BILL ANALYSIS
Bill No: SB
586
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
SB 586 Author: Yee
As Introduced: February 27, 2009
Hearing Date: April 14, 2009
Consultant: Art Terzakis
SUBJECT
State Property: Sale
DESCRIPTION
SB 586 is an urgency measure that directs the Department of
General Services (DGS), in consultation with the Department
of Food and Agriculture (DFA), to enter into negotiations
to sell, to any interested party, at fair market value,
with certain restrictions, a 13-acre parking lot portion of
the state-owned Cow Palace property, located in the County
of San Mateo and the City and County of San Francisco.
Specifically, this measure:
1. Requires DGS, in consultation with DFA, prior to an
unspecified date, to enter into negotiations to sell the
specified property at fair market value, without any
conditions relating to entitlement, to any interested
party upon terms and conditions deemed to be in the
state's best interests.
2. Makes it explicit that DGS shall not sell the real
property for less than fair market value and specifies
that fair market value shall be evaluated at the highest
and best use of the property as entitled within its
existing zone designation.
3. Stipulates that the sales agreement must require the
purchaser to develop the property for uses consistent
with the general plan of the City of Daly City and the
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Bayshore Revitalization Redevelopment Plan.
4. Provides that DGS shall be reimbursed from the sale
proceeds for any costs or expenses incurred in the
disposition of the property and requires that the net
proceeds received from the disposition of the property be
paid into the Fair and Exposition (F&E) Fund for the
benefit of the District 1-A Agricultural Association (Cow
Palace).
5. Provides that DFA, until an unspecified date, shall
assume only the rights, duties, and powers of the board
of directors of the District 1-A Agricultural Association
affiliated with negotiating the sale of the property.
6. Exempts the sale of the state property made on an
"as-is" basis from designated provisions of CEQA.
Additionally, exempts from those provisions of CEQA the
execution of the purchase and sales agreement or the
exchange agreement if the disposition is not made on an
"as-is" basis and the close of escrow is contingent on a
specified requirement or compliance with CEQA.
7. Declares that the sale of this property does not
constitute a sale of surplus state property as set forth
in Section 9 of Article III (Prop 60 of 2004) of the
California Constitution or subdivision (g) of Section
11011 of the Government Code relating to the Deficit
Recovery Bond Retirement Sinking Fund Subaccount.
EXISTING LAW
Existing law generally requires the Director of General
Services (DGS) to perform various functions with respect to
state property and provides for the sale, lease, or
transfer of surplus state property.
Existing law requires the Director of DGS to request
authorization by the Legislature prior to the disposition
by sale or otherwise of state land reported to it by a
state agency as being in excess of its foreseeable needs.
Each state agency is required to annually review
proprietary state lands under its jurisdiction to determine
what lands are in excess of the agency's foreseeable needs
and to report to DGS.
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Existing law provides criteria for state agencies to use in
determining and reporting to DGS lands in excess of the
agency's foreseeable needs. Under existing law, DGS is
responsible for determining if surplus land is needed by
any other state agency.
Existing law requires surplus State property to be offered
to local entities for the purposes of low and moderate
income housing; parks, recreational or open space; school
facilities; enterprise zones; and infill development within
transit village areas.
Existing law specifies that the Legislature may authorize a
particular surplus property be sold at less than fair
market value and provides that 30 days prior to executing
such a transaction, DGS must report to the chairs of the
fiscal committees of the Legislature the following
information: (a) the financial terms of the transaction;
(b) a comparison of fair market value for the property and
financial terms; (c) the basis for agreeing to terms and
conditions other than fair market value.
Existing law [Government Code 11011 (k) (1) and (2)]
contains provisions exempting the sale of surplus property
from designated provisions of the California Environmental
Quality Act (CEQA). Specifically, the law provides that
any disposition of a parcel of surplus property made on an
"as-is" shall be exempt from statutory requirements of
CEQA; however, the law makes it explicit that the buyer or
transferee of a parcel shall be subject to any local
governmental entitlement or land use approval requirements
and CEQA.
Furthermore, existing law provides that if any transaction
is not on an "as-is" basis sale and close of escrow is
contingent on satisfying any local governmental approvals
for entitlement or land use requirements, including
compliance by the local government with CEQA, then the
execution of the purchase and sale agreement or exchange
agreement is exempt from CEQA.
California's network of fairs includes 54 district
agricultural associations (DAA), state agency fairs, which
are managed under the California Department of Food and
Agriculture (CDFA) within the Division of Fairs and
Expositions (F&E). Each fair operates with a degree of
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autonomy with a board of directors appointed by the
governor and in accordance with state law governing the
operation of state agencies. Prior to the passage of the
2009-10 budget in February which changed the funding
structure for fairs, for 75 years, license fees assessed
against California horseracing had been the sole state
support for the California Network of Fairs through the F&E
Fund. Current law provides the F&E Fund will receive $32
million annually from the General Fund.
Proposition 60A of November 2004 (SCA 18, Johnson,
Resolution Chapter 103/04) which was adopted by the
electorate (73% margin) requires, among other things, that
the proceeds from the sale of surplus state property, with
specified exceptions, be used to pay the principal and
interest on the Economic Recovery Bond Act of 2004.
BACKGROUND
Purpose of SB 586: According to the author's office, this
measure is intended to allow the state to negotiate with
any interested buyer to sell a 13 acre parcel within the
Cow Palace property in order to bring needed economic
development to the neighborhood surrounding the Cow Palace
and to renovate and improve the antiquated Cow Palace
building.
Specifically, SB 586 would require the state to enter into
negotiations to sell, at fair market value, to any
interested party, approximately13 acres of the Cow Palace's
parking lot, as specified. The author's office emphasis
that selling this portion of the Cow Palace property will
provide much needed development in the Bayshore Community.
According to the author's office, the Bayshore Community in
Daly City is in desperate need of basic services. This
neighborhood has no post offices, pharmacies or grocery
stores. Some residents living near the Cow Palace must take
three buses to get to the closest grocery store. The Cow
Palace property occupies 68 acres within this neighborhood,
including a 13-acre overflow parking lot that is rarely
used.
The author's office states that the Cow Palace is currently
running an operating deficit of nearly $700,000, and over
the past five years the Cow Palace has lost over $1.5
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million dollars. During this period of time, the F&E Fund
has been tapped to help close the Cow Palace's debt. As
recently as 2007, the Daly City Redevelopment Agency
offered to enter into a long-term ground lease for
approximately 13 acres of Cow Palace property. The
author's office notes that the Redevelopment Agency offered
a minimum base rent of $1.4 million, which represented a
fair market rent, however the Cow Palace Board rejected the
offer and discussions ended without a ground lease and
without improved revenue to the Cow Palace.
The author's office points out that SB 586 would provide
for the disposition of the overflow parking lot, at fair
market value, with the proceeds going to the F&E Fund
because monies that were expended to initially purchase the
parking lot parcel were derived from the F&E Fund. The
author's office contends that the proposed sale of the
13-acres will generate approximately $20-21 million dollars
in revenue for the state.
Arguments in Opposition: Writing in opposition, the
Western Fairs Association indicates that this measure is
unnecessary and premature due to the fact that community
needs are already being addressed by the Cow Palace Board
(Board) which has begun a Request for Proposal (RFP)
process to develop the 13-acres of the Cow Palace property
referenced in SB 586. The Western Fairs Association
contends that the RFP process should be fully vetted by the
Board before the Legislature decides to override and
abandon the process.
CEQA Exemption: The ability to get excess properties
declared surplus by the Legislature has been impeded these
past few years by a disagreement between the Legislature
and the Administration regarding the removal of a statutory
exemption for the State's surplus properties from the
requirements of CEQA. This disagreement has at least for
now been resolved with enactment of AB 8xx (Nestande),
Chapter 6 of 2009-10 Second Extraordinary Session, that
places within the Government Code an ongoing CEQA exemption
for all properties declared surplus by the Legislature.
The CEQA exemption language contained in SB 586 mirrors the
language in AB 8xx.
PRIOR/RELATED LEGISLATION
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AB 8xx (Nestande) Chapter 6, Statutes of 2009-10 Second
Extraordinary Session. Among other things, exempted the
sale of surplus state real property made on an "as is"
basis from designated provisions of CEQA. The bill also
exempted from those provisions of CEQA the execution of the
purchase and sale agreement or the exchange agreement for
surplus state real property if the disposition is not made
on an "as is" basis and the close of escrow is contingent
on a specified requirement or compliance with CEQA. AB 8xx
also provided expedited environmental permitting and CEQA
exemption for a list of 11 critical transportation
projects, as specified.
SB 760 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof,
approximately 3.14 acres of real property in the City of
Red Bluff that is specifically declared not to be surplus
to the needs of the state, and, in return, to acquire up to
40,000 net square feet of usable office and related space
for consolidated administrative operations of the state.
(Pending in this committee)
SB 256 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof
approximately 1.69 acres of real property in the City of
Chico, currently used by the California Highway Patrol as
its Chico area office, which is specifically declared not
to be surplus to the needs of the state. (Pending in this
committee)
SB 178 (Aanestad) 2009-10 Session. Would authorize DGS to
sell, lease, exchange, or any combination thereof,
approximately 3 acres of real property in the City of
Redding, currently used by the Department of Forestry and
Fire Protection as its Shasta-Trinity Unit Headquarters,
that is specifically declared not to be surplus to the
needs of the state. (Pending in this committee)
SB 30 (Denham) 2009-10 Session. Would require DGS to
identify not less than $1 billion worth of state property
that can be sold immediately to pay for the retirement of
outstanding general obligation bonds issued by the state,
thereby helping to close the state's budget deficit.
(Pending in this committee)
SB 29 (Denham) 2009-10 Session. Would require the
California Science Center to sell the parcel of land that
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the Los Angeles Memorial Coliseum and the Los Angeles
Memorial Sports Arena occupy and the state's share of the
Los Angeles Memorial Sports Arena structure by authorizing
DGS to establish a process to solicit bids for the fair
market sale of the parcel of the land and the Los Angeles
Memorial Sports Arena structure. (Pending in this
committee)
AB 2026 (Villines) Chapter 761, Statutes of 2008.
Authorized DGS to sell, exchange, or lease for fair market
value nine specified parcels deemed to be surplus to the
state's needs. Additionally, rescinded the surplus
authorization granted previously to DGS with respect to
seven specified parcels. Furthermore, exempted the State's
execution of a purchase and sales agreement from CEQA
however, the provisions made it explicit that in an "as is"
sale, the buyer or transferee will be subject to any local
governmental entitlement or land use approval requirements
including requisite CEQA provisions.
SB 1527 (Yee) 2007-08 Session. Similar to SB 586 (Yee) of
2009. Would have required DGS to enter into negotiations
to sell a 13-acre parcel at the Cow Palace to any
interested third party, with the Daly City Redevelopment
Agency having the first right of refusal. (Vetoed by
Governor - message stated "this measure circumvents the
state's current competitive bid process and would
potentially limit the state's financial return for the sale
of state-owned land without creating any added value for
the surrounding community. By including the first right
of refusal provisions, this bill narrows the range of
options for the use of the property and places the state at
risk to receive less revenue than if the property was
offered to all interested parties through a normal
competitive bid process.")
SB 99 (Battin) 2005-06 Session. Would have established the
Commission on Asset Review and Divestiture to review
biennially the inventory of all real property held by the
State. (Held in Senate Appropriations Committee)
SUPPORT: As of April 10, 2009:
Daly City, City of
Daly City Redevelopment Agency
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OPPOSE: As of April 10, 2009
Western Fairs Association
DUAL REFERRAL: Senate Environmental Quality Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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