BILL ANALYSIS
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|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,
Yee
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
property.
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.
Background
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)
ACORN
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
property.
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
community.
TSM:cm 7/14/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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