BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 562|
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                                UNFINISHED BUSINESS 


          Bill No:  SB 562
          Author:   Lara (D)
          Amended:  6/16/15  
          Vote:     21  

           SENATE GOVERNANCE & FIN. COMMITTEE:  7-0, 5/6/15
           AYES:  Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,  
            Pavley

           SENATE FLOOR:  36-0, 5/18/15
           AYES:  Allen, Anderson, Bates, Beall, Block, Cannella, De León,  
            Fuller, Gaines, Galgiani, Hancock, Hernandez, Hertzberg, Hill,  
            Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire,  
            Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen,  
            Nielsen, Pan, Roth, Runner, Stone, Vidak, Wieckowski, Wolk
           NO VOTE RECORDED:  Berryhill, Hall, Pavley

           ASSEMBLY FLOOR:  79-0, 7/13/15 - See last page for vote

           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.

          Assembly Amendments declare that this bill's provisions must not  
          be construed to authorize the City of Long Beach to use  
          tidelands trust revenues that are subject to specified state  
          laws for general municipal purposes or any other purpose  
          unconnected with the public trust.  Amendments also make several  
          non-substantive clarifying amendments to this bill's provisions.








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          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.

           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  








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             City.

           4) Requires the negotiation process to specifically prohibit:

              a)    Practices that may result in unlawful activity,  
                including rebates, kickbacks, or other unlawful  
                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.









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           10)Prohibits the private portion of the project from being  
             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  
                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.








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              d)    "City" means the City of Long Beach and its  
                departments, including the City of Long Beach 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  
                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)Prohibits its provisions from being construed to authorize  
             the City to use tidelands trust revenues that are subject to  








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             specified state laws for general municipal purposes or any  
             other purpose unconnected with the public trust.

           14)Contains legislative findings and declarations regarding the  
             necessity and benefits of using a P3 to develop a new Long  
             Beach Civic Center.

           15)Directs that its provisions are severable.

          Background
          
          Confronted by aging infrastructure, growing populations, and  
          limited revenue sources, local governments sometimes turn to  
          non-traditional financing techniques to pay for the construction  
          of new public infrastructure and the replacement of existing  
          facilities.  

          Long-term lease-leaseback financing is one method that local  
          governments use as an alternative to issuing general obligation  
          bonds to pay for public infrastructure.  Under this approach, a  
          local government leases public property to a third-party that  
          undertakes improvements to the property and leases the improved  
          property back to the local government.  The rights to receive  
          the lease payments from the local government are used to secure  
          debt that was issued to pay for the costs of acquiring and  
          improving the public property.

          In 1996, the Legislature authorized local governments to enter  
          into P3s for fee-producing infrastructure projects that might  
          not be feasible without private-sector involvement.  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.  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.

          In 2007, the City identified seismic deficiencies in its City  
          Hall and Main Library Buildings and found that substantial  
          seismic renovations would be required to protect lives during a  








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          major earthquake.  The City evaluated the costs of retrofitting  
          the existing structures and concluded that the City Hall and  
          Main Library buildings should be replaced rather than repaired.   
          In 2013, the City initiated a procurement process for  
          development of a new Civic Center through a P3 agreement.  The  
          City officials want to clarify their authority under state law  
          to finance the Long Beach Civic Center improvements through a P3  
          agreement that combines elements of state laws that authorize  
          cities to enter into lease-leaseback financing and  
          design-build-finance-operate-maintain financing agreements.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified7/14/15)


          City of Long Beach 
          Downtown Long Beach Associates
          Los Angeles/Orange Counties Building and Construction Trades  
          Council
          Port of Long Beach


          OPPOSITION:   (Verified7/14/15)


          None Received
                                    
          ASSEMBLY FLOOR:  79-0, 7/13/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,  
            Chau, Chávez, Chiu, Chu, Cooley, Dababneh, Dahle, Daly, Dodd,  
            Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia,  
            Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,  
            Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,  
            Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,  
            Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,  
            Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  








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            Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Cooper


          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          7/15/15 9:46:02


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