BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 562|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: SB 562
Author: Lara (D)
Amended: 4/14/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 5/6/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,
Pavley
SUBJECT: Infrastructure financing: City of Long Beach Civic
Center
SOURCE: Author
DIGEST: This bill allows the City of Long Beach to use a
public-private partnership procurement method to develop a new
civic center.
ANALYSIS:
Existing law:
1) Authorizes local governments to enter into public-private
partnerships (P3s) for fee-producing infrastructure projects
that might not be feasible without private-sector
involvement.
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2) Allows local governments may solicit proposals and enter into
agreements with private entities for the study, planning,
design, financing, construction, maintenance, rebuilding,
improvement, repair, or operation by private entities of
specific types of fee-producing infrastructure (AB 2660,
Aguiar, Chapter 1040, Statutes of 1996).
3) Requires that a P3 agreement for the construction of
fee-producing infrastructure by a private entity must provide
for the lease of those facilities to, or ownership by, the
private entity for up to 35 years.
This bill:
1) Allows the City of Long Beach (City) to use a P3 agreement to
contract and procure a project to revitalize and redevelop
the Long Beach Civic Center with a new city hall, port
headquarters, public library, and public park, and
residential, retail, hospitality, institutional, and
industrial facilities.
2) Allows the City to enter into a P3 with one or more private
entities for delivery of the project through a concession
agreement, design-build agreement, design-build-finance
agreement, project agreement, lease-leaseback, or other
appropriate agreements that combine one or more major
elements of these agreements.
3) Requires the City to award the contract to the private entity
or entities whose proposal or proposals the City determines,
in writing, to be the most advantageous by providing the best
value in meeting the best interests of the City.
4) Requires the negotiation process to specifically prohibit:
a) Practices that may result in unlawful activity,
including rebates, kickbacks, or other unlawful
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consideration
b) City employees from participating in the selection
process when those employees have a relationship with a
person or business entity seeking a contract that would
subject those employees to specified statutory
prohibitions against financial conflicts of interest.
5) Allows the City to terminate the project prior to project
award should the City determine that the project is not in
the best interests of the City or should the negotiations
with the private entity or entities otherwise fail.
6) Requires that all documents related to the project must be
subject to disclosure under the California Public Records
Act, except those exempted from disclosure under that Act.
7) Requires the Long Beach Civic Center project to comply with
the California Environmental Quality Act (CEQA) before
project construction commences and directs that neither the
act of selecting a private entity, nor the execution of an
agreement with the private entity, requires prior compliance
with CEQA.
8) Requires that the City must own the public portion of the
project, unless the City elects to provide for ownership of
the project by the private entity through a separate lease
agreement.
9) Allows a lease agreement to provide for the lease of all or a
portion of the project to, or ownership by, the private
entity or entities, for a term up to 50 years and requires
the agreement to provide for complete reversion of the public
portion of the project to the City at the expiration of the
lease or transfer term.
10)Prohibits the private portion of the project from being
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financed or developed by the P3 or otherwise using public or
tax-exempt financing.
11)Directs that:
a) The plans and specifications for the project must
comply with all applicable governmental design standards
for that particular infrastructure project.
b) The studying, planning, designing, constructing,
developing, financing, operating, maintaining, or any
combination, of the project must utilize private sector
firms. However, a facility leased to a private entity,
during the term of the lease, must be deemed to be public
property for purposes of identification, maintenance,
enforcement of laws, and for purposes of the Government
Claims Act.
c) All public works constructed pursuant to this bill's
provisions must comply with specified provisions of the
California Labor Code relating to public works projects.
12)Defines the following terms:
a) "Best interests of the city" means a procurement
process that is determined by the City to provide the best
value and an expedited delivery schedule while maintaining
a high level of quality workmanship and materials.
b) "Best value" means a value determined by objective
criteria that must include a combination of price,
financing costs, features, functions, performance,
life-cycle maintenance costs and abatement offsets, and
development experience.
c) "Business entity" means a partnership, corporation, or
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other legal entity that is able to provide appropriately
licensed contracting, architectural, engineering,
financial, operations, management, facilities maintenance,
and other services for development of a new Long Beach
Civic Center.
d) "City" means the City of Long Beach and its
departments, including the Harbor Department.
e) "Long Beach Civic Center" means the area bounded by
Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia
Avenue, containing approximately 14.98 acres and the
parcel on the south side of 3rd Street between Pacific
Avenue and Cedar Avenue, containing approximately 0.89
acres.
f) "Private entity" means an individual, business entity,
or combination of individuals and business entities.
g) "Private portion of the project" means those parcels
of land within the Long Beach Civic Center to be conveyed
to a private entity and developed as residential, retail,
hospitality, institutional, or industrial facilities.
h) "Project" means the revitalization and redevelopment
of the Long Beach Civic Center with a new city hall, port
headquarters, public library, and public park, and
residential, retail, hospitality, institutional, and
industrial facilities.
i) "Public portion of the project" means those parcels of
land within the Long Beach Civic Center to be developed as
a city hall, port headquarters, public park, public
library, or other government facilities.
j) "Public-private partnership" means a cooperative
arrangement between the public and private sectors, built
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on the expertise of each partner, that best meets the
city's needs through the appropriate allocation of
resources, risks, and rewards for the purposes of, and,
including studying, planning, designing, constructing,
developing, financing, operating, maintaining, or any
combination thereof, the project.
13)Contains legislative findings and declarations regarding the
necessity and benefits of using a public-private partnership
to develop a new Long Beach Civic Center.
14)Directs that its provisions are severable.
Comments
1. Purpose of the bill. SB 562 merges existing state laws
relating to lease-leaseback P3s and
design-build-finance-operate-maintain P3s to allow the City to
use a unique hybrid P3 model to finance its Civic Center
project. The Long Beach City Hall and Main Library have been
found to be seismically deficient. Using a P3 procurement
model will allow Long Beach to use General Fund dollars that
are currently spent on maintenance and offsite leases to fund
the construction of a new Civic Center, potentially at no
additional cost to the taxpayer over what is currently paid,
as adjusted for inflation. The P3 model is the same mechanism
that was used successfully to design, build, finance, operate,
and maintain the courthouse the state recently constructed in
Long Beach. This financing mechanism will allow the City to
address public health and safety concerns in the earliest
possible timeframe without significantly increasing the City's
General Fund obligations or requiring a tax increase.
2. Lease term. SB 562's 50-year limit on a lease agreement for
the Civic Center project is shorter than the limits that
generally apply to leases on city property. However, 50 years
far exceeds the 20 to 30 year terms of bonds or other debt
instruments that local governments usually use to finance
public infrastructure projects and extends the 35-year maximum
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lease term established by the 1996 Aguiar bill for local P3
agreements. While allowing for a longer lease term may help
ensure that the annual General Fund impact of Long Beach's
Civic Center project doesn't exceed budgeted amounts, longer
financing periods typically result in higher overall borrowing
costs, which are ultimately paid by the City's taxpayers. It
is unclear whether authorizing a maximum 50-year term for Long
Beach's public-private infrastructure agreement makes it more
difficult to ensure that the public's interest in the Civic
Center project is protected for the duration of any agreement.
3. Special legislation. The California Constitution prohibits
special legislation when a general law can apply (Article IV,
§16). SB 562 contains findings and declarations explaining
the need for legislation that applies only to the City of Long
Beach.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified5/7/15)
City of Long Beach
Downtown Long Beach Business Associates
Port of Long Beach
OPPOSITION: (Verified5/7/15)
None received
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
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5/8/15 15:09:24
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