BILL ANALYSIS Ó AB 1143 Page 1 Date of Hearing: April 12, 2011 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair AB 1143 (Dickinson) - As Introduced: February 18, 2011 SUBJECT : Director of General Services: authority to enter into a lease, lease-purchase agreement, or a lease with an option to purchase a build-to-suit facility. SUMMARY : Authorizes the Department of General Services (DGS), with the consent of the Board of Equalization (BOE), to enter into a lease to consolidate the BOE headquarters (HQ). Specifically, this bill : 1)Authorizes DGS, with BOE's consent, to enter into a lease, lease-purchase agreement, or lease with an option to purchase a build-to-suit facility in the Sacramento area for purposes of consolidating the BOE HQ operations into one single location. 2)Requires DGS to develop the agreements or leases pursuant to this bill and provide them to the Department of Finance (DOF) for review and approval prior to soliciting bids. 3)Requires DGS to obtain approval from DOF prior to execution of an agreement or lease. 4)Requires DGS to notify the Legislature of the terms and conditions of the agreement or lease at least 30 days prior to executing the agreement for a lease, lease-purchase, or lease with an option to purchase for build-to-suit, pursuant to this bill. 5)Requires DGS to be reimbursed for any reasonable costs incurred pursuant to this bill. EXISTING LAW authorizes DGS (subject to legislative approval) to sell, lease, exchange, or transfer various specified properties for current market value, or upon terms and conditions as DGS determines are in the best interests of the state. FISCAL EFFECT : Unknown AB 1143 Page 2 COMMENTS : Purpose of this bill . According to the author's office, "BOE has outgrown its current HQ space, which includes the 450 N Street building and four annex locations, and anticipates future growth. The staffing increases are due largely to growth to address legislative mandates for revenue administration, collection and enforcement efforts? The HQ building was designed to house not more than 2,200 employees. However, BOE currently requires space for approximately 2,900 employees for its operations. "This bill would support BOE's core mission of revenue-generating processing, protect the health and safety of employees, eliminate inefficiencies of managing operations across multiple annex locations, and accommodate future short-term and long-term growth." Background . The BOE HQ building located at 450 N Street is owned by the State of California and has property management services provided by DGS. BOE is the primary tenant and pays monthly rent as identified annually by DGS to occupy the building, as well as any additional costs to maintain, upgrade, operate, or fund other special repairs to the building. Construction of the BOE HQ building began in 1991 and was completed in January 1993. Since then, the BOE HQ has been plagued with costly repairs for mold remediation and water intrusion problems. A 1997 study prepared by the architectural firm, Dreyfuss and Blackford, and two DGS reviews have indicated that the HQ building is designed to house 2,200 employees, while BOE requires space for approximately 2,900 employees. Recent staffing increases are due largely to growth to address legislative mandates for revenue collection and enforcement efforts. BOE has been forced to move approximately one-fourth of the HQ operations to four different annex locations in the greater Sacramento area. However, BOE states that these facilities are at maximum capacity, leaves no room for future growth, and will result in programmatic delays if unaddressed. Support . According to the sponsor, BOE, this bill "will begin the process of moving ÝBOE's] 2,900 employees out of the N Street building and annex locations, which are at capacity, to a location that better meets its business needs. BOE has been AB 1143 Page 3 working with DGS to right size the HQ building by identifying adequate office space for additional employees? Assuming modest growth of 56 positions per year over the next five years, there will be inadequate space for these employees Ýin the current HQ]. Consequently, the implementation of any additional tax and fee programs enacted by the Legislature would likely be delayed because it generally takes about 12 months to locate facilities to house the staff. BOE needs a new facility that can house all HQ staff, with reasonable room for growth, in light of its mission critical, revenue-generating work." Previous Legislation . AB 151 (Jones) of 2009 would have required DGS to study whether it is in the state's best interests to sell or lease the Sacramento property used for BOE offices, and would have authorized BOE to independently lease its facilities. The Governor vetoed AB 151 with the following message: While I am sympathetic with this bill's objective of ultimately locating most or all BOE HQ units in a single location, the fiscal condition of the state precludes relocating BOE's HQ or field offices for the foreseeable future. Permanently relocating the BOE HQ would result in costs exceeding $100 million. Furthermore, this bill would complicate the sale of bonds to retire the existing Pooled Money Investment Board loan on the property, resulting in additional costs to the state. Lastly, this bill would unacceptably remove all Administration oversight from BOE's real estate transactions, and would require BOE to develop and maintain a separate competency in that field. Those activities would redirect resources and focus from BOE's core mission as a revenue agency. REGISTERED SUPPORT / OPPOSITION : Support Board of Equalization (sponsor) Service Employees International Union, Local 1000 Opposition AB 1143 Page 4 None on file. Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916) 319-3301