BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
256 (Aanestad)
Hearing Date: 5/28/2009 Amended: 5/21/2009
Consultant: Bob Franzoia Policy Vote: GO 11-0
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BILL SUMMARY: SB 256 would authorize the Director of General
Services (DGS) to sell, lease, or exchange, or any combination
thereof, for no less than fair market value, approximately 1.69
acres of property in the City of Chico, currently used by the
California Highway Patrol (CHP) as its Chico area office, that
is specifically declared not to be surplus to the needs of the
state. DGS would be authorized to use the proceeds of any sale,
exchange, lease or combination thereof or a portion of the
property to acquire or lease the land and facilities necessary
to provide a substitute location for the CHP, thereby making an
appropriation. This bill would require the director to
initially offer the property for disposition to the City of
Chico. This bill would authorize the director to offer the
property to the public through a competitive selection process
determined by the director to be in the best interest of the
state, if the City of Chico is unable to enter into an agreement
for the disposition of the property. This bill would also
authorize the director to enter into an agreement or lease for
the purpose of providing a substitute location for the CHP
office. This bill would require DGS to notify the Legislature
when entering into a lease or agreement.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Sale of non surplus state Unknown, likely significant,
one time Special
property increase in revenue; unknown potential
costs for new CHP office or lease cost
avoidance depending on how property
is disposed
* Motor Vehicle Account
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STAFF COMMENTS: SUSPENSE FILE.
If the property is sold, it is unlikely the proceeds will be
sufficient to fund land acquisition and construction costs of a
new CHP office. If the property is disposed of in some other
manner, for example through a where there is an exchange of
equity value for a new CHP facility, there may be an increase in
lease revenue resulting in major cost avoidance in future years.
Current law generally requires a state agency to review annually
its real property holdings and determine what, if any, is in
excess of its foreseeable needs. These properties are commonly
referred to as surplus state properties. They include both
unused properties and those which are underutilized by an
agency. Once real property has been identified as surplus, the
state attempts to sell the property, or dispose of it in some
other manner.
Page 2
SB 256 (Aanestad)
When surplus property is sold, the sales revenues are deposited
into the account that originally paid for the acquisition of the
property. In most instances, sale revenues are deposited in the
General Fund and are available for expenditure on any state
program. Pursuant to Proposition 60A (2004), the proceeds from
the sale are deposited in the Deficit Recovery Bond Retirement
Sinking Fund Subaccount and are be used to pay the
principal and interest on Proposition 57 bonds. Once these
bonds are fully repaid, proceeds from surplus property sales
would be deposited in the General Fund. Proposition 60A only
applies to those properties that were purchased with General
Fund revenue or bonds secured by the General Fund. Proposition
60A does not apply to the
sale of surplus property acquired with special funds.
Under the provisions of Proposition 60A, the proceeds of the
sale of surplus property must be used to pay the holders of the
state's deficit reduction bonds. These payments are intended to
accelerate the redemption of the state's debt, and reduce future
General Fund payments to the bondholders. This bill avoids the
transfer of the proceeds associated with the disposition of the
property pursuant to Section 9 of Article III of the
Constitution by specifying that the disposition of the Chico
property does not constitute a sale or other disposition of
surplus state property and instead states the property is
unsuitable to the needs of the state.
This bill authorizes the department to sell, lease or exchange
or any combination thereof, all or a portion of the property at
fair market value. Upon appropriation, the director shall use
the proceeds to relocate and expand the operations of the Chico
area office of the CHP.
The department would be required to develop the terms and
conditions of any agreements or lease, and provide them to the
Department of Finance for review prior to soliciting bids and
shall obtain approval from the Department of Finance prior to
the execution of any agreement or lease.
Staff notes the sale and the lease provisions of this bill may
delay DGS in disposing of the property and securing a new CHP
facility.