BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1143
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          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
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           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
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          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
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          None on file. 
           
          Analysis Prepared by  :    Joanna Gin / B.,P. & C.P. / (916) 
          319-3301