BILL ANALYSIS
AB 650
Page 1
Date of Hearing: May 6, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
AB 650 (Hill) - As Amended: April 30, 2009
SUBJECT : City of Half Moon Bay.
SUMMARY : Directs the Infrastructure and Economic Development
Bank (I-Bank) to loan
$10 million to the City of Half Moon Bay to assist in the
purchase of the Beachwood Property. Specifically, this bill :
1)Directs the I-Bank, pursuant to already established criteria,
to loan the City of Half Moon Bay $10 million to enable the
City to purchase the property known as the Beachwood Property.
2)Specifies that this loan is made to assist the City of Half
Moon Bay relating to its settlement agreement in the case of
Yamagiwa v. City of Half Moon Bay (N.D. Cal. 2007) 523 F.
Supp.2d 1036, involving certain property known as the
Beachwood Property in the City of Half Moon Bay.
3)Requires the City of Half Moon Bay, prior to the disbursement
of any funds, to obtain an independent appraisal of the
Beachwood Property that conforms to the Uniform Standards of
Professional Appraisal Practice.
4)Contains an urgency clause.
EXISTING LAW :
1)Specifies the duties and authority of the I-Bank in
administering various programs for economic development
activities in the state.
2)Specifies that I-Bank activities may be funded through the
California Infrastructure Bank Fund, which is continuously
appropriated.
3)States that the funds appropriated to the I-Bank can only be
used to pay eligible costs, which include the following: all
or any part of the cost of construction, renovation, and
acquisition of all lands, structures, real or personal
property, rights, rights of way, franchises, licenses,
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easements, and interests acquired or used for a project; the
cost of demolishing or removing any buildings or structures on
land so acquired, including the cost of acquiring any lands to
which the buildings or structures may be moved; the cost of
all machinery, equipment and financing charges; interest prior
to, during, and for a period after, completion of
construction, renovation, or acquisition, as determined by the
I-Bank; provisions for working capital; reserves for principal
and interest and for extensions, enlargements, additions,
replacement, renovations, and improvements; and, the cost of
architectural, engineering, financial and legal services,
plans, specifications, estimates, administrative expenses, and
other expenses necessary or incidental to determining the
feasibility of any project or incidental to the construction,
acquisition, or financing of any project.
4)Requires the legislative body of the applicant to find, by
resolution, each of the following prior to a project being
selected for financing by the I-Bank:
a) The project facilitates effective and efficient use of
existing and future public resources so as to promote
economic development and conservation of natural resources;
b) The project must develop and enhance public
infrastructure in a manner that will attract, create and
sustain long-term employment opportunities;
c) The project is consistent with the general plan of both
the city and county, or only the county for projects in
unincorporated areas in which the project is located;
d) The proposed financing is appropriate for the specific
project; and,
e) The project is consistent with the criteria, priorities,
and guidelines for the selection of projects adopted by the
I-Bank.
FISCAL EFFECT : Unknown
COMMENTS :
1)On November 28, 2007, a federal district court ruled that the
City of Half Moon Bay's (City's) construction activities
caused man-made wetlands to form on private property,
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precluding previously-approved residential development and
constituting a physical taking
of the property by the City. The court awarded the owner of the
property approximately
$37 million. Attorneys' fees, pre-judgment interest and other
costs increased the City's liability to approximately $41.1
million.
2)According to the City, the sponsor of AB 650, it faced two
difficult options as a result of this judgment: a) Pay the
$41.1 million, which would likely bankrupt the City and
severely disrupt its basic services and functions; or b)
litigate a costly appeal with a risk that the appeal would not
succeed. Faced with near-certain bankruptcy on one hand and
an extremely high-risk gamble on the other, the City entered
into settlement negotiations with the owner of the property.
The final settlement agreement on April 2, 2008, obligates the
City to a) approve the entitlements to develop the Beachwood
property by June 29, 2009; or, b) pay the owner
$18 million for the property by August 29, 2009. Failure to
meet this payment deadline requires the City to pay the owner
an interest penalty assessment of 6% annually retroactive to
December 2007, and until the amount of the settlement amount
and accrued interest are paid in full.
The City state's that while the settlement agreement
significantly reduced the City's liability, Half Moon Bay's
financial situation remains extremely dire. The City's fiscal
year (FY) 2008-2009 budget includes $9 million in general
funds, $6 million in special funds, for a total annual
municipal budget of $15 million. The financial obligation of
the settlement agreement represents 120% of the City's total
budget.
3)Legislative history : During the 2007-2008 legislative
session, AB 1991(Mullin) sought relief for the City by
authorizing development on the property consistent with a
tentative subdivision map previously approved by the City in
1990. The bill exempted the proposed development from
obtaining a coastal development permit under the California
Coastal Act or the City's certified local coastal program. AB
1991 would have exempted the proposed development from
obtaining any permits or approvals (other than existing
approvals at the time) under the California Environmental
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Quality Act (CEQA), California Endangered Species Act, the
California Fish and Game code, the Porter Cologne Water
Quality Act, and certain state highway encroachment permits.
AB 1991 passed the State Assembly 46-18 and was held in the
Senate Rules Committee.
AB 650 seeks a different approach to meet the financial burden
of the City of Half Moon Bay. Under AB 650, the City will be
able to protect the Beachwood property from future
development. AB 650 provides partial financial relief to meet
the terms of the settlement agreement and preserve the
property for purposes as a public park.
4)During the last 20 years, the Legislature has bailed out local
governments, school districts, community colleges, and other
local entities facing extraordinary financial challenges. The
amount of these bailouts have totaled over several hundred
million dollars. In each case, the financial relief has taken
various forms to meet the specific needs of the individual
entity facing its own unique circumstance. Examples of this
include:
a) In 1995 Merced County was unable to pay $5 million to
the California Department of Forestry (CDF) for contracted
fire prevention and suppression services. The state
allowed Merced County to pay back these funds over a
ten-year period;
b) Butte County officials announced that they were $3.5
million short in balancing their
FY 1989-1990 budget. Within a three-year period, the Butte
County's costs for state required programs grew by $4.7
million while revenue only grew by $4 million. Revenue for
discretionary spending declined by 21% during this same
period. The Department of Finance responded by authorizing
Butte County to defer payment
of $2.8 million for CDF fire services and several other
adjustments; and,
c) In 2008 the Legislature approved AB 2680 (Adams), which
forgave $777,084 of a loan owed to the state by a private
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water company, so that the County of San Bernardino could
acquire a failing water system and rebuild it for the
citizens of Cedar Glen; without this debt forgiveness it
would not have been financially feasible for San Bernardino
County to rebuild the water system.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Half Moon Bay [SPONSOR]
Alianto Properties, Inc.
Bay City Flower Co., Inc.
CSG Consultants
Half Moon Bay Coastside Chamber of Commerce and Visitors' Bureau
Half Moon Bay Parks and Recreation Commission
Franchi Old World Italian Seeds
San Mateo County Association of REALTORS
Individual letters (5)
Opposition
Individual letter
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958