BILL ANALYSIS                                                                                                                                                                                                    



                                                                SB 586
                                                                Page  1


        SENATE THIRD READING
        SB 586 (Yee)
        As Amended  August 24, 2009
        2/3 vote.  Urgency 

         SENATE VOTE  :35-0  
         
         BUSINESS & PROFESSIONS     11-0 APPROPRIATIONS      17-0        
         
         ----------------------------------------------------------------- 
        |Ayes:|Hayashi, Emmerson,        |Ayes:|De Leon, Conway, Ammiano, |
        |     |Conway, Eng               |     |                          |
        |     |Hernandez, Nava, Niello,  |     |Charles Calderon, Coto,   |
        |     | John A. Perez, Ruskin,   |     |Davis, Duvall, Fuentes,   |
        |     |Smyth, Monning            |     |Hall, Harkey, Miller,     |
        |     |                          |     |John A. Perez, Skinner,   |
        |     |                          |     |Solorio, Audra            |
        |     |                          |     |Strickland, Torlakson,    |
        |     |                          |     |Hill                      |
        |-----+--------------------------+-----+--------------------------|
        |     |                          |     |                          |
         ----------------------------------------------------------------- 
         SUMMARY  : Directs the Department of General Services (DGS), in  
        consultation with the Department of Food and Agriculture (DFA) to  
        enter into negotiations by 2010, to sell at fair market value, to  
        any interested third party, 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)Provides the coordinates of the 13-acre property at the Cow Palace  
          for sale, identified as "Parcel A." 

        2)Requires a notice of every public auction or bid opening on the  
          parcel for sale to be printed in a newspaper of general  
          circulation published in the county in which the parcel is  
          located. 
        
        3)Prohibits DGS from selling the parcel below fair market value.   
          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.









                                                                SB 586
                                                                Page  2


        4)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.

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

        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, following 30 days of this bill's enactment, to  
          assume only the rights, duties, and powers of the board of  
          directors of the DAA 1-A associated with negotiating the sale of  
          the real property of the DAA 1-A. 

        8)Makes legislative findings and declarations. 

        9)Takes effect immediately as an urgency measure.

         FISCAL EFFECT  :  According to the Assembly Appropriations Committee,  
        unknown one-time revenue to the F&E Fund from the property sale, net  
        of any reimbursement to DGS for the department's cost to administer  
        the disposition.

         COMMENTS  :  According to the author's office, "The structure commonly  
        known as the Cow Palace is located on 68 acres of property located  
        within the jurisdiction of the City of Daly City and the Daly City  
        Redevelopment Agency (DCRA) ? The Cow Palace imposes a financial  
        challenge to Daly City because of the high cost of providing excess  
        public safety services to the facility.  The Cow Palace constrains  
        improvement of the Bayshore neighborhood and remains in blighted  
        condition due to its deteriorated physical infrastructure and  
        non-conformance with seismic and American Disabilities Act  
        requirements.

        "This bill allows DGS to sell, at fair market value, 13 acres of  
        property adjacent to the Cow Palace. The 13 acres that the bill  
        identifies is an overflow parking lot. This bill will not result in  
        the sale of the Cow Palace.  The funds that result from the sale of  
        the Cow Palace would be paid into the F&E Fund? State law provides  
        that of any amount paid into the F&E Fund in excess of $13 million  








                                                                SB 586
                                                                Page  3


        in any fiscal year, half of the excess amount shall be transferred  
        to the General Fund (Business & Professions Code, section 19620.1)."  


        The Cow Palace 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. 

        In March 2008, the DAA 1-A released a request for proposal (RFP) to  
        lease the 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.  RFP responses were  
        initially due June 30, 2008, and the deadline was extended several  
        times to due to a lack of bids.  DGS is currently in exclusive  
        negotiations with a developer on the lease. 

        This bill declares that the sale of the Cow Palace property would  
        not constitute a sale or other disposition of surplus state property  
        subject to Proposition 60A requirements.  It is noted that this bill  
        is not consistent with provisions of other surplus property bills  
        because it does not require DGS to obtain approval to enter into  
        sale negotiations from the state agency that owns the property.   
        Instead, this bill requires DGS to consult with, but does not  
        require the approval of, DFA as the property owner prior to entering  
        negotiations.  

        SB 1527 (Yee) of 2008 was an identical measure, with the exception  
        that the DCRA was afforded the first right of refusal to the parcel  
        of property.  The Governor's veto message stated the following:  "SB  
        1527 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."


         Analysis Prepared by  :    Joanna Gin / B. & P. / (916) 319-3301 









                                                                SB 586
                                                                Page  4



                                                                  FN: 0002282