BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  SB 1527|
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                                 THIRD READING

          Bill No:  SB 1527
          Author:   Yee (D)
          Amended:  7/14/08
          Vote:     27 - Urgency

           SENATE AGRICULTURE COMMITTEE  :  4-1, 4/15/08
          AYES:  Ducheny, Denham, Florez, Kuehl
          NOES:  Maldonado

           SENATE GOVERNMENTAL ORG. COMMITTEE  :  10-0, 5/13/08
          AYES:  Florez, Battin, Denham, Harman, Negrete McLeod,  
            Padilla, Vincent, Wiggins, Wyland, Yee

           SENATE APPROPRIATIONS COMMITTEE  :  12-2, 7/7/08
          AYES:  Torlakson, Ashburn, Cedillo, Corbett, Dutton,  
            Florez, Kuehl, Oropeza, Ridley-Thomas, Simitian, Wyland,  
          NOES:  Cox, Aanestad
          NO VOTE RECORDED:  Runner

           SUBJECT :    State Surplus Property

           SOURCE  :     Author

           DIGEST  :    This bill directs the Department of General  
          Services (DGS), 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 (Cow Palace).  The net proceeds of the sale will  


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          be paid into the Fair and Exposition Fund, a continuously  
          appropriated fund, for the benefit of the District 1-A  
          Agricultural Association, and requires reimbursement from  
          the net proceeds of the sale of any DGS costs incurred in  
          the disposition of the property. 

           ANALYSIS  :    Existing law generally requires the Director  
          of the DGS to perform various functions with respect to  
          state property and provides for the sale, lease, or  
          transfer of surplus state property.  Existing law requires  
          the Director of DGS 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 DGS.

          Existing law provides criteria for state agencies to use in  
          determining and reporting to DGS lands in excess of the  
          agency's foreseeable needs.  Under existing law, DGS is  
          responsible for determining if surplus land is needed by  
          any other state agency.  The law also provides that if the  
          land is not needed by another state agency, the property is  
          offered to local governments for any of the following  
          purposes:  "parks and recreation," "open-space," "low or  
          moderate income housing," and "local schools."

          The state's network of fairs includes 81 fairs operating  
          under a variety of governance structures, including 54  
          district agricultural associations (state agency fairs), 23  
          county fairs, two citrus fruit fairs (independent nonprofit  
          organizations with state oversight), and the California  
          Exposition and State Fair (Cal Expo), also a state agency  
          fair.  The 54 district agricultural associations are  
          managed under the Department of Food and Agriculture within  
          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.  For 75 years,  
          license fees assessed against California horseracing have  
          been the sole state support for the California network of  
          fairs through the Fairs and Expositions (F&E) Fund.   
          Existing law guarantees the F&E Fund will receive $40  



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          million annually generated by horseracing license fees.

          Proposition 60A of November 2004 (SCA 18 [Johnson],  
          Resolution Chapter 103, Statutes of 2004) which was adopted  
          by the electorate (73 percent margin) requires, among other  
          things, that the proceeds from the sale of surplus state  
          property, with specified exceptions, be used to pay the  
          principal and interest on the Recovery Bond Act of 2004.

          This bill:

          1. Requires DGS, in consultation with Department of Food  
             and Agriculture (DFA), prior to January 1, 2009, to  
             enter into negotiations to sell at fair market value  
             with an all cash sale, or cash equivalent, without any  
             conditions relating to entitlement, to any interested  
             third party, with the Daly City Redevelopment Agency  
             afforded the right of first refusal, upon terms and  
             conditions deemed to be in the state's best interest, a  
             specified parcel of property located within the City and  
             County of San Francisco and the County of San Mateo.

          2. Makes it explicit that DGS shall not sell the real  
             property for less than fair market value.

          3. Specifies that upon acceptance by DGS of any bid, offer,  
             or proposal, the Daly City Redevelopment Agency shall  
             have the right of first refusal.  If DGS rejects all  
             bids, proposals, or offers obtained in the open market,  
             then DGS shall enter into negotiations to sell the  
             subject parcel to the Daly City Redevelopment Agency at  
             fair market value.

          4. Specifies that if the Daly City Redevelopment Agency  
             exercises its right of first refusal or enters into  
             negotiations with DGS pursuant to the above, then,  
             within 90 days, the Daly City Redevelopment Agency and  
             the Director of DGS shall enter into a written agreement  
             to complete the sale of the property described in the  
             bill at least at its fair market value but for no less  
             than the accepted bid, proposal, or offer.

          5. Specifies that fair market value shall be evaluated at  
             the highest and best use of the property as entitled  



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             with its existing zone designation, generally required  
             for all real estate appraisals and as governed by the  
             Uniform Standards of Professional Appraisal Practice.

          6. Specifies that if the Daly City Redevelopment Agency and  
             DGS have not entered into a written agreement for the  
             purchase of the property within the time limit specified  
             above without reasonable delay, the Director of DGS may  
             sell, transfer, or otherwise dispose of the property as  
             provided by law.

          7. Requires the purchaser to develop the property for uses  
             consistent with the general plan of the City of Daly  
             City, any amendment to the general plan, and specific  
             plan amendments to any specific plan, and the Bayshore  
             Revitalization Redevelopment Plan.

          8. Provides that DGS shall be reimbursed by the buyer for  
             any costs or expenses incurred in the disposition of the  

          9. Requires that the net proceeds received from the  
             disposition of the property be paid into the F&E Fund  
             for the benefit of the District 1-A Agricultural  
             Association (DAA 1-A).

          10.Provides that DFA, until June 1, 2012, shall assume only  
             the rights, duties, and powers of the board of directors  
             of the DAA 1-A affiliated with negotiating the sale of  
             the property of the Association.

          11.Requires the DFA, in coordination with DGS, no later  
             than June 1, 2013, to provide to the Legislature a  
             report analyzing the business operations of the DAA 1-A  
             for the previous five years and make recommendations  
             identifying the best use of the property.


          The Cow Palace  .  DDA 1-A first opened in 1941 after a long  
          period of development.  The initial proposal for  
          construction of the Cow Palace was a result of the great  
          success of the 1915 Pan Pacific International Exposition in  
          San Francisco.  After several attempts to develop the Cow  



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          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.

          Twenty years after its inception, and at the height of the  
          Depression, the Cow Palace was built under the New Deal  
          "Works Progress Administration" (WPA) program as part of a  
          federal effort to put Americans back to work.  Since  
          opening in 1941, the Cow Palace has hosted a wide variety  
          of sporting events, concerts, etc., including the Grand  
          National Rodeo, Ringling Bros. Barnum & Bailey Circus, the  
          San Francisco Flower and Garden Show, the Golden Gate  
          Kennel Club Dog Show, the Exotic Erotic Ball and Disney on  
          Ice.  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 location of approximately $175,000 from the F&E Fund  
          to the Cow Palace for the Grand National Rodeo.

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

                          Fiscal Impact (in thousands)

           Major Provisions             2008-09             2009-10          
              2010-11            Fund

           Sale of state property    Unknown, major revenue increase  
          one         Special*
          (revenue)                       time; revenue increase  
          likely less than
                                                fair market value due  
          to restrictions
                                                on sale

          *Fair and Exposition Fund (if the parcel was initially  
          acquired with monies 
            from this fund; otherwise the revenue from the sale will  
          be deposited in the 
            Deficit Recovery Bond Retirement Sinking Fund Subaccount  
          pursuant to 
            Prop. 60A



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           SUPPORT  :   (Verified  7/11/08)

          Bayshore Community Services
          Bayshore Friendship Senior Citizen Club
          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
          Hundreds of local residents

           OPPOSITION  :    (Verified  7/11/08)

          Crossroads of the West Gun Shows
          Flying U Rodeo
          Hastings Island Land Company
          Horse Power Promotions
          Nevada County Fairgrounds
          Professional Rodeo Cowboys Association
          Save the Cow Palace Coalition
          Yuba Sutter Fair

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          this bill is intended to allow the state to negotiate with  
          a willing buyer, Daly City, to bring needed economic  
          development to the neighborhood surrounding the Cow Palace.  
           Specifically, this bill requires the state to enter into  
          negotiations to sell approximately 13 acres of Cow Palace  
          property to Daly City or the Daly City Redevelopment Agency  
          and also require that the net proceeds from that property  
          sale be deposited into the F&E Fund for the benefit of the  
          District 1-A Agricultural Association (the Cow Palace).  As  
          amended, the bill no longer requires that the Director of  
          DGS, prior to January 1, 2009, to sell the property.  The  
          bill now requires that the Director of DGS, prior to  
          January 1, 2009, to enter into negotiations to sell the  

          The author's office notes that the Cow Palace has been  



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          operating in the red with the state's General Fund making  
          up the difference.  Also, as recently as 2007, the Daly  
          City Redevelopment Agency offered to enter into a long-term  
          ground lease for approximately 13 acres of Cow Palace  
          property.  According to the author's office, the  
          Redevelopment Agency offered a minimum base rent of $1.4  
          million, which represented a fair market rent, however the  
          Cow Palace board of directors rejected the offer and  
          discussions ended without a general lease and without  
          improved revenue to the Cow Palace.

          Proponents claim that this bill enables Daly City to  
          provide the community with a needed local grocery store,  
          bank, affordable housing units, and other services to the  
          local Bayshore community.

           ARGUMENTS IN OPPOSITION  :    Opponents of this bill argue  
          that the sale of the Cow Palace would close a historic and  
          valuable asset of the state.  With over 50,000 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.

          The District 1-A Agricultural Association, in an effort to  
          address the desire of Daly City for more retail space to  
          better serve the community 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 the local  

          TSM:cm  7/14/08   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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