BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2241 (Eggman) - Local government: agricultural land.
Amended: May 23, 2014 Policy Vote: G&F 10-0
Urgency: No Mandate: No
Hearing Date: June 30, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2241 would revise the fees charged when a
Williamson Act or Farmland Security Zone contract is rescinded
to place the property into a solar-use easement contract, and
specify that 50% of the rescission fees would be retained by the
county and not transmitted to the General Fund. The bill would
sunset on January 1, 2020, at which time rescission fees would
return to the levels in current law and all fees would be
deposited into the General Fund.
Fiscal Impact:
Unknown overall impact on rescission fee revenues since the
bill increases the fees related to Williamson Act contract
conversions to solar-use easement contracts and decreases
the rescission fees for FSZ conversions.
Unknown, potentially significant revenue decreases to the
General Fund and Soil Conservation Fund, and corresponding
increases to counties, related to counties retaining 50% of
rescission fees. However, to the extent the bill
incentivizes the conversion of more Williamson Act and FSZ
contracts to solar-use easement contracts, and the mix of
those conversions, the bill could result in an overall
increase in rescission fees, which could mitigate some of
the losses of state revenues. (See Staff Comments)
Negligible impact on the Department of Conservation.
Background: Existing law, the California Land Conservation Act
of 1965 (Williamson Act), authorizes landowners to sign ten-year
contracts with counties, agreeing to restrict a property's use
to agriculture, open space, or compatible uses. In return for
the agreement to keep the land out of development, the landowner
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benefits from reduced property tax assessments based on the
property's use rather than its market value. These contracts
renew automatically each year, unless the contract is ended
through nonrenewal, cancellation, or termination. Under
nonrenewal, either the landowner or the county may provide
notice to not renew the contract. When the term of the contract
runs out after nine years, the property is reassessed at its
market value and land restrictions end. County officials can
cancel a Williamson Act contract at a landowner's request if the
board of supervisors finds that cancellation is consistent with
the Act's purpose or in the public interest. A contract ends
immediately upon cancellation and payment of cancellation fees
by the landowner to the state in an amount equal to 12.5% of the
property's unrestricted value. A contract can be rescinded when
a board of supervisors cancels a Williamson Act contract and the
landowner simultaneously enters into an agricultural
conservation easement on other land of an equal or greater
value.
Existing law also allows for a Farmland Security Zone contract,
which operates in the same manner as a Williamson Act contract,
except the term of the contract is a minimum of 20 years and the
cancellation fees are 25% of the fair market value of the
property.
Existing law, SB 618 (Wolk), Chap. 596/2011, authorizes a
property owner and city or county to mutually agree to rescind a
Williamson Act or FSZ contract on "marginally productive" or
"physically impaired" land, as determined by the Department of
Food and Agriculture, and simultaneously enter into a solar-use
easement contract. In order to encourage solar generation to
meet California's Renewable Standards goals, SB 618 provides for
a lower rescission fee for conversions of Williamson Act and FSZ
contracts to solar-use easement contracts. Those rescission
fees are reduced by half when compared to standard cancellation
fees: from 12% to 6.25% for Williamson Act conversions, and from
25% to 12.5% for FSZ contract conversions.
Under current law, cancellation and rescission fees are
collected by the county treasurer and transferred to the General
Fund. Approximately $2.5 million in cancellation fees are
transferred to the Soil Conservation Fund each year to cover the
Department of Conservation's costs to administer the Williamson
Act. Cancellation and rescission fee revenues can fluctuate
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dramatically from year to year. For example, the state received
only $106,812 in the 2010-11 fiscal year, but over $26 million
in 2005-06. On average, the state has collected approximately
$7.8 million annually between fiscal years 1999-00 and 2012-13.
Proposed Law: AB 2241 would revise the fees to rescind a
Williamson Act or FSZ contract when the property is
simultaneously placed under a solar-use easement contract.
Specifically, this bill would:
Increase the rescission fees when a Williamson Act contract is
converted to a solar-use easement contract from 6.25% to 10%
of the fair market value of the property.
Decrease the rescission fees when a FSZ contract is converted
to a solar-use easement contract from 12.5% to 10% of the fair
market value of the property.
Reduce the amount of rescission fees transferred to the State
General Fund from 100% to 50%.
The changes imposed by AB 2241 would sunset on January 1, 2020.
Staff Comments: The Department of Conservation indicates that
there have only been three conversions from Williamson Act and
FSZ contracts to solar-use easement contracts as a result of SB
618 to date. The author's office indicates that the bill is
intended to provide an incentivize for more counties to rescind
current contracts on marginally productive or physically
impaired lands by allowing counties to retain 50% of rescission
fee revenues.
The overall impact on rescission fees in general, and the state
impacts on the General Fund and Soil Conservation in particular,
are impossible to quantify and depend on a number of factors.
For instance, counties will have the incentive to convert more
contracts to solar-use easement contracts because they can
retain 50% of rescission fees, and property owners with FSZ
contracts would benefit from a lower rescission fee of 10%,
rather than 12.5% of market value. However, property owners
with Williamson Act contracts would pay a higher rescission fee
of 10% to convert to a solar-use easement contracts, up from
6.25% of market value. It is unclear what these potentially
competing incentives would have on the overall volume of
contract conversions.
Without accounting for the change in the volume and mix of
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contract conversions, and whether the bill incentivizes more
conversions, the following examples can illustrate the potential
impacts on state and county revenues:
For the conversion of a Williamson Act contract to a
solar-use easement contract on property valued at $1
million, current law would generate a rescission fee of
$62,500 (6.25%) for the General Fund and Soil Conservation
Fund. Under AB 2241, the rescission fee would increase to
$100,000 (10%) and be shared evenly between the county and
state funds. This would reduce state revenues by $12,500
for each $1 million of assessed valuation that is
converted. Counties would gain $50,000.
For the conversion of a FSZ contract to a solar-use
easement contract on property valued at $1 million, current
law would generate a rescission fee of $125,000 (12.5%) for
the General Fund and Soil Conservation Fund. Under AB
2241, the rescission fee would decrease to $100,000 (10%)
and be shared evenly between the county and state funds.
This would reduce state revenues by $75,000 for each $1
million of assessed valuation that is converted. Counties
would gain $50,000.