BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 43|
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UNFINISHED BUSINESS
Bill No: SB 43
Author: Alquist (D), et al
Amended: 8/27/09
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 9/9/09
AYES: Wiggins, Cox, Aanestad, Kehoe, Wolk
ASSEMBLY FLOOR : 56-14, 9/3/09 - See last page for vote
SUBJECT : Joint powers agency: City of Santa Clara
SOURCE : Author
DIGEST : This bill authorizes the City of Santa Clara and
the Redevelopment Agency of Santa Clara as a joint powers
agency, the Santa Clara Stadium Authority, to construct,
operate, and maintain a stadium for use by a professional
football team using a specified design-build authority.
Assembly Amendments delete the Senate version of the bill
dealing with health professionals. This bill currently
deals with the City of Santa Clara.
ANALYSIS : Under existing law, two or more public
agencies may enter into an agreement to jointly exercise
any power common to the contracting parties, as specified.
Public contracting . The Local Agency Public Construction
Act spells out the procedures that local officials must
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follow when awarding public works contracts. Under the
traditional design-bid-build project delivery method, local
officials invite bids for construction projects based on
completed design plans and specifications and then award
contracts to the lowest responsible bidder. Alternatively,
under the design-build method, local officials contract
with a single entity to both design and construct a
project. Authorized local entities must still invite
competitive bids, but local officials may select the
winning bidder based on either lowest cost or a set of
criteria defining "best value."
General law cities can use the design-build method to
construct buildings and related infrastructure worth more
than $1 million (AB 642 [Wolk], Chapter 314, Statutes of
2008). A pilot program permits redevelopment agencies to
use the design-build method for 10 public improvement
projects worth more than $1 million, provided that the
State Public Works Board first approves the projects (SB
4XX [Cogdill], Chapter 2, Statutes of 2009-10, Second
Extraordinary Session).
Local agency officials can award construction contracts
without competitive bids only under limited circumstances.
General law cities and redevelopment agencies do not need
competitive bids for work that costs less than $5,000, and
cities can bypass competitive bidding in emergencies.
The California Constitution gives charter cities broad
control over their "municipal affairs." While general law
cities and redevelopment agencies must follow the statutory
public contracting procedures, charter cities may spell out
their own public contracting rules.
Redevelopment . Local officials establish redevelopment
agencies to eliminate economic and physical blight. To
accomplish this task, the Community Redevelopment Law gives
redevelopment agencies two extraordinary powers - property
tax increment financing and property management powers,
including the power of eminent domain.
Joint powers agencies . The Joint Exercise of Powers Act
allows two or more public agencies to carry out a common
program or joint project, provided that each agency already
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has the power to perform that program or project.
Sometimes, these joint powers agreements create a new,
separate joint powers agency (JPA) to finance and operate
the common program or project.
This bill is special legislation that allows a JPA that
includes the City of Santa Clara and the Redevelopment
Agency of the City of Santa Clara to use a unique
design-build authority to construct a professional football
stadium. The JPA must be called the Santa Clara Stadium
Authority.
Design-build contract . This bill authorizes the Stadium
Authority to award a design-build contract to a qualified
design-build contractor to construct a stadium without
using an otherwise applicable competitive bidding process.
However, before the Stadium Authority can award such a
contract, all of the following must first occur:
1. Santa Clara's voters must approve a ballot measure
endorsing the development of a professional football
stadium.
2. The Stadium Authority's governing board must determine
that the contract's cost is reasonable.
3. The Stadium Authority's governing board must determine
that awarding the contract is in the JPA's best
interest.
The design-build contract authorized by this bill is
subject to the following conditions and restrictions:
1. The contract cannot involve money from the City's
general fund or enterprise funds.
2. The redevelopment agency's financial contribution to the
contract must be limited to a specified maximum amount.
This amount does not include debt service and other
related financing costs.
3. Funds from the redevelopment agency and any Mello-Roos
Act tax can only be used to pay for subcontract work
that is awarded to the lowest responsible bidder.
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4. The contract cannot modify the redevelopment agency's
statutory obligations and limitations.
5. A private party must be responsible for any construction
cost overruns.
6. The Stadium Authority may specify that the design-build
contractor's payment bond must be in a sum not less than
one-half of the contract price or $300 million,
whichever is less.
7. The Stadium Authority must report to the Legislative
Analyst's Office about its design-build experience
within six months of completing the stadium's
construction.
Subcontracts . This bill requires the Stadium Authority to
establish a competitive bid process that the design-build
contractor must use for awarding subcontracts. The
design-build contractor may award subcontracts to either
the lowest responsible bidder or to the "best value"
bidder. The design-build contractor cannot use funds from
the redevelopment agency or a Mello-Roos Act tax to pay for
subcontract work unless the contractor awards the
subcontract to the lowest responsible bidder in a manner
consistent with provisions in the City's charter.
Powers . In addition to the powers that the City and the
redevelopment agency have in common, this bill gives the
Stadium Authority the power to acquire, construct, finance,
maintain, manage, and operate a professional football
stadium and related facilities. The bill prohibits the
Stadium Authority and the Redevelopment Agency of the City
of Santa Clara from spending property tax increment
revenues on the stadium's operation and maintenance.
Non-stadium projects . This bill declares that it is not
the Legislature's intent to authorize the use of
design-build contracting for streets and highways, public
rail transit, water resource facilities, and infrastructure
not located on the stadium site or adjacent city streets
and property. For any improvement on the state highway
that may result from the construction, operation, or
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maintenance of a football stadium, this bill requires the
Department of Transportation (Caltrans) to be the
responsible agency for providing project development and
design services. This bill permits Caltrans to use
Department employees and consultants to perform those
services.
This bill contains legislative findings in support of its
special provisions.
Background
The City of Santa Clara is a charter city located at the
southern tip of the San Francisco Bay. In 1957, the City
established the Redevelopment Agency of the City of Santa
Clara. Like most redevelopment agencies, the Santa Clara
City Council serves as the Agency's Board of Directors, the
City Manager serves as Executive Director, and the City
Attorney serves as General Counsel. In 1973, the Agency
established the Bayshore North Redevelopment Project Area.
Covering 1,200 acres, this project area includes the City's
Convention Center Complex and the California's Great
America amusement park.
In November 2006, the San Francisco 49ers announced plans
to construct a new football stadium in Santa Clara on
City-owned land within the Bayshore North Redevelopment
Project Area. In January 2008, the City concluded its
feasibility study of the proposed stadium, and subsequently
directed the City Manager to enter into non-binding
negotiations with the 49ers. In June 2009, the City
Council approved a Term Sheet agreement for the potential
49ers football stadium, clarifying and documenting the
parties' understandings and commitments.
According to the Term Sheet, the City of Santa Clara and
its redevelopment agency plan to form a JPA that will own,
construct, maintain, and operate a football stadium for the
49ers. The estimated cost for the stadium and related
facilities is $937 million. Up to $114 million will come
from public funds, including $59 million from the
redevelopment agency, $35 million from a new Mello-Roos Act
special tax on surrounding hotel owners, and $20 million
from the City's utility fund to relocate an electrical
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substation. The 49ers and the NFL will invest $493
million, and the team will be responsible for any
construction cost overruns. Finally, the JPA will fund the
remaining $330 million by borrowing against future naming
rights and ticket sales revenues.
The 49ers want Santa Clara officials to award a
design-build contract for the stadium to a general
contractor of the team's choice. However, Santa Clara's
city charter requires the City to award contracts to the
lowest responsible bidder. Further, the state law that
allows redevelopment agencies to use design-build contracts
requires competitive bidding.
Over the past two years, the City of Santa Clara, the
City's redevelopment agency, and the 49ers have crafted a
public-private partnership to finance the construction of a
new stadium. Because the team plans to pay for more than
half of the construction costs as well as any cost
overruns, the City and team officials believe that the team
should get to hire the general contractor of its choice.
The 49ers want to ensure that a contractor who has
extensive experience in constructing NFL stadiums and
familiarity with NFL guidelines is managing the project.
Recent Assembly amendments ensure that the general
contractor must use public money only to pay for
subcontract work that's awarded to the lowest responsible
bidder. This bill also prohibits the use of property tax
increment revenues to pay for the stadium's operation and
maintenance. The 49ers get to choose their general
contractor while local construction workers get to
competitively bid on hundreds of new projects. This bill
provides a unique contracting scheme that suits the
stadium's unique financing arrangement.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 9/10/09)
San Francisco 49ers
Santa Clara and San Benito Counties Building and
Construction Trades Council
Santa Clara City Councilmember Kevin Moore.
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Santa Clara Mayor Patricia M. Mahan
Santa Clara Vice Mayor Jamie L. Matthews
Silicon Valley Leadership Group
State Building and Construction Trades Council of
California
OPPOSITION : (Verified 9/10/09)
Santa Clara City Councilmember Jamie McLeod
Santa Clara City Councilmember Will Kennedy
ASSEMBLY FLOOR :
AYES: Adams, Arambula, Beall, Bill Berryhill, Blakeslee,
Block, Blumenfield, Brownley, Buchanan, Caballero,
Carter, Conway, Cook, Coto, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Furutani, Gaines, Galgiani, Gilmore, Hall, Hayashi,
Hernandez, Hill, Huber, Jones, Krekorian, Lieu, Bonnie
Lowenthal, Mendoza, Monning, Nava, Nestande, Niello,
Nielsen, John A. Perez, V. Manuel Perez, Portantino,
Ruskin, Salas, Skinner, Smyth, Solorio, Swanson, Torres,
Torrico, Villines, Yamada, Bass
NOES: Ammiano, Anderson, Tom Berryhill, Chesbro, Duvall,
Fuller, Hagman, Harkey, Huffman, Knight, Logue, Ma, Audra
Strickland, Tran
NO VOTE RECORDED: Charles Calderon, Davis, DeVore,
Garrick, Jeffries, Miller, Saldana, Silva, Torlakson,
Vacancy
DLW:mw 9/10/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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