BILL ANALYSIS
Bill No: SB
29
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 29 Author: Denham
As Introduced: December 2, 2008
Hearing Date: April 28, 2009
Consultant: Art Terzakis
SUBJECT
Surplus State Property: Los Angeles Memorial Coliseum
DESCRIPTION
SB 29 is an urgency measure that mandates the sale of land
that the Los Angeles Memorial Coliseum (Coliseum) and the
Los Angeles Memorial Sports Arena (Sports Arena) occupy,
including the state's share of the Sports Arena structure,
and abolishes the Los Angeles Memorial Coliseum Commission
(LAMCC) upon completion of that sale. Specifically, this
measure:
1. Makes various findings relative to the fact that the
Coliseum has fallen into disrepair and state taxpayers
are receiving neither appropriate services nor an
adequate investment return on the property due to
ineffective oversight and management of the facility by
the LAMCC and declares that the solution to this problem
is for the State to sell the property for a quick cash
infusion.
2. Requires the California Science Center to sell, for
fair market value, the parcel of property that both the
Coliseum and the Sports Arena occupy in accordance with
bid solicitation procedures required to be developed, no
later than January 1, 2011, by the Department of General
Services (DGS).
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3. Provides that, upon completion of the sale of the
property, the LAMCC must rescind the Joint Powers
Agreement (JPA) with the City of Los Angeles, the County
of Los Angeles, and the California Science Center that
established the LAMCC, thus terminating the LAMCC.
4. Provides that, upon termination of the LAMCC, any
outstanding revenue bonds issued to finance the
construction of the Arena must be fully redeemed in
accordance with the bond indenture and the JPA.
5. Exempts the buyer(s) of the property from all state and
local environmental laws and regulations with respect to
improvements, construction, or remodeling, if the
buyer(s) continue with the same use of the property.
EXISTING LAW
Existing law creates the Los Angeles Memorial Coliseum
Commission (LAMCC) through a joint powers agreement with
the City of Los Angeles, the County of Los Angeles and the
Sixth District Agricultural Association, referred to as the
California Science Center. The Coliseum and the Sports
Arena are under the authority of the LAMCC which was formed
as a JPA between the city and county of Los Angeles and the
state in 1945.
The LAMCC consists of (a) three members nominated by the
Chairman of the Board of Supervisors; (b) one member
appointed by the Los Angeles City Council President; (c)
two members appointed by the City of Los Angeles, Board of
Recreation and Parks Commission; (d) three members elected
by the California Science Center Board of Directors; and,
(e) two ex-officio members, one each appointed by the
Senate Committee on Rules and the Speaker of the Assembly.
Existing law establishes the California Science Center, a
state agency and museum located in Exposition Park, Los
Angeles. The Center is a public/private partnership
between the State and the California Science Center
Foundation.
Existing law generally requires DGS to perform various
functions with respect to state property and provides for
the sale, lease, or transfer of surplus state property.
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Existing law (Government Code Section 11011) 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.
This annual review of proprietary state lands does not
apply to tax-deeded land, land held for highway purposes,
lands under the jurisdiction of the State Lands Commission,
land that has escheated to the state or that has been
distributed to the state by a court decree in estates of
deceased persons, and lands under the jurisdiction of the
State Coastal Conservancy. Jurisdiction of all land
reported as excess is transferred to DGS, when requested by
the Director of DGS, for sale or disposition under Section
11011 or as may otherwise be authorized by law.
Section 11011 of the Government Code provides criteria for
state agencies to use in determining and reporting to DGS
lands in excess of the agency's foreseeable needs. A state
agency is to include land not currently being utilized, or
currently being underutilized, for any existing or ongoing
program; land for which the agency has not identified any
specific utilization relative to future needs; and land not
identified by the agency within its master plan for
facility development.
Where applicable within its jurisdiction under Section
11011, DGS is responsible for determining if surplus land
is needed by any other state agency. Section 11011.1
requires the state to first offer surplus state real
property to local agencies, and next, to offer the property
to nonprofit affordable housing sponsors, as defined, prior
to offering the property to private entities. This section
of law also prescribes the procedure for local agencies and
nonprofit affordable housing sponsors to use to obtain the
surplus state
real property.
Existing law specifies that the Legislature may authorize a
particular surplus property be sold at less than fair
market value and provides that 30 days prior to executing
such a transaction, DGS must report to the chairs of the
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fiscal committees of the Legislature the following
information: (a) the financial terms of the transaction;
(b) a comparison of fair market value for the property and
financial terms; (c) the basis for agreeing to terms and
conditions other than fair market value.
Existing law [Government Code 11011 (k) (1) and (2)]
contains provisions exempting the sale of surplus property
from designated provisions of the California Environmental
Quality Act (CEQA). Specifically, the law provides that
any disposition of a parcel of surplus property made on an
"as-is" basis shall be exempt from statutory requirements
of CEQA; however, the law makes it explicit that the buyer
or transferee of a parcel shall be subject to any local
governmental entitlement or land use approval requirements
and CEQA.
Furthermore, existing law provides that if any transaction
is not on an "as-is" basis sale and close of escrow is
contingent on satisfying any local governmental approvals
for entitlement or land use requirements, including
compliance by the local government with CEQA, then the
execution of the purchase and sale agreement or exchange
agreement is exempt from CEQA.
Proposition 60A of November 2004 (SCA 18, Johnson,
Resolution Chapter 103/04) which was adopted by the
electorate (73% 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 Economic Recovery Bond Act of 2004.
BACKGROUND
Brief History: The Coliseum was commissioned in 1921 as a
memorial to veterans of World War I (rededicated to
veterans of all wars in 1968.) The official ground breaking
ceremony took place on December 21, 1921 with work being
completed less than two years later, on May 1, 1923. In
1930, it was expanded to over 100,000 seats for the 1932
Olympic Games. The Coliseum also hosted the 1984 Olympic
Games. In 1984, the State and U.S. government declared the
Coliseum an "historical landmark."
The Coliseum and the adjacent Sports Arena are located in
Exposition Park, just south of the campus of the University
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of Southern California (USC). The Coliseum and the Sports
Arena are under the authority of the LAMCC which was formed
as a JPA in 1945. The complex is supported by revenue
generated from these two facilities.
Since 1923 the Coliseum has served as the home field of the
USC football team. The University of California Los
Angeles (UCLA) also played its home football games in the
Coliseum from 1933-81. Over the years the Coliseum has
hosted numerous events including, concerts, political
rallies, religious gatherings, high school football games,
international soccer games, etc. The complex (Coliseum and
Sports Arena) has also provided a home for various
professional football, basketball, hockey, and baseball
teams [e.g., Rams and Raiders (NFL), Los Angeles Chargers
(AFL), Dodgers (NL), Kings (NHL), Lakers (NBA)]. In late
March 2008, professional baseball returned to the Coliseum
with the Dodgers' 50th anniversary celebration (1958-61) of
their move from Brooklyn - over 115,000 fans (record crowd
for baseball) witnessed the exhibition game between the
Boston Red Sox and the L.A. Dodgers - final score: Bosox 7,
Dodgers 4.
Purpose of SB 29: According to the author's office, the
Coliseum and its surrounding properties and buildings have
fallen into disrepair and have lost several major tenants
over the past two decades because of the LAMCC's
ineffective oversight and local infighting. As such, state
taxpayers are receiving neither appropriate services nor an
adequate investment return on these properties. The
author's office argues that the solution is for the state
to sell the land on which this underutilized resource
occupies for fair market value to a public agency, private
party, or a partnership of both. The author's office
contends that alternative ownership would bring the
possibility of reinvigoration, enhancement and forward
thinking to the area and benefit state taxpayers. The
author's office notes that in 2004 the Department of
General Services pegged the value of the Coliseum and
Sports Arena properties between $240 million if sold "as
is" and $400 million if the property were to be
redeveloped. The author believes that selling this
property would be a step in the right direction toward
eliminating the overwhelming state budget debt.
Arguments in Opposition: Writing in opposition, the LAMCC
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states that it has many concerns with SB 29 and highlights
the following:
The facility is on the National Register of
Historic Places protecting it from being anything but
a Coliseum;
The Commission has a legal, binding lease for the
property for the next 46 years at a set rental rate;
and,
The parking surrounding the Coliseum is owned and
controlled by the State and the revenue generated from
parking is necessary for the maintenance and upkeep of
Exposition Park. The LAMCC argues that buying the
"hole in the doughnut" is not commercially appealing."
Also writing in opposition, the Los Angeles County Board of
Supervisors (Board) argues that SB 29 would be illegal in
several significant respects including: (1)
unconstitutional violation of the separation of powers
doctrine by encroachment on the municipal affairs of the
City of Los Angeles (City) and the County of Los Angeles
(County); (2) unconstitutional abrogation of contractual
rights and relationships of the City and County, and the
independently created LAMCC; and, (3) unconstitutional
special legislation affecting the California Joint Exercise
of Powers Act relating to only one entity (the LAMCC),
among the hundreds of joint powers authorities which have
been created and are operating under that Act.
Staff Comments: In late December 2007, Governor
Schwarzenegger announced a principle lease agreement
between the state and the LAMCC for the land under the
Coliseum and Sports Arena. The $1 million per year lease
is for 47 years. In mid February 2008, USC also signed a
25-year tenant agreement with the LAMCC that includes
paying 8% of ticket sales to the Coliseum as rent. That
agreement is renewable for an additional 22 years. As part
of the agreement, the LAMCC and USC are expected to work
together to sell naming rights to the Coliseum in order to
help generate more than $100 million in improvements.
Essential improvements that are immediately necessary to
enhance the fan experience include: (1) new video board,
(2) new seats, (3) new locker rooms, (4) more restrooms,
and (5) more concession stands. Work on these improvements
is expected to begin immediately with major work to be
performed during the off-season to avoid interruptions to
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USC games.
Additional aspects of the agreement include USC's right to
have consent over any other major college football or NFL
team at the Coliseum. The LAMCC will continue to run the
day-to-day operations of the Coliseum and retain 100% of
concession sales. Furthermore, the agreement provides that
the LAMCC will offer USC a rental offset option if
improvement costs are not covered by the naming rights,
Coliseum reserves and other operating income.
On February 13, 2008, Governor Schwarzenegger issued the
following statement after the LAMCC voted to approve the
new sublease with USC: "I would like to commend the
commission members and the negotiating teams for their
success in reaching an agreement that will benefit all
parties, including California's taxpayers. This deal will
help bring critically-needed funding to the state while
boosting the local economy. This is fantastic news for the
people of Los Angeles and all Californians."
Studies/Reports/Legislative Informational Hearings: Over
the past two decades various reports completed by the
Little Hoover Commission and the State Auditor have
detailed critical findings and problems associated with the
State's property management practices.
In January 2001, the State Auditor issued a report, titled
"The State's Real Property Assets: The State Has Identified
Surplus Real Property but Some of Its Property Management
Processes are Ineffective," which focused on state
agencies' handling of their excess real estate. Among
other things, the report found that:
The State lacks an effective process for evaluating
whether it needs the property it owns and for
identifying surplus.property
Few incentives exist for most landowning agencies
to actively identify and dispose of property that is
surplus to their current and foreseeable program
needs.
Most property sales do not benefit the selling
agency because proceeds are required to be deposited
in the State's General Fund, thus there is little
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incentive to report such properties surplus.
The report also suggested that:
The State could improve its real estate management
by implementing practices used by other government
entities. (The Auditor indicated that various state
governments and the federal government had implemented
diverse practices to meet the challenges of managing
real estate assets, including procedures for
identifying and disposing of surplus property.)
California officials could improve decisions about
surplus property by establishing an independent body
to review the processes and criteria for retaining
property and to arbitrate property retention
decisions.
Caltrans should make sure that staff list and
correctly categorize all surplus property in the
Caltrans' databases and explore alternative methods to
assist in the prompt identification and timely
disposition of its surplus property.
In 2004, Governor Schwarzenegger issued an Executive Order
(S-10-04) requiring agencies to help expedite the sale of
billions of dollars of surplus state properties - this
order was based primarily on findings of the California
Performance Review (CPR). Similar to the Auditor's 2001
report findings, the CPR concluded that the State's laws
and processes for identifying and selling underutilized and
surplus properties are ineffective resulting in delayed and
below market sales of such properties. The CPR report
recommended that the State's laws be amended and its
processes streamlined to increase property sales and
revenue to the State.
In May of 2008, the Senate Committee on Governmental
Organization (Committee) held an informational hearing to
determine if the State effectively manages and utilizes its
real estate holdings, whether it has an accurate accounting
of its real property and whether current laws and processes
for selling surplus properties are effective and responsive
to changing economic needs. The Committee invited State
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Auditor Elaine Howle to kick-off the hearing by identifying
issues still relevant in her January 2001 report. The
Committee also invited three of the state's largest
property owners - Caltrans, DGS and the University of
California (UC) - to participate in the hearing because of
their ownership of "high-profile" property holdings that
have been targeted for sale by the Schwarzenegger
Administration and legislators.
The Director of Caltrans, Will Kempton, told Committee
members that Caltrans had committed to dispose of 640
excess properties between July 2006 and December 2007, and
an additional 500 excess properties by December 31, 2008 -
a total of 1,140 parcels. The Director informed the
Committee that Caltrans had made significant progress on
meeting those commitments. Specifically, Caltrans had
disposed of 756 parcels, for a total of $1.83 million
between July 1, 2006 and March 31, 2008. The Director also
informed the Committee that Caltrans holds a large
inventory of parcels for several projects that have been
delayed for decades. Complex and sensitive local issues
surrounding these projects require resolution before final
property disposition can be utilized. The two largest
groups of parcels included in this list of "intractable"
properties are the 456 parcels held for the Interstate 710
(I-710) extension in Los Angeles County and the 463 parcels
held for the State Route 238 (SR-238) Hayward Bypass
project in Alameda County.
Allen Meacham, the Assistant Director of the Real Estate
Services Group of the Office of the President, UC Regents,
informed the Committee that as of June 30, 2007, UC owned
program-related real estate totaling approximately 112
million gsf of buildings, and approximately 35,000 acres of
land. Almost all of these buildings and most of this land
are located on the University's 10 campuses; the balance of
UC's land area consists largely of the various natural
reserves and agriculture experiment stations the UC
operates for research.
Mr. Meacham told Committee members that UC acquires its
real estate by paying market value for it, and at times by
receiving it as a donation. At times the property received
by UC is subject to deed restrictions that limit the use of
the land to UC's mission, and provide that title shall
revert to the donor if the UC ever ceases to use the
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property for its mission. Mr. Meacham also indicated that
the UC has a very long time horizon with respect to surplus
property due to the fact that history shows that campuses
start small and inevitably become so large that they run up
against their neighbors and must grow upward rather than
outward. The UC therefore does not consider vacant campus
land as surplus, but as a resource to be husbanded for
future generations of students.
Mr. Meacham concluded his testimony as follows, "Over the
last 3 fiscal years, the UC has sold a total of 11 surplus
properties, at an aggregate price of approximately $74
million. Currently, the UC has 4 properties that have been
declared surplus, and is in varying stages of preparing
them for sale. In all but 1 of these 15 cases, the
properties were located some distance from the campus.
Because they were distant from the campus, no other campus
unit was found to make use of the property, and it was
concluded to be surplus. Proceeds from the sale of a
surplus property are first applied to pay off any debt that
was incurred in its purchase, and that remains outstanding.
Otherwise, the proceeds from the sale typically remain
with the campus, and are often applied to purchase or
construct a replacement facility, or to endow the program
that occupied the surplus property prior to sale."
As a result of the Committee hearing, the State Auditor
decided to conduct a follow-up review and evaluate state
agencies' actions that responded to the original audit
report published in 2001, concentrating specifically on the
State's management of surplus property. The follow-up
report was released in late March 2009 and noted, among
other things, that "although DGS has implemented some of
the 2001 report's recommendations, it has not fully
implemented others." The Auditor also learned that
"although Caltrans has implemented or attempted to
implement most of the initial report's recommendations
there are still questions as to the reliability of some
fields within its database of surplus property." In
addition, the Auditor discovered that "because there is no
entity with broad oversight of state property, the State
continues to lack assurance that its properties are being
carefully evaluated to identify when they are unused or
underused so that such properties can either be sold to
generate revenue or be put to better use." This was one of
the same fundamental concerns raised in the 2001 report.
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California Environmental Quality Act (CEQA) Exemption: The
ability to get excess properties declared surplus by the
Legislature has been impeded these past few years by a
disagreement between the Legislature and the Administration
regarding the removal of a statutory exemption for the
State's surplus properties from the requirements of CEQA.
This disagreement has at least for now been resolved with
enactment of AB 8xx (Nestande), Chapter 6 of 2009-10 Second
Extraordinary Session, that places within the Government
Code an ongoing CEQA exemption for all properties declared
surplus by the Legislature. SB 29 contains a provision
which would exempt the buyer(s) of the property from all
state and local environmental laws and regulations with
respect to improvements, construction, or remodeling,
provided the buyer(s) continue with the same use of the
property.
PRIOR/RELATED LEGISLATION
AB 8xx (Nestande) Chapter 6, Statutes of 2009-10 Second
Extraordinary Session. Among other things, exempted the
sale of surplus state real property made on an "as is"
basis from designated provisions of CEQA. The bill also
exempted from those provisions of CEQA the execution of the
purchase and sale agreement or the exchange agreement for
surplus state real property if the disposition is not made
on an "as is" basis and the close of escrow is contingent
on a specified requirement or compliance with CEQA. AB 8xx
also provided expedited environmental permitting and CEQA
exemption for a list of 11 critical transportation
projects, as specified.
SB 760 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof,
approximately 3.14 acres of real property in the City of
Red Bluff that is specifically declared not to be surplus
to the needs of the state, and, in return, to acquire up to
40,000 net square feet of usable office and related space
for consolidated administrative operations of the state.
(Pending in this committee)
SB 586 (Yee) 2009-10 Session. An urgency measure that
would direct DGS, in consultation with the Department of
Food and Agriculture, to enter into negotiations to sell,
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to any interested party, 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.
(Passed out of this committee on a vote of 11-1; currently
pending in Senate Environmental Quality Committee)
SB 256 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof
approximately 1.69 acres of real property in the City of
Chico, currently used by the California Highway Patrol as
its Chico area office, which is specifically declared not
to be surplus to the needs of the state. (Pending in this
committee)
SB 178 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof,
approximately 3 acres of real property in the City of
Redding, currently used by the Department of Forestry and
Fire Protection as its Shasta-Trinity Unit Headquarters,
that is specifically declared not to be surplus to the
needs of the state. (Pending in this committee)
SB 136 (Huff) 2009-10 Session. Annual DGS surplus property
bill that authorizes DGS to dispose of three specified
parcels. (Pending in this committee)
SB 30 (Denham) 2009-10 Session. Would require DGS to
identify not less than $1 billion worth of state property
that can be sold immediately to pay for the retirement of
outstanding general obligation bonds issued by the state,
thereby helping to close the state's budget deficit.
(Pending in this Committee)
SB 28 (Denham) 2009-10 Session. Among other things, would
require that the San Quentin Prison site be sold, the
proceeds shall be exempt from the provisions of Proposition
60A of 2004, and the monies shall go to building a new
death row at another prison. (Pending in Senate Public
Safety Committee)
SB 1681 (Battin) Chapter 532, Statutes of 2008. Among
other things, revised the conditions and procedures by
which DGS may dispose of surplus land to local agencies and
private entities and individuals.
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SB 1527 (Yee) 2007-08 Session. Similar to SB 586 (Yee) of
2009. (Vetoed by Governor - message stated "this measure
circumvents the state's current competitive bid process and
would potentially limit the state's financial return for
the sale of state-owned land without creating any added
value for the surrounding community. By including the
first right of refusal provisions, this bill narrows the
range of options for the use of the property and places
the state at risk to receive less revenue than if the
property was offered to all interested parties through a
normal competitive bid process.")
SB 1133 (Denham) 2007-08 Session. Would have mandated the
sale of the parcel of land that the Coliseum and the Sports
Arena occupy, including the state's share of the Sports
Arena structure, and abolishes the Los Angeles Memorial
Coliseum Commission upon completion of that sale. (Failed
passage on Senate floor)
SB 1060 (Ridley-Thomas) 2007-08 Session. Would have
abolished the Los Angeles Memorial Coliseum Commission
(LAMCC) and reorganized the administrative and management
structure for Exposition Park in Los Angeles by creating an
Exposition Park Authority consisting of 9-board members
responsible for managing and operating all state-owned
properties located in Exposition Park. Also, mandates that
the board sell the parcel that the Los Angeles Memorial
Sports Arena occupies. (Failed passage in Assembly policy
committee)
SB 282 (Cox) Chapter 293, Statutes of 2007. Established
the State Fair Leasing Authority, consisting of specified
representatives, for the purpose of entering into leases or
other agreements for the use of the State Fair (Cal-Expo)
Race Track or any other facilities owned or controlled by
the fair.
AB 2026 (Villines) Chapter 761, Statutes of 2008.
Authorized DGS to sell, exchange, or lease for fair market
value nine specified parcels deemed to be surplus to the
state's needs. Additionally, rescinded the surplus
authorization granted previously to DGS with respect to
seven specified parcels. Furthermore, exempted the State's
execution of a purchase and sales agreement from CEQA
however, the provisions made it explicit that in an "as is"
sale, the buyer or transferee will be subject to any local
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governmental entitlement or land use approval requirements
including requisite CEQA provisions.
AB 1849 (De Vore) 2007-08 Session. Similar to SB 1133
(Denham) of 2008. (Failed passage in Assembly policy
committee)
AB 957 (Spitzer) Chapter 59, Statutes of 2008. Required
Caltrans to report to DGS its property holdings, including
excess lands, on July 1 of each year.
SB 99 (Battin) 2005-06 Session. Would have established the
Commission on Asset Review and Divestiture to review
biennially the inventory of all real property held by the
State. (Held in Senate Appropriations Committee)
SB 1750 (Battin) 2003-04 Session. Similar to SB 99
(Battin) of 2005-06. (Failed passage in this Committee)
AB 2805 (Ridley-Thomas) Chapter 954, Statutes of 2004.
Granted the Los Angeles City Council the ability to extend
the timeline and financing options of the Hoover
Redevelopment Area to facilitate further development of the
area through the location of an NFL franchise in the
Coliseum.
AB 260 (Wright) 1999-2000 Session. Would have established
an Exposition Park Authority, consisting of five members,
to manage Exposition Park and allow the authority, with the
approval of the State and Consumer Services Agency, to
build, maintain, and operate a stadium, arena, pavilion or
other sports facility. (Died on Assembly floor pending
concurrence of Senate amendments)
AB 3220 (Archie-Hudson) Chapter 841, Statutes of 1996.
Among other things, renamed the California Museum of
Science and Industry as the California Science Center and
specified that it is deemed to be a tax-exempt organization
as an instrumentality of the state.
SUPPORT: Howard Jarvis Taxpayers Association
OPPOSE: As of April 24, 2009:
City of Los Angeles
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Los Angeles County Board of Supervisors
Los Angeles Memorial Coliseum Commission
FISCAL COMMITTEE: Senate Appropriations Committee
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