BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 436|
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UNFINISHED BUSINESS
Bill No: SB 436
Author: Kehoe (D), et al.
Amended: 9/2/11
Vote: 21
SENATE NAT. RESOURCES AND WATER COMMITTEE : 9-0, 4/26/11
AYES: Pavley, La Malfa, Cannella, Evans, Fuller, Kehoe,
Padilla, Simitian, Wolk
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 5/4/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/26/11
AYES: Kehoe, Walters, Alquist, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Emmerson
SENATE FLOOR : 39-0, 6/2/11
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De Le�n, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Strickland, Vargas, Walters, Wolk,
Wright, Wyland, Yee
NO VOTE RECORDED: Runner
ASSEMBLY FLOOR : Not available
SUBJECT : Land use: mitigation lands: nonprofit
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organizations
SOURCE : California Council of Land Trusts
DIGEST : This bill authorizes a state or local agency to
allow a qualified and approved nonprofit organization or
special district to hold property and long-term stewardship
funds (i.e., accompanying funds) to mitigate adverse
impacts to natural resources caused by a permitted
development project.
Assembly Amendments (1) add findings and declaration
language explaining the existing law, regulations, and
accounting standards that provide protections for the range
of issues that may arise in the long-term management of
endowments for protecting mitigation properties; (2) add
findings and declaration language explaining that due to
the existing protections in law, regulation, and accounting
standards, the bill does not impose any liability or duty
to perform upon a state or local agency with regard to
reviewing or approving special districts or nonprofit
organization with regard to holding endowments; (3)
authorize a state or local agency to require a project
proponent to transfer mitigation property to any of these
additional entities: a for-profit entity, a person, or
other entity; (4) require that the accompanying funds be
held by the agency that requires the mitigation or by the
special district or nonprofit organization that holds the
property except under any of the following circumstances:
(a) the accompanying funds are held by an entity other than
the state or holder of the mitigation property as of
January 1, 2012; (b) the accompanying funds are held by
another entity pursuant to the terms of a natural Community
conservation plan or a safe harbor agreement that is
executed on or before January 1, 2012; or (c) where
existing law prohibits the holder of the mitigation
property to hold the endowment, including for-profit
entities.
ANALYSIS :
Existing law :
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1. 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.
2. 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.
This bill:
1. Transferring Mitigation Property:
A. Authorizes a state or local agency to allow a
special district, a nonprofit organization, a
for-profit entity, a person, or another entity to
hold title to and manage mitigation property that
is transferred by a project proponent for the
mitigation of adverse impacts on natural resources
caused by permitting the development of a project
or facility.
B. Defines "special district" as any regional park
district, regional park and open-space district,
regional open-space district, the Santa Clara
County Open-Space Authority, or resource
conservation district.
C. Requires a nonprofit organization, for the
purpose of holding title to and managing mitigation
property, to meet 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 the state.
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(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, or cultural or historic
resources, including but not limited to,
agricultural lands, wildlife habitat, wetlands,
endangered species habitat, open-space areas,
and outdoor recreational areas.
D. Authorizes the state or local agency to require
a special district or nonprofit organization to
submit a report not more than once every 12 months
that details the stewardship and condition of the
property.
E. Requires that the recording instrument for the
title of the property include a provision that if
the state or local agency reasonably determines
that the mitigation property is not being held,
monitored, or stewarded for conservation purposes,
the property shall revert to the state or local
agency or a qualified and approved special district
or nonprofit organization.
2. Transferring Accompanying Funds:
A. Defines "accompanying funds" as the funds that may
be conveyed for the long-term stewardship of a
property. Also known as "endowments," these funds do
not include funds conveyed for meeting short-term
performance objectives of a project.
B. Requires that the accompanying funds be held by
the agency that requires the mitigation or by the
special district or nonprofit organization that holds
the mitigation property except under limited
circumstances as specified.
C. Requires the holder of the accompanying funds to
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meet 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 the
Financial Accounting Standards Board for
nonprofit organizations or the Governmental
Accounting Standards Board for public agencies.
(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.
D. Requires the mitigation agreement that authorizes
the funds to be conveyed by a local agency to a
special district or nonprofit organization to include
a provision that requires the accompanying funds
revert to the local agency if any of the following
occurs:
(1) The special district or nonprofit ceases
to exist.
(2) The special district or nonprofit is
dissolved.
(3) The special district or nonprofit becomes
bankrupt or insolvent.
(4) The state or local agency determines that
the accompanying funds are not being held,
managed, invested, or disbursed for conservation
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purposes in the manner specified in the
mitigation agreement.
E. Repeals, on January 1, 2022, the provisions
regarding a special district or nonprofit
organization holding accompanying funds.
3. Other Funds:
A. Authorizes a state or local agency that allows a
special district or nonprofit organization to hold
and manage mitigation property to require an
administrative endowment from the project proponent
for reasonable costs associated with reviewing
qualifications, approving holders, and regular
oversight of compliance and performance.
B. Authorizes a local agency to 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.
Background
When state or local agencies approve land use projects,
they can require the project applicant to transfer interest
in real property (either fee title or easements) to the
agency in order to mitigate the impact that the development
will have on natural resources. The Department of Fish and
Game (DFG) frequently requires such mitigations. A state
or local public agency may also require itself to protect
lands in order to mitigate impacts caused by its own
project. Under Section 65965 of the Government Code, a
state or local agency may authorize a nonprofit
organization to hold title and to manage the mitigation
lands. Eligible nonprofit organizations must be a
501(c)(3) organization under the Internal Revenue Code
whose principal purpose is the protection or stewardship of
natural land or natural, cultural, or historic resources.
The project applicant may also be required to provide funds
to finance the management of lands provided for mitigation
in perpetuity, also known as an endowment. Under Section
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13014 of the Fish and Game Code, such mitigation funds are
deposited in the Fish and Game Mitigation and Protection
Endowment Principal Account (account). The account is held
in the Special Deposit Fund and invested with the Pooled
Money Investment Account. Interest generated on endowment
funds in the account is available to DFG, upon
appropriation by the Legislature, for long-term management,
enhancement, and enforcement activities on habitat lands in
a manner consistent with the underlying mitigation
agreement.
The Uniform Management of Institutional Funds Act (Act)
(Part 7 (commencing with Section 18501) of Division 9 of
the Probate Code) establishes management and investment
guidelines for funds that are held by individuals,
organizations, or governmental agencies (institutions) for
charitable purposes. The Act requires that the funds must
be invested with consideration to the general economic
conditions, the possible effect of inflation or deflation,
the needs that the funds are to finance, the need for
portfolio diversification, and the need to preserve the
fund's capital.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to Assembly Appropriations Committee (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 DFG to
develop regulations and standards. (Fish and Game
Preservation Fund.); (3) (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.); (4) one-time costs of an unknown
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amount, but likely ranging from the tens of thousands to
hundreds of thousands of dollars, in 2012-13 to DFG, and
possibly other state agencies, to review the qualifications
of nonprofits and special districts applying to hold and
manage mitigation lands and related funds. (Fish and Game
Preservation Fund and other special funds.); (5) potential
ongoing annual General Fund costs in the tens of thousands
of dollars to the State Controller and the Department of
Finance to oversee nonprofit organizations and special
districts that hold funds for the management of mitigation
lands. (General Fund.); and (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 the ongoing costs of DFG, other state
agencies and local agencies.
SUPPORT : (Verified 9/7/11)
California Council of Land Trusts (source)
Amargosa Conservancy
American Land Conservancy
American River Conservancy
Bay Area Open Space Council
Bay Area Ridge Trail Council
Big Sur Land Trust
California Association of Local Agency Formation
Commissions
California Building Industry Association
California Special District Association
Catalina Island Conservancy
Center for Natural Lands Management
East Austin Creek Conservation Bank
East Bay Municipal Utilities District
East Bay Regional Park District
Eastern Sierra Land Trust
Elkhorn Slough Foundation
Lake County Land Trust
Land Conservancy of San Luis Obispo County
Land Trust for Santa Barbara County
Land Trust of Santa Cruz County
Marin Agricultural Land Trust
Mendocino Land Trust
Midpeninsula Open Space District
Monterey County Board of Supervisors
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Muzzy Ranch Conservation Company
Pacific Forest Trust
Pacific Gas and Electric Company
Palos Verdes Peninsula Land Conservancy
Placer Land Trust
Redlands Conservancy
Redwood Coast Land Conservancy
Sacramento Valley Conservancy
Sanctuary Forest
San Joaquin River Parkway and Conservation Trust
Santa Cruz County Regional Transportation Commission
Save Mount Diablo
Sequoia Riverlands Trust
Sierra-Cascade Land Trust Council
Solano Land Trust
Southern California Open Space Council
T.J. Nelson & Associates
The Nature Conservancy
Transition Habitat Conservancy
Transportation Agency for Monterey County
Tri-Valley Conservancy
Trust for Public Land
Wildlife Heritage Foundation
ARGUMENTS IN SUPPORT : The California Council of Land
Trusts, the sponsor of the bill, states, "One key component
of the win-win partnership between nonprofit land trusts
and public agencies is the management of mitigation lands.
In recent years, numerous local, state, and federal
agencies have turned to land trusts to be the long-term
holders and managers of mitigation projects?However,
long-term stewardship requires a dedicated investment for
these purposes- an endowment that perpetually replenishes
itself through interest earned on principal. These
endowments are attached to the mitigation projects, but are
not necessarily conveyed from the project proponent to the
nonprofit charged with preserving these mitigation lands.
In some cases, the public agency chooses to hold the
endowment although it does not hold the land or the
associated stewardship responsibility. This often creates
challenges in sustaining a healthy endowment that range
from reimbursement delays to reasonable rates of return."
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CTW:do 9/7/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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