BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1900 (Jones-Sawyer) - San Pedro courthouse ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: March 31, 2016 |Policy Vote: JUD. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: Yes |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Jolie Onodera | | | | ----------------------------------------------------------------- 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 AB 1900 (Jones-Sawyer) Page 1 of ? 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: AB 1900 (Jones-Sawyer) Page 2 of ? 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 AB 1900 (Jones-Sawyer) Page 3 of ? 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).) AB 1900 (Jones-Sawyer) Page 4 of ? 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. AB 1900 (Jones-Sawyer) Page 5 of ? 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 AB 1900 (Jones-Sawyer) Page 6 of ? 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 AB 1900 (Jones-Sawyer) Page 7 of ? 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". -- END --