BILL ANALYSIS                                                                                                                                                                                                    Ó





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

          SB 1465 (De León) - Public contracts:  2024 Olympic Games and  
          Paralympic Games
          
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          |Version: March 29, 2016         |Policy Vote: G.O. 11 - 1        |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: April 25, 2016    |Consultant: Mark McKenzie       |
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          This bill meets the criteria for referral to the Suspense File.



          Bill  
          Summary:  SB 1465 would authorize the Governor to sign  
          agreements required by the United State Olympic Committee (USOC)  
          as part of the City of Los Angeles 2024 Olympic Games bid  
          process.  The bill would authorize the Governor to make the  
          state jointly liable, as specified, with the Organizing  
          Committee for the Olympic Games (OCOG), a nonprofit corporation,  
          for obligations of the OCOG and for any financial deficit  
          relating to the games, as specified.  


          Fiscal  
          Impact:  Potential future state costs of up to $250 million*,  
          should Los Angeles be selected as the site of the 2024 Olympics  








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          by the International Olympic Committee (IOC). State costs would  
          only occur if the 2024 games incurred large financial deficits,  
          and all other securities provided by non-state entities are  
          exhausted.

          * The liability may be secured by a General Fund appropriation  
          or by insurance coverage, letters of credit, or other acceptable  
          secured instruments purchased or secured by the General Funds,  
          or by any combination thereof.


          Background:  The Los Angeles bid for the 2024 Summer Olympics and  
          Paralympics is an ongoing attempt to bring the 2024 Olympic  
          Games (XXXIII Olympiad) to the City of Los Angeles.  Los Angeles  
          is one of four candidate cities vying for the games - along with  
          Paris, France; Rome, Italy; and Budapest, Hungary.  The IOC is  
          scheduled to select a host city in September 2017.

          Los Angeles was chosen by the USOC as the American host city  
          candidate on August 28, 2015 after the Los Angeles City Council  
          voted unanimously to back the bid.  The City of Boston was  
          originally chosen to be the American bid, but withdrew in late  
          July 2015 due to potential cost overruns.




          Proposed Law:  
            SB 1465, the 2024 Olympic Games and Paralympic Games Act,  
          would establish a structure to provide assurances required by  
          the International Olympic and/or Paralympic Committees to  
          demonstrate that the City of Los Angeles is prepared to host the  
          summer games.  Among other things, this bill would:
                 Authorize the Governor to enter into an agreement on  
               behalf of the state with the international site selection  
               organizations setting out representations and assurances in  
               connection with the selection of a host site in this state.  
                The agreement must provide for the state accepting  
               liability for any net financial deficit of the games, not  
               to exceed $250 million, as specified.


                 Establish the Olympic Games Trust Fund and authorize the  
               state to fund it in any manner it considers appropriate and  
               at the time it deems necessary.  Any funds on deposit may  







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               only be used to obtain adequate security to fulfill the  
               obligations of the state under a games support contract to  
               indemnify and insure up to $250 million of general  
               liabilities and net financial deficit from the games.


                 Require the Olympic Games Trust Fund to be maintained  
               until the Director of Finance determines that the state's  
               obligations are fulfilled, if Los Angeles is chosen as the  
               host city.  The Trust Fund must be immediately terminated  
               if Los Angeles is not selected, and any sum on deposit  
               reverts to the General Fund.


                 Require the state and City of Los Angeles to be the  
               payers of last resort regarding any net financial deficit,  
               and prohibit accessing any state security for liabilities  
               and deficits  until and after  : (1) all OCOG security is  
               exhausted; (2) any security provided by any other person or  
               entity is exhausted; (3) the limits of any relevant  
               insurance policies have been fully expended and exhausted;  
               (4) payment has been sought by the OCOG from all third  
               parties liable to the OCOG; and (5) Los Angeles has  
               expended and exhausted $250 million of its security  
               deposit.




          Related  
          Legislation:  This bill is similar to AB 300 (Nunez), Chap  
          4/2007, which authorized the state to enter into an agreement  
          with the USOC as part of the City of Los Angeles 1016 Olympic  
          Games bid process.
          This bill is also similar to SB 1987 (Burton), Chap 16/2002,  
          which authorized the state to enter into an agreement with the  
          USOC in connection with the City of San Francisco's bid to host  
          the 2012 Olympic Games.




          Staff  
          Comments:  The OCOG has been authorized by the City of Los Angeles to  
          pursue an application and bid with a site selection organization  







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          for selection as the site for the games, and has executed a bid  
          committee agreement with the USOC regarding a bid to host the  
          2024 Olympic Games.  Staff notes that the City's bid proposal  
          contains several features that minimize the potential for  
          financial risk.  Most importantly, the need for new construction  
          (which has been the cause of cost overruns in other host cities)  
          is minimized because nearly all of the event venues, as well as  
          proposed sites for the Olympic Stadium, Village, and press  
          center, already exist.  The bid also does not propose any new  
          public infrastructure or intentions to use the Games as a tool  
          for urban renewal or redevelopment projects.  

          SB 1465 creates the Olympic Games Trust Fund and authorizes  
          deposits in amounts necessary to provide adequate security to  
          cover up to $250 million in potential financial obligations.   
          The state could cover these obligations from balances on deposit  
          in the Trust Fund itself, or it could purchase insurance,  
          letters of credit, or another form of financial guarantees from  
          outside parties.

          The state will be the payer of last resort for any liabilities  
          and net financial deficits related to the staging of the Games.   
          Any financial security provided by the bill would only be  
          accessed if Los Angeles is chosen as the host city and the Games  
          are a financial failure.  Furthermore, state payments would not  
          occur until the security provided by the OCOG or by any other  
          entity is exhausted and any insurance policies covering the  
          state's liability are exhausted.  This bill is similar to  
          previous measures enacted as part of host city bids for the 2012  
          and 2016 Summer Games, but AB 1465 includes an additional layer  
          of security against the state covering any liabilities and  
          losses by requiring the City of Los Angeles to expend and  
          exhaust $250 million of its security deposit before any state  
          payments are made. 

          SB 1465 does not contain an appropriation, but is intended to  
          demonstrate the state's commitment as part of the Olympic bid  
          process.  Any state funding would be provided in a future act of  
          the Legislature.  Staff notes the bill makes no mention of how  
          any revenues would be distributed or by whom.  Presumably, if a  
          future Legislature appropriates the funding necessary for the  
          state to fulfill its obligations under a games support contract,  
          it would specify how any revenue (and potentially the amount of  
          those revenues) would be distributed.








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