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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