BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
151 (Jones)
Hearing Date: 8/2/2010 Amended: 8/2/2010
Consultant: Bob Franzoia Policy Vote: G O 8-0
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BILL SUMMARY: AB 151 would do the following:
- Require the Department of General Services (DGS) to conduct a
study to determine whether it is in the best interest of the
state to sell or lease the Board of Equalization's (BOE)
headquarters in Sacramento, and to report its findings to the
Legislature no later than April 1, 2011.
- Authorize DGS, after making this determination, to sell,
exchange, lease or any combination thereof, all or a portion of
the property.
- Require DGS to uses the revenue resulting from any sale,
exchange or lease to pay off the outstanding loan on the
property, including any obligations associated with it.
- Specify that the proceeds from the sale of BOE headquarters
property are revenues resulting from the sale that are in excess
of the amount necessary to satisfy the outstanding loan on the
property.
- Authorize BOE to hire (rent) or lease any property without
written approval of DGS and to be exempt from the provisions of
Government Code 14682.
- Authorize BOE to exercise prescribed powers, including among
others, acquiring and relocating to new facilities through lease
of real or personal property in its name, maintain offices,
storage, and parking facilities, and negotiating contracts and
all other instruments necessary or convenient for the exercise
of its powers and functions.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Study Up to $250 one time General*
Special
Disposal of property Unknown, one time, revenue
potentiallyGeneral**
up to $91,000; amount available for
deposit in subaccount probably $0
Acquisition of propertyUnknown, multi millions of dollars
inGeneral*
costs over several years to
acquireSpecial
facilities and consolidate BOE
operations;
stranded costs of up to $3,500 for up to
12
months
* Property Acquisition Law Account or a variety of other special
funds; 56 percent General Fund
** Deficit Recovery Bond Retirement Sinking Fund Subaccount
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
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AB 151 (Jones)
The BOE administers sales and use taxes, insurance tax, excise
taxes, and various other taxes and fees. As an appellate body,
the BOE adjudicates appeals on property
tax assessments, as well as appeals under the various business
taxes laws that it administers, personal income tax, corporation
tax, and senior citizens property tax assistance programs. Of
its $473 million 2009-10 budget, $266 million, or 56 percent,
comes from the General Fund with reimbursements of $141 million
accounting for the remainder.
In 1993, DGS entered into a lease purchase agreement for the
BOE's headquarters building, located at 450 N Street,
Sacramento. The building, which houses 2,400 employees, has
experienced a variety of problems including failing window
retention systems and water intrusion. In 2006, DGS exercised a
purchase option on the building. A loan of $81 million was
approved from the Pooled Money Investment Account in 2007. The
outstanding balance on the loan is currently about $91 million.
According to the Governor's 2010-11 Budget, lease revenue bond
to pay back the PMIA loan will be sold prior to June 30th of
this year. Debt service of $7 million to $8 million annually
will commence on these bonds in 2010-11.
When surplus property is sold, the sales revenues are deposited
into the account that originally paid for the acquisition of the
property. In most instances, sale revenues are deposited in the
General Fund and are available for expenditure on any state
program. Pursuant to Proposition 60A (2004), the proceeds from
the sale are deposited in the Deficit Recovery Bond Retirement
Sinking Fund Subaccount and are be used to pay the principal and
interest on Proposition 57 bonds. Once these bonds are fully
repaid, proceeds from surplus property sales would be deposited
in the General Fund. Proposition 60A only applies to those
properties that were purchased with General Fund revenue or
bonds secured by the General Fund. Proposition 60A does not
apply to the
sale of surplus property acquired with special funds.
Upon the sale or lease of the BOE headquarters, the property
would only be surplus if DGS sells the property for more than
the outstanding loan. Additionally, only the revenue, if any,
above the amount owed on the loan would be subject to
Proposition 57 and deposited in the Deficit Recovery Bond
Retirement Sinking Fund Subaccount and be used to pay the
principal and interest on Proposition 57 economic recovery
bonds.
This bill authorizes BOE to procure new facilities that meet the
agency's needs using cost efficiency as a primary criterion,
among other agency-specific criteria, as applicable. This bill
also states it is the intent of the Legislature to permit the
BOE to utilize a portion of its 2010-11 operating budget to pay
for the BOE's actual reasonable costs for actions taken in
2010-11. If the BOE identifies sufficient funds within its
operating budget, this language permits the BOE to acquire new
facilities without legislative appropriation. Staff recommends
this bill be amended to, at a minimum, delete the intent
language (page 5, lines 3-6).
Government Code 14682 (c) provides that when tenant state
agencies located in existing state owned or state leased
facilities vacate their premises, they shall continue paying
rent for the facilities unless and until a new tenant can be
assigned or until DGS
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AB 151 (Jones)
can negotiate a mutual termination of the lease. (If the
department generates the tenant's relinquishment, or if the
tenant is vacating in accordance with the provisions of its
lease agreement, the tenant shall not be obligated to pay rent
after vacating the premises.) This bill nothwithstands
Government Code 14682 and authorizes the BOE to relocate its
offices
There is ample information indicating a consolidation of BOE
office space is an appropriate facilities management decision.
However, by exempting BOE from Government Code 14682, this bill
strands the investment in the building and creates ongoing
General Fund costs of up to approximately $3.5 million in lost
rental payments ($292,000 monthly) that would not be fully
offset until the building was sold or leased. The rent may be
less than current as DGS would keep systems operating but
suspend daily cleaning, etc while tenant improvements, paid by
the next tenants, are made. In light of the impact on the
General Fund, staff recommends this bill be amended to strike
this provision (page 4, lines 36 to 39).