BILL ANALYSIS Ó
SB 1465
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Date of Hearing: June 21, 2016
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Kansen Chu, Chair
SB
1465 (De León) - As Amended June 16, 2016
SENATE VOTE: 35-1
SUBJECT: Public contracts: 2024 Olympic Games and Paralympic
Games.
SUMMARY: This bill would authorize the Governor to sign
agreements with the International Olympic Committee (IOC) and
the International Paralympic Committee (IPC) as part of the site
selection process for the City of Los Angeles' bid to host the
2024 Olympic Games and Paralympic Games. This bill would also
authorize the Governor to enter into an agreement for the state
to be jointly liable (up to $250 million), 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, and establishes the
Olympic Games Trust Fund. Specifically, this bill:
1) Enacts the 2024 Olympic Games and Paralympic Games Act for
the purpose of establishing a structure to provide financial
guarantees, as required by the IOC, that California and the
City of Los Angeles are prepared to host the summer games.
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2) Makes the following legislative findings and declarations:
a) Hosting the games in California is expected to
generate billions of dollars for the state's economy;
b) The OCOG, on behalf of the City of Los Angeles, has
developed a self-sufficient bid for financing the games,
including sufficient funds to reimburse local and regional
governments for services provided during the games;
c) The City of Los Angeles plans to host a sustainable
and environmentally responsible games, has committed to
sports and recreational opportunities for young people
throughout the area and plans to develop and implement a
unique and broad-based cultural program;
d) The City of Los Angeles has involved athletes, sports
professionals, environmentalists, business and financial
experts, nonprofit organizations, youth service leaders
and other individuals who represent the entire diversity
of the state; and,
e) The City of Los Angeles expects there will be net
revenue exceeding expenses that can be devoted to legacy
programs for youth and citizens of California.
3) Defines "games support contract" to mean a joinder agreement
executed by the Governor and containing terms permitted or
required by this bill. Also, defines "joinder agreement" to
mean an agreement entered into by the Governor, on behalf of
the state, and the IOC and the IPC setting out
representations and assurances by the state in connection
with the selection of a site in this state for the location
of the games.
4) Authorizes the Governor to enter into a joinder agreement
specifying that the state shall provide or cause to be
provided any or all of the state government funding,
facilities, and other resources specified in the OCOG's bid
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to host the games.
5) Provides that the agreements shall accept liability for
obligations of the OCOG to a site selection organization,
including obligations indemnifying the site selection
organization against claims and liabilities to third parties
arising out of or relating to the games.
6) Provides that any liability for an amount in excess of $250
million shall be the responsibility of the OCOG. Also,
provides that the OCOG will be bound by a series of
agreements with the site selection organization as set forth
in the joinder agreement.
7) Establishes within the State Treasury a special fund to be
known as the "Olympic Games Trust Fund" and provides that the
state may choose to fund the Olympic Games Trust Fund in any
manner it considers appropriate and at the time or times the
state determines necessary. Funds in the Trust Fund may be
used only for the sole purpose of fulfilling the obligations
of the state under a games support contract to provide
adequate security, as specified.
8) Provides that no additional state funds shall be deposited
into the Olympic Games Trust Fund once the Director of
Finance determines that the account has achieved a sufficient
balance to provide adequate security to demonstrate the
state's ability to fulfill its obligations under a games
support contract, or any other agreement, to indemnify and
insure up to $250 million of any net financial deficit and
general liability resulting from the conduct of the games.
9) Provides that if the City of Los Angeles is selected by the
site selection organization as the host city for the games,
the Olympic Games Trust Fund shall be maintained until a
determination by the Department of Finance is made that the
state's obligations under a games support contract, or any
other agreement, to indemnify and insure against any net
financial deficit and general liability resulting from the
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conduct of the games are satisfied and concluded, at which
time the trust fund shall be terminated. Also, stipulates
that if the City of Los Angeles is not selected by the site
selection organization as the host city for the games, the
Olympic Games Trust Fund shall be immediately terminated and
any monies therein shall immediately revert to the General
Fund.
10)Stipulates that all moneys deposited, transferred, or
otherwise contained in the trust fund shall be, upon
appropriation by the Legislature, used for the sole purpose
of obtaining adequate security to demonstrate the state's
ability to fulfill its obligations under a games support
contract, or any other agreement, to indemnify and insure up
to $250 million of any net financial deficit and general
liability resulting from the conduct of the games.
11)Makes it explicit that the state, along with the City of Los
Angeles, will be the payer of last resort with regard to any
net financial deficit. Also, provides that any financial
security provided by this bill may not be accessed 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.
EXISTING LAW: Existing law provides specified requirements in
awarding certain public contracts.
FISCAL EFFECT: According to Senate Appropriations Committee,
potential future state costs of up to $250 million, should Los
Angeles be selected as the site of the 2024 Olympics by the 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 $250 million dollar
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.
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COMMENTS:
1)Background: Los Angeles bid for Olympics. 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 United States Olympic Committee
(USOC) 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.
According to information supplied by the LA 2024 Bid
Committee, their bid has a strong overall risk mitigation
strategy, which features three key components:
First, all main Olympic Games facilities exist or are
planned, these include the "Big Three" Olympic venues: the
Olympic Stadium (which will be the LA Coliseum), Olympic
Village (athletes will be hosted by UCLA at their campus),
and International Broadcast Center/Main Press Center (which
will be housed at the NBC/Universal lot).
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Second, there will be minimal construction of new
competition venues necessary, as 97% of venues are
existing, already planned, or temporary. According to LA24,
only one new permanent competition venue will be built for
canoe slalom.
Finally, the remaining risk will be comprehensively
covered by a combined approach of conservative budgeting;
significant budget contingency; insurance for any
unanticipated issues; and lastly, in the very unlikely
event of net liabilities that exceed the Los Angeles 2024
budget, SB 1465 provides that the City of Los Angeles must
initially contribute at least $250 million prior to any
State contribution.
1)Author's statement of need for legislation: Bill is necessary
to fulfill IOC requirements and will stimulate the economy.
According to the author's office, this bill would establish a
structure to provide state financial guarantees to demonstrate
that California is serious and prepared to host the 2024
Olympic Games and Paralympic Games. This guarantee is required
by the USOC and IOC as a prerequisite before any city can be
considered for hosting an Olympic Games. Furthermore, the
USOC and IOC require that all bid states and bid committees
execute certain agreements including the authorized agreements
contain in this bill. He notes that, this bill proposes that
the state's liability shall not exceed the amount of funds
appropriated (up to $250 million) to the Olympic Games Trust
Fund. The funds may only be used for the sole purpose of
fulfilling the obligations of the state under a games support
contract to demonstrate adequate financial security. Any
liability above this amount shall be the responsibility of the
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OCOG.
Supporters, such as the State Building and Construction Trades
Council, add that hosting the 2024 Olympic Games and
Paralympic Games in Los Angeles is expected to generate
billions of dollars of economic revenue for the state and
local economies. They point to the fact the city has hosted
two prior Olympic Games with great success in 1932 (the X
Olympiad) and 1984 (the XXIII Olympiad), and note that
proceeds from the 1984 games continue to support youth
athletic programs all over southern California today.
The LA Area Chamber of Commerce proudly points out that the
only two times in history the Games made money were both when
Los Angeles served as host. This fact, they claim, will make
passage of this measure very low risk to the state. They close
by stating, "hosting the Olympics will be good for tourism,
good for tax revenues and business, and good for state pride
and spirit."
2)Author's recent amendments: Adding geographic diversity to
strengthen this legislation. One of the findings and
declarations in this bill states that, "The endorsing
municipality will involve athletes, sports professionals,
environmentalists, business and financial experts, nonprofit
organizations, youth service leaders and other individuals who
represent the entire diversity of the endorsing municipality's
state in its bid." In adding the word "state" instead of
"area", the authors have expanded this scope beyond the Los
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Angeles region to include the diverse geography of the state
of California. We envision hosting preliminary rounds of
competitions such as soccer trials at Levi Stadium, track and
field qualifying at CSU Sacramento, softball and baseball
played at CSU Fresno, or rowing hosted by UC Berkeley, the
possibilities are many. This concept is in keeping with most
international competitions, such as the recent Women's World
Cup of soccer, hosted by Canada and played in cities ranging
from Moncton, on the East coast in New Brunswick and the
central city of Montreal, Quebec all the way to Vancouver,
British Columbia on the West coast. Indeed the coming Summer
Olympic Games in Rio will have events at 45 different venues
all across their nation. This expansion could be accomplished
prudently, using the existing stellar facilities of northern
California in addition to those in the LA area.
3)Prior related legislation.
a) SB 41 (de Leon), of 2015, would have authorized the
state to enter into an agreement with the USOC in
connection with the City of Los Angeles' bid to host the
2024 Olympic Games and Paralympic Games. (Held in the
Senate Governmental Organization Committee at author's
request.)
b) SCR 49 (Gaines), Resolution Statute 86, Statutes of
2011, urged the California Winter Games Committee to
consider Lake Tahoe as a host region for the Winter Games.
a) AB 300 (Nunez), Ch.4, Statutes of 2007, authorized the
Governor to sign agreements required by the USOC as part of
the City of Los Angeles' 2016 Olympic Games bid process.
The bill also authorized the Governor to make the state
jointly liable (not to exceed $250 million), as specified,
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with the OCOG, a nonprofit corporation, for obligations of
the OCOG and for any financial deficit relating to the
games, and established the Olympic Games Trust Fund.
c) SB 1987 (Burton), Ch.16, Statutes of 2002, established a
structure for the state to indemnify, insure and provide
financial guarantees up to $250 million as required by the
USOC to further the bid of the San Francisco Bay Area to
host the 2012 Summer Olympic Games. The bill also provided
the Governor the authority to sign any contracts on behalf
of the state as part of the bid process.
REGISTERED SUPPORT / OPPOSITION:
Support
City of Anaheim
City of Bakersfield
City of Fresno
City of Long Beach
City of Los Angeles
City of Oakland
City of Sacramento
City of San Diego
City and County of San Francisco
City of San Jose
City of Santa Ana
California Hotel and Lodging Association
International Brotherhood of Boilermakers, Iron Ship Builders,
Blacksmiths, Forgers & Helpers Local 92
Los Angeles Area Chamber of Commerce
Los Angeles County Federation of Labor, AFL-CIO
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Los Angeles Olympic Games 2024
Los Angeles/Orange County Building Trades Council
SEIU California
S.M.A.R.T. Local Union 105
State Building and Construction Trades Council of California
Opposition
There is no opposition on file.
Analysis Prepared by:Dana Mitchell / A.,E.,S.,T., & I.M. / (916)
319-3450