BILL ANALYSIS Ó
Bill No: AB
503
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 503 Author: Wieckowski
As Amended: June 19, 2013
Hearing Date: June 25, 2013
Consultant: Paul Donahue
SUBJECT
Surplus state property: fair market value; public schools
DESCRIPTION
Authorizes the Director of the Department of General
Services (DGS) to transfer surplus state property at a
price less than fair market value if the property will be
used for public school purposes. Specifically, this bill :
1)Provides that the Director of General Services may
transfer surplus state property, or a portion of surplus
state property, to a local agency at a price that is less
than fair market value, if the property to be transferred
will be used solely for public school purposes.
2)Authorizes the Director of General Services to negotiate
with the Santa Clara Unified School District, the City of
San Jose, or both, to transfer title of all or a portion
of the former Agnews Developmental Center to the
district, the city, or both, for public school purposes.
EXISTING LAW
Existing law allows DGS to dispose of state real property
that has been identified as surplus, or declared surplus by
the Legislature. DGS is required to offer surplus real
property to other state agencies, to local agencies and
private entities as provided in statute.
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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
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.
Current law also allows the Director of DGS to transfer
surplus state real property to a local agency for less than
fair market value if the local agency uses the surplus
state real property for parks or open-space purposes.
Proposition 60A of November, which was passed by the
electorate requires 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
1)Purpose : According to the author, current laws establish
a priority system for the disposal of surplus real
property that makes local agencies priority buyers if
they can demonstrate that the property is to be used for
open space, public parks, affordable housing, and the
like. Under these circumstances, the Director of DGS has
the authority to transfer the property for less than fair
market value. This bill reinserts use of the property for
public schools to that list, noting that DGS previously
had this authority until it was repealed during the
recession in 2008.
2)Background : The property that is the subject of this bill
is approximately 85 acres, a portion of the former Agnews
Developmental Center. Last year, DGS began negotiations
with Santa Clara Unified School District (SCUSD)
officials for the purchase of a 54-acre portion of the
property. At that time DGS sent SCUSD a "priority buyer"
letter, but the district never acknowledged receipt of
the letter and did not otherwise respond.
DGS then started preparations to sell the property, and
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obtained administration approval to put the property on
the market. SCUSD officials responded that they had not
accepted or responded to the priority buyer offer because
they did not have the requisite funds to purchase the
parcel at fair market value. In any event, negotiations
ceased.
In early April of this year or thereabouts, DGS met again
with SCUSD officials, who by this time had also enlisted
the City of San Jose as a potential purchase partner. The
new purchase plan offered by the City and SCUSD was that
the City would build a 30-acre park behind the 54-acre
school site. Apparently, the thinking was that, because
state law allows DGS to sell real property at less than
market value if it will be used for park purposes, then
the joint City-SCUSD project could be conveyed to the
parties at a price below market value. DGS declined to
accept this proposal, in part because the proposed park
would as a practical matter be inaccessible to the
public, given that it lies behind the proposed school
site, which has the prime street access.
DGS reports that the property is currently on the market.
The department listed the property in early June, in part
because the terms of a prior contract for the sale of an
adjoining portion of the former Agnews Developmental
Center granted a right of first refusal to the buyer.
According to the terms of that prior agreement, when DGS
first contemplates a sale of the subject property, it
must notify the adjoining landowner of its intention to
sell, and the landowner has 60 days within which to
decide whether to exercise the right of first refusal. In
this instance, DGS so notified the adjoining landowner of
its intent to sell, and if DGS had not listed the
property for sale before June 21, 2013, it would have
been required under the terms of its contract to offer
another right of first refusal.
3)Issues : This bill seems to be attempting to engineer a
sale of the Agnews property to the City of San Jose and
the SCUSD for the amount they currently have in their
coffers. It should be noted that the Legislature
typically does not direct by statute the sale of state
property to a specific entity. In addition, the provision
in this bill allowing for a sale at less than fair market
value could result in a significant loss of state
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revenue, to which the author replies that "a public
school site is just as critical, if not more so, than a
public park or open space."
PRIOR/RELATED LEGISLATION
SB 1481 (Governmental Organization), Chapter 528, Statutes
of 2010. Provides that proceeds from the sale or lease of
California State Militia armories be deposited in the
Armory Fund, regardless of then-existing statutes requiring
the proceeds to pay the principal and interest on the
Economic Recovery Bond Act (Proposition 57, approved in
March 2004).
SB 136 (Huff), Chapter 166, Statutes of 2009. Among other
things, authorized the director of DGS to dispose of 85
acres of surplus state property at the former Agnews
Developmental Center in Santa Clara County.
SB 1681 (Battin), Chapter 532, Statutes of 2008. Repealed
several laws governing the disposition of surplus land by
DGS to local agencies and private entities, including
timelines for execution of sales and preferences for sales
of property to be used for low and moderate income housing,
parks, open spaces, and schools.
SUPPORT:
City of San Jose
Santa Clara County Office of Education
Santa Clara Unified School District
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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