BILL ANALYSIS
SENATE AGRICULTURE COMMITTEE
Senator Abel Maldonado, Chairman
BILL NO: SB 1527 HEARING: 4/15/08
AUTHOR: Yee FISCAL: Yes
VERSION: 2/22/08 CONSULTANT: John Chandler
State property: surplus property. URGENCY
BACKGROUND AND EXISTING LAW
Over 140 years ago, California began organizing what is today
one of the largest fair system in the nation. The 54 district
agricultural associations, state agency fairs, are managed under
the Department of Food and Agriculture (CDFA) in the Division of
Fairs and Expositions. Each fair operates with a degree of
autonomy with a board of directors appointed by the governor and
in accordance with state law governing the operation of state
agencies.
District Agriculture Association 1-A (Cow Palace) first opened
in 1941 after a long period of development. The thought of the
Cow Palace was a result of the great success of the 1915 Pan
Pacific International Exposition livestock expo. After several
attempts to develop the Cow Palace locally, a legislative
appropriation of $250,000 was eventually passed in 1931. This
appropriation was to be used in part to purchase a suitable
site. However, as the depression of the 1930's worsened, and
resistance of using public funds for construction of a livestock
pavilion developed. A local newspaper headline read, "Why, when
people are starving, should money be spent on a "palace for
cows?" The headline became the origin of the world famous name.
Twenty years after its inception, and at the height of the
Depression, the Cow Palace was built under the New Deal "Works
Progress Administration" programs as part of a federal effort to
put Americans back to work. Since its construction, the Cow
Palace has hosted a wide variety of events from the Annual Grand
National Rodeo to the Exotic Erotic Ball. While events at the
Cow Palace can bring over 500,000 visitors, the facility is
currently running a deficit of $600,000. The Division of Fairs
and Expositions is providing a loan of $336,000 to the Cow
Palace to help address the shortfall. This loan is in addition
to an annual allocation of approximately $175,000 from the Fair
and Exposition Fund (F&E Fund) to the Cow Palace for the Grand
National Rodeo.
For 75 years, license fees assessed against California
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horseracing has been the sole state support for the California
Network of Fairs through the F&E Fund. Current law guarantees
the F&E Fund will receive $40 million annually generated by
horseracing license fees.
California Food and Agriculture Code 4002 specifies that
proceeds from the sale of real property owned by any DAA are
paid into the F&E Fund. The money will be available to the DAA
for three years before the proceeds are available.
In 2004, SCA 18 (Johnson) authorized proposition 57 for the
March 2004 ballot which created a California Constitutional
Amendment that earmarked the proceeds from any disposal of
surplus state property for repayment of the Economic Recovery
Bond Act.
Existing law requires the Department of General Services to
request authorization by the Legislature prior to the
disposition by sale or otherwise of state land reported to it by
a state agency as being in excess of its foreseeable needs.
Each state agency is required to annually review proprietary
state lands under its jurisdiction to determine what lands are
in excess of the agency's foreseeable needs and to report to the
director of the Department of General Services.
Related and historic legislation on fairs and fair property
include the following:
AB 1517 (Jones) of 2008 revises the terms for the disposition of
two previously authorized State surplus property transactions
between the National Guard and Saint Francis High School in
Sacramento. Pending with Senate Appropriations.
AB 2947 (Leno) of 2008 prohibits the sale of firearms and
ammunition at the Cow Palace. Pending with the Assembly Public
Safety Committee
SB 281 (Maldonado, Chapter 346, Statutes of 2007) requires CDFA
to develop upon approval of the DGS, criteria to be used for the
purchase of goods and the disposal of property by a district
agricultural association and Cal Expo.
SB 455 (Denham) of 2007 would have authorizes the Director of
General Services to sell or lease to the City of Soledad the
California Correctional Training Facility's (prison) wastewater
treatment and disposal site. Vetoed.
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SB 1041 (Denham) of 2006 directs the CDFA to identify two
district agricultural fairs willing to be used in a pilot
project studying the effects of transferring fair authority to
local agencies. Died in Assembly Appropriations.
SB 1397 (Maddy, Chapter 335, Statutes of 1996) redefines the
proper uses for funding of state-financed fair support to
maximize local autonomy and decision making while using auditing
and fiscal reporting to guard against mismanagement.
SB 1527 was heard previously in the Senate Agriculture committee
on April 1, 2008. Following extensive testimony by both
supporters and opponents to the bill, the committee held the
bill in committee to allow the author time to resolve concerns
expressed by members during the hearing. Of concern was the
declaration of the Cow Palace property and surplus state
property, the limited offering of the sale only to Daly City,
and recent request for lease proposal by the Cow Palace to lease
a thirteen acre portion of the property for development.
PROPOSED LAW
SB 1527 would require the Department of General Services to sell
part or all of the real property occupied by the District
Agriculture Association 1-A, (Cow Palace) located in San
Francisco and San Mateo Counties to the City of Daly City at
fair market value. All proceeds shall be paid into the Deficit
Recovery Bond Retirement Sinking Fund.
COMMENTS
1.Proponents of this bill state that the Cow Palace and its 101
acres of real estate within Daly City has failed to be
adequately maintained over the years. It constrains the
development of the Bayshore neighborhood and remains in
blighted condition due to its deteriorated physical
infrastructure and non-conformance with seismic and ADA
requirements. Further, they believe that the facility is
outdated for the region and an inappropriate land-use within
the surrounding residential area. The Cow Palace imposes a
financial challenge to Daly City because of the high cost of
providing excess public safety services to the facility.
The sale of the Cow Palace facilities to Daly City would
provide much needed development in the Bayshore community.
Daly City redevelopment would provide the community with a
needed local grocery store, bank, affordable housing units,
and other services to the local community.
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Some of the events held at the Cow Palace have drawn criticism
from the neighborhood and the Legislature, charging that such
events do not represent the community surrounding the Cow
Palace. Assemblymember Leno's bill, AB 2948, currently
pending in the Assembly Public Safety Committee, would seek to
prohibit the Cow Palace from hosting gun shows at its
facility.
Additionally, the Cow Palace is currently running an operating
deficit of just over $600,000. By taking a state facility
that is losing money, the sale of the Cow Palace real property
could generate anywhere from 85-150 million dollars in revenue
for the state.
2.Opponents of this bill argue that the sale of the Cow Palace
would close a historic and valuable asset of the state. Over
500,000 people use the Cow Palace annually, attending
countless events including the famous Grand National Rodeo,
held at the Cow Palace since 1941. Similar to other DAA's in
Southern California, the Cow Palace provides unique open space
in an urban setting for Emergency Services during disasters
such as the recent fires.
Although many exhibitors would be able to relocate their
events to neighboring facilities, others such as the Grand
National Rodeo and the Dickens Christmas Fair believe they
would be unable to find suitable replacement facilities.
With over 500,000 visitors a year, supporters of the Cow
Palace argue that the facility is not surplus state property.
Further, within the Food and Agriculture Code, an established
process for the California Network of Fairs to dispose of fair
property and direct the proceeds to the enhancement and
continuation of the California fair network exists.
Opponents believe that the declaration of DAA 1-A as surplus
property could be setting a precedent that may lead to other
DAA's throughout the state being declared surplus and also
sold.
Finally, in an effort to address the desire of Daly City for
more retail space to better serve the community, DAA 1-A is
working on a Request for Proposal to develop 13 acres of the
Cow Palace site for retail development. According to
opponents of the bill, this is a continuation of recently
failed negotiations between Daly City, the Cow Palace, and
private land owners to develop property with needed retail for
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the local community. The development of these acres by the
Cow Palace would generate needed revenue, eliminating the
current operating deficit and providing extra funds for
facility improvements. Similar development of DAA property
has been successful at the Madera Fair DAA 21-A.
3.Many other DAA's have opened satellite wagering facilities to
help increase fair revenue for their fair. Since 1991, under
the Business and Professions Code Section 19605(c), the Cow
Palace was authorized to operate up to three satellite
wagering facilities within the county and city of San
Francisco in conjunction with the San Francisco Fair (DAA 5).
Currently DAA 5 is no longer operating; however, the Committee
may want to consider why the Cow Palace has never taken
advantage of this opportunity for revenue growth by operating
a satellite wagering facility.
4.This bill would specify that proceeds from the property sale
of the Cow Palace would all be paid to the Deficit Recovery
Bond Retirement Sinking Fund as specified in Article XVI of
the California Constitution. Under the Food and Agriculture
Code Section 4002, revenue from the sale of fair real property
is to be paid to the Fair and Exposition Fund where it is
available to the fair for up to three years before being
distributed to all fairs in the network of California fairs.
By sending the proceeds to the Deficit Recovery Bond
Retirement Sinking Fund, this bill would eliminate any
possibility of using the real property sale revenue for a
possible relocation of DAA 1-A in another location or
benefiting other fairs in the Network of Fairs. The Committee
may want to consider if the funds should be sent to the
Deficit Recovery Bond Retirement Sinking Fund or to the Fair
and Exposition Fund.
5.SB 1527 requires DGS to sell some or all of the Cow Palace
real estate property before January 1, 2009. Even with the
urgency clause, it will still take time for this bill to
travel through the legislative process and be signed by the
governor. Hence, the deadline of January 1, 2009, seems
unrealistic for Daly City and DGS to come to terms with the
sale of the Cow Palace. The Committee may want to consider if
the timeframe in the bill is too short and should be extended.
6.The sale of surplus state property can be subject to
California Environmental Quality Act (CEQA) environmental
review process. Governor Schwarzenegger has vowed to veto all
surplus property bills that do not contain CEQA exemption
language. SB 1527 currently does not include any language
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exempting it from CEQA requirements.
7.SB 1527 specifies that the Department of General Services
shall sell all or part of the Cow Palace to the Daly City
Redevelopment Agency or to the City of Daly City at fair
market value. It would seem that if the state qualifies the
Cow Palace as surplus property and consequently sell the
property, it should be offered to all interested parties. The
Committee may want to consider if the bill should allow the
general public the same opportunity to bid on the Cow Palace
as is offered to Daly City.
8.Should Daly City purchase all of the property currently
occupied by the Cow Palace, this would make DAA 1-A an orphan
without a home. Since the Constitution mandates the proceeds
be sent to the Deficit Recovery Bond Retirement Fund rather
than the historic path though F&E Fund which provided a means
for the DAA to relocate, the Committee may want to consider if
all DAA 1-A's property is sold to Daly City, should the state
dissolve DAA 1-A at that time?
9.During the April 1, 2008, Senate Agriculture Committee
hearing, members expressed concerns with the bill.
Specifically members were concerned about the property being
declared surplus property, and the limited offering of the
property sale exclusively to Daly City. The bill has yet to
be amended to address any of the concerns express during the
April 1 hearing. However, the author is in the process of
negotiating amendments to the bill.
10.This bill includes an urgency clause due to meet the timeline
with the bill to sell the Cow Palace by January 1, 2009.
Without the urgency clause, the bill would take effect the
same day as the Department of General Services is required to
conclude the sale of the Cow Palace property.
11.The Senate Rules Committee has doubled referred this bill to
the Senate Governmental Organization Committee as the second
committee of referral. Therefore, if this measure is approved
by this committee, the motion should include an action to
re-refer the bill to the Senate Committee on Governmental
Organization.
SUPPORT
ACORN
Bayshore Community Services
Bayshore Friendship Senior Citizen Club
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Bayshore Sanitary District
Bayshore School District
City of Daly City
County of San Mateo
Plumbers, Steamfitters, and Refrigeration Fitters Local Union
#467
San Mateo county Building and Construction Trades Council
Many individuals
OPPOSITION
California Cattlemen's Association
California Farm Bureau Federation
Crossroads of The West Gun Shows
Flying U Rodeo
Hastings Island Land Company
Horse power Promotions
National Rifle Association of America
Nevada County Fairgrounds
Professional Rodeo Cowboys Association
Save the Cow Palace
Western Fairs Association
Yuba Sutter Fair
Many individuals