BILL ANALYSIS Ó AB 2726 Page 1 ASSEMBLY THIRD READING AB 2726 (Daly) As Amended March 28, 2014 Majority vote ADMINISTRATIVE REVIEW 9-3 APPROPRIATIONS 15-1 ----------------------------------------------------------------- |Ayes:|Frazier, Achadjian, |Ayes:|Gatto, Bigelow, | | |Buchanan, | |Bocanegra, Bradford, | | |Ian Calderon, Cooley, | | Ian Calderon, | | |Daly, Medina, Olsen, | |Campos, Eggman, Gomez, | | |Quirk-Silva | |Holden, Linder, Pan, | | | | |Quirk, Ridley-Thomas, | | | | |Wagner, Weber | |-----+--------------------------+-----+--------------------------| |Nays:|Allen, Gorell, Hagman |Nays:|Donnelly | | | | | | ----------------------------------------------------------------- SUMMARY : Revises existing law governing how the University of California (UC) sells real property. Specifically, this bill : 1)Increases the estimated value of real property, from $500,000 to $1 million, that UC is required to sell through competitive bidding. 2)Requires UC to publicly accept the bid which offers the best combination of price, terms and bidder's qualifications or reject all bids or proposals. 3)Specifies that the bidder's qualifications may include factors other than price and terms, such as the bidder's ability to complete the transaction or secure development entitlements. 4)Gives UC the discretion, in the event a successful bidder fails to perform, to accept from the remaining bids or proposals the one that is most advantageous to UC, rather than start the bid process over. 5)Adds properties acquired through foreclosure, deed in lieu of foreclosure, and transactions involving property accepted in settlement of a defaulted mortgage or other legal settlement, AB 2726 Page 2 to the list of transactions currently exempt from competitive bidding. EXISTING LAW generally requires UC, in Public Contract Code Section 10511, to sell real property valued at more than $500,000 through competitive bidding and provides a list of categorical exemptions. In addition, UC is required to provide public notice of the sale, as specified, and to accept in public the bid which offers the combination of price and terms deemed to be in the best interest of UC or reject all bids. FISCAL EFFECT : According to the Assembly Appropriations Committee, minor administrative cost savings to UC from streamlining the disposition of properties valued at between $500,000 and $1 million and by allowing the university to take into account bidder qualifications when selecting the best bid. UC indicates that, because many properties under $1 million are single family residences, these changes will facilitate sales to the broader range of potential buyers and increase the likelihood that sales can proceed more expeditiously to a qualified buyer. UC expects this to result in additional net revenues of up to several hundred thousand dollars annually. Finally, exempting property acquired by UC through foreclosure from competitive bidding will also expedite the disposition of such properties. COMMENTS : UC is sponsoring this bill to reduce administrative costs associated with the sale or other disposition of UC-owned property. UC states that the flexibility provided in this bill will allow UC to seek the highest and best use of properties, many of which are single family homes that have been donated to UC, within its real estate portfolio. Current law requires UC to dispose of any real property worth more than $500,000 through a competitive sealed bid process. This bill raises that threshold to $1 million. According to UC, this change would facilitate sales of smaller value properties to a broader range of buyers represented by the traditional real estate brokerage community. UC notes that brokers representing these properties have estimated that as many as half of potential buyers do not follow through with the transaction because they have to obtain a binding financing commitment and complete other due diligence at their own expense prior to submitting their bid. This change would allow these properties AB 2726 Page 3 to be sold through more efficient and conventional means. This bill also enables UC to consider a bidder's qualifications in addition to price and monetary terms when selling real property. Currently, UC is required to accept the highest price that is offered. This bill allows UC to consider other relevant factors, such as a potential buyer's financial capacity, ability to secure local zoning changes and other development entitlements, and ability to complete any needed rehabilitation of the property being offered for sale. Lastly, UC adds that exempting real property that has been acquired through foreclosure or due to a mortgage default or as settlement of litigation from the competitive bidding process will expedite the disposal of such properties and allow the proceeds from such sales to benefit UC programs in a timely manner. Analysis Prepared by : Cassie Royce / A. & A.R. / (916) 319-3600 FN: 0003253