BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 151|
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THIRD READING
Bill No: AB 151
Author: Jones (D)
Amended: 8/20/10 in Senate
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 8-0, 6/22/10
AYES: right, Harman, Calderon, Florez, Negrete McLeod,
Padilla, Price, Yee
NO VOTE RECORDED: enham, Oropeza, Wyland
SENATE APPROPRIATIONS COMMITTEE : 7-4, 8/12/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Ashburn, Emmerson, Walters, Wyland
ASSEMBLY FLOOR : 8-0, 1/27/10 - See last page for vote
SUBJECT : Department of General Services: authorization
SOURCE : Board of Equalization
DIGEST : This bill requires the Director of the
Department of General Services to conduct a study to
determine whether it is in the best interest of the state
to sell or lease specified real property in the City of
Sacramento owned by the state, and to report its findings
to the Legislature no later than April 1, 2011. The bill
authorized the Director, after making a determination, to
sell, exchange, lease, or any combination thereof, all or a
portion of the property. This bill also requires the
Director to use the revenues resulting from any sale,
CONTINUED
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exchange, or lease of the property to pay off the total
outstanding loan on the property, including any obligations
associated with it, as specified.
Senate Floor Amendments of 8/20/10 permit the Department of
Finance to determine that it is cost beneficial prior to
the Board of Equalization hiring or leasing property for
its occupancy.
ANALYSIS :
Existing law:
1. Authorizes the Department of General Services (DGS) to
perform various functions with regard to state property
and provides for the sale, lease, or transfer of surplus
state property, if authorized or contemplated by law.
2. Authorizes DGS to acquire, construct, lease, or transfer
state property, as specified, and when specifically
authorized by the Legislature.
3. Authorizes DGS to acquire title to real property in the
name of the State whenever the acquisition of real
property is authorized or contemplated by law, if no
other state agency is specifically authorized and
directed to acquire it.
4. Authorizes DGS to hire, lease, lease-purchase, or lease
with an option to purchase any real or personal property
for the use of any state agency if DGS deems the hiring
or leasing is in the State's best interest and is
specifically authorized to do so by the Legislature.
This bill:
1. Requires 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.
2. Authorizes DGS, after making this determination, to
sell, exchange, lease or any combination thereof, all or
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a portion of the property.
3. Requires 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.
4. Specifies 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.
5. Authorizes BOE to hire (rent) or lease any property
without written approval of DGS and to be exempt from
the provisions of Government Code 14682.
6. Authorizes 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.
7. Requires BOE to first consider the utilization of
existing state-owned, state-leased, or state-controlled
facilities before considering the leasing of additional
facilities. If no available appropriate state
facilities exist, the BOE may not, absent legislative
approval in the Budge Act, procure new facilities to
meet the agency's needs. If legislative approval is
given in the Budget Act, requires BOE in procuring new
facilities, use cost efficiency as a primary criterion,
among other agency-specific criteria, as applicable.
Background
In 1993, DGS entered into a lease-purchase agreement with
the California Public Employees Retirement System (CalPERS)
for the BOE headquarters building located at 450 N Street
in Sacramento and immediately began experiencing water
intrusion problems caused by heavy rains.
Another major problem was the curtain wall window system
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failure, which was identified in 1998, in which windows
leaked and fell to the street below and onto the surface of
the attached parking garage (seven windows fell between
1999 and 2005). Moreover, due to the water intrusion, in
2007 mold was discovered on the top three floors, which
were subsequently vacated, thus requiring the relocation of
over 200 employees to another building. Subsequent
inspections led to the discovery of mold on every floor,
and remediation of this issue is ongoing.
In 2006, the state exercised its option to purchase the
building. A loan of approximately $81 million was approved
from the Pooled Money Investment Account (PMIA) effective
in 2007. The outstanding balance on the loan is currently
about $91 million. According to the Governor's 2010-11
budget proposal, lease-revenue bonds to pay back the PMIA
loan will be sold prior to June 30th of this year. The
budget indicates that debt service of about $8.2 million
annually will commence on these bonds in 2010-11.
Comments
Given the ongoing problems with its headquarters, the BOE,
which is sponsoring this measure, believes "it is time for
the State to take a step back and have a thorough
independent economic analysis performed to determine the
most cost beneficial manner for the State to address the
450 N Street building."
The BOE cites the continuing costs for the repairs
described above, the loss of productivity (with associated
cost and loss of revenue generation) from having to
continually move staff around the building to accommodate
the mold remediation, and pending building infrastructure
repairs as identified by DGS. Past and ongoing repairs,
plus all known infrastructure repairs identified for the
future, including the costs of remediation, lost
productivity and revenue is estimated to be approximately
$98 million.
The BOE further indicates that, while their staff has grown
to 2,900 employees, the building was designed to
accommodate only 2,200 personnel. The BOE began a process
of housing the overflow staff in separate, leased
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facilities. The BOE argues that "As a tenant with no
ownership interest, the BOE should not be responsible for
paying the extensive repairs needed for the State's 450 N
Street building."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Study Up to $250 one
timeGeneral*
Special
Disposal of property Unknown, one
time, revenue General**
Potentially up to $91,000; amount
available for
deposit in subaccount probably $0
Acquisition of property Unknown,
multi millions of dollars in General*
costs over several years to
acquireSpecial
facilities and consolidate BOE
operations
* Property Acquisition Law Account or a variety of other
special funds; 56 percent General Fund
** Deficit Recovery Bond Retirement Sinking Fund Subaccount
SUPPORT : (Verified ) (unable to reverify)
Board of Equalization (source)
SEIU, Local 1000
OPPOSITION : (Verified ) (unable to reverify)
Department of Finance
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ARGUMENTS IN SUPPORT : The BOE believes it is time for
the State to take a step back and perform a thorough
independent economic analysis to determine the most cost
beneficial manner to address the 450 N Street building.
Continuing to spend millions of taxpayer dollars per year
on a host of building issues does not adequately address
the long-term building problems for the State. The current
approach continues to drain the State's budget without any
assurance that it will stop. The BOE believes that this is
an opportunity to make a strategic determination as to what
is in the best financial interest for the State, especially
during this current fiscal crisis. An economic
development/economic analysis will provide the State with
the following high-level benefits: (1) a thorough review
of the remaining repairs needed at the 450 N Street
building and their associated costs, (2) suggestions for
addressing the debt service on the building and repair
costs, (3) opportunities to partner with private sector
developers to address the short and long-term use of the
building, (4) opportunities to sell the building or locate
a back-fill tenant, (5) options to meet BOE's space needs
with a facility of the appropriate size.
ARGUMENTS IN OPPOSITION : The Department of Finance
contends that no additional legislative authority is
required for DGS to investigate the possible relocation of
BOE. Finance notes that DGS and BOE are currently working
to develop a study that will examine the very points
envisioned by this bill.
ASSEMBLY FLOOR :
AYES: dams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Chesbro, Conway, Cook, Coto, De La Torre,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Monning, Nava, Nestande, Niello, Nielsen,
John A. Perez, Portantino, Ruskin, Saldana, Silva,
Skinner, Smyth, Solorio, Audra Strickland, Swanson,
Torres, Torrico, Tran, Villines, Yamada
NO VOTE RECORDED: arter, Davis, De Leon, DeVore, Hall,
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Miller, V. Manuel Perez, Salas, Torlakson, Bass
TSM:do 8/22/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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