BILL ANALYSIS
AB 521
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Date of Hearing: April 13, 2009
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Felipe Fuentes, Chair
AB 521 (De La Torre) - As Introduced: February 25, 2009
SUBJECT : Utility property: leases for park purposes.
SUMMARY : Requires the California Public Utilities Commission
(PUC) to consider additional benefits when evaluating lease
proposals in order to encourage the use of utility property for
public parks.
EXISTING LAW : Prohibits public utilities from selling, leasing,
assigning, mortgaging, or otherwise disposing of or encumbering
the whole or any part of property necessary or useful in the
performance of its duties to the public without first having
secured approval from the PUC.
THIS BILL:
1) Authorizes a public utility to lease real property to a
governmental entity for purposes of maintaining a public park,
with the utility retaining a right-of way easement.
2) Requires the PUC to include the community benefits of parks
and open space as part of its calculation in determining the
fair value of the lease to ratepayers
FISCAL EFFECT : Unknown.
COMMENTS : According to the sponsor, this bill would facilitate
the ability to use utility right-of-ways to create new
recreational parks and open spaces. The majority of Californians
live in metropolitan areas, many of which lack adequate park
space. These communities often have difficulty creating new
parks because of a lack of open spaces and the cost of land.
This bill would help to create new parks and mitigate the cost
of these parks by utilizing utility property and ensuring that
the community benefits of parks are taken into account when
determining a fair lease rate.
1) Background: Existing law requires that a public utility to
obtain approval from the PUC before engaging in any transaction
involving property used to deliver service. The PUC has held
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that the primary question in such proceedings is whether the
proposed transaction is adverse to the public interest, and has
defined the public interest as having been served when "utility
property is used for other productive purposes without
interfering with the utility's operation or affecting service to
utility customers."
Once the utility submits an application detailing the proposal
and the terms of the lease, the PUC reviews it to ensure that it
does not interfere with the utility's ability to provide
adequate service to the public at reasonable rates. The monetary
ratepayer impacts of such transactions are generally positive in
that they shift the costs of property ownership from the utility
to the lessee including the costs of insurance, maintenance, and
management, and therefore justify a lower lease rate.
2) Increased value for parks : The intent of AB 521 is to
increase the likelihood that utility owned property will be
leased to local governments to be used as parks and open space.
In fact the language may create a land use priority for usage as
park over other commercial purposes. When considering a lease of
utility owned land for a commercial use the PUC looks at the
economic value of the land and if the lease will allow
ratepayers to recover that value. This bill requires the PUC to
consider non-economic factors in determining the economic value
of the lease for a public park. These non-economic factors could
increase the benefit of leasing the land for a public park and
decrease the comparative benefit of a commercial use.
3) This bill may already be PUC practice : Over the past 10 years
the PUC has considered several proposals to lease utility land
for various purposes. The records of these decisions indicate
that the proceedings did include consideration of benefits to
the community. Additionally, in one recent proceeding the
sponsors of this bill were able to negotiate a lease agreement
for a park that was lower than the appraised value of the land.
This indicates that the PUC did take into account non-economic
benefits of the public use.
4) In search of the elusive community benefit formula: This bill
requires the PUC to include the "community benefits" of parks
and open space as a benefit to ratepayers when reviewing a
right-of-way lease. These added benefits would theoretically
justify the lower lease rate for municipal governments that plan
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to use this land for park space. However, this requirement
exemplifies a fundamental difficulty in crafting these types of
policies: attempting to quantify intangible social benefits for
the purpose of evaluating pecuniary transactions. This provision
could potentially be interpreted in any number of ways during
implementation. While there is little consensus regarding how
these benefits should be monetized, the committee may wish to
consider amending the bill to express legislative intent
regarding what types of results constitute community benefits.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Bellflower
Southern California Edison (SCE)
Trust for Public Land (TPL) (Sponsor)
Opposition
None on file.
Analysis Prepared by : Nina Kapoor / U. & C. / (916) 319-2083