BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
178 (Aanestad)
Hearing Date: 5/28/2009 Amended: 5/11/2009
Consultant: Bob Franzoia Policy Vote: GO 12-0
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BILL SUMMARY: SB 178 would authorize the Department of General
Services (DGS) to sell, lease, or exchange, or any combination
thereof, approximately three acres of real property in the City
of Redding, currently used by the California Department of
Forestry (CDF) as its Shasta-Trinity Unit Headquarters, that is
specifically declared not to be surplus to the needs of the
state. DGS would be required to use the proceeds of any sale,
exchange, lease or combination thereof or a portion of the
property to acquire or lease the land and facilities necessary
to provide a substitute location for the headquarters, thereby
making an appropriation. This bill would require DGS to
initially offer the property for disposition to the City of
Redding and to the public though a competitive selection process
if the City of Redding is unable to enter into an agreement.
This bill would authorize DGS to enter into agreements or leases
for the purpose of providing a substitute location for the
headquarters on or near the Redding Airport. This bill would
provide that any use or redevelopment of the property awarded to
a nongovernmental entity would be subject to City of Redding
zoning and building code regulations. This bill would require
DGS to notify the Legislature when entering into a lease or
agreement.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Sale of non surplus state Unknown, likely significant,
one time General
property increase in revenue; unknown potential
cost for new CDF office or lease cost
avoidance depending on how property
is disposed
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STAFF COMMENTS: SUSPENSE FILE.
If the property is sold, it is unlikely the proceeds will be
sufficient to fund land acquisition and construction costs of a
new CDF office. If the property is disposed of in some other
manner, for example through a lease where there is an exchange
of equity value for a new CDF facility, there may be an increase
in lease revenue resulting in major cost avoidance in future
years.
Current law generally requires a state agency to review annually
its real property holdings and determine what, if any, is in
excess of its foreseeable needs. These properties are commonly
referred to as surplus state properties. They include both
unused properties and those which are underutilized by an
agency. Once real property has been identified as surplus, the
state attempts to sell the property, or dispose of it in some
other manner.
Page 2
SB 178 (Aanestad)
When surplus property is sold, the sales revenues are deposited
into the account that originally paid for the acquisition of the
property. In most instances, sale revenues are deposited in the
General Fund and are available for expenditure on any state
program. Pursuant to Proposition 60A (2004), the proceeds from
the sale are deposited in the Deficit Recovery Bond Retirement
Sinking Fund Subaccount and are be used to pay the
principal and interest on Proposition 57 bonds. Once these
bonds are fully repaid,
proceeds from surplus property sales would be deposited in the
General Fund. Proposition 60A only applies to those properties
that were purchased with General Fund revenue or bonds secured
by the General Fund. Proposition 60A does not apply to the
sale of surplus property acquired with special funds.
Under the provisions of Proposition 60A, the proceeds of the
sale of surplus property must be used to pay the holders of the
state's deficit reduction bonds. These payments are intended to
accelerate the redemption of the state's debt, and reduce future
General Fund payments to the bondholders. This bill avoids the
transfer of the proceeds associated with the disposition of the
property pursuant to Section 9 of Article III of the
Constitution by specifying that the disposition of the Redding
property does not constitute a sale or other disposition of
surplus state property and instead states the property is
unsuitable to the needs of the state.
This bill authorizes DGS to sell, lease or exchange or any
combination thereof, all or a portion of the property at fair
market value. Upon appropriation, DGS shall use the proceeds to
relocate, consolidate, or expand the operations of the CDF unit
on or near the Redding Airport.
The department would be required to develop the terms and
conditions of any agreements or lease, and provide them to the
Department of Finance for review prior to soliciting bids and
shall obtain approval from the Department of Finance prior to
the execution of any agreement or lease.
Staff notes the sale and the lease provisions of this bill may
delay DGS in disposing of the property and securing a new CDF
facility.