BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2015-2016 Regular Session SB 940 (Vidak) Version: April 12, 2016 Hearing Date: May 3, 2016 Fiscal: Yes Urgency: Yes TH SUBJECT High-Speed Rail Authority: Eminent Domain: Right of First Refusal DESCRIPTION This bill would require the California High-Speed Rail Authority, prior to selling an interest in excess real property, to send notification by certified mail to the last known owner of the real property prior to acquisition by the Authority at his or her last known address, advising him or her that the real property will be offered for sale. This bill would restrict the authority from selling the real property until at least 30 days after the notification has been sent. BACKGROUND In 1993, California established the Intercity High-Speed Rail Commission to develop a framework for creating a statewide high-speed rail system. Following a study released by the Commission in 1996 indicating the feasibility of such a statewide system, the Legislature passed SB 1420 (Costa et al., Ch. 796, Stats. 1996), which established the California High-Speed Rail Authority (Authority) and directed it to continue planning for the system. The Authority serves as the administrative body with primary responsibility for overseeing the planning and construction of the high-speed rail system. (See Pub. Util. Code Sec. 185024.) Several years later, on November 4, 2008, the voters of California passed Proposition 1A, the Bond Act, "to initiate the SB 940 (Vidak) PageB of? construction of a high-speed train system that connects the San Francisco Transbay Terminal to Los Angeles Union Station and Anaheim, and links the state's major population centers, including Sacramento, the San Francisco Bay Area, the Central Valley, Los Angeles, the Inland Empire, Orange County, and San Diego . . ." (Sts. & Hy. Code Sec. 2704.04.) The Bond Act authorized the issuance and sale of $9 billion in general obligation bonds "upon appropriation by the Legislature" to begin construction of the high-speed train system. (Id.) Among other capital costs, the Bond Act authorized the Authority to incur costs for "all activities necessary for acquisition of interests in real property and rights-of-way and improvement thereof," as well as "relocation assistance for displaced property owners and occupants." (Id.) In 2013, the Legislature vested the Authority with independent power to manage property acquired for the high-speed rail system with the passage of AB 481 (Lowenthal, Ch. 132, Stats. 2013). Without such independent power, property acquisition and management duties and responsibilities for state agencies generally rest with the Department of General Services. Under this independent grant of power, the Authority may sell or exchange real property or interest therein at fair market value if it determines that the property, having been acquired by the state for the high-speed rail project, is no longer necessary for that purpose. (Pub. Util. Code Sec. 185040(a).) Existing law provides specific procedures for the Authority to follow when selling excess property to adjoining landowners, as well as to public sector entities like municipalities and local agencies. Absent specific procedures, existing law requires the Authority to sell excess property either by receipt of competitive sealed bids, or at public auction, depending on which method is more likely to achieve the higher sales price. (Pub. Util. Code Sec. 185040(f).) This bill would require the Authority, prior to selling excess property, to send a notice by certified mail to the last known owner of the property at his or her last known address, advising that the property will be offered for sale. This bill would also restrict the Authority from selling the property until at least 30 days after the notification to the prior owner has been sent. CHANGES TO EXISTING LAW SB 940 (Vidak) PageC of? Existing law declares the intent of the Legislature to initiate the construction of a high-speed train system that connects the San Francisco Transbay Terminal to Los Angeles Union Station and Anaheim, and links the state's major population centers, including Sacramento, the San Francisco Bay Area, the Central Valley, Los Angeles, the Inland Empire, Orange County, and San Diego, as specified. (Sts. & Hy. Code Sec. 2704.04(a).) Existing law states that the net proceeds received from the sale of $9 billion dollars of bonds shall be used for planning and engineering for the high-speed train system and for other capital costs, as specified. (Sts. & Hy. Code Sec. 2704.04(b).) Existing law specifies that capital costs payable or reimbursable include, with respect to the high-speed train system or any portion thereof, all activities necessary for acquisition of interests in real property and rights-of-way and improvement thereof; acquisition and construction of tracks, structures, power systems, and stations; acquisition of rolling stock and related equipment; mitigation of direct or indirect environmental impacts; relocation assistance for displaced property owners and occupants; other related capital facilities and equipment; and such other purposes related to the foregoing, for the procurement thereof, and for the financing or refinancing thereof, as specified. (Sts. & Hy. Code Sec. 2704.04(c).) Existing law directs the California High-Speed Rail Authority (Authority) to develop and implement an intercity high-speed rail service that is fully integrated with the state's existing intercity rail and bus network, consisting of interlinked conventional and high-speed rail lines and associated feeder buses. Existing law specifies that the intercity network shall be fully coordinated and connected with commuter rail lines and urban rail transit lines developed by local agencies, as well as other transit services, through the use of common station facilities whenever possible. (Pub. Util. Code Sec. 185030.) Existing law empowers the Authority to do any of the following, as specified: enter into contracts with private or public entities for the design, construction, and operation of high-speed trains; acquire rights-of-way through purchase or eminent domain; issue debt, secured by pledges of state funds, federal grants, or project revenues; SB 940 (Vidak) PageD of? enter into cooperative or joint development agreements with local governments or private entities; set fares and schedules; and relocate highways and utilities. (Pub. Util. Code Sec. 185036.) Existing law provides that if the Authority determines real property or an interest therein, previously or hereafter acquired by the state for high-speed rail purposes, is no longer necessary for those purposes, the Authority may sell or exchange the real property or interest therein at fair market value. (Pub. Util. Code Sec. 185040(a).) Existing law states that the Authority may sell excess property to an adjoining landowner if it makes either of the following two findings: that the property is of a size or shape that is below the average, normal standard size and shape of other privately owned properties in the immediate neighborhood, and that if the property were sold to other than the adjoining owner, it would give rise to a land use development that would be below and not consistent with the normal land use of other properties in that neighborhood, that the sale of the property to a party other than the adjoining owner may cause an undue or unfair hardship to the adjoining owner in the normal land use development or operation of his or her property, that the property considered as part of the adjoining property would have a higher and better use than under separate ownership, and that the fair market value of the property considered as part of the adjoining property would be higher than under separate ownership; or that the sale of the excess parcel to other than the adjoining owner would deprive the adjoining owner of an existing vested right of access to a public highway and thereby create a possible cause of action against the authority or the state. (Pub. Util. Code Sec. 185040(b).) Existing law provides that the Authority may sell excess property to municipalities or other local agencies at their request, without calling for competitive bids, at a price representing the fair market value thereof, and upon a determination that the intended use is for a public purpose. (Pub. Util. Code Sec. 185040(c).) Existing law provides that if it is improved property, excess SB 940 (Vidak) PageE of? property may be sold to a former owner who has remained in occupancy, or to a residential tenant of a tenure of five years or more with all rent obligations current or paid in full. (Pub. Util. Code Sec. 185040(d).) Existing law provides that any real property or interest therein may in like manner be exchanged, either as whole or part consideration, for any other real property or interest therein as needed for high-speed rail purposes, as specified. (Pub. Util. Code Sec. 185040(e).) Existing law provides that the Authority may sell or lease excess right-of-way parcels to municipalities or other local agencies for public purposes, and may accept as all or part of the consideration for the sale or lease any substantial benefits the state will derive from the municipality or other local agency's undertaking maintenance or landscaping costs that would otherwise be the obligation of the state. (Pub. Util. Code Sec. 185041.) Existing law states that, except as provided, excess property shall be sold either by receipt of competitive sealed bids, or at public auction, whichever method is determined by the authority to be more likely to achieve the higher sales price. (Pub. Util. Code Sec. 185040(f).) This bill requires the Authority, prior to selling excess real property or an interest therein, to send notification by certified mail to the last known owner of the real property or interest therein at his or her last known address, advising him or her that the real property or interest therein will be offered for sale. This bill states that the Authority shall not sell the excess real property or interest therein until at least 30 days after SB 940 (Vidak) PageF of? the notification required in the above provision has been sent. COMMENT 1.Stated need for the bill According to the author: Nearly 1,300 individual properties have been identified by the High-Speed Rail (HSR) Authority as necessary to complete the planned 120 mile route from Madera to Bakersfield. Many of these properties have been in families for generations, and HSR may end up splitting properties or severely limit the productivity of any remaining property. While these 1,300 properties have been identified as necessary to complete the current alignment, there is always a possibility that the preferred route may change or that the project is never completed, leaving the state holding onto properties it no longer needs. In 2013 the Legislature passed, and the Governor signed, AB 481 which stated that the Authority may dispose of properties that it deems no longer necessary. Unfortunately this legislation did not require the Authority to dispose of unneeded properties. Additionally, AB 481 did not provide the original landowner, or their family, an opportunity to repurchase the land. Under current law, it is possible for the Authority to decide that a property they acquired is no longer necessary and they could decide to hold onto the property in perpetuity or decide to sell it to someone else, without even contacting the original property owner to see if they are interested in buying the property back. Senate Bill 940 would require the High-Speed Rail Authority to notify previous landowners and their families of excess land that the Authority has deemed not necessary for High-Speed Rail (HSR) and that the Authority plans to sell. 2.Informing prior owners of land sales Real property, unlike many other saleable assets, is considered somewhat unique under the law. At common law, because land was viewed as immovable and, to some extent, eternal, English courts and the resulting case law considered each parcel of land to be SB 940 (Vidak) PageG of? distinguishable from all others. The unique character of land under the law has passed into California's Civil Code in various forms, including in Section 3387, which provides specific remedies for breaches of agreements to transfer real property not normally applicable to the performance of contractual obligations.<1> This bill, in a way, follows this common law tradition by establishing a notification process for prior owners of land held by the California High-Speed Rail Authority to learn that it will be offered for sale. The bill would require the Authority to notify the prior owner, at their last known address, by certified mail that land they once owned has been deemed in excess to the Authority's requirements and will be sold, ostensibly so the prior owner can seek to repurchase the land. The bill would also require the Authority to refrain from selling the land for at least 30 days after sending the notice to the prior owner. However, the bill would not provide the prior owner with any special right to purchase the land, such as a right of first refusal. Rather, the prior owner would have to purchase the land on the open market through the Authority's sale process just as any other prospective purchaser, unless the prior owner received priority under some other provision of law, such as that provided to former owners of improved property who have remained in occupancy. 3.Logistical concerns While this bill may be useful in reuniting certain prior owners with land they formerly owned, its notification provision could become largely obsolete the further that period of prior ownership is from the point in time at which the Authority offers the land for sale. Under the bill, the authority would only be obligated to send a notice of sale to the prior owner of an excess parcel at their last known address. If a period of years has elapsed, it is quite possible that the prior owner --------------------------- <1> Civil Code Section 3387 states: It is to be presumed that the breach of an agreement to transfer real property cannot be adequately relieved by pecuniary compensation. In the case of a single-family dwelling which the party seeking performance intends to occupy, this presumption is conclusive. In all other cases, this presumption is a presumption affecting the burden of proof. SB 940 (Vidak) PageH of? will have moved away, rendering the notification process ineffective. If a significant period of time elapses, the remote chance of notifying a prior owner of a pending sale may be outweighed by the time and expense endured by the Authority to retain the necessary records and go through the notification process. Support : Citizens for California High Speed Rail Accountability; Kings County Board of Supervisors; Southwest California Legislative Council Opposition : None Known HISTORY Source : Author Related Pending Legislation : None Known Prior Legislation : AB 1138 (Patterson, 2015) would have prohibited the High-Speed Rail Authority, or the State Public Works Board acting on behalf of the Authority, from adopting a resolution of necessity to commence an eminent domain proceeding to acquire a parcel of real property along a corridor, or usable segment thereof, for the high-speed train system unless the resolution identified the sources of all funds to be invested in the corridor or usable segment, and certified that the Authority had completed all necessary project level environmental clearances necessary to proceed to construction, as specified. This bill died in the Assembly Transportation Committee. AB 481 (Lowenthal, Ch. 132, Stats. 2013) granted the High-Speed Rail Authority (HSRA) independent authority to manage property acquired for high-speed rail purposes, similar to the independent authority provided to the Department of Transportation. Among other things, this bill authorized the HSRA to acquire, grant access to, and quitclaim easements and rights-of-way on property owned or being acquired by the state, and to sell property no longer needed for high-speed rail purposes at fair market value to an adjacent property owner, a local agency, or former owner, as specified. SB 940 (Vidak) PageI of? SB 1420 (Costa et al., Ch. 796, Stats. 1996) created the High-Speed Rail Authority and required the Authority to develop and implement high speed rail services that interconnect with existing intercity rail and bus services. Among other things, this bill authorized the Authority, upon receiving either legislative or voter approval, to contract for the design, construction and operation of a high-speed rail network, and to take associated implementation steps, including acquiring land and rights-of-way for the high-speed rail network. Prior Vote : Senate Transportation and Housing Committee (Ayes 10, Noes 0) **************