BILL ANALYSIS �
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2011-2012 Regular Session |
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BILL NO: SB 1266 HEARING DATE: April 10, 2012
AUTHOR: Corbett URGENCY: No
VERSION: As Introduced CONSULTANT: Katharine Moore
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: Resource conservation lands: appraisal process.
BACKGROUND AND EXISTING LAW
California is a large and ecologically-diverse state comprised
of over 100 million acres and numerous distinct ecosystems from
tidal pools to chaparral, alpine lakes, deserts and redwood
forests, among others. The state has an interest in acquiring
and maintaining lands for conservation purposes in order to
support wildlife, maintain and restore habitat, and provide
public access, recreation and other purposes. For example, the
state spent $2.7 billion on acquisitions to purchase 1.5 million
acres of conservation land and easements from 2000 - 2009.
Current law provides that the state can purchase conservation
lands or easements with the approval of the Director of
Department of General Services (DGS)(Government Code �11005.2)
and in specified instances requires DGS to conduct an appraisal
review (Fish and Game Code (FGC) �1348.2 and Public Resources
Code (PRC) �5096.512)). Appraisers must be licensed and their
work must conform to the United Standards of Professional
Appraisal Practice (USPAP), a set of national standards and
guidelines for appraisal reports. Accurate appraisals of the
fair market value of the conservation lands or easements
proposed for acquisition from willing sellers are critical to
the on-going success and public support of the acquisition
programs. In practice, appraising conservation lands and
easements can be challenging for many reasons including, for
example, the uniqueness of the property or easement and the
likely lack of comparable properties.
In order to provide greater transparency to the state's
decision-making process to buy and sell conservation lands, the
Legislature passed AB 1701 (Laird, c. 708, Statutes of 2004)
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which set mandatory disclosure requirements for conservation
land acquisitions costing more than $25 million of state funds
(PRC ��5096.500 - 5096.501, ��5096.511 - 5096.516).
Requirements were set for the appraisals of these "major
acquisitions" by the Wildlife Conservation Board (WCB) or the
State Coastal Conservancy, including at least one independent
appraisal, and a review of the appraisal by DGS or as specified.
Each review includes, among other items, an assessment of
whether the appraisal conforms to USPAP. Additionally, public
disclosure requirements for the appraisal, the appraisal review
and other documents were specified, as well as requirements for
the process of disposing acquired lands that no longer served
conservation purposes.
Three years following the passage of AB 1701 in October 2007,
the Legislative Analyst's Office (LAO) released a report -
Improving the Appraisal Function in Resources Land Acquisitions
- highlighting some perceived continuing weaknesses in the
acquisition of conservation lands. Appraisal quality was one of
the concerns raised and Senator Corbett introduced SB 1285 (c.
711, statutes of 2008) to address this and other concerns.
Among other provisions, SB 1285 added the Department of Parks
and Recreation and all of the state conservancies to the
agencies subject to the major acquisition requirements in the
PRC, and required DGS to convene a workgroup of specified
composition to develop and adopt standards, subject to the
approval of the Natural Resources Agency, for appraisals of
resource conservation acquisitions (PRC �5096.517). The
workgroup was directed to consider elements of the appraisal
where additional requirements and supporting information were
likely to improve the justification of the valuation, as well as
facilitate oversight.
On February 22, 2012, DGS incorporated the workgroup's
recommendations into regulation (Title 2, California Code of
Regulations, regulation 1880).
PROPOSED LAW
This bill would codify the workgroup's recommendations. These
include additional requirements that appraisals of conservation
lands and easements must meet in order to be acceptable for
state review. Each appraisal, performed by an appropriately
licensed or certified real estate appraiser, must include:
Photographs and maps clearly illustrating the property
The market data used in the appraisal and its
relationship to the property in question
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A complete description of the property and its
characteristics, including verifiable information of its
development potential, obstacles to development, and
evidence of market demand for development
Information on the extent of a title search on the
property, a discussion of unrecorded rights and other
specified conditions, including evidence of public use,
with potential to affect the value of the property, and how
these were incorporated into the appraisal
A separate appraisal of timber, carbon credits or other
specialty interests where warranted. This appraisal shall
be conducted by a qualified individual, as specified, and
reviewed and approved by another
ARGUMENTS IN SUPPORT
According to the author, this bill "ensures appraisals contain
all the necessary information for the state to conduct a
comprehensive review of the potential purchase and determine as
accurately as possible the value of the project. By raising the
standards and putting them in statute, SB 1266 protects
taxpayers' money and makes sure the state undertakes
conservation land purchases only when it makes the most sense."
The California Council of Land Trusts concurs and adds that this
bill "further strengthens best practices for state expenditures
for lands for conservation purposes."
COMMENTS
Can an appraisal valuation be legislated? In its 2007 report,
the LAO stated that "�i]t is important to note that we do not
envision the �appraisal] standards being overly prescriptive.
Rather the standards would provide some basic parameters to
ensure that the state is consistently provided with reliable
appraisal-related information to help it make decisions about
purchasing or funding land acquisitions for resource
conservation purposes." The Committee may find that this bill's
provisions meet this test, while recognizing that appraisal
valuations remain dependent upon the appraiser's professional
judgment, including of the required supporting information.
Recent appraisals and appraisal review controversy . The WCB is
authorized by statute to acquire, and make grants for the
acquisition of, conservation lands and easements in order to
protect fish and wildlife and provide suitable recreation
throughout the state. As such, the WCB is a major purchaser of
conservation lands and easements under the auspices of various
programs. From 2000 - 2010, for example, the WCB spent
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approximately $1.4 billion of state funds on acquisitions, while
leveraging another $1.2 billion from other sources. The WCB's
existing policy is to obtain DGS' review of all conservation
acquisition appraisals, and is required to do so for direct
purchases under FGC �1348.2. In recent years, some of the WCB's
property or conservation easement acquisitions, as well as the
processes and procedures followed during acquisitions, have been
publicly questioned. The quality of specific appraisals, the
timing of the public release of appraisals, as well as the
appropriate acquisition size or value threshold to trigger
additional scrutiny have all been criticized. Unsurprisingly,
market conditions can change significantly over the multi-year
course of these acquisitions and appraisal valuations can become
out-of-date. In 2011, WCB double-checked DGS's approval of an
appraisal for a large conservation easement, the Gualala River
Forest Conservation Easement, over concern the appraisal was
becoming dated. DGS withdrew its initial approval and the WCB
delayed its consideration of the project while another appraisal
was conducted, reviewed by DGS and approved. The re-appraisal
found a roughly 38% reduction in the overall value of the
property, although it remained well-over the negotiated price
with the WCB (by approximately $10 million). The WCB
subsequently approved purchase of this conservation easement.
In response to the criticism, the WCB has worked with
stakeholders to develop a revised policy that expands the pool
of projects meriting additional appraisal review and subsequent
public dissemination of the review. The revised policy is
currently pending before the WCB.
SUPPORT
California Council of Land Trusts (sponsor)
Big Sur Land Trust
Bodega Land Trust
California Waterfowl Association
Land Trust of Santa Cruz County
Mendocino Land Trust
Ojai Valley Land Conservancy
Peninsula Open Space Trust
Planning and Conservation League
Redwood Coast Land Conservancy
Rocky Mountain Elk Foundation
Sierra Foothill Conservancy
Solano Land Trust
The Nature Conservancy
The Trust for Public Land
Wildlife Heritage Foundation
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OPPOSITION
None Received
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