BILL REQ. #:  H-1584.1 

READ FIRST TIME 02/28/05.   

     AN ACT Relating to the department of natural resources' authority to create a single pilot mitigation bank on state-owned aquatic lands; amending RCW 43.84.092; reenacting and amending RCW 43.84.092; adding a new chapter to Title 79 RCW; providing effective dates; providing an expiration date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   (1) The legislature finds that the existing state and federal regulatory framework for wetland and aquatic resource mitigation is an important tool used to offset impacts to aquatic lands.
     (2) The legislature further finds that because impacts to wetlands and aquatic resources often affect state-owned aquatic lands, the department should work within established state and federal regulatory mitigation processes to develop a single pilot mitigation bank on state-owned aquatic lands.
     (3) The intent of this chapter is to establish the proprietary mechanisms for the department to develop, implement, and manage a single pilot mitigation bank on state-owned aquatic lands. Additional authority will be needed if the department seeks to establish more than one mitigation bank.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Compensatory mitigation" means the process of restoring, creating, enhancing, or, in exceptional circumstances, preserving wetlands, other aquatic resources, or uplands for the purposes of compensating for the unavoidable adverse environmental impacts of a project that remain after all appropriate and practicable avoidance and minimization has been achieved.
     (2) "Credit" means a unit of trade representing the increase in the ecological value of a site due to improvements made to the habitat conditions of the site, as measured by acreage, functions, or values, or by some other regulatory approved assessment method.
     (3) "Department" means the department of natural resources.
     (4) "Mitigation" means the sequential process of avoiding impacts, minimizing impacts, and compensating for the remaining unavoidable impacts of a project.
     (5) "Mitigation bank" means a site or sites where wetlands, aquatic resources, or uplands are restored, created, enhanced, or in exceptional circumstances, preserved expressly for the purpose of providing compensatory mitigation in advance of authorized project impacts to similar resources.
     (6) "Mitigation banking agreement" means a legal agreement between the department and a public or private entity under which the parties to the agreement agree to jointly develop, implement, and manage a single pilot mitigation bank that is located on state-owned aquatic lands and is approved through state or federal regulatory mitigation processes.
     (7) "Mitigation banking partners" means public or private entities with which the department has entered into a mitigation banking agreement under section 3 of this act.
     (8) "Project" means a physical construction project that develops or redevelops land in a way that results in unavoidable adverse environmental impacts that remain after all appropriate and practicable avoidance and minimization has been achieved.
     (9) "Site" means a mitigation bank site, or a site where compensatory mitigation has or will occur.

NEW SECTION.  Sec. 3   (1) The department may enter into mitigation banking agreements with public or private entities to develop, implement, and manage a single pilot mitigation bank that is located on state-owned aquatic lands and is approved through state or federal regulatory mitigation processes. A mitigation banking agreement must establish the business relationship between the department and its mitigation banking partner, clearly identifying the assets each entity will contribute to the pilot mitigation bank project. The agreement is not subject to the provisions of RCW 79.90.480 or 79.90.500.
     (2) The department and its mitigation banking partners must develop and adopt a management plan, for the pilot mitigation bank, that is approved through state or federal regulatory mitigation processes and, if applicable, by the city or county in which the aquatic lands are located. The department must work cooperatively with other applicable public agencies, affected federally recognized tribes, or private entities in the development of the management plan, or in the establishment of specifications for the plan. The department and its mitigation banking partners are responsible for expenses incurred in the development of the management plan. All management plans adopted under this section must include:
     (a) An identification of the wetlands, other aquatic resources, or uplands and their associated ecological and recreational functions, that will be improved and protected on the pilot mitigation bank site;
     (b) Details for the creation, restoration, enhancement, or preservation of the wetlands, other aquatic resources, or uplands on the pilot mitigation bank site;
     (c) Details of the long-term management actions that will occur on the site, when the actions will occur, and where those actions will occur within the site; and
     (d) Details on the amount of funding necessary for the long-term management endowment and details as to how the amount was calculated under section 4 of this act.
     (3) The service area for the pilot mitigation bank must be based on the geographic and functional connectivity of the pilot mitigation bank site with the impacting project sites, which must be determined and approved through state or federal regulatory mitigation processes.
     (4) Consistent with state and federal regulatory mitigation processes, state-owned aquatic lands utilized as the pilot mitigation bank will not be available for other uses that will change the intent of the site as a mitigation site or compromise the ecological functions of the site.
     (5)(a) The department may sell mitigation bank credits generated from the pilot mitigation bank and receive revenues from the sale of mitigation bank credits generated from the pilot mitigation bank that have been sold by its mitigation banking partners.
     (b) The department and its mitigation banking partners must determine the economic value of the mitigation bank credits for the pilot mitigation bank. The economic value of the mitigation bank credits will not be subject to the provisions of RCW 79.90.480 or 79.90.500. The department and its mitigation banking partners must sell the credits for no less than market value, as determined using appropriate mitigation credit market appraisal techniques. The economic value of the mitigation bank credits may include the costs associated with the habitat improvements made to the site and the value associated with the use of state-owned aquatic lands for the mitigation bank.
     (c) All moneys received by the department from the sale of mitigation bank credits generated from the pilot mitigation bank, in excess of a long-term management endowment created in section 4 of this act and in excess of the revenues to mitigation banking partners, must be deposited according to RCW 79.90.245 and 79.64.040, and paid to towns according to RCW 79.92.110.

NEW SECTION.  Sec. 4   (1) The department or its mitigation banking partners will create an endowment for the purpose of generating funds that are to be used for the long-term monitoring, maintenance, and management of the pilot mitigation bank.
     (2) The department or its mitigation banking partners will assume long-term management responsibility for the pilot mitigation bank after the amount of money necessary to establish the endowment that will adequately cover the costs of long-term monitoring, maintenance, and management is determined by the department, documented in the management plan, and approved through state or federal regulatory mitigation processes.
     (3) The amount of money necessary to establish the endowment must be based on the specific conditions of the pilot mitigation bank site and the long-term management plan for the site, as approved through state or federal regulatory mitigation processes.
     (4)(a) If the department assumes the long-term management responsibility for the pilot mitigation bank, the revenue from the sale of mitigation bank credits generated to establish the endowment must be deposited into the aquatic lands compensatory mitigation endowment account established in section 5 of this act.
     (b) The department must keep separate accounting records for moneys received into the aquatic lands compensatory mitigation endowment account from the sale of mitigation bank credits to ensure that funding for long-term management is fully secured and expended as approved through state or federal regulatory mitigation processes.

NEW SECTION.  Sec. 5   (1) The aquatic lands compensatory mitigation endowment account is created in the custody of the state treasurer. All receipts from moneys received by the department for the purpose of creating a long-term management endowment under section 4 of this act must be deposited into the account.
     (2) The moneys in the account must be invested for the benefit of the pilot mitigation bank site that the department has agreed to manage under this chapter.
     (3) The account must be administered by the state investment board. The principal of the account is irreducible. Disbursements from the account in an amount equal to the site management costs for the pilot mitigation bank, adjusted annually by the inflation rate, must be deposited into the aquatic lands compensatory mitigation management account, created in section 6 of this act, upon authorization of the commissioner of public lands and the director of the state investment board, provided the principal of the compensatory mitigation endowment account is not reduced. Allocations to the state investment board expense account under RCW 43.33A.160 may also be made from this account.

NEW SECTION.  Sec. 6   (1) The aquatic lands compensatory mitigation management account is created in the custody of the state treasurer. The account will receive revenues from the aquatic lands compensatory mitigation endowment account as described in section 5 of this act.
     (2) The moneys in the account must be used solely by the department for the purpose of performing long-term monitoring, maintenance, and management of the pilot mitigation bank site that is located on state-owned aquatic lands. Only the commissioner of public lands or the commissioner's designee may authorize expenditures from the account. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.

NEW SECTION.  Sec. 7   The purchase and sale of mitigation bank credits, generated by the single pilot mitigation bank authorized in this chapter, are to be voluntarily agreed to by the department and public or private third-party entities that are required to fulfill regulatory compensatory mitigation obligations. Mitigation credits made available through the pilot mitigation bank should be one of several options for third parties to meet their regulatory compensatory mitigation obligations. The department may not require a third party to buy mitigation credits from the pilot mitigation bank as a condition to use state-owned aquatic lands. If a third party agrees through the regulatory mitigation process to purchase credits from the pilot mitigation bank to fulfill its compensatory mitigation obligations for impacts to state-owned aquatic lands, the third party must complete the purchase prior to the department issuing a use authorization for the impacting project.

NEW SECTION.  Sec. 8   Nothing in this chapter affects the authority of the department to exchange, sell, or transfer jurisdiction of state-owned tidelands and shorelands or accept gifts of aquatic lands under RCW 79.90.457, 79.90.580, or 79.90.475 except that state-owned aquatic lands used for the pilot mitigation bank will not be transferred out of state ownership and control.

NEW SECTION.  Sec. 9   By December 31, 2010, the department must provide a report to the appropriate committees of the senate and house of representatives that provides the status of the pilot mitigation bank in regards to regulatory certification, management plan development, service area determination, credit determination, valuation, and sale, and endowment fund creation and expenditure.

Sec. 10   RCW 43.84.092 and 2003 c 361 s 602, 2003 c 324 s 1, 2003 c 150 s 2, and 2003 c 48 s 2 are each reenacted and amended to read as follows:
     (1) All earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.
     (2) The treasury income account shall be utilized to pay or receive funds associated with federal programs as required by the federal cash management improvement act of 1990. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for refunds or allocations of interest earnings required by the cash management improvement act. Refunds of interest to the federal treasury required under the cash management improvement act fall under RCW 43.88.180 and shall not require appropriation. The office of financial management shall determine the amounts due to or from the federal government pursuant to the cash management improvement act. The office of financial management may direct transfers of funds between accounts as deemed necessary to implement the provisions of the cash management improvement act, and this subsection. Refunds or allocations shall occur prior to the distributions of earnings set forth in subsection (4) of this section.
     (3) Except for the provisions of RCW 43.84.160, the treasury income account may be utilized for the payment of purchased banking services on behalf of treasury funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasury and affected state agencies. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4) Monthly, the state treasurer shall distribute the earnings credited to the treasury income account. The state treasurer shall credit the general fund with all the earnings credited to the treasury income account except:
     (a) The following accounts and funds shall receive their proportionate share of earnings based upon each account's and fund's average daily balance for the period: The aquatic lands compensatory mitigation endowment account, the aquatic lands compensatory mitigation management account, the capitol building construction account, the Cedar River channel construction and operation account, the Central Washington University capital projects account, the charitable, educational, penal and reformatory institutions account, the common school construction fund, the county criminal justice assistance account, the county sales and use tax equalization account, the data processing building construction account, the deferred compensation administrative account, the deferred compensation principal account, the department of retirement systems expense account, the drinking water assistance account, the drinking water assistance administrative account, the drinking water assistance repayment account, the Eastern Washington University capital projects account, the education construction fund, the election account, the emergency reserve fund, The Evergreen State College capital projects account, the federal forest revolving account, the health services account, the public health services account, the health system capacity account, the personal health services account, the state higher education construction account, the higher education construction account, the highway infrastructure account, the industrial insurance premium refund account, the judges' retirement account, the judicial retirement administrative account, the judicial retirement principal account, the local leasehold excise tax account, the local real estate excise tax account, the local sales and use tax account, the medical aid account, the mobile home park relocation fund, the multimodal transportation account, the municipal criminal justice assistance account, the municipal sales and use tax equalization account, the natural resources deposit account, the oyster reserve land account, the perpetual surveillance and maintenance account, the public employees' retirement system plan 1 account, the public employees' retirement system combined plan 2 and plan 3 account, the public facilities construction loan revolving account beginning July 1, 2004, the public health supplemental account, the public works assistance account, the Puyallup tribal settlement account, the regional transportation investment district account, the resource management cost account, the site closure account, the special wildlife account, the state employees' insurance account, the state employees' insurance reserve account, the state investment board expense account, the state investment board commingled trust fund accounts, the supplemental pension account, the Tacoma Narrows toll bridge account, the teachers' retirement system plan 1 account, the teachers' retirement system combined plan 2 and plan 3 account, the tobacco prevention and control account, the tobacco settlement account, the transportation infrastructure account, the tuition recovery trust fund, the University of Washington bond retirement fund, the University of Washington building account, the volunteer fire fighters' and reserve officers' relief and pension principal fund, the volunteer fire fighters' and reserve officers' administrative fund, the Washington fruit express account, the Washington judicial retirement system account, the Washington law enforcement officers' and fire fighters' system plan 1 retirement account, the Washington law enforcement officers' and fire fighters' system plan 2 retirement account, the Washington school employees' retirement system combined plan 2 and 3 account, the Washington state health insurance pool account, the Washington state patrol retirement account, the Washington State University building account, the Washington State University bond retirement fund, the water pollution control revolving fund, and the Western Washington University capital projects account. Earnings derived from investing balances of the agricultural permanent fund, the normal school permanent fund, the permanent common school fund, the scientific permanent fund, and the state university permanent fund shall be allocated to their respective beneficiary accounts. All earnings to be distributed under this subsection (4)(a) shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (b) The following accounts and funds shall receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The aeronautics account, the aircraft search and rescue account, the county arterial preservation account, the department of licensing services account, the essential rail assistance account, the ferry bond retirement fund, the grade crossing protective fund, the high capacity transportation account, the highway bond retirement fund, the highway safety account, the motor vehicle fund, the motorcycle safety education account, the pilotage account, the public transportation systems account, the Puget Sound capital construction account, the Puget Sound ferry operations account, the recreational vehicle account, the rural arterial trust account, the safety and education account, the special category C account, the state patrol highway account, the transportation 2003 account (nickel account), the transportation equipment fund, the transportation fund, the transportation improvement account, the transportation improvement board bond retirement account, and the urban arterial trust account.
     (5) In conformance with Article II, section 37 of the state Constitution, no treasury accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

Sec. 11   RCW 43.84.092 and 2004 c 242 s 60 are each amended to read as follows:
     (1) All earnings of investments of surplus balances in the state treasury shall be deposited to the treasury income account, which account is hereby established in the state treasury.
     (2) The treasury income account shall be utilized to pay or receive funds associated with federal programs as required by the federal cash management improvement act of 1990. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for refunds or allocations of interest earnings required by the cash management improvement act. Refunds of interest to the federal treasury required under the cash management improvement act fall under RCW 43.88.180 and shall not require appropriation. The office of financial management shall determine the amounts due to or from the federal government pursuant to the cash management improvement act. The office of financial management may direct transfers of funds between accounts as deemed necessary to implement the provisions of the cash management improvement act, and this subsection. Refunds or allocations shall occur prior to the distributions of earnings set forth in subsection (4) of this section.
     (3) Except for the provisions of RCW 43.84.160, the treasury income account may be utilized for the payment of purchased banking services on behalf of treasury funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasury and affected state agencies. The treasury income account is subject in all respects to chapter 43.88 RCW, but no appropriation is required for payments to financial institutions. Payments shall occur prior to distribution of earnings set forth in subsection (4) of this section.
     (4) Monthly, the state treasurer shall distribute the earnings credited to the treasury income account. The state treasurer shall credit the general fund with all the earnings credited to the treasury income account except:
     (a) The following accounts and funds shall receive their proportionate share of earnings based upon each account's and fund's average daily balance for the period: The aquatic lands compensatory mitigation endowment account, the aquatic lands compensatory mitigation management account, the capitol building construction account, the Cedar River channel construction and operation account, the Central Washington University capital projects account, the charitable, educational, penal and reformatory institutions account, the common school construction fund, the county criminal justice assistance account, the county sales and use tax equalization account, the data processing building construction account, the deferred compensation administrative account, the deferred compensation principal account, the department of retirement systems expense account, the drinking water assistance account, the drinking water assistance administrative account, the drinking water assistance repayment account, the Eastern Washington University capital projects account, the education construction fund, the election account, the emergency reserve fund, The Evergreen State College capital projects account, the federal forest revolving account, the health services account, the public health services account, the health system capacity account, the personal health services account, the state higher education construction account, the higher education construction account, the highway infrastructure account, the industrial insurance premium refund account, the judges' retirement account, the judicial retirement administrative account, the judicial retirement principal account, the local leasehold excise tax account, the local real estate excise tax account, the local sales and use tax account, the medical aid account, the mobile home park relocation fund, the multimodal transportation account, the municipal criminal justice assistance account, the municipal sales and use tax equalization account, the natural resources deposit account, the oyster reserve land account, the perpetual surveillance and maintenance account, the public employees' retirement system plan 1 account, the public employees' retirement system combined plan 2 and plan 3 account, the public facilities construction loan revolving account beginning July 1, 2004, the public health supplemental account, the public works assistance account, the Puyallup tribal settlement account, the regional transportation investment district account, the resource management cost account, the site closure account, the special wildlife account, the state employees' insurance account, the state employees' insurance reserve account, the state investment board expense account, the state investment board commingled trust fund accounts, the supplemental pension account, the Tacoma Narrows toll bridge account, the teachers' retirement system plan 1 account, the teachers' retirement system combined plan 2 and plan 3 account, the tobacco prevention and control account, the tobacco settlement account, the transportation infrastructure account, the tuition recovery trust fund, the University of Washington bond retirement fund, the University of Washington building account, the volunteer fire fighters' and reserve officers' relief and pension principal fund, the volunteer fire fighters' and reserve officers' administrative fund, the Washington fruit express account, the Washington judicial retirement system account, the Washington law enforcement officers' and fire fighters' system plan 1 retirement account, the Washington law enforcement officers' and fire fighters' system plan 2 retirement account, the Washington public safety employees' plan 2 retirement account, the Washington school employees' retirement system combined plan 2 and 3 account, the Washington state health insurance pool account, the Washington state patrol retirement account, the Washington State University building account, the Washington State University bond retirement fund, the water pollution control revolving fund, and the Western Washington University capital projects account. Earnings derived from investing balances of the agricultural permanent fund, the normal school permanent fund, the permanent common school fund, the scientific permanent fund, and the state university permanent fund shall be allocated to their respective beneficiary accounts. All earnings to be distributed under this subsection (4)(a) shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (b) The following accounts and funds shall receive eighty percent of their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The aeronautics account, the aircraft search and rescue account, the county arterial preservation account, the department of licensing services account, the essential rail assistance account, the ferry bond retirement fund, the grade crossing protective fund, the high capacity transportation account, the highway bond retirement fund, the highway safety account, the motor vehicle fund, the motorcycle safety education account, the pilotage account, the public transportation systems account, the Puget Sound capital construction account, the Puget Sound ferry operations account, the recreational vehicle account, the rural arterial trust account, the safety and education account, the special category C account, the state patrol highway account, the transportation 2003 account (nickel account), the transportation equipment fund, the transportation fund, the transportation improvement account, the transportation improvement board bond retirement account, and the urban arterial trust account.
     (5) In conformance with Article II, section 37 of the state Constitution, no treasury accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

NEW SECTION.  Sec. 12   Section 10 of this act expires July 1, 2006.

NEW SECTION.  Sec. 13   Section 11 of this act takes effect July 1, 2006.

NEW SECTION.  Sec. 14   Sections 1 through 9 of this act constitute a new chapter in Title 79 RCW.

NEW SECTION.  Sec. 15   Section 10 of this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2005.