BILL ANALYSIS                                                                                                                                                                                                    




                   Senate Appropriations Committee Fiscal Summary
                           Senator Tom Torlakson, Chairman

                                           1527 (Yee)
          
          Hearing Date:  6/30/08          Amended: 6/24/08
                                                                   As  
          proposed to be amended
          Consultant:  Bob Franzoia       Policy Vote: G O 10-0  Ag 4-1
          _________________________________________________________________ 
          ____
          BILL SUMMARY: SB 1527, an urgency measure, would direct the  
          Department of General Services, prior to January 1, 2009, to  
          enter into negotiations to sell at fair market value, with  
          certain restrictions, a parcel of state property located in the  
          County of San Mateo and the City and County of San Francisco.   
          The net proceeds of the sale would be paid into the Fair and  
          Exposition Fund, a continuously appropriated fund, for the  
          benefit of the District 1-A Agricultural Association, thereby  
          making an appropriation.  The bill would require reimbursement  
          from the net proceeds of the sale of any DGS costs incurred in  
          the disposition of the property.
          _________________________________________________________________ 
          ____
                            Fiscal Impact (in thousands)

           Major Provisions         2008-09      2009-10       2010-11     Fund
           Sale of state property Unknown, major revenue increase one  
          time;Special
          (revenue)              revenue increase likely less than fair  
          market
                                 value due to restrictions on sale    

          * Fair and Exposition Fund (if the parcel was initially acquired  
          with moneys form this fund; otherwise the revenue from the sale  
          would be deposited in the Deficit Recovery Bond Retirement  
          Sinking Fund Subaccount pursuant to Prop 60A as noted below)  
          _________________________________________________________________ 
          ____
          STAFF COMMENTS: The property would be sold to the Daly City  
          Redevelopment Agency or to the City of Daly City.  The net  
          proceeds shall be paid into the Fair and Exposition Fund for the  
          benefit of the District 1-A Agricultural Association.  The sale  
          would be required to have an agreement requiring the purchaser  
          to retain title to the entire property sold to it for uses  
          consistent with the general plan of the City of Daly City, any  










          amendment to that general plan, any specific plan amendments to  
          any specific plan, and the Bayshore revitalization redevelopment  
          plan.

          Current law generally requires a state agency to review annually  
          its real property holdings and determine what, if any, is in  
          excess of its foreseeable needs.  These properties are commonly  
          referred to as "surplus state properties."  Once real property  
          has been identified as surplus, the state attempts to sell the  
          property, or dispose of it in some other manner.  When surplus  
          property is sold, the sales revenues are deposited into the  
          account that originally paid for the acquisition of the  
          property. In most instances, sales revenues are deposited in the  
          General Fund and are available for expenditure on any state  
          program.  Pursuant to Proposition 60A (2004), the proceeds from  
          the sale would be used to pay the principal and interest on  
          Proposition 57 bonds.  Once these bonds are fully repaid,  
          proceeds from surplus property sales would be deposited in the  
          General Fund.  Proposition 60A only applies to those properties  
          that were purchased with General Fund revenue or bonds secured  
          by the General Fund.  Staff notes that the bill, as amended on  
          May 20, 2008 contains a finding and declaration that appears to 
          Page 2
          SB 1527 (Yee)

          be at odds with the intent of the bill to dispose of the  
          property.  Staff recommends an amendment to strike Section 3 of  
          the bill.

          The proposed amendments would amend Government Code Section  
          11011.27 (a), as added by the bill, and as amended 6/24/2008, to  
          read (bold notes language that would be added to the bill):

          (a) The Director of General Services in consultation with the  
          Department of Food and Agriculture, prior to January 1,  2009,  
          shall   sell at fair market value to the Daly City Redevelopment  
          Agency or to the City of Daly City  2009, shall enter into  
          negotiations to sell at fair market value with an all cash sale  
          without any conditions relating to entitlements to any  
          interested third-party to any interested party, with the Daly  
          City Redevelopment Agency afforded the right of first refusal,  
          upon those terms and conditions and subject to those  
          reservations and exceptions that the director determines are in  
          the best interests of the state, the following real property:?.

          Staff notes the following:










          - The bill no longer requires that the Director of General  
          Services, prior to January 1, 2009, shall sell the property.   
          The bill now requires that the Director of General Services,  
          prior to January 1, 2009, shall enter into negotiations to sell  
          the property.
          - A "first right of refusal" restriction places the seller at a  
          disadvantage and may depress the fair market value of the  
          property.
          - An "as is" restriction (sale without any conditions relating  
          to entitlements) casts uncertainty on the development process  
          and may depress the fair market value of the property.  (By  
          requiring the property be sold with this restriction, potential  
          buyers lack certainty about zoning changes which may occur post  
          sale that might restrict the development potential of the  
          property.)