BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING
          SB 1527 (Yee)
          As Amended July 14, 2008
          2/3 vote.  Urgency 

           SENATE VOTE  :27-9  
           
           BUSINESS & PROFESSIONS    7-2   APPROPRIATIONS      12-3        
           
           ----------------------------------------------------------------- 
          |Ayes:|Eng, Carter, Hayashi,     |Ayes:|Leno, Caballero, Davis,   |
          |     |Hernandez, Horton,        |     |DeSaulnier, Furutani,     |
          |     |Galgiani, Torrico         |     |Huffman, Karnette,        |
          |     |                          |     |Krekorian, Lieu, Ma,      |
          |     |                          |     |Nava, Solorio             |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Duvall, Maze              |Nays:|Walters, La Malfa,        |
          |     |                          |     |Nakanishi                 |
           ----------------------------------------------------------------- 

           SUMMARY  :  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 parcel of state  
          property located in the County of San Mateo and the City and  
          County of San Francisco, known as the Cow Palace.    
          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 at fair market value, as specified,  
            without any conditions relating to entitlement, to any  
            interested third party, with the Daly City Redevelopment  
            Agency (DCRA) afforded the right of first refusal, a specified  
            parcel of property located within the City and County of San  
            Francisco and the County of San Mateo known as the Cow Palace.

          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.









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          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, and as governed by the Uniform  
            Standards of Professional Appraisal Practice.

          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.

          5)Requires the sales agreement to include a requirement that the  
            purchaser develop the property for uses consistent with the  
            general plan of the City of Daly City, any amendment to the  
            general plan, and the Bayshore Revitalization Redevelopment  
            Plan.

          6)Requires DGS to be reimbursed by the buyer for any costs or  
            expenses incurred in the disposition of the property.

          7)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).

          8)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.

          9)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 property, by June 1, 2013.

          10)Contains an urgency clause, allowing this bill to take effect  
            immediately upon enactment.

           EXISTING LAW  :

          1)Requires DGS to perform various functions with respect to  
            state property, and provides for the sale, lease, or transfer  
            of surplus state property, upon authorization by the  
            Legislature.  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  








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            to report their findings to DGS.

          2)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 shall be offered to local governments for  
            local government facilities, parks and recreation, open-space,  
            low or moderate income housing, and local schools.

          3)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 (Proposition 60A of November 2004, SCA 18 [Johnson],  
            Resolution Chapter 103, Statutes of 2004).

           FISCAL EFFECT  :   According to the Assembly Appropriations  
          Committee analysis: 

          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 :  According to the author, "The Bayshore neighborhood  
          in Daly City is in desperate need of basic services.  There are  
          no post offices, no pharmacies and no grocery stores in the  
          area.  In fact, residents who live in proximity to the facility  
          must take three buses to get to the closest grocery store.

          "The structure commonly known as the Cow Palace is located on 68  
          acres of property located in the Bayshore neighborhood within  
          the jurisdiction of Daly City.  Within the footprint of the Cow  
          Palace property is a 13 acre overflow parking lot, which is  
          rarely used. 

          "Unfortunately, The Cow Palace is currently running an operating  
          deficit of nearly $700,000. Over the past five years the Cow  
          Palace has lost over $1.5 million dollars.  The facility is in  
          great need of a cash infusion in order to provide much needed  








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          updates. State estimates show that in order for the structure to  
          become seismically safe it would cost nearly $50 million  
          dollars.  Additional funds are needed to allow the property to  
          become ADA (Americans with Disabilities Act) compliant and to  
          replace the faulty roof."

          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 DFA 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.  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 Fairs and Exposition Fund will receive $40  
          million annually generated by horseracing license fees.

          The initial proposal for construction of the Cow Palace was a  
          result of the success of the 1915 Pan Pacific International  
          Exposition in San Francisco.  After several attempts to develop  
          the Cow Palace locally, a legislative appropriation was passed  
          in 1931 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, and 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, and Disney on Ice.  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 F&E Fund to the Cow Palace  
          for the Grand National Rodeo.

          This bill would require DGS to enter into negotiations to sell,  
          at fair market value, a 12.97 acre parcel of state owned  








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          property adjacent to the Cow Palace that is currently used as  
          overflow parking.  DCRA will be given a right of refusal to  
          purchase the property, and if a sale agreement between DGS and  
          the DCRA is not executed within 90 days of entering  
          negotiations, DGS is authorized to sell the property to other  
          parties.  

          In March 2008, the DAA 1-A released a request for proposal (RFP)  
          to lease this 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 three bidders who  
          responded to the RFP.  


           Analysis Prepared by  :    Ross Warren / B. & P. / (916) 319-3301 


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