BILL ANALYSIS SB 1527 Page 1 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. SB 1527 Page 2 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 SB 1527 Page 3 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 SB 1527 Page 4 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 SB 1527 Page 5 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 FN: 0006601