BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1656|
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THIRD READING
Bill No: AB 1656
Author: Dickinson (D)
Amended: 8/5/14 in Senate
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 10-0, 6/24/14
AYES: Correa, Berryhill, Cannella, De León, Galgiani,
Hernandez, Lieu, Padilla, Torres, Vidak
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 79-0, 5/29/14 - See last page for vote
SUBJECT : Board of Equalization: facilities
SOURCE : Board of Equalization
DIGEST : This bill authorizes the Department of General
Services (DGS), with the consultation of the Board of
Equalization (BOE), to enter into agreements for the planning,
design, construction, and acquisition of facilities to relocate
the BOE headquarters in the Sacramento region.
ANALYSIS :
Existing law:
1.Authorizes DGS to acquire, construct, lease, or transfer state
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property, as specified, and when specifically authorized by
the Legislature.
2.Authorizes DGS to hire, lease, lease-purchase, or lease with
an option to purchase any real or personal property for the
use of any state agency if DGS deems the hiring or leasing is
in the state's best interest, and DGS is specifically
authorized to do so by the Legislature.
3.Provides a mechanism by which DGS can dispose of surplus
property upon approval by the Legislature, under any terms and
conditions and subject to any reservations and exceptions that
DGS deems to be in the best interests of the state, with right
of first refusal going to local agencies or nonprofit
affordable housing sponsors prior to it being offered for sale
to private entities or individuals.
4.Requires each state agency to annually review proprietary
state lands under its jurisdiction to determine what lands are
in excess of the agency's foreseeable needs and to report
their findings to DGS.
This bill:
1. Authorizes DGS to enter into agreements for the planning,
design, construction, and acquisition of facilities to
relocate the BOE headquarters in the Sacramento region.
Permits DGS to enter into one or more agreements to acquire,
construct, purchase, lease-purchase, or enter in a lease to
purchase option, as specified.
2. Authorizes BOE to relocate its offices from existing
state-owned or state-leased facilities to consolidate its
headquarters and annexes to a single location without any
obligation to pay rent on those facilities after leaving.
3. Requires DGS to solicit and accept proposals for acquiring
or constructing consolidated facilities for BOE on the "best
value" basis, as specified.
4. Requires DGS to develop terms and conditions of the
agreements or leases authorized by this bill by December 31,
2015.
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5. Provides that the acquisition and sale may be handled
separately or combined into one proposal; and provides DGS
with proposal and agreement options.
6. Requires DGS to provide notice of terms and conditions of
the proposed agreements or leases to the chairs of the fiscal
committees of the Legislature and the Joint Legislative
Budget Committee (JLBC), or their designees, at least 45 days
prior to executing the agreements.
7. Requires DGS to determine if it is in the best interest of
the state to sell, to lease to other tenants, or to exchange
the Sacramento property, as defined, and notify the chairs of
the legislative fiscal committees and the JLBC of the most
cost-effective option for the state.
8. Authorizes DGS, upon making the determination specified
above, to sell, exchange, exchange, lease, or any combination
thereof, all or a portion of the Sacramento property.
Requires DGS, upon sale, exchange, or lease of the property,
to make an early payoff of the total outstanding lease
revenue bonds on the property, including accrued interest and
any other obligations associated with the property, using the
revenues resulting from any sale, exchange, or lease.
Specifies other provisions relating to the sale of surplus
property and for facilitating the sale of the property.
9. Authorizes the State Public Works Board (SPWB) to issue
revenue bonds, negotiable notes, or negotiable bond
anticipation notes, as specified, to finance the acquisition
of land and facilities as authorized. Permits SPWB and DGS
to borrow funds for project costs from the Pooled Money
Investment Account.
10.Authorizes expenditures of up to $3 million from BOE
building repair funds to develop acquisition-related
agreements.
11.Defines "Sacramento property" as the 2.50 acres of real
property, owned by the state and located in the City of
Sacramento, as specified, that is BOE's current state-owned
headquarters.
12.Makes legislative findings and declarations relating to BOE
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facilities.
Background
In 1993, DGS entered into a lease-purchase agreement with the
California Public Employees' Retirement System for the BOE
headquarters building, located at 450 N Street in Sacramento,
and immediately began experiencing water intrusion problems
caused by heavy rains.
Another major problem was the curtain wall window system failure
in 1998, in which windows leaked and fell to the street below
and onto the surface of the attached parking garage (seven
windows fell between 1999 and 2005). Moreover, in 2007, due to
the water intrusion, mold was discovered on the top three
floors, which were subsequently vacated, thus requiring the
relocation of over 200 employees to another building.
In 2006, the state exercised its option to purchase the
building. A loan of approximately $81 million was approved from
the Pooled Money Investment Account (PMIA) effective in 2007.
On June 12, 2014, the Sacramento Bee reported that a faulty fire
system pump at BOE's "beleaguered headquarters in downtown
Sacramento prompted the state fire marshal to put the 24-story
tower under fire watch." This means that until the system is
fixed, someone must continuously walk the high-rise while on
lookout for fire hazards.
Prior Legislation
AB 151 (Jones, 2009-2010 Session) would have required DGS to
conduct a study as to whether it is in the best interest of the
state to sell, lease, or exchange the BOE headquarters. It
authorized the sale, lease, or exchange thereof, based upon the
director's findings. It required DGS to investigate new land
and facilities for a BOE headquarters using the net proceeds of
the initial agreement. Furthermore, the bill granted BOE
independent real estate authority without DGS involvement. The
bill was vetoed by Governor Schwarzenegger who wrote:
While I am sympathetic with this bill's objective of
ultimately locating most or all Board of Equalization (BOE)
headquarters units in a single location, the fiscal
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condition of the state precludes relocating BOE's
headquarters or field offices for the foreseeable future.
Permanently relocating the BOE headquarters 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
DGS estimates costs of $3 million to develop and issue a
request for proposal and develop terms and conditions of an
agreement. This bill authorizes the use of funds from a loan
deposited into the Architecture Revolving Fund reserved for
repairs to BOE's headquarters building. Any amounts loaned
must be repaid from BOE's operating funds within five years
from the date those funds were borrowed.
Increased state costs resulting from the procurement of a new
headquarters facility and relocation of BOE staff. These
costs are unknown, and would reflect a variety of factors, but
could reach the tens of millions of dollars annually (General
Fund and special funds).
Increased, but unknown, administrative efficiencies and
revenues resulting from the consolidation of BOE staff
(General Fund and special funds).
The total fiscal impact to the state of consolidating BOE into a
single new location reflects a variety of factors. Currently,
the outstanding balance of the lease-revenue bonds that financed
the acquisition of the building is $77 million; BOE pays $11.9
million annually in debt service payments until 2020-21. If BOE
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were to vacate the 450 N Street location, these debt-service
payments would need to continue, either (1) by placing another
tenant in the building, (2) retiring the bonds, or (3) making
annual appropriations (which could present legal problems if
payments are made with no tenant occupying the facility).
BOE has indicated that, if it were to remain at the 450 N Street
location, additional remediation costs will total $31 million.
BOE itself could avoid spending a large portion of these costs
if were to vacate the 450 N Street site; however, much of the
spending will still occur, for the purposes of either (1)
selling the building, or (2) refurbishing it in preparation of
occupancy by another tenant. It is noted, however, that if this
bill were not to be enacted, these remediation costs will likely
occur anyway, with BOE still occupying the building.
BOE will incur new lease payments for the consolidated location,
likely in the tens of millions of dollars annually. It will
also incur moving and other relocation expenses, offset somewhat
by reduced costs and increased revenues resulting from
efficiencies in operation. Assuming proportionality to BOE's
current budget, 57% of the total costs will come from the
General Fund.
SUPPORT : (Verified 8/15/14)
Board of Equalization (source)
California Taxpayers Association
Cities of Elk Grove and Sacramento
SEIU Local 1000
ARGUMENTS IN SUPPORT : According to the author and the BOE,
which is sponsoring this bill, the costs of staying in the
building justify relocation. Since moving to the 450 N Street
building in 1992, the state has spent approximately $59 million
to make repairs to the building. Several years of water
intrusion caused mold growth which required remediation repairs,
including extensive repairs to the exterior wall window system.
In addition, several building systems (e.g., elevator
modernization) have required extensive renovation and/or
replacement because of the age of the building. The state could
spend approximately $64 million more over the next few years to
address the most recent problems. These include replacing 2,070
spandrel glass panels on the exterior of the building, replacing
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waste water pipes and cleaning mold from the HVAC ducts, and
performing various other infrastructure repairs.
ASSEMBLY FLOOR : 79-0, 5/29/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,
Nazarian, Nestande, Olsen, Pan, Patterson, Perea, John A.
Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Vacancy
MW:nl 8/16/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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