BILL ANALYSIS
SB 43
Page 1
Date of Hearing: July 8, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
SB 43 (Alquist) - As Amended: June 30, 2009
SENATE VOTE : Vote not relevant
SUBJECT : Joint powers agencies: City of Santa Clara.
SUMMARY : Authorizes the City of Santa Clara (City) and the
Redevelopment Agency of Santa Clara (Agency) as a joint powers
agency (JPA) to construct, operate, or maintain a stadium for
use by a professional football team using a specified
design-build authority. Specifically, this bill :
1)Authorizes the JPA between the City and the Agency to award a
design-build contract related to the stadium to a qualified
design-build contractor without utilizing an otherwise
applicable competitive bid process, provided the governing
body of the JPA determines the cost of the contract is
reasonable and the award of the contract without utilizing the
competitive bid process is in the best interest of the JPA.
2)Prohibits the JPA from awarding a design-build contract
related to the stadium unless:
a) The design-build contract does not require an
expenditure of money from the City's general fund;
b) The obligation of the Agency to contribute funding
toward the amount due under the design-build contract is
limited to a specified maximum amount, provided the
specified maximum amount need not apply to debt service and
other financing costs; and,
c) A private party is responsible for any construction cost
overruns.
3)Requires a design-build contract awarded by the JPA to require
all subcontract work be awarded through a competitive process
established by the JPA.
4)Authorizes the JPA to specify the payment bond for a
design-build contract be in a sum not less than half the
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contract price or $300,000,000, whichever is less.
EXISTING LAW :
1)Authorizes, under the Joint Exercise of Powers Act, two or
more public agencies (i.e., federal government, any state, any
state department or agency, county, county board of education,
county superintendent of schools, city, public corporation,
public district, and regional transportation commission in any
state) to enter into a joint powers authority to exercise
jointly any power common to the contracting agencies and to
form a separate JPA at their option.
2)Requires local officials, under the Local Agency Public
Construction Act, to invite bids for construction projects and
then award contracts to the lowest responsible bidder under
the traditional design-bid-build project delivery system.
3)Authorizes cities to use the design-build method for projects
costing more than $1 million.
4)Authorizes redevelopment agencies, until January 1, 2016, to
use the design-build method for infrastructure projects
costing more than $1 million, provided the State Public Works
Board approves the project as one of 10 design-build projects
statewide.
FISCAL EFFECT : None
COMMENTS :
1)The author states the San Francisco 49ers (49ers) professional
football team would like to use the design-build method to
construct a new $937-million stadium in an existing
redevelopment project area in the City. Because the City's
charter mandates all public contracts be awarded to the lowest
bidder, the City is unable to take advantage of the state's
design-build authorization that has been extended to all
cities.
According to the author, on June 2, 2009, the Santa Clara City
Council and the 49ers approved a proposal that outlines the
financing for the stadium construction. To assist this
project, SB 43 will give the City a legislative option to
award a design-build contract through the newly created JPA.
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On June 23, 2009, the City established a Charter Review
Commission to consider amending its charter to allow for
design-build authority. The author says the City would like
to have the ability to consider a design-build option other
than having to amend its charter. The author says a
design-build method will allow for greater project
collaboration, cost control, faster construction, and a
streamlined construction process for a stadium that is
projected to be completed in 2014 provided the City's
residents in spring 2010 approve the charter amendment
allowing the City to utilize design-build.
2)By entering into a joint powers authority with the Agency, the
City will have access to the Agency's tax-increment revenue in
the Bayshore North Development Project Area. The use of the
Agency's funds, however, will be limited to a specified
maximum amount provided the specified maximum amount need not
apply to debt service and other financing costs. The author
states that, in the City's agreement with the 49ers, the
Agency will contribute $59 million in redevelopment funds.
The rest of the $114 million in public contributions for the
$939 million needed for the stadium construction will be $20
million from a utility fund for a substation relocation and
$35 million from a Mello-Roos tax imposed on the surrounding
hotels. In addition, the 49ers have agreed to be responsible
for any cost overruns.
3)The design-build language in current law is based on a
compromise struck in 2000 among local officials, labor groups,
and contractors. Local officials wanted the flexibility and
potential cost savings offered by design-build contracts.
Labor unions wanted to ensure that counties pre-qualify
employers to protect workers' interests. Contractors wanted
to be sure they had fair access to county contracts. Further
changes to the language, consistent with the principles of the
2000 compromise were made by SB 287 (Cox), Chapter 376,
Statutes of 2005; SB 416 (Ashburn), Chapter 585, Statutes
2007, which extended this authority to use design-build
contracting for the construction of buildings and directly
related improvements to all 58 counties in the state; SB 642
(Wolk), Chapter 314, Statues 2008, which extended this
authority to use design-build contracting for the construction
of buildings and directly related improvements to all cities
in the state; SB 1699 (Wiggins), Chapter 415, Statutes 2008,
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which extended this authority to use design-build contracting
for the construction of buildings and improvements in excess
of $2.5 million directly related to a Sonoma Valley Health
Care District hospital or health facility building; and SB 4xx
(Cogdill), Chapter 2, Statutes 2009-10 Second Extraordinary
Session, which extended this authority to use design-build
contracting for infrastructure projects in excess of $1
million to redevelopment agencies, provided the State Public
Works Board approves the project as one of 10 design-build
projects statewide.
SB 43 would breach the carefully crafted compromised reached in
2000 between all interested stakeholders by not including any
of the language included in every other design-build
authorization law. There is not a single cross-reference to
existing design-build laws. SB 43 even states that all
existing design-build laws are legally inapplicable in this
situation. Furthermore, SB 43 goes another step beyond
existing design-build laws and allows the JPA to decide how
subcontractors will be hired. According to the author, the
City and 49ers have already agreed 80% to 85% of all
subcontracting work will be required to be done with local
union labor. The Committee may wish to consider whether it
wishes to diverge from the well-established precedent of the
2000 compromise language.
4)Furthermore, SB 43 grants design-build authority to a JPA, the
first time this has been done. In addition, SB 43 grants the
design-build authority to a JPA whose public agency members do
not have the authority to use the design-build contracting
method on their own (the City is limited by its charter to
using only competitive bidding and the Agency is authorized by
state law to use design-build only for infrastructure projects
in limited circumstances). The Committee may wish to consider
whether it wants to authorize a JPA to use the design-build
method without requiring a report back to the Legislature on
its use, as has been done most recently with redevelopment
agencies on infrastructure projects.
REGISTERED SUPPORT / OPPOSITION :
Support
Patricia Mahan, Mayor of the City of Santa Clara
Santa Clara and San Benito Counties Building & Construction
SB 43
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Trades Council
San Francisco 49ers
Opposition
Individual letters (10)
Analysis Prepared by : Jennifer R. Klein / L. GOV. / (916)
319-3958