BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2726
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          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,  








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            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  








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          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 


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