By Katherine J. Hart

On October 8, 2011, Governor Jerry Brown signed Senate Bill No. 436 (SB 436), authored by Senator Kehoe, into law. SB 436 substantially strengthens the mitigation aspect of the Planning and Zoning Law. It amends Government Code Section 65965 (Definitions), and adds three new Government Code Sections: 65966 and 65967, 65968.

As currently written, Chapter 4.6 of the Planning and Zoning Law, is comprised of one Section – Section 65965 – consisting of definitions.

As of January 1, 2012, SB 436 will expand the definitions in Section 65965 from three definitions to nine. The bill will also add Section 65966 to the code, which requires that any conservation easement created to satisfy a state or local mitigation requirement must be perpetual regardless of which statute it is created by (Section 51075 or Civil Code section 815). The bill does not require an agency to identify funding for stewardship of properties to be protected, but the bill at least gives agencies the option to identify such endowments and lays out rules regarding the management and investment of the endowments.

The newly added Section 65967 dictates that where a state or local agency requires a project applicant to provide mitigation land, the agency is permitted to authorize a special district, nonprofit or for-profit entity to hold title to and manage that property. This section also provides that where a state or local agency must protect property to mitigate impacts of a public project, it may transfer the interest in the mitigation property to a special district, nonprofit or for profit organization, or provide funding to a nonprofit, for-profit or special district to acquire such land. Any nonprofit organization selected by a state or local agency to hold title to or manage mitigation lands is required to be organized under IRS Code Section 501(c)(3), qualified to do business in California, (e.g., a “qualified organization” under IRC Section 170(h)(3)), and have its primary purpose be protection or stewardship of natural resources. Notably, the majority of land trusts and conservancies nationwide have been complying with such provisions for decades, especially those that are accredited by the Land Trust Accreditation Commission.

The new Section 65968 allows the selected entity – be it a special district, nonprofit or for-profit group – to hold the endowment and have title to the mitigation land subject to certain exceptions. The section outlines the parameters of doing so. The section automatically reverts on January 1, 2022, unless deleted or extended by other legislation before then.

SB 436 authorizes state and local agencies to require endowments to manage mitigation lands. Agencies have historically focused on the preservation and/or restoration of mitigation lands when approving a development project, which is wonderful, but when it comes to preserving those lands in perpetuity, they forget that requires funding for continual and consistent monitoring, generally upkeep, insurance, and the like. All these things cost money, which is exactly what an endowment is for – the perpetual maintenance of valued natural resources. While “qualified” nonprofit conservancies are usually very good about requiring a minimum endowment when accepting new mitigation lands, it’s important for state and public agencies to know they are required to do the same if they intend on holding and managing mitigation lands and when they order land be set aside for mitigation purposes.

Katherine J. Hart is an attorney at Abbott & Kindermann, LLP and the President of the Sacramento Valley Conservancy. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.