BILL ANALYSIS                                                                                                                                                                                                    



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

          AB 2428 (Ting) - State highways:  property leases
          
           ----------------------------------------------------------------- 
          |                                                                 |
          |                                                                 |
          |                                                                 |
           ----------------------------------------------------------------- 
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Version: August 1, 2016         |Policy Vote: T. & H. 8 - 3      |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Urgency: No                     |Mandate: No                     |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Hearing Date: August 1, 2016    |Consultant: Mark McKenzie       |
          |                                |                                |
           ----------------------------------------------------------------- 


          This bill meets the criteria for referral to the Suspense File.



          Bill  
          Summary:  AB 2428 would require the Department of Transportation  
          (Caltrans) to lease on a first right of refusal basis any  
          airspace under or adjacent to a freeway, or other property  
          acquired for highway purposes to San Francisco for park,  
          recreational, or open-space purposes.  The bill requires that  
          the lease amount would be 10 percent or less of the average fair  
          market lease value for up to 10 parcels.


          Fiscal  
          Impact:  
           Unknown loss of Caltrans lease revenues for 20 years or more,  
            potentially over $1 million per year initially, and likely  
            increasing in future years as the gap between lease payments  
            and fair market value increases.  Actual lease revenue losses  
            would depend upon the fair market lease value of selected  
            properties.  Staff notes that these revenue losses would be a  
            General Fund impact because lease revenues are currently used  







          AB 2428 (Ting)                                         Page 1 of  
          ?
          
          
            to partially offset General Fund payments for  
            transportation-related debt service.


          Background:  Existing law authorizes Caltrans to lease the areas above or  
          below state highways to public agencies or private entities.   
          Leases to private entities are subject to competitive bidding  
          requirements.  Existing law authorizes Caltrans to lease any  
          airspace under a freeway, or property acquired for highway  
          purposes, that is not excess property, to the City and County of  
          San Francisco, or a political subdivision thereof, for an  
          emergency shelter or feeding program at a rate of $1 per month.
          Caltrans has negotiated several long-term agreements with the  
          City and County of San Francisco to lease airspace under  
          freeways, including a project that provides volleyball and  
          basketball courts and pedestrian trails under Interstate-280,  
          and a dog park and skatepark on two parcels under the Route 101  
          Central Freeway.




          Proposed Law:  
            AB 2428 would require Caltrans to lease any airspace under or  
          adjacent to a freeway, or other specified property located in  
          San Francisco, which is not excess property and is within a  
          "priority development area," to the City and County of San  
          Francisco, or a political subdivision thereof, for park,  
          recreational, or open-space purposes.  The bill would require  
          the lease amount for up to 10 parcels to be 10 percent or less  
          of the average fair market lease value for each of the parcels.
          The bill requires the lessee to fund any associated  
          infrastructure, to accept full liability for non-highway uses,  
          and to fund all non-highway-related maintenance costs associated  
          with park, recreational, and open-space uses.  The bill also  
          requires the lease to authorize the lessee to subsidize its  
          associated maintenance costs by generating revenue under a  
          "limited revenue generation model," so long as any excess  
          revenue is shared 50/50 with Caltrans.


          Finally, the bill defines "priority development area" as an area  
          identified in a Sustainable Communities Strategy, as specified.









          AB 2428 (Ting)                                         Page 2 of  
          ?
          
          



          Staff  
          Comments:  Caltrans indicates that there are 77 available  
          airspace lots in San Francisco; 75 of these parcels are  
          currently leased to a variety of public and private entities,  
          including 66 that are leased at market rate for parking or  
          storage purposes.  The leases generate approximately $9.25  
          million in annual revenue.  Caltrans indicates that the monthly  
          rents, current lease terms, and parcel sizes vary dramatically  
          among the currently-leased parcels, but comprehensive data on  
          all of the properties is currently unavailable.
          This bill requires Caltrans to give San Francisco the first  
          right of refusal for any properties located within a "priority  
          development area," including those with current lease tenants  
          that may be interested in renewing an expiring lease.  The bill  
          also requires up to ten parcels to be leased for a discounted  
          rate of 10 percent or less of the average fair market lease  
          value.  The resulting loss in Caltrans lease revenues are  
          unknown, and could exceed $1 million each year initially.  The  
          actual revenue loss would depend on the current fair market  
          value of those parcels that are chosen by San Francisco for  
          park, recreation, or open-space purposes, and the lease terms.   
          Staff notes that the revenue losses are likely to increase in  
          future years since the lease terms are likely to be at least 20  
          years, and the fair market lease value is likely to increase  
          over the duration of the lease, but the annual lease payments  
          are unlikely to increase over time. 




                                      -- END --