BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2605 (De La Torre)
Hearing Date: 6/28/2010 Amended: 6/15/2010
Consultant: Bob Franzoia Policy Vote: G O 8-0
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BILL SUMMARY: AB 2605, an urgency measure, would require the
Department of General Services (DGS), at least 30 days prior to
executing a transaction for the sale or lease of specified state
property or buildings, to submit to the chairs of the fiscal
committees of the Legislature an analysis of the transactions
comparing the costs and benefits to the state of a sale or lease
of the property or building to continued ownership over a 50
year period. This bill would prohibit the property or building
from being sold or leased until the Legislature determines that
the transaction is in the best interests of the state, makes a
finding to this effect, and explicitly authorizes the sale by
statute.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
DGS analysis of sale/lease Less than $100 one time,
assuming trans- Special*
costs and benefits actions occur within one year
Legislative approval Unknown fiscal impacts
General/
Special*
* Property Acquisition Law Account
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STAFF COMMENTS:
ABx4 22 (Evans) Chapter 20/2009 authorizes DGS to sell specified
state buildings and lease the buildings for the new owners
through a long term lease. This was intended to provide a
significant amount of one time revenue to address the budget
shortfall while allowing the state continued use of the
buildings.
The property and buildings subject to the provisions of this
bill are:
(1) The Attorney General Building located at 1300 I Street in
the City of Sacramento.
(2) The California Emergency Management Agency Building located
at 3650 Schriever Avenue in the City of Rancho Cordova.
(3) The Capitol Area East End Complex, located in the City of
Sacramento, at all of the following locations:
(A) Block 225 located at 1430 N Street in the City of
Sacramento.
(B) Block 171 located at 1501 Capitol Avenue in the City of
Sacramento
(C) Block 172 located at 1500 Capitol Avenue in the City of
Sacramento.
(D) Block 173 located at 1615 Capitol Avenue in the City of
Sacramento.
(E) Block 174 located at 1616 Capitol Avenue in the City of
Sacramento.
(F) The parking facility located at 1214 17th Street in the City
of Sacramento.
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AB 2605 (De La Torre)
(4) The Elihu M. Harris Building located at 1515 Clay Street in
the City of Oakland.
(5) The Franchise Tax Board Complex located at 9645 Butterfield
Way in the City of Sacramento.
(6) The San Francisco Civic Center, also known as the Earl
Warren/Hiram Johnson Building, at both of the following
locations:
(A) 350 McAllister Street in the City and County of San
Francisco.
(B) 455 Golden Gate Avenue in the City and County of San
Francisco.
(7) The New Junipero Serra State Building located at 320 West
4th Street in the City of Los Angeles.
(8) The Department of Justice Building located at 4949 Broadway
in the City of Sacramento.
(9) The Public Utilities Commission Building, also known as the
Governor Edmund G. "Pat" Brown Building, located at 505 Van Ness
Avenue in the City and County of San Francisco.
(10) The Judge Joseph A. Rattigan Building located at 50 D
Street in the City of Santa Rosa.
(11) The Ronald Reagan State Building located at 300 South
Spring Street in the City of Los Angeles.
This bill would require DGS, prior to executing a transaction
for a sale or lease to complete an analysis of the transaction
comparing the costs and benefits to the state of a sale or lease
over a 50 year period. Presumably, the state performed similar
analyses when it initially decided to construct these buildings
and that those analyses found savings when comparing ownership
to leasing.
In an April 27, 2010 report to the Legislature, Evaluating the
Sale-Leaseback Proposal: Should the State Sell Its Office
Buildings? the Legislative Analyst estimated that over a 35 year
period, the cost of leasing the facilities would be over $5
billion more than the cost of state ownership and that these
costs greatly exceed even the more optimistic (net proceeds of
$1.4 billion) of two estimates for sale revenue. The cost
differential would increase to over $200 million annually in
later years.
Government Code 14670.13 (e), as added by ABx4 22 (Evans),
required that 30 days prior to executing a transaction for a
sale or lease of any of buildings noted above, DGS shall report
to the chairs of the fiscal committees of the Legislature the
terms and conditions of the transaction, including, but not
limited to, the financial terms. This bill would amend that
subdivision to provide that any of these buildings could not be
sold or leased until the Legislature explicitly authorizes the
sale by statute.
As noted by the Legislative Analyst: In the current budget
environment, however, the sale-leaseback represents one
imperfect option among many for balancing the budget. In
deciding whether to endorse the sale-leaseback, the Legislature
will need to consider how its costs compare to other
alternatives for addressing the state's budget shortfall, such
as reducing expenditures and/or augmenting revenues.