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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: March 29, 2016 |Policy Vote: G.O. 11 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: April 25, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- 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 SB 1465 (De León) Page 1 of ? 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 SB 1465 (De León) Page 2 of ? 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 SB 1465 (De León) Page 3 of ? 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. SB 1465 (De León) Page 4 of ? -- END --