organization to effectively manage and steward land, water, or
natural resources, as well as the accompanying funds. The local
agency may adopt guidelines to assist it in that review process,
which may include, but are not limited to, the use of or reliance
upon guidelines, standards, or accreditation established by a
qualified entity that are in widespread state or national use.
(e) The state or local agency may require the special district or
nonprofit organization to submit a report not more than once every 12
months and for the number of years specified in the mitigation
agreement that details the stewardship and condition of the property
and any other requirements pursuant to the mitigation agreement for
the property.
(f) The recorded instrument that places the title of the property
with a special district, nonprofit organization, or for-profit
entity, pursuant to subdivision (a) or (b) shall include a provision
that if the state or local agency or its successor agency reasonably
determines that the property is not being held, monitored, or
stewarded for conservation purposes in the manner specified in that
instrument or in the mitigation agreement, the property shall revert
to the state or local agency, or to another public agency, special
district, or nonprofit organization pursuant to subdivisions (c) and
(d) and subject to approval by the state or local agency. If a state
or local agency determines that a property must revert, it shall work
with the parties to the mitigation agreement, or other affected
entities, to ensure that any contracts, permits, funding, or other
obligations and responsibilities are met.
SEC. 5. Section 65968 is added to the
Government Code , to read:
65968. (a) If a local agency authorizes a special district or
nonprofit organization to hold the property pursuant to subdivision
(a) or (b) of Section 65967, the agency may allow the accompanying
funds to be held by the same special district or nonprofit
organization that holds the property pursuant to this section. Except
for the local agency or as prohibited by law, no other special
district, nonprofit organization, or entity may hold the accompanying
funds if the property is held by a special district or nonprofit
organization.
(b) The special district or nonprofit organization shall hold,
manage, invest, and disburse the funds in furtherance of the
long-term stewardship of the property for which the funds were set
aside.
(c) The local agency shall determine that the holder of
accompanying funds meets all of the following requirements:
(1) The holder has the capacity to effectively manage the
mitigation funds.
(2) The holder has the capacity to achieve reasonable rates of
return on the investment of those funds similar to those of other
prudent investors.
(3) The holder utilizes generally accepted accounting practices as
promulgated by either of the following:
(A) The Financial Accounting Standards Board for nonprofit
organizations.
(B) The Governmental Accounting Standards Board for public
agencies, to the extent those practices do not conflict with any
requirement for special districts in Article 2 (commencing with
Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5 of the
Government Code.
(4) The holder will be able to ensure that funds are accounted
for, and tied to, a specific property.
(5) If the holder is a nonprofit organization, it has an
investment policy that is consistent with the Uniform Prudent
Management of Institutional Funds Act (Part 7 (commencing with
Section 18501) of Division 9 of the Probate Code).
(d) The mitigation agreement that authorizes the funds to be
conveyed to a special district or nonprofit organization pursuant to
subdivision (a) shall include a provision that requires the
accompanying funds held by a special district or a nonprofit
organization to revert to the local agency, or to a successor
organization identified by the agency and subject to subdivision (c),
if any of the following occurs:
(1) The special district or nonprofit organization ceases to
exist.
(2) The special district or nonprofit organization is dissolved.
(3) The special district or nonprofit organization becomes
bankrupt or insolvent.
(4) The local agency reasonably determines that the accompanying
funds held by the special district or nonprofit organization, or its
successor entity, are not being held, managed, invested, or disbursed
for conservation purposes and consistent with the mitigation
agreement and legal requirements. Any reverted funds shall continue
to be held, managed, and disbursed only for long-term stewardship and
benefit of the specific property for which they were set aside. If
the funds revert from the special district or nonprofit organization,
the special district or nonprofit organization may choose to
relinquish the property. If the property is relinquished, the local
agency shall accept title to the property or identify an approved
special district or nonprofit organization to accept title to the
property.
(e) Subject to subdivision (d), any accompanying funds that are
conveyed to and held by a special district or nonprofit organization
pursuant to this section shall continue to be held by the entity if
this section is repealed and those funds are conveyed prior to the
date this section is repealed.
(f) This section shall remain in effect only until January 1,
2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date.
SEC. 6. Section 65968.01 is added to the
Government Code , to read:
65968.01. (a) Notwithstanding Section 13014 of the Fish and Game
Code, if a state agency authorizes a special district or nonprofit
organization to hold the property pursuant to subdivision (a) or (b)
of Section 65967, the agency may allow the accompanying funds to be
held by the same special district or nonprofit organization that
holds the property pursuant to this section. Except for the state
agency or as prohibited by law, no other special district, nonprofit
organization, or entity may hold the accompanying funds if the
property is held by a special district or nonprofit organization.
(b) The special district or nonprofit organization shall hold,
manage, invest, and disburse the funds only in furtherance of the
long-term stewardship of the property for which the funds were set
aside.
(c) The state agency shall determine that the holder of
accompanying funds meets all of the following requirements:
(1) The holder has the capacity to effectively manage the
mitigation funds.
(2) The holder has the capacity to achieve reasonable rates of
return on the investment of those funds similar to those of other
prudent investors.
(3) The holder utilizes generally accepted accounting practices as
promulgated by either of the following:
(A) The Financial Accounting Standards Board for nonprofit
organizations.
(B) The Governmental Accounting Standards Board for public
agencies, to the extent those practices do not conflict with any
requirement for special districts in Article 2 (commencing with
Section 53630) of Chapter 4 of Part 1 of Division 2 of Title 5 of the
Government Code.
(4) The holder will be able to ensure that funds are accounted
for, and tied to, a specific property.
(5) If the holder is a nonprofit organization, it has an
investment policy that is consistent with the Uniform Prudent
Management of Institutional Funds Act (Part 7 (commencing with
Section 18501) of Division 9 of the Probate Code).
(d) The mitigation agreement that authorizes the funds to be
conveyed to a special district or nonprofit organization pursuant to
subdivision (a) shall include a provision that requires the
accompanying funds held by a special district or a nonprofit
organization to revert to the state agency, or to a successor
organization identified by the agency and subject to subdivision (c),
if any of the following occurs:
(1) The special district or nonprofit organization ceases to
exist.
(2) The special district or nonprofit organization is dissolved.
(3) The special district or nonprofit organization becomes
bankrupt or insolvent.
(4) The state agency reasonably determines that the accompanying
funds held by the special district or nonprofit organization, or its
successor entity, are not being held, managed, invested, or disbursed
for conservation purposes and consistent with the mitigation
agreement and legal requirements. Any reverted funds shall continue
to be held, managed, and disbursed only for long-term stewardship and
benefit of the specific property for which they were set aside. If
the funds revert from the special district or nonprofit organization,
the special district or nonprofit organization may choose to
relinquish the property. If the property is relinquished, the state
agency shall accept title to the property or identify an approved
special district or nonprofit organization to accept title to the
property.
(e) Subject to subdivision (d), any accompanying funds that are
conveyed to and held by a special district or nonprofit organization
pursuant to this section shall continue to be held by the entity if
this section is repealed and if those funds are conveyed prior to the
date this section is repealed.
(f) If the state agency is the department and it chooses to
authorize special districts or nonprofits to hold the accompanying
funds pursuant to subdivision (a), the following conditions
additionally apply:
(1) A special district or nonprofit organization shall not hold
funds unless it is certified by the department. The department shall
adopt regulations for a process to certify special districts or
nonprofit organizations to hold accompanying funds. The department
shall not certify more than 10 special districts or nonprofit
organizations to hold accompanying funds under this section.
(2) The department shall contract with any of the following
entities to evaluate qualifications for holding accompanying funds
and to provide regular oversight of financial management of the
accompanying funds:
(A) The Controller.
(B) The Office of State Audits and Evaluations in the Department
of Finance.
(C)
An independent, qualified person or firm experienced with financial
evaluation and oversight.
(3) A special district or nonprofit organization that holds
accompanying funds for the long-term stewardship of land may be
subject to oversight by any of the entities in paragraph (2) of
subdivision (f). The entity may annually review independent audit or
financial statements, tax filings, or any other documents or reports
determined necessary to verify the sound financial management of
funds held by a special district or nonprofit organization.
(4) All reasonable costs incurred by the department or the entity
under this subdivision shall be paid by the administrative endowment
established pursuant to subdivision (e) of Section 65966.
(g) This section shall not apply retroactively to endowment funds
held by the state in the Pooled Money Investment Account as of
January 1, 2012.
(h) This section shall remain in effect only until January 1,
2022, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2022, deletes or extends
that date. All matter omitted in this version of the bill
appears in the bill as amended in the Assembly, July 13, 2011. (JR11)