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.





          SB 1527 - Page 4


            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