BILL ANALYSIS                                                                                                                                                                                                    



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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          2797 (Chiu)


          As Amended  August 19, 2016


          Majority vote


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          |ASSEMBLY:  |76-0  |(May 19, 2016) |SENATE: |32-7  |(August 23,      |
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          Original Committee Reference:  NAT. RES.


          SUMMARY:  Authorizes the Port of San Francisco (Port) to loan  
          specified nontrust lease revenues to cover the infrastructure  
          costs for the development of Seawall Lot 337.  Expands the  
          boundaries of Seawall Lot 337 and extends permissible lease  
          periods.  Specifically, this bill:


          1)Exempts specified actions amending the Mission Bay South  
            Redevelopment Plan from certain redevelopment agency  
            dissolution provisions. 


          2)Requires the San Francisco Bay Conservation and Development  
            Commission (BCDC), on January 1, 2017, to designate Pier 48,  
            the wharf between Pier 48 and Pier 50, and a portion of  
            Seawall Lot 337 as not a Port priority use area.










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          3)Allows the Port to enter into 75-year leases and prohibits  
            nontrust leases from extending beyond December 31, 2105.


          4)Allows the Port to use its nontrust lease revenues from  
            Seawall Lot 337 to make Port advances to fund Seawall Lot 337  
            infrastructure.


          6)Requires State Lands Commission (SLC) to either approve or  
            disapprove the procedures for establishing the fair market  
            value of the development parcels, the form of ground lease,  
            and the Port's use of Port advances to pay for Seawall Lot 337  
            infrastructure costs.


          7)Prohibits SLC from approving the Port's use of Port advances  
            unless SLC determines that the Port advances are in the best  
            interests of the state, will benefit the public trust, and is  
            consistent with the Port's fiduciary duties as trustee.   
            Requires SLC to only approve the Port's use of Port advances  
            if it finds that there are sufficient assurances that the  
            trust will be made whole.


          8)Requires the Port to ensure repayment, with interest, of each  
            Port advance within 25 years after the Port advance is made.   
            Allows extension of the repayment period beyond 25 years if  
            SLC approves.  Requires SLC to base its approval, in part, on  
            whether the port is taking actions that ensure the trust is  
            made whole, consistent with its fiduciary duties as a trustee  
            of the public trust.


          The Senate amendments: 


          1)Allow the Port to revise the boundaries of Seawall Lot 337 to  
            the realigned or reconfigured park or street boundaries if the  
            new boundaries are approved by the executive officer of SLC  
            rather than specifying the boundaries.









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          2)Require BCDC, on January 1, 2017, to designate Pier 48, the  
            wharf between Pier 48 and Pier 50, and a portion of Seawall  
            Lot 337 as not a Port priority use area.


          3)Limit nontrust leases from extending beyond December 31, 2105.  



          4)Allow SLC to only approve the Port's use of Port advances if  
            it finds that there are sufficient assurances that the trust  
            will be made whole.


          5)Reduce the time limits on repayment of each port advance from  
            50 years to 25 years after the Port advance is made.


          6)Require that no later than December 31, 2105, the use of the  
            designated seawall lot or development parcel in Seawall Lot  
            337 be consistent with the public trust.


          EXISTING LAW:  


          1)Protects, pursuant to the common law doctrine of the public  
            trust (Public Trust Doctrine), the public's right to use  
            California's waterways for commerce, navigation, fishing,  
            boating, natural habitat protection, and other water-oriented  
            activities.  The Public Trust Doctrine provides that filled  
            and unfilled tide and submerged lands and the beds of lakes,  
            streams, and other navigable waterways (public trust lands)  
            are to be held in trust by the state for the benefit of the  
            people of California.  
          2)Establishes that SLC is the steward and manager of the state's  
            public trust lands.  SLC has direct administrative control  
            over the state's public trust lands and oversight authority  
            over public trust lands granted by the Legislature to local  
            public agencies (granted lands).









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          3)Grants in trust to the Port, pursuant to the Burton Act,  
            Chapter 1333, Statutes of 1968, administrative control over  
            the public trust lands in the harbor of San Francisco for  
            purposes of commerce, navigation, and fisheries.


          4)Authorizes the Port, pursuant to SB 815 (Migden), Chapter 660,  
            Statutes of 2007, to lease all or any portion of designated  
            seawall lots free from use requirements established by the  
            public trust, the Burton Act trust, and the Burton Act  
            Transfer Agreement (hereinafter "nontrust leases"), provided  
            certain conditions are met, including:


             a)   The term of any individual non-trust lease, including  
               any extension of the term allowed by right of renewal, does  
               not exceed 75 years, and the non-trust lease will terminate  
               no later than January 1, 2094;
             b)   All revenues received by the Port from the non-trust  
               lease will be deposited in a separate account in the harbor  
               fund to be expended for the preservation of historic piers  
               and historic structures, or for the construction and  
               maintenance of waterfront plazas and open space required by  
               the special area plan.  Prior to the use of revenues for  
               any pier of structure subject to public trust restrictions,  
               the executive officer of SLC must approve the proposed uses  
               of the piers or structures; and,


             c)   The non-trust lease is for fair market value subject to  
               the approval of SLC, which must find that the lease is  
               consistent with the terms of the public trust and Burton  
               Act trust, other than their restrictions on use, and that  
               it is in the best interest of the state.


          5)Requires that, prior to the lease of Seawall Lot 337 for  
            nontrust uses, a study is undertaken and approved by SLC.   
            Requires the study to analyze the need to retain  
            trust-consistent uses on the site.  Requires that, prior to  
            the lease of Seawall Lot 337 for nontrust uses, the San  








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            Francisco Bay Conservation and Development Commission has  
            amended the seaport plan to remove the port priority use  
            designation from lands to be leased for nontrust uses.
          6)Allows the Port to lease Seawall Lot 330 to any person, free  
            of the public trust, the Burton Act trust, and the  
            restrictions of SB 815 if all specified conditions are met.


          7)Authorizes the Port, conditioned on the approval of SLC, to  
            provide a rent credit or other waiver or deferral of rent in  
            connection with a nontrust lease of Seawall Lot 337 that  
            results in an effective rent to the port below fair market  
            value for affordable housing.


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee:


          1)Unknown, significant SLC costs to review development project  
            documents, review and approve non-trust leases, make fair  
            market value determinations, and approve or disapprove the  
            Port's use of non-trust lease revenues for specified purposes.  
             These SLC costs must be reimbursed by the Port.


          2)Unknown ongoing SLC costs (General Fund) for oversight of the  
            non-trust leases and land uses in the project area through  
            2120.  Staff notes that the current termination date for any  
            authorized non-trust leases is 2094.


          3)Unknown temporary loss of local trust revenues, likely in  
            excess of $150 million, for 50 or more years, for loans of  
            non-trust revenues to the Port to pay for Seawall Lot 337  
            infrastructure (including a return on developer equity) or to  
            reimburse the developer directly for those costs.  These costs  
            represent a diversion of funds that would otherwise be used to  
            preserve historic piers and structures, or the construction  
            and maintenance of waterfront plazas and open space,  
            consistent with public trust purposes.









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          4)Likely minor costs to the BCDC to update and reprint the  
            seaport plan to reflect the removal of Pier 48 from the port  
            priority use area designation, as specified. (General Fund).


          COMMENTS:  


          1)Public Trust.  The foundational principle of the common law  
            Public Trust Doctrine is that it is an affirmative duty of the  
            state to protect the people's common heritage in navigable  
            waters for their common use.  The traditional uses allowed  
            under the Public Trust Doctrine were described as  
            water-related commerce, navigation, and fisheries.  As a  
            common law doctrine, the courts have significantly shaped the  
            Public Trust Doctrine in a number of important ways.  Courts  
            have found that the public uses to which sovereign lands are  
            subject are sufficiently flexible to encompass changing public  
            needs.  The courts have also found that preservation of these  
            lands in their natural state, so that they may serve as  
            ecological units for scientific study, as open space, and as  
            environments that provide food and habitat for birds and  
            marine life, are appropriate uses under the common law Public  
            Trust Doctrine.  Courts have also made clear that sovereign  
            lands subject to the Public Trust Doctrine cannot be sold into  
            private ownership.
          2)Background on Granted Lands.  For over 100 years the  
            Legislature has granted public trust lands to local  
            governments so the lands can be managed locally for the  
            benefit of the people of California.  There are over 80  
            trustees in the state, including the ports of Los Angeles,  
            Long Beach, San Diego, San Francisco, Oakland, Richmond,  
            Benicia, and Eureka.  While these trust lands are managed  
            locally, SLC has oversight authority to ensure those local  
            trustees are complying with the Public Trust Doctrine and the  
            applicable granting statutes.


          3)Port of San Francisco.  In 1968, the Legislature enacted the  
            Burton Act, which transferred, in trust, the interest of the  
            state in, and the control and management of the Port.   








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            However, when this occurred, the Port's assets were in poor  
            condition.  For example, 23 of the piers transferred in 1968  
            were virtually unusable for maritime purposes because of their  
            poor physical condition.  Those piers which were structurally  
            sound were only marginally productive because containerized  
            shipping was already replacing break bulk shipping at the time  
            of the transfer.


            The City was also required to assume $55 million of the  
            state's bond debt, which, according to the Port, hampered its  
            ability to make capital improvements to its assets.  The age  
            and condition of Port facilities, some of which are historic  
            structures at the end of their useful life, combined with  
            their construction on filled tidelands in a high risk seismic  
            area, has created a significant capital funding challenge for  
            the Port.  


            In 2007, after lengthy discussions between the Port and SLC,  
            the Legislature enacted SB 815.  That statute recognized that  
            several of the seawall lots granted under the Burton Act,  
            including portions of Seawall Lot 337, ceased to be useful for  
            the promotion of the public trust except for the generation of  
            revenues for the public trust.  SB 815 lifted the public trust  
            and the Burton Act use restrictions on the designated seawall  
            lots, subject to the requirement that the revenues be used by  
            the Port for preservation of historic piers and historic  
            structurers.  The bill also authorized leases for nontrust  
            uses to have 75-year terms, with an end date of January 1,  
            2094. 


          Analysis Prepared by:                                             
                          Michael Jarred / NAT. RES. / (916) 319-2092  FN:  
          0004812














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