BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
586 (Yee)
Hearing Date: 5/18/2009 Amended: 5/6/2009
Consultant: Bob Franzoia Policy Vote: GO 11-1
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BILL SUMMARY: SB 586, an urgency measure, would require the
Department of General Services (DGS) to sell, at fair market
value, a specified parcel of state property located in the
County of San Mateo and the City and County of San Francisco.
The net proceeds of the sale would be paid into the Fair and
Exposition Fund, a continuously appropriated fund, for the
benefit of the District 1-A Agricultural Association, thereby
making an appropriation. This bill would also declare the
Legislature's findings that the sale of this property does not
constitute a sale of surplus state property.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Sale of state property Unknown revenue increase one timeSpecial*
* Fair and Exposition Fund (assumes the parcel was initially
acquired with moneys form this fund; otherwise the revenue from
the sale would be deposited in the Deficit Recovery Bond
Retirement Sinking Fund Subaccount pursuant to Prop 60A as noted
below). Reimbursement from the net proceeds of the sale of any
DGS costs incurred in the disposition of the property would be
made.
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STAFF COMMENTS: 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.
When surplus property is sold, the sale 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. However, pursuant to Section 9 of Article III of the
Constitution as established by Proposition 60A (2004), the sale
revenues are deposited in the Deficit Recovery Bond Retirement
Sinking Fund Subaccount and are be used to pay the principal and
interest on Proposition 57 economic recovery bonds. Once these
bonds are fully repaid, the sale revenue will 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.
This bill avoids the transfer of the proceeds associated with
the disposition of the property to the Deficit Recovery Bond
Retirement Sinking Fund Subaccount because the best available
information indicates the property was initially purchased with
special funds and by specifying that the disposition of the
property does not constitute a sale or
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SB 586 (Yee)
other disposition of surplus state property that would otherwise
be subject to the provisions of Proposition 60A.
This bill authorizes DGS to sell, at fair market value with an
all cash sale or cash equivalent without any conditions relating
to entitlements, to any interested third party, upon those terms
and conditions and subject to those reservations and exceptions
that DGS determines are in the best interests of the state.
This bill is similar to SB 1527 (Yee) 2008 which was vetoed by
the Governor with the following message:
This bill requires the Director of General Services 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.
SB 1527 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.
Staff notes this bill does not contain the provisions to which
the Governor objected.