BILL ANALYSIS Ó
AB 2492
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 2492 (Jones-Sawyer) - As Introduced: February 21, 2014
SUBJECT : Local agencies: meetings: real property transactions.
SUMMARY : Expands a Ralph M. Brown Act (Brown Act) exemption
that allows a local agency's legislative body to meet in closed
session for the purpose of granting authority to the agency's
negotiator in real estate transactions. Specifically, this
bill :
1)Allows the legislative body of a local agency to hold a closed
session with its negotiator prior to the purchase, sale,
exchange, or lease of real property by or for the local agency
to grant authority to its negotiator regarding the price and
terms for the purchase, sale, exchange, or lease (emphasis
added).
2)Finds and declares that the interest protected by this bill's
limitation on the public's access to the meetings of public
bodies and the need for protecting that interest is as
follows: Local agencies increasingly are entering into more
sophisticated and complex real estate transactions requiring
the negotiation of nonmonetary terms outside the scope of the
"price and terms of payment" that constitute valuable
consideration. A local agency must be authorized to consider
all of the terms of a real estate transaction in closed
session in order to preserve its negotiating position so as to
strike the best bargain in the public interest.
EXISTING LAW :
1)Provides, pursuant to Section 3 of Article I of the California
Constitution (Constitution), that the people have the right of
access to information concerning the conduct of the people's
business, and, therefore, the meetings of public bodies and
the writings of public officials and agencies shall be open to
public scrutiny.
2)Provides, pursuant to the Constitution, that a statute, court
rule, or other authority shall be broadly construed if it
furthers the people's right of access, and narrowly construed
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if it limits the right of access.
3)Provides, pursuant to the Constitution, that a statute, court
rule, or other authority that limits the right of access shall
be adopted with findings demonstrating the interest protected
by the limitation and the need for protecting that interest.
4)Establishes, pursuant to the Brown Act, standards for local
public agencies' open and public meetings. Requires the
meetings of local governments' legislative bodies to be "open
and public," thereby ensuring the people's access to
information so they may retain control over the public
agencies that serve them. Prohibits closed meetings, with
specified exceptions, and requires local agencies to post
hearing notices, provide the public with copies of materials
distributed during open meetings, and follow related
provisions to ensure public access to the meetings and
deliberations of local agencies' legislative bodies.
5)Allows a legislative body of a local agency to hold a closed
session with its negotiator prior to the purchase, sale,
exchange, or lease of real property by or for the local agency
to grant authority to its negotiator regarding the price and
terms of payment for the purchase, sale, exchange, or lease
(emphasis added).
6)Requires, prior to the closed session authorized in 5), above,
the legislative body of the local agency to hold an open and
public session in which it identifies its negotiators, the
real property or real properties which the negotiations may
concern, and the person or persons with whom its negotiators
may negotiate. Negotiators may be members of the legislative
body of the local agency.
FISCAL EFFECT : None
COMMENTS :
1)Purpose of this bill . This bill expands an exemption to the
Brown Act that allows a local agency's legislative body to
meet in closed session before buying, selling, exchanging, or
leasing real estate to grant authority to its negotiator
regarding the price and terms of payment for the purchase,
sale, exchange, or lease. This bill would remove the clause
"of payment" from this provision, allowing discussion in
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closed session of any terms related to the purchase, sale,
exchange, or lease of the local agency's real property. This
bill is author-sponsored.
2)Author's statement . According to the author, "Local agencies
are increasingly entering into more sophisticated and complex
real estate transactions. Such transactions often require the
negotiation of non-monetary terms outside the scope of 'price
and terms of payment' that constitute valuable consideration
for entering into the transaction. This information may
sometimes be more valuable to the public than the monetary
price that constitutes the rent or purchase price.
"The courts have narrowly interpreted the meaning of 'price
and terms of payment' to exclude the consideration in closed
session of non-monetary terms. This leaves a local agency in
the difficult position of having to dissect a proposed
agreement into terms that can be discussed in closed session
and those terms that cannot.
"This forces the local agency to either publicly disclose a
portion of its negotiating position or effectively limits the
local agency's ability to provide confidential direction to
its real estate negotiators on terms that not only affect the
value of the transaction, but also have significant public
impact. Consequently, a local agency is left with a clear
disadvantage in negotiations, which is harmful to the public
interest and only serves to benefit the other party to the
negotiations."
3)Background . The Brown Act requires legislative bodies of
local agencies to hold their meetings open to the public,
except as expressly authorized. While the Brown Act makes
exceptions for specified matters, such as litigation, employee
discipline, and negotiations for real estate transactions,
these exceptions are construed narrowly, in favor of the
public's right of access to public information.
Existing law allows a legislative body of a local agency to
hold a closed session with its negotiator prior to the
purchase, sale, exchange, or lease of real property by or for
the local agency to grant authority to its negotiator
regarding the price and terms of payment for the purchase,
sale, exchange, or lease. This particular exception to the
Brown Act's open meetings provisions has been the subject of
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debate in the courts, the Legislature, and an opinion by the
state's Attorney General (AG).
4)Attorney General Opinion . At the request of the Orange County
District Attorney, the AG issued on December 27, 2011, Opinion
No. 10-206 (opinion) on the following question:
"What items may be discussed under the
real-estate-negotiations exception to the open meeting
requirements of the Ralph M. Brown Act - an exception which
states that the legislative body of a local governmental
agency may meet in closed session with its real estate
negotiator 'to grant authority to its negotiator regarding
the price and terms of payment' for a proposed purchase,
sale, exchange, or lease of identified real property?"
The AG concluded as follows:
"The real-estate-negotiations exception to the open meeting
requirements of the Ralph M. Brown Act permits discussion
in closed session of: (1) the amount of consideration that
the local agency is willing to pay or accept in exchange
for the real property rights to be acquired or transferred
in the particular transaction; (2) the form, manner, and
timing of how that consideration will be paid; and (3)
items that are essential to arriving at the authorized
price and payment terms, such that their public disclosure
would be tantamount to revealing the information that the
exception permits to be kept confidential."
This AG opinion also states that "we believe that the phrase
'terms of payment' is best understood as the form, manner, and
timing upon which the agreed-upon price is to be paid - for
example, an all-cash transaction (either up-front or in
installments), a seller-financed mortgage, an exchange of
property or property rights, or the like. It is significant
that the word 'terms' is immediately modified by the words 'of
payment.' In our view, this modification rules out any
possibility that the statute is meant to authorize
closed-session discussions of any and all terms of the
transaction as a whole.
"This view is bolstered by the legislative history of the
exception, which reveals that the phrase 'terms of payment'
came about after a series of amendments incorporating other
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possible wordings. As introduced, the statute would have
allowed a county board of supervisors to conduct a closed
session 'with other persons for purposes of negotiations for
the purchase, sale or lease of property.' An early amendment
applied the exemption more broadly to 'the legislative body of
a local agency,' but simultaneously narrowed the scope of
discussion to a 'meeting with [the local governing body's]
designated negotiator to give instructions' concerning the
'terms or price, or both' of a specified real property
transaction. Next, the language was amended to limit the
scope of discussion to only the 'price' of the proposed
transaction. A final amendment settled on 'price and terms of
payment' for the particular purchase, sale, exchange, or lease
of real property. From this history, we can see that the
Legislature considered and rejected the broader phrase
('terms' of the proposed transaction) in favor of the narrower
phrase ('terms of payment'). Moreover, the reported appellate
decisions in which the phrase 'terms of payment' appears
reveals a consistent understanding that it is meant to
describe how and when the price is to be paid."
The AG opinion further notes, "While exceptions to the Brown
Act must be given a narrow construction, they must still be
interpreted in a manner that gives effect to the underlying
purposes of the law. Among the purposes at play in this
situation is the need to conserve scarce public resources
through effective negotiation of real estate transactions?
Ultimately, of course, each case must be decided on its own
facts. But, for the reasons stated, we cannot accept the view
that the real-estate-negotiations exception permits the
closed-session discussion of any and all aspects of a proposed
transaction that might have some effect on price and payment
terms. The purpose of the exception is to protect a local
agency's bargaining position, not to keep confidential its
deliberations as to the wisdom of a proposed transaction."
5)Policy consideration . Removing the phrase "of payment" from
statute, as this bill does, greatly expands the items that
would be permissible for local agencies to discuss in closed
session with their real estate negotiators. It also runs
counter to legislative history, the aforementioned AG opinion,
and case law on this issue. The Committee may wish to
consider whether this bill meets Constitutional requirements
to demonstrate the interest protected by limiting the public's
right to access the meetings of public bodies and the writings
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of public officials and the need for protecting that interest.
6)Previous legislation . AB 3007 (Plescia) of 2004 would have,
among many provisions, repealed existing law allowing a
legislative body of a local agency to hold a closed session
with its negotiator prior to the purchase, sale, exchange, or
lease of real property by or for the local agency to grant
authority to its negotiator regarding the price and terms of
payment for the purchase, sale, exchange, or lease. This bill
was never heard.
AB 1050 (Kehoe) of 2001 would have required a legislative body
of a local agency, prior to the initial closed session with
its negotiator concerning a proposed real property
transaction, to deliberate in an open and public session
issues related to the desirability of, and any policy
considerations regarding, the transaction. AB 1050 also would
have added a number of additional public disclosure
requirements related to a local agency's real estate
transactions, and would have prohibited a number of items
related to a local agency's real estate transactions from
being discussed in closed session. AB 1050 was held on the
Assembly Floor.
SB 139 (Kopp), Chapter 260, Statutes of 1998, required the
legislative body of a local agency to disclose the names of
its real property negotiators, at an open and public session,
prior to a closed session to discuss the purchase, sale,
exchange, or lease of real property.
7)Arguments in support . The California Special Districts
Association, in support, writes, "Special districts report
that property transactions frequently include non-monetary
terms, which can be just as important as the monetary terms in
an agreement?Disclosing the non-monetary tentative terms of a
property transaction mid-negotiation places local agencies at
a great disadvantage. The Attorney General Opinion means
potentially pivotal issues must be discussed in open session
before all parties. In addition, the local agencies' ability
to direct their real estate negotiators is hampered.
"While the Attorney General Opinion does not hold the force of
law, it has created uncertainty for local agencies. The
uncertainty could significantly hinder successful real estate
transactions that hurt both the local agency and also the
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community it serves?
AB 2492 will uphold protections for public engagement in the
business before their local legislative bodies while ensuring
a fairer playing field for parties to a real estate
transaction involving local public agencies."
The Association of California Healthcare Districts, in
support, states, "Current law, Government Code 54956.8,
authorizes local agencies to hold closed sessions to negotiate
sale, lease or exchange of real property transactions
regarding 'the price and terms of payment for the purchase.'
However, Healthcare Districts are in a unique position of
often negotiating other non-monetary terms in agreements. For
example a hospital lease agreement may include protections to
ensure specified healthcare services are continued. The
non-monetary aspects of the negotiations are an integral part
of the final agreement, therefore should be discussed as a
whole in closed session.
"AB 2492 would clarify existing law to ensure that local
government entities can negotiate all aspects, not just
purchase price, of a sale or lease of real property in closed
session. This will create a more confidential negotiation
process for all parties involved."
8)Arguments in opposition . The California Newspaper Publishers
Association, in opposition, states, "?AB 2492, which would
remove the words 'of payment' from the existing (real estate)
exemption, upends the careful balance in Section 54956.8 in
favor of substantial increased secrecy. The elimination of
these two key words would give an agency free rein to discuss
an unlimited array of potential issues outside of public view
that have very little to do with the essence of the
transaction. Discussions concerning zoning changes,
environmental impact, alternative sites, historical or
landmark considerations, gentrification, displacement of
residents, traffic and naming rights are but a few examples of
what could become commonplace - all outside of public view and
with no public input.
"It is hard to imagine a more paramount interest that the
public has in an agency's decision-making and oversight than
in the area of land use. One need look no further than the
recent debacle involving the Los Angeles Memorial Coliseum
Commission to see what California would be like if AB 2492 was
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to become law. Despite the plain language in Section 54956.8,
the corruption plagued Commission met in secret with officials
at USC to transfer control of the taxpayer owned landmark.
For months, the lease discussions exceeded the current
standard of 'price and terms of payment.' The resulting 98
year lease that was negotiated in these secret sessions would
grant the school most of the benefits of owning the stadium
complex, including the neighboring Sports Arena, but guarantee
the public little in terms of revenues from or access to the
properties.
"In 2013, Los Angeles Superior Court Judge Luis A. Lavin found
that the Commission had violated the Brown Act's Section
54956.8 by discussing in closed session the broad outlines of
the proposed lease including: giving the naming rights of the
cultural and historical facility to USC; public access to the
venues involved in the deal; the length of the lease; parking
concerns; the impact on neighboring museums; and the
environmental impact of demolishing the Sports Arena, among
many other issues. In his ruling, Judge Lavin stated, 'The
Coliseum's view on what it can discuss in secret 'would
decimate the letter and spirit' of the state's open-meetings
law.' AB 2492 would legitimize, protect and encourage the
destructive behavior that Judge Lavin condemned in his
findings.
"After the corruption scandals involving the City of Bell and
now the Coliseum Commission, the public needs more tools to
combat self-dealing, favoritism and other corrupt activities
in local government, not less."
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Health Care Districts
Association of California Water Agencies
California Special Districts Association
Opposition
California Newspaper Publishers Association
Californians Aware
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
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