On October 8, 2011, Governor Brown signed into law Senate Bill (SB) 436 authorizing state and local agencies to transfer funds to a nonprofit organization, special district or land trust that are set aside for long-term management of land acquired as mitigation for a development project. Sponsored by Senator Christine Kehoe and supported by the California Council of Land Trust and numerous nonprofit organizations, land trusts, conservancies, and applicants caught in the California Department of Fish & Game permit log-jam, SB 436 would provide greater flexibility in identifying the holder of conservation easements and endowments while providing definable criteria for the endowment holder.

Under existing state law, state and local agencies may impose conditions during the permit process for purposes of mitigating the environmental impact of a development project. These conditions may include the requirement to transfer property to a public entity for conservation and mitigation purposes either in fee or conservation easement. The property protected under conservation easement may be turned over to a nonprofit group to manage the land subject to approval by a state or local agency that the nonprofit meets certain qualifications.

In recent years, public agencies and project proponents relied on nonprofit organizations and special districts to serve as long-term managers and holders of mitigation projects. For California Department of Fish & Game (CDFG) authorizations, often only CDFG or the National Fish & Wildlife Foundation (NFWF), under a separate agreement, however, were authorized to hold the endowment under CDFG’s December 2010 endowment pilot program. This often created challenges and uncertainty in sustaining a healthy endowment (assuming that CDFG even signed off on the easement) when other nonprofits or public agencies were allowed by other agencies (e.g., USFWS) to hold the endowment. Project proponents often experienced substantial delays in obtaining CDFG’s approval of the nonprofit organization, the easement and the endowment amount which were required to support CDFG’s issuance of incidental take authorizations. These delays prevented many applicants from completing the permitting process in a timely manner, incurring further development expenses, even in those instances in which federal incidental take authorizations were already obtained, and mitigation land was set aside and management funds established.

SB 436 revises existing law set forth in Government Code 65965 and authorizes a state or local public agency to approve a nonprofit organization, a special district, a for-profit entity, a person, or another entity to hold title to and undertake the long-term management of properties held for mitigation purposes subject to certain criteria that will remain in effect until January 1, 2022. If an agency proposes a project that results in impacts to natural resources and the agency proposes to provide property to mitigate such adverse impacts, the agency may implement any necessary action to satisfy the agency’s obligations, including setting aside funds for long term management. The bill also establishes five definable criteria for the conveyance, management and investment of accompanying funds associated with the management of the conservation easement lands, and provides options for a project proponent to select an endowment funding arrangement with a nonprofit organization or special district that may be more flexible than the arrangements imposed by CDFG. SB 436 formalizes a local agency’s ability to require a project proponent to fund a one-time payment for the initial stewardship costs in the first 3 years while the endowment begins to accumulate investment earnings — a practice already being informally imposed by CDFG under the endowment pilot program.

 
Alicia Guerra
Briscoe Ivester & Bazel LLP
155 Sansome Street, 7th Floor
San Francisco, CA 94104
Telephone: (415) 402-2700
Fax: (415) 398-5630

Disclaimer: In our Newsletters and Bulletins, Briscoe Ivester & Bazel LLP intends to present general information to the public and does not intend to provide legal advice pertaining to a particular situation.

 

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