BILL REQ. #:  H-4973.1 

READ FIRST TIME 02/09/04.   

     AN ACT Relating to the department of natural resources' authority for compensatory mitigation management on state-owned aquatic lands; reenacting and amending RCW 43.79A.040; and adding a new chapter to Title 79 RCW.

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 ensure that individual compensatory mitigation sites and mitigation bank sites on state-owned aquatic lands are properly planned for and protected over the long term.
     (3) The intent of this chapter is to establish the proprietary mechanisms for the department, on state-owned aquatic lands, to: Serve as the long-term manager of compensatory mitigation sites; utilize in- lieu fee mitigation funds for habitat improvement projects; and develop, implement, and manage mitigation banks.

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 uplands, wetlands, or other aquatic resources 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 assessment method.
     (3) "Department" means the department of natural resources.
     (4) "In-lieu compensatory mitigation" means payment from a sponsor to a natural resource management entity for the purpose of designing, implementing, and managing compensatory mitigation projects to offset unavoidable impacts from a project.
     (5) "Mitigation" means the sequential process of avoiding impacts, minimizing impacts, and compensating for the remaining unavoidable impacts of a project.
     (6) "Mitigation bank" means a site where either wetlands or aquatic resources, or both, 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.
     (7) "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 mitigation bank that is located on state-owned aquatic lands and is approved through state or federal regulatory mitigation processes.
     (8) "Mitigation partners" means public or private entities with which the department has entered into mitigation banking agreements under section 4 of this act.
     (9) "Project" means a physical construction project that develops or redevelops land in a way that creates unavoidable adverse environmental impacts that remain after all appropriate and practicable avoidance and minimization has been achieved.
     (10) "Site" means a mitigation bank site, or a site where compensatory mitigation has or will occur.
     (11) "Sponsor" means the person or entity that is proposing, financing, designing, or constructing a project.

NEW SECTION.  Sec. 3   (1) The department may create an endowment for the purpose of generating funds that are to be used for the long-term monitoring, maintenance, and management of proprietary compensatory mitigation sites and mitigation bank sites.
     (2) Any endowment created by the department may accept money from public or private entities. However, the department may only accept money for an endowment that will fund compensatory mitigation sites and compensatory mitigation bank sites that are:
     (a) Developed by the public or private entities that donate the money;
     (b) Are located on state-owned aquatic lands; and
     (c) Are approved through state or federal regulatory mitigation processes.
     (3)(a) Before the department may assume management responsibility for a site, the amount of money necessary to establish an endowment that will adequately cover the costs of long-term monitoring, maintenance, and management must be determined by the department and approved through state or federal regulatory mitigation processes.
     (b) The amount of money necessary to establish an endowment must be based on the specific conditions of the compensatory mitigation site or mitigation bank site being considered by the department, and the long-term management plan for the site, as approved through state or federal regulatory mitigation processes.
     (c) Moneys collected by the department to establish an endowment must be deposited into the aquatic lands compensatory mitigation endowment account established in section 6 of this act.
     (4)(a) The department may accept in-lieu fee payments, from public or private entities, for the purpose of designing, implementing, and managing in-lieu compensatory mitigation projects that are located on state-owned aquatic lands and approved through state or federal regulatory mitigation processes.
     (b) In-lieu fee payments collected by the department must be deposited into the aquatic lands compensatory mitigation management account established in section 7 of this act.
     (5)(a) The department shall keep separate accounting records of all moneys received under this section for:
     (i) The long-term management of compensatory mitigation sites;
     (ii) The long-term management of mitigation bank sites; and
     (iii) The design, implementation, and management of in-lieu fee compensatory mitigation projects.
     (b) The department shall ensure, through its accounting records, that the funds for each site are fully secured and expended as approved through state or federal regulatory mitigation processes.
     (6) Consistent with state and federal regulatory mitigation policies, state-owned aquatic lands utilized as compensatory mitigation sites to offset long-term unavoidable project impacts and mitigation banks shall not be available for other uses that will compromise the ecological functions of the sites.

NEW SECTION.  Sec. 4   The department is authorized to enter into mitigation banking agreements with public or private entities to develop, implement, and manage mitigation banks that are located on state-owned aquatic lands and are approved through state or federal regulatory mitigation processes.

NEW SECTION.  Sec. 5   (1) The department is authorized to:
     (a) Sell mitigation bank credits from a department mitigation bank that is located on state-owned aquatic lands and approved through state or federal regulatory mitigation processes; and
     (b) Receive revenues from the sale of mitigation bank credits sold by public or private entities with which the department has entered into mitigation banking agreements.
     (2)(a) State or federal regulatory agencies must determine the ecological value of the mitigation bank credits through mitigation bank certification processes developed by those agencies. The ecological value may not be determined by the department.
     (b) The department and its mitigation partners must determine the economic value of the credits. The department and its mitigation partners shall 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 value associated with the use of state-owned aquatic lands for the mitigation bank.
     (3) Revenue from the sale of mitigation bank credits generated by a department mitigation bank on state-owned aquatic lands must be deposited into the aquatic lands compensatory mitigation endowment account established in section 6 of this act. All moneys received by the department from the sale of mitigation bank credits from a specific mitigation bank on state-owned aquatic lands, in excess of the revenues to mitigation partners and in excess of the long-term management endowment for that particular site, must be deposited according to RCW 79.90.245 and 79.64.040, and paid to towns according to RCW 79.92.110.
     (4) The department shall keep separate accounting records of all moneys received from the sale of mitigation bank credits from department mitigation banks to ensure that funding for the long-term management of particular mitigation bank sites are fully secured and expended as approved through state or federal regulatory mitigation processes.
     (5) Consistent with state and federal regulatory mitigation processes, state-owned aquatic lands utilized as department mitigation banks are not available for other uses that will compromise the ecological functions of the mitigation banks.

NEW SECTION.  Sec. 6   (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 sole purpose of creating long-term management endowments under sections 3 and 5 of this act must be deposited into the account.
     (2) The moneys in the account must be pooled and invested for the benefit of all compensatory mitigation sites and mitigation bank sites 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 of the interest and investment earnings from the account, less the allocations to the state investment board expense account under RCW 43.33A.160, must be made to the aquatic lands compensatory mitigation management account, created in section 7 of this act, upon authorization of the commissioner of public lands, and the director of the state investment board. The account is subject to allotment procedures under chapter 43.88 RCW, but an appropriation is not required for expenditures.

NEW SECTION.  Sec. 7   (1) The aquatic lands compensatory mitigation management account is created in the custody of the state treasurer. All receipts from interest and investment earnings from the aquatic lands compensatory mitigation endowment account created in section 6 of this act and in-lieu compensation payments for completing compensatory mitigation projects on state-owned aquatic lands received under section 3 of this act must be deposited into the account.
     (2) Expenditures from the account may be used solely by the department for the purpose of designing, implementing, and managing in-lieu compensatory mitigation projects and performing long-term monitoring, maintenance, and management of compensatory mitigation sites and mitigation bank sites that are located on state-owned aquatic lands.
     (3) The moneys in the account shall be pooled and expended solely for the benefit of compensatory mitigation sites, under sections 3 and 5 of this act, that the department has agreed to manage under this chapter. 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. 8   The authority granted in this chapter for the use of state-owned aquatic lands for compensatory mitigation or mitigation bank sites is intended to be voluntarily agreed to by the department and a public or private third-party entity. The department is prohibited from conditioning a third party's use of state-owned aquatic lands with the provisions of this chapter unless the conditions are agreed to by both the department and the third party.

NEW SECTION.  Sec. 9   Nothing in this chapter affects the authority of the department to exchange state-owned tidelands and shorelands under RCW 79.90.457.

Sec. 10   RCW 43.79A.040 and 2003 c 403 s 9, 2003 c 313 s 10, 2003 c 191 s 7, 2003 c 148 s 15, 2003 c 92 s 8, and 2003 c 19 s 12 are each reenacted and amended to read as follows:
     (1) Money in the treasurer's trust fund may be deposited, invested, and reinvested by the state treasurer in accordance with RCW 43.84.080 in the same manner and to the same extent as if the money were in the state treasury.
     (2) All income received from investment of the treasurer's trust fund shall be set aside in an account in the treasury trust fund to be known as the investment income account.
     (3) The investment income account may be utilized for the payment of purchased banking services on behalf of treasurer's trust funds including, but not limited to, depository, safekeeping, and disbursement functions for the state treasurer or affected state agencies. The investment 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)(a) Monthly, the state treasurer shall distribute the earnings credited to the investment income account to the state general fund except under (b) and (c) of this subsection.
     (b) The following accounts and funds shall receive their proportionate share of earnings based upon each account's or fund's average daily balance for the period: The Washington promise scholarship account, the college savings program account, the Washington advanced college tuition payment program account, the agricultural local fund, the American Indian scholarship endowment fund, the students with dependents grant account, the basic health plan self-insurance reserve account, the contract harvesting revolving account, the Washington state combined fund drive account, the Washington international exchange scholarship endowment fund, the developmental disabilities endowment trust fund, the energy account, the fair fund, the fruit and vegetable inspection account, the game farm alternative account, the grain inspection revolving fund, the juvenile accountability incentive account, the law enforcement officers' and fire fighters' plan 2 expense fund, the local tourism promotion account, the produce railcar pool account, the rural rehabilitation account, the stadium and exhibition center account, the youth athletic facility account, the self-insurance revolving fund, the sulfur dioxide abatement account, the children's trust fund, ((and)) the ((investing in innovation)) aquatic lands compensatory mitigation endowment account, and the aquatic lands compensatory mitigation management account. However, the earnings to be distributed shall first be reduced by the allocation to the state treasurer's service fund pursuant to RCW 43.08.190.
     (c) 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 advanced right of way revolving fund, the advanced environmental mitigation revolving account, the city and county advance right-of-way revolving fund, the federal narcotics asset forfeitures account, the high occupancy vehicle account, the local rail service assistance account, and the miscellaneous transportation programs account.
     (5) In conformance with Article II, section 37 of the state Constitution, no trust accounts or funds shall be allocated earnings without the specific affirmative directive of this section.

NEW SECTION.  Sec. 11   Sections 1 through 9 of this act constitute a new chapter in Title 79 RCW.