BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1900 (Jones-Sawyer) - San Pedro courthouse
          
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          |Version: March 31, 2016         |Policy Vote: JUD. 7 - 0         |
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          |Urgency: Yes                    |Mandate: No                     |
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          |Hearing Date: August 1, 2016    |Consultant: Jolie Onodera       |
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          This bill meets the criteria for referral to the Suspense File. 

          Bill  
          Summary:  AB 1900, an urgency measure, would authorize the  
          Judicial Council to sell the property known as the San Pedro  
          courthouse, a surplus court facility, at fair market value and  
          upon specified terms and conditions. This bill would deposit and  
          transfer the sale proceeds from the Special Fund for Economic  
          Uncertainties to the Immediate and Critical Needs Account  
          (ICNA), and appropriate the funds to the Judicial Council for  
          the planning, design, construction, rehabilitation, renovation,  
          replacement, or acquisition of court facilities.


          Fiscal  
          Impact:  
            Sale proceeds  :  Redirection of one-time revenue potentially in  
            excess of several million dollars from the Special Fund for  
            Economic Uncertainties (SFEU) to the Immediate and Critical  
            Needs Account (ICNA). Under existing law, the proceeds from  
            the sale of surplus state property are to be deposited into  
            the SFEU (now that the principal and interest on the 2004  
            Economic Recovery Bonds have been fully paid). The 2016 Budget  
            Act reflects a 2016-17 ending balance of $1.75 billion in the  







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            SFEU. Absent the declaration of the courthouse as "surplus  
            property," the net proceeds of the sale would potentially be  
            subject to reversion to the General Fund and the State Court  
            Facilities Construction Fund pursuant to Government Code §  
            70391(c)(1).
            Appropriation to Judicial Council  :  One-time appropriation  
            potentially in excess of several million dollars to the  
            Judicial Council from the ICNA. Annual revenues to the ICNA  
            have been declining, and the 2016 Budget Act reflects a  
            2016-17 ending balance of $87.8 million in the ICNA.
            Disposition process  :  Potential one-time costs (General Fund*)  
            to the Judicial Council for expenses incurred for the  
            disposition process including but not limited to an appraisal,  
            title and escrow fees. As the bill requires all sale proceeds  
            (instead of net proceeds) to be transferred to the ICNA, the  
            disposition costs would be charged against the Trial Court  
            Trust Fund.  
           Operations/maintenance  :  Future cost savings (General Fund*)  
            to the Judicial Council in avoided maintenance and operations  
            costs. Despite the closure of the courthouse at the end of  
            June 2013, the Judicial Council continues to share  
            responsibility with the county for maintenance and operations  
            costs pursuant to Government Code § 70343(a)(2). 
            Uncodified statutory text  :  Staff notes the entire provisions  
            of the bill are uncodified. Although uncodified statutory text  
            has the force of law, codifying the statutory text of the bill  
            would facilitate future references to the authorization  
            provided and the specific terms and conditions of the sale.  
           
           *Trial Court Trust Fund


          Background:  As reported by the Legislative Analyst's Office in "Completing  
          the Goals of Trial Court Realignment," (September 28, 2011),  
          although the state assumed responsibility for funding the  
          operations of trial courts in 1997, the state did not begin to  
          take over the responsibility for and ownership of trial court  
          facilities from counties until 2002 with the enactment of SB  
          1732 (Escutia) Chapter 1082/2002, more commonly referred to as  
          the Trial Court Facilities Act of 2002. In contrast to the  
          Legislature's decision to decentralize control of court  
          employees to individual trial courts, SB 1732 realigned  
          responsibility for facilities to the Judicial Council. SB 1732  
          included the following key components:








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          Transfer of Responsibility for Trial Court Facilities. The  
          legislation authorized the transfer of title and all management  
          responsibility for most court facilities from the counties to  
          the state by June 30, 2007, and required the Judicial Council  
          and the California State Association of Counties to establish a  
          process for transferring facilities on a building-by-building  
          basis. Moreover, the Judicial Council-not individual trial  
          courts-was given the primary responsibility for the provision of  
          court facilities, as well as the authority to own and construct  
          future court facilities. The Judicial Council has since assumed  
          responsibility from the counties for all trial court facilities.  



          Required County Facility Payment. Although the state would  
          assume responsibility for trial court facilities, the  
          legislation required counties to make annual payments into a  
          newly created Court Facilities Trust Fund based on the amount  
          the county had historically spent on the maintenance and  
          operation of the transferred facilities. The state would be  
          responsible for all operation and maintenance costs above the  
          fixed county payment. 


          Established State Court Facility Construction Fund (SCFCF). In  
          order to support the improvement of existing court facilities  
          and the construction of new facilities, the legislation  
          increased fines and fees, the resulting revenues of which are  
          deposited into the SCFCF. These funds were used to finance $1.5  
          billion in lease-revenue bonds to support 13 trial court  
          facility projects.

          Existing law provides that the Judicial Council, as the  
          policymaking body for the judicial branch, has the  
          responsibility and authority to dispose of surplus court  
          facilities following the transfer of responsibility from the  
          counties to the state pursuant to trial court realignment,  
          subject to all of the following:


          (1) If the property was a court facility previously the  
          responsibility of the county, the Judicial Council shall comply  
          with the requirements of Government Code (GC) § 11011 [DGS  








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          surplus property statutes], and as follows, except that,  
          notwithstanding any other provision of law, the proportion of  
          the net proceeds that represents the proportion of other state  
          funds used on the property other than for operation and  
          maintenance shall be returned to the fund from which it came and  
          the remainder of the proceeds is to be deposited in the State  
          Court Facilities Construction Fund.

          (2) The Judicial Council is required to consult with the county  
          concerning the disposition of the facility. Notwithstanding any  
          other law, including GC § 11011, when requested by the  
          transferring county, a surplus facility shall be offered to that  
          county at fair market value prior to being offered to another  
          state agency or local government agency.

          (3) The Judicial Council is required to consider whether the  
          potential new or planned use of the facility is compatible with  
          the use of other adjacent public buildings; unreasonably departs  
          from the historic or local character of the surrounding property  
          or local community; has a negative impact on the local  
          community; unreasonably interferes with other governmental  
          agencies that use or are located in or adjacent to the building  
          containing the court facility; or is of sufficient benefit to  
          outweigh the public good in maintaining it as a court facility  
          or building.

          (4) All funds received for disposal of surplus court facilities  
          shall be deposited by the Judicial Council in the State Court  
          Facilities Construction Fund.

          (5) If the facility was acquired, rehabilitated, or constructed,  
          in whole or in part, with moneys in the State Court Facilities  
          Construction Fund that were deposited in that fund from the  
          state fund, any funds received for disposal of that facility  
          shall be apportioned to the state fund and the State Court  
          Facilities Construction Fund in the same proportion that the  
          original cost of the building was paid from the state fund and  
          other sources of the State Court Facilities Construction Fund.

          (6) Submission of a plan to the Legislature for the disposition  
          of court facilities transferred to the state, prior to, or as  
          part of, any budget submission to fund a new courthouse that  
          will replace the existing court facilities transferred to the  
          state. (GC § 70391 (c).)








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          Proposed Law:  
           This bill, an urgency measure, would state the intent of the  
          Legislature to specifically authorize the Judicial Council, with  
          certain participation by the County of Los Angeles, to sell  
          property known as the San Pedro courthouse, a surplus court  
          facility that is unsuitable for the needs of the judicial  
          branch, and appropriate those sale proceeds to the Judicial  
          Council for the planning, design, construction, rehabilitation,  
          renovation, replacement, or acquisition of court facilities.  
          Specifically, this bill:
                 Authorizes the Judicial Council to sell the property, at  
               fair market value and upon the terms and conditions and  
               subject to the reservations the Judicial Council deems in  
               the best interests of the state, if all of the following  
               requirements are satisfied:


               (1) The sale complies with Section 70391 of the Government  
               Code, as applicable.


               (2) The Judicial Council consults with the County of Los  
               Angeles concerning the sale of the property.


               (3) The Judicial Council offers the County of Los Angeles  
               the right to purchase the property at a fair market value  
               before otherwise offering the property for sale.


                 Requires the proceeds from the sale of the property to  
               be deposited into the Special Fund for Economic  
               Uncertainties and then to be immediately transferred to the  
               Immediate and Critical Needs Account (ICNA) of the State  
               Court Facilities Construction Fund.


                 Appropriates the proceeds from the sale of the property  
               from the ICNA to the Judicial Council for the purposes of  
               the planning, design, construction, rehabilitation,  
               renovation, replacement, or acquisition of court  
               facilities.








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                 Specifies "property" shall mean the San Pedro courthouse  
               located at 505 South Centre Street, in the City and County  
               of Los Angeles, Assessor Parcel Number 7455-013-901.


                 Provides this act is an urgency statute necessary for  
               the immediate preservation of the public peace, health, or  
               safety within the meaning of Article IV of the Constitution  
               and shall go into immediate effect. The facts constituting  
               the necessity are:  To enable the sale of the surplus San  
               Pedro court facility to occur as soon as possible, it is  
               necessary that this act take effect immediately.




          Prior  
          Legislation:  SB 1407 (Perata) Chapter 311/2008 created the ICNA  
          and authorized the Judicial Council up to $5 billion in bond  
          financing for court construction projects.
          SB 1732 (Escutia) Chapter 1082/2002, commonly referred to as the  
          Trial Court Facilities Act of 2002, sought to implement the  
          recommendations of the Task Force on Court Facilities to  
          transition facilities from county to state control. In contrast  
          to the Legislature's decision to decentralize control of court  
          employees to individual trial courts, SB 1732 realigned  
          responsibility for facilities to the Judicial Council.




          Staff  
          Comments:  This bill declares the San Pedro courthouse a surplus  
          court facility and will potentially result in one-time revenue  
          to the state in the millions of dollars. 
          Under existing law (Section 9 of Article III of the California  
          Constitution), the proceeds from the sale of "surplus state  
          property" occurring on or after November 2, 2004, are required  
          to be used to pay the principal and interest on bonds issued  
          pursuant to the Economic Recovery Bond Act of 2004. Once the  
          principal and interest on those bonds are fully paid (which  
          occurred in 2015), the proceeds from the sale of surplus state  








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          property are required to be deposited into the Special Fund for  
          Economic Uncertainties (SFEU), or any successor fund.


          Although this bill requires the sale proceeds to be deposited in  
          the SFEU, the bill additionally requires immediate transfer of  
          the sale proceeds to the ICNA, resulting in a redirection of  
          funds that otherwise would have remained in the SFEU.


          Staff notes that in the absence of the declaration of the San  
          Pedro courthouse as surplus state property, existing law  
          pursuant to Government Code § 70391(c)(1) provides that the  
          proportion of the net proceeds that represents the proportion of  
          other state funds used on the property other than for operation  
          and maintenance is required to be returned to the fund from  
          which it came, which in the case of the San Pedro courthouse  
          would be the General Fund, and the remainder of the proceeds are  
          to be deposited in the State Court Facilities Construction Fund.  
          Disposition of the property without designating it as "surplus  
          state property" would additionally allow the Judicial Council to  
          utilize a portion of the sale proceeds to cover the costs of the  
          disposition process of the property, as only the net proceeds of  
          the sale are required to be returned to the originating fund  
          source. 


          Recommended Amendments:  


             1.   Staff notes the entire contents of the measure are  
               uncodified. Although uncodified statutory text has the  
               force of law, the author may wish to consider an amendment  
               to codify the statutory text of the bill (excluding the  
               legislative intent language) to facilitate the future  
               reference to the sale authorization and the specific terms  
               and conditions tied to the sale.


             2.   To account for the costs incurred in the disposition  
               process of the property (including the appraisal, title and  
               escrow fees, etc.), and to the extent allowable under the  
               authority for sale of the property, the author may wish to  
               consider technical amendments to specify only the net  








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               proceeds of the sale are to be deposited, transferred, and  
               appropriated, as specified.


             3.   Staff recommends the following technical amendment  
               on page 2 in line 19, strike the word "a". 


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