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