BILL ANALYSIS
AB 2605
Page 1
ASSEMBLY THIRD READING
AB 2605 (De La Torre)
As Amended June 1, 2010
Majority vote
REVENUE & TAXATION APPROPRIATIONS 12-0
(vote not relevant)
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| | |Ayes:|Fuentes, Ammiano, |
| | | |Bradford, |
| | | |Charles Calderon, Coto, |
| | | |Davis, |
| | | |Monning, Ruskin, Skinner, |
| | | |Solorio, Torlakson, |
| | | |Torrico |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires the Department of General Services (DGS) to
submit a cost-benefit analysis to the Legislature at least 30
days prior to executing a sale or lease transaction of specified
state buildings, and prohibits the sale or lease unless the
Legislature provides statutory authorization. Specifically,
this bill :
1)Requires DGS to submit a cost-benefit analysis to the fiscal
committees of the Legislature comparing the sale or lease of
specified state buildings compared to continued state
ownership over a 50-year period.
2)Prohibits the sale of lease of the specified state buildings
until the Legislature determines that the transaction is in
the state's best interests, makes a finding to this effect,
and explicitly provides statutory authorization.
3)Contains an urgency clause.
EXISTING LAW :
1)Authorizes DGS to sell 11 state buildings by means of a public
bidding process deemed to be the fair market value for the
property and designed to obtain the highest, most certain
return for the State from a responsible bidder.
AB 2605
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2)Requires DGS, 30 days prior to executing a sale transaction,
to report to the chairs of the fiscal committee chairs of the
Legislature the financial terms of the transaction, a
comparison of fair market value for the real property and any
basis for agreeing to terms and conditions other than fair
market value.
3) Requires that the proceeds of the sale be deposited in the
General Fund.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis:
1)Minor absorbable cost to DGS for the additional legislative
report.
2)To the extent the Legislature does not authorize a sale or
long-term lease through a subsequent statute, upon finding
that this is not in the state's best interests, there would
likely be long-term cost savings to the extent a sale would
otherwise have occurred. However, this would also result in a
loss of up-front revenue to the state from sale of the
buildings. The Governor's 2010-11 budget proposal assumes
that proceeds from selling the buildings would provide $600
million to the General Fund. The Legislative Analyst's Office
has indicated that this amount probably represents the low end
of what the state could expect to receive from a sale.
COMMENTS : AB 22 X4 (Evans), Chapter 20, Statutes of 2009-10
Fourth Extraordinary Session, authorized DGS to sell the Orange
County Fairgrounds and to sell 11 other state-owned buildings or
complexes, including buildings that currently house the
California Supreme Court, California Public Utilities
Commission, and California Emergency Management Agency.
The Assembly Committee on Accountability and Administrative
Review held a hearing on April 28, 2010, regarding AB 22 X4.
The hearing included testimony from the Legislative Analyst's
Office (LAO), which conducted a cost-benefit analysis comparing
the costs of owning and maintaining the buildings versus selling
them and leasing them back from private owners. The LAO
concluded that even if the state sells the buildings for a total
of $2.5 billion, which it considers optimistic, the cost of
selling and leasing back the buildings will be more than $5
AB 2605
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billion more than owning the buildings over a 35-year period.
The LAO concluded that selling the buildings for a short-term
revenue boost that would ultimately add to state costs is poor
fiscal policy, and that the Legislature should strongly consider
other alternatives to solving the state budget deficit.
The committee also found other concerns with selling the state
buildings, including that there was little economic analysis
done by the Governor's Administration, there was little public
discussion of this proposal, and selling buildings the state
currently uses and will likely need in the future goes against
40 years of state facilities policy, which favors ownership of
buildings over leasing office space.
Also testifying at the committee hearing were former members of
the Los Angeles State Building Authority and the San Francisco
State Building Authority, who were removed from their posts
after expressing concerns over the sale.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301
FN: 0004734