BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1424 (Wolk) - State property: tidelands transfer: City of  
          Martinez.
          
          Amended: April 8, 2014          Policy Vote: NR&W 9-0
          Urgency: No                     Mandate: Yes (see staff comment)
          Hearing Date: May 5, 2014       Consultant: Marie Liu
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 1424 would grant state trust lands to the City  
          of Martinez (city) in exchange for a revenue-sharing agreement  
          with the state. 

          Fiscal Impact: 
              Annual costs of approximately $13,000 to the General Fund  
              for lost lease revenues from the city.
              On-going annual costs, likely minor, to the General Fund to  
              the State Lands Commission (SLC) for administrative and  
              oversight duties. These costs are to be reimbursed by the  
              city.
              Unknown costs to the General Fund and the Land Bank Fund  
              (LBF) for forgone revenue-sharing until the city has paid  
              off loans with the Division of Boating and Waterways within  
              the Department of Parks (DPR).
              Unknown revenues to the General Fund and the LBF after  
              2038, but potentially later, as a result of a  
              revenue-sharing agreement. 

          Background: The state, through the SLC, currently grants certain  
          tide and submerged lands to the City of Martinez. This land  
          grant requires the city to return any net revenues generated on  
          the granted trust lands. 

          The city has also been leasing a piece of state land that  
          contains the Martinez Marina. The current lease was renewed in  
          2010 for 46 years. For the first ten years of the lease, the  
          city is required to pay an annual rent of $10,000 plus five  
          percent of the rent collected for marina use. Both the rent and  
          revenue share will be adjusted according to a specified schedule  
          beginning of year 11 of the lease.









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          The SLC is the trustee of the LBF created pursuant to the  
          Kapiloff Land Bank Act of 1982 (PRC §§8600). The LBF may be used  
          for mitigation, title settlements, or the management and  
          improvement of real property held by the SLC for the public  
          trust.

          According to DPR, the city currently has five outstanding loans  
          totaling $4.249 million ($2.975 million in principal plus  
          interest) that it received for improvements made to the Martinez  
          Marina. These loans were issued between FY1959-60 and FY 1984-85  
          by the Department of Boating and Waterways, which is now a  
          division within DPR. The last loan will mature on August 1,  
          2038. The city is disputing its obligation to repay the largest  
          of these loans, a $1.3 million loan made in FY 1959-60. 

          Proposed Law: This bill would repeal the existing land grant and  
          land lease with the city and would establish a new grant for  
          these lands that would cover all involved parcels. This new  
          grant would:
           Require the city to hold the lands in trust for the benefit of  
            all Californians.
           Allow the city to lease the lands for terms not to exceed 49  
            years and only for purposes consistent with the public trust  
            doctrine. 
           Require the city to develop, and submit to the SLC for  
            approval by January 1, 2020, a trust lands use plan describing  
            any proposed development, preservation, or other use of the  
            trust lands. 
           Require the city to submit a report every five years,  
            beginning in 2025, regarding the utilization of the trust  
            land.
           Require the city to reimburse SLC for all expenses incurred in  
            the administration of the act, including periodic audits.
           Require that the city annually transmit 20% of all gross  
            revenues generated on the trust lands beginning in 2015. Of  
            this amount, 80% would be deposited in the General Fund and  
            20% would be deposited into the LBF. The city would be  
            exempted from sharing revenues with the state until the DPR  
            determines that the city has repaid loans it owes to that  
            department.

          Related Legislation: SB 551 (DeSaulnier) Chapter 422, Statutes  
          of 2011 made a grant to the City of Pittsburg with substantially  
          similar conditions, except the revenue sharing with the state  








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          was not contingent on the repayment of loans.

          Staff Comments: For most past land grants, including the  
          existing grant to Martinez, the SLC has only required that net  
          trust revenues be returned to the state, which effectively has  
          meant that the state never receives any revenues from granted  
          trust lands. This grant however would allow the state to receive  
          20% of gross revenues. The SLC feels that these new revenue  
          sharing provisions will encourage grantees to appropriately  
          develop tidelands while assuring revenues for the General Fund.  
          Currently the General Fund is only receiving approximately  
          $13,000 a year from the city as a result of the Martinez Marina.  
          While this bill would result in the loss of these lease  
          revenues, once the city develops and implements a plan its  
          granted lands as required by this bill, the General Fund may see  
          higher revenues.

          However, staff notes that the state is highly unlikely to  
          receive any revenues from this grant for at least 23 years  
          because the city would be exempt from the revenue sharing until  
          it has paid off its outstanding loans from the DPR. There are  
          two substantial issues with this exemption. First, the exemption  
          arguably serves as a disincentive for the city to fully repay  
          the DPR loans, especially considering that the city is disputing  
          its obligation to repay one of the loans. Staff notes that the  
          exception applies even if the state's portion of revenues  
          exceeds the city's yearly loan repayment obligation and. The  
          exception is also irrespective of the amount of the residual  
          loan. Second, this exception effectively is repaying the loans  
          off with General Fund monies. That is, the city is repaying the  
          loans with monies that would otherwise have been deposited in  
          the General Fund. In essence, this agreement could be  
          interpreted as forgiving the city of these loans. Staff  
          recommends that the loan repayment obligation remain with the  
          city instead of the General Fund.

          The LBF is continuously appropriated to the SLC. By requiring  
          the deposit of revenues in the LBF, this bill makes an  
          appropriation.

          This bill is tagged as a state-mandated local program because of  
          the requirements on the city. However, as the city is able to  
          recover the costs through fees or assessments, its costs would  
          not be reimbursed. 








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