BILL ANALYSIS �
SB 436
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Date of Hearing: August 17, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 436 (Kehoe) - As Amended: July 13, 2011
Policy Committee: Natural
ResourcesVote:7-0
Local Government 7-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill allows a nonprofit organization or some types of
special districts to hold title to and manage mitigation lands
and to hold related management funds.
FISCAL EFFECT
1)Potentially significant shift in the formal management and
disposition of potentially tens to hundreds of millions of
dollars from the state treasury to individual nonprofit
organizations and certain special districts, to the extent
that state agencies convey such funds in response to this
bill. This shift may increase the amount of money earned on
such funds; it also may expose the state to more risk of loss
of those funds.
2)One-time costs ranging from $150,000 to $200,000 during
2011-12 and 2012-13 to the Department of Fish and Game (DFG)
to develop regulations and standards. (Fish and Game
Preservation Fund.)
(DFG estimates startup costs to be $481,000 in the first 18
months following passage the bill. DFG, however, has been
developing a pilot program for the management of mitigation
funds by nonprofits. The work DFG has already put in
developing the pilot program should limit the costs DFG
realizes to develop regulations and standards for this bill.)
3)One-time costs of an unknown amount, but likely ranging from
the tens of thousands to hundreds of thousands of dollars, in
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2012-13 to DFG to review the qualifications of nonprofits and
special districts applying to hold and manage mitigation lands
and related funds (Fish and Game Preservation Fund).
(Actual costs will depend upon the number of entities applying
to DFG and the complexity of the review required for each
applicant. DFG estimates these costs at $511,000 during the
second year of the program. As is the case with DFG's other
startup costs, the costs of review applicants should be
limited by the work DFG has already performed in development
of its pilot project.)
4)Ongoing annual costs of an unknown amount, but likely in the
hundreds of thousands of dollars, beginning in 2012-13 to DFG
to review, process and, if accepted, administer requests to
hold and manage mitigation lands and related funds (Fish and
Game Preservation Fund).
5)Potential ongoing annual GF costs in the tens of thousands of
dollars to the State Controller to oversee nonprofit
organizations and special districts that hold funds for the
management of mitigation lands.
6)Potential revenue, in the form of one-time stewardship
payments and administrative endowments, of an unknown amount
but presumably sufficient to cover most of DFG's and the
controller's ongoing costs.
SUMMARY (continued)
Specifically, this bill:
1)Requires a local or state agency that requires the protection
of land as mitigation for a proposed project to identify how
the long-term stewardship of the land will be met, including
by ensuring that funds set aside for the management of the
land will generate revenue sufficient to cover annual
stewardship costs of the land.
2)Authorizes a state or local agency to allow a nonprofit
organization or limited categories of special districts to
hold title to and manage land acquired as mitigation for a
project and to hold funds dedicated for the long-term
management of those lands.
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3)Requires a public agency to review the qualifications of a
nonprofit or special district that may hold lands and funds.
4)Authorizes a public agency to contract with an independent
third-party to review the qualifications of nonprofits and
special districts and evaluate stewardship and management of
mitigation lands and related funds.
5)Authorizes DFG to contract with the Controller for the
evaluation of the qualifications of nonprofits and special
districts.
6)Requires a nonprofit or special district that is to hold title
to and manage mitigation lands and related funds on behalf of
DFG to be certified by DFG as meeting certain qualifications
and limits to 10 the number of such entities that DFG may
certify.
7)Authorizes the Controller to oversee nonprofits and special
districts that hold funds for the management of mitigation
lands.
8)Authorizes a public agency (a) to require a nonprofit or
special district that will hold mitigation land to establish
an administrative endowment from project proponents to cover
the costs of review of nonprofit or special district
qualifications and oversight of management of lands and funds
and (b) to require project proponents to provide a one-time
payment to the holder of mitigation funds to cover stewardship
costs for five years, while the endowment matures.
9)Requires funds to be returned to the public agency if the
funds are misused or if the recipient ceases to exist or
operate according to agreement.
10)Sunsets the bill's provisions as of January 1, 2022.
COMMENTS
1)Rationale. Existing law clearly allows a state or local
agency to transfer land or conservation easements to a
nonprofit agency for management of the land or easement.
Existing law however, does not explicitly state that a state
or local agency also may transfer to the nonprofit funds,
known as endowment funds, that are dedicated to the management
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of the property or easement. According to the author, because
of this statutory silence, some state and local agencies are
reluctant to transfer endowment funds to a nonprofit, even
though doing so would simplify and streamline management of
the land or easement. The author and the California Council
of Land Trusts-the sponsor of this bill-contend that this bill
would clarify state and local government authority, thereby
resulting in greater transfer of endowments to nonprofits.
2)Background. State and local governments have the authority to
issue permits to allow the development of land within their
respective jurisdictions. In some cases, the state or local
agency issuing the land development permit requires the
applicant to transfer to the agency an interest in real
property to mitigate any adverse impact upon natural resources
caused by permitting the development. In many cases, the
state or local agency does not want to hold or manage the
mitigation property. State law expressly allows such a state
or local agency to authorize certain categories of nonprofit
organizations to hold title to and manage those mitigation
properties.
State law, however, does not explicitly authorize a state or
local agency to transfer to a nonprofit agency endowment funds
for the management of mitigation property, even if the state
or local agency has transferred to the nonprofit the
mitigation lands to which the endowment funds are dedicated.
Despite this lack of explicit statutory authorization,
Legislative Counsel concluded in 2006 that existing statute
allows a state agency to authorize nonprofit organizations to
hold and manage funds set aside for the purpose of long-term
management of mitigation lands. Indeed, the bill's sponsor
reports that it is common practice among some public agencies
to transfer endowment funds to nonprofit agencies for the
management of mitigation properties.
DFG currently is developing a pilot program to allow a
nonprofit to hold funds dedicated to the long-term management
of mitigation lands also held and managed by the nonprofit.
3)Fish and Game Mitigation Accounts. Existing law requires
funds received by 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
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Fund. Interest generated on endowment funds deposited in the
former account is 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.
Recently, the endowment funds have produced a low rate of
return, though the funds have been managed with very little
risk. Some contend third parties, such as nonprofits and
special districts, are free of restrictions faced by state
agencies that limit their ability to manage the endowment
funds and, therefore, could manage the endowment funds to
generate more revenue than could the state.
Such concern is accentuated by the case of Environmental
Trust, an organization holding endowments for state and
federal mitigation. As a result of financial mismanagement,
the organization filed for bankruptcy and DFG was forced to
accept 11 mitigation properties with insufficient endowment
funds for continued land management. Bill proponents counter
that existing law provides the Attorney General and DFG
sufficient authority to ensure such mismanagement does not
occur and that this bill enhances that authority.
4)Some Special Districts More Special Than Others. The bill
refers to existing sections of code to define the types of
special districts that may hold and manage mitigation lands
and related funds. Based on the bill's code references, the
special districts affected by this bill are any regional park
district, regional park and open-space district or regional
open-space district or a specific special district in Santa
Clara County. However, there are other types of special
districts, such as resource conservation districts, that
manage mitigation lands. Should the bill treat all special
districts equally?
5)Fourth Time's the Charm? Several bills have tried,
unsuccessfully, to codify the mitigation land fund management
provisions envisioned by this bill. AB 2916 (Assembly Water,
Parks and Wildlife Committee, 2006) and SB 1011
(Hollingsworth, 2007) were held in Senate Appropriations.
AB 444 (Caballero, 2009) was vetoed, the governor expressed
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concern with what he characterized as insufficient protections
for the state's financial and environmental resources.
AB 484 (Alejo), which contains provisions similar to SB 436,
passed the Assembly 75-1 and appears to be a two-year bill.
6)Support . This bill is supported by the California Council of
Land Trusts (sponsor), some conservation groups, and a long
list of nonprofits of that type that this bill would authorize
to hold and mange mitigation lands and related funds.
7)There is no formal opposition registered to this bill.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081