BILL ANALYSIS
SB 43
Page 1
SENATE THIRD READING
SB 43 (Alquist)
As Amended July 14, 2009
Majority vote
SENATE VOTE : 37-2
LOCAL GOVERNMENT 5-2
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|Ayes:|Caballero, Arambula, | | |
| |Davis, | | |
| |De La Torre, Skinner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Duvall | | |
| | | | |
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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,
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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
contract price or $300 million whichever is less.
5)Requires the JPA to submit to the Legislative Analyst's Office
by December 1, 2014, a report containing a description of each
project procured through the design-build process after
January 1, 2010, and before November 1, 2014, and other
specified information.
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
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statewide.
FISCAL EFFECT : None
COMMENTS : 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.
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.
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.
The design-build language in current law is based on a
compromise struck in 2000 among local officials, labor groups,
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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, 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 4 X2 (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.
This bill 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. This bill even states that all
existing design-build laws are legally inapplicable in this
situation. Furthermore, this bill 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
Legislature may wish to consider whether it wishes to diverge
from the well-established precedent of the 2000 compromise
language.
Furthermore, this bill grants design-build authority to a JPA,
the first time this has been done. In addition, this bill
grants the design-build authority to a JPA whose public agency
members do not have the authority to use the design-build
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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
Legislature may wish to consider clarifying that all of the
provisions of the Community Redevelopment Law (Part 1
(commencing with Section 33000) of Division 24 of the Health and
Safety Code), except for competitive bidding, would continue to
apply in this situation to the Agency and reiterating that a
majority of residents of the City would need to approve the
building of a stadium for use by a professional football team.
Analysis Prepared by : Jennifer R. Klein / L. GOV. / (916)
319-3958
FN: 0001929