BILL ANALYSIS
SB 1527
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Date of Hearing: August 7, 2008
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
SB 1527 (Yee) - As Amended: July 14, 2008
Policy Committee: Business and
Professions Vote: 7-2
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill directs the Department of General Services (DGS) to
enter into negotiations, prior to January 1, 2009, to sell at
fair market value, with certain restrictions, a 13-acre parking
lot portion of the state-owned Cow Palace property, located in
the County of San Mateo and the City and County of San
Francisco. Specifically, this bill:
1)Requires DGS, in consultation with the Department of Food and
Agriculture (DFA), prior to January 1, 2009, to enter into
negotiations to sell the property at fair market value,
without any conditions relating to entitlement, to any
interested third party, with the Daly City Redevelopment
Agency (DCRA) afforded the right of first refusal on the
property.
2)Specifies that if DCRA exercises its right of first refusal or
enters into negotiations with DGS pursuant to the above, then
DCRA and DGS shall enter into a written agreement within 90
days to complete the sale of the property at least at its fair
market value but for no less than the accepted bid, proposal,
or offer.
3)Specifies that fair market value shall be evaluated at the
highest and best use of the property as entitled within its
existing zone designation.
4)Specifies that if the DCRA and DGS do not enter into a written
agreement for the purchase of the property within 90 days, DGS
may sell, transfer, or otherwise dispose of the property as
provided by law.
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5)Requires the sales agreement to require the purchaser to
develop the property consistent with the general plan of the
City of Daly City and the Bayshore Revitalization
Redevelopment Plan.
6)Requires that the net proceeds from the disposition of the
property be paid into the Fairs and Exposition Fund (F&E Fund)
for the benefit of the District 1-A Agricultural Association
(DAA 1-A).
7)Provides that DFA, until June 1, 2012, shall assume only those
rights, duties, and powers of the board of directors of the
DAA 1-A associated with negotiating the sale of the property.
8)Requires the DFA, in coordination with DGS, 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 Cow Palace property, by June
1, 2013.
FISCAL EFFECT
1)Unknown one-time revenue to the Fairs and Exposition Fund from
the property sale, net of any costs to DGS to administer the
transaction. It is unclear whether the disposition process
required in the bill would result in less than optimum
revenues to the state. (See Comment #5.)
2)One-time cost, probably under $50,000, to DFA for the report.
COMMENTS
1)Purpose . The author indicates that the Bayshore neighborhood
in Daly City is in desperate need of basic services. This
neighborhood has no post offices, pharmacies or grocery
stores. Some residents living near the Cow Palace must take
three buses to get to the closest grocery store. The Cow
Palace property occupies 68 acres within this neighborhood,
including a 13-acre overflow parking lot that is rarely used.
The author states that the Cow Palace is currently running an
operating deficit of nearly $700,000, and over the past five
years the Cow Palace has lost over $1.5 million dollars. This
bill provides for the disposition of the overflow parking lot,
with the proceeds going to Fairs and Exposition Fund.
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2)Background . The state's network of fairs includes 54 district
agricultural associations (state agency fairs), which are
managed under the DFA within the Division of Fairs and
Expositions. Each fair operates with a degree of autonomy
through a board of directors appointed by the governor. State
support to these fairs comes through the Fairs and Expositions
Fund, principally from a portion of license fees assessed
against California horseracing. State funding has been around
$11 million annually in recent years.
According to the DFA, the Cow Palace 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 F&E Fund to the
Cow Palace for the Grand National Rodeo.
3)Conflict with Leasing Process . In March 2008, the DAA 1-A
released a request for proposal (RFP) to lease the same
13-acre parcel with the expectation that the lease could
generate $1.5 million in revenue annually. The RFP is
consistent with the City of Daly City's master plan to
construct a grocery store, bank, and affordable housing on the
site. Responses to the RFP were due June 30, 3008 and DGS,
DFA, and the DAA 1-A are currently negotiating with two
responsive bidders. Even if enacted, the property sale
envisioned in this bill could be precluded if a lease
agreement is entered into prior to completion of any sale
transaction.
4)Proposition 60A . Under Proposition 60A, the net proceeds of
the sale of surplus property must be used to pay the holders
of the state's deficit reduction bonds. These payments
accelerate the redemption of the state's debt and reduce
future General Fund payments to the bondholders. The proceeds
of sales of property purchased with gas-tax revenue i.e.,
revenue constitutionally dedicated to highway construction, or
special funds, are exempt from the deficit payment
requirement.
SB 1527 declares that sale of the Cow Palace property does not
constitute a sale of surplus state property subject to the
requirements of Proposition 60A, and directs the sale proceeds
into the appropriate special fund for district agricultural
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fairs.
5)Opposition . DGS is opposed to providing a right of first
refusal to the DCRA, arguing that this approach could reduce
the number of parties interested in bidding on the property,
possibly resulting in reduced revenue to the state from the
sale. The author responds in part that affording DCRA the
opportunity to obtain the property, when combined with the
DCRA's existing control over an adjoining 12.5 acre parcel and
the potential cooperation from the owner of an additional
11-acre contiguous parcel could enhance the overall value of
the state-owned parcel by providing the opportunity for a
development encompassing almost 37 acres. DGS is also opposed
because the property disposition lacks an exemption to the
California Environmental Quality Act (CEQA), as discussed
below.
6)No CEQA Exemption . In recent years, several legislative
measures to sell state property have been vetoed due to
objections that the bills did not exempt the property
dispositions from a CEQA review. This bill likewise does not
provide a CEQA exemption. The author argues that the transfer
of property should fall under a categorical CEQA exemption
inasmuch as the use of the property has not changed since it
was first acquired by the state as a parking lot for the Cow
Palace, and would not change until acquired by the DCRA. At
that time, subject to local control, the future change of use
and development of the parcel will be subject to CEQA.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081