BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 586|
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THIRD READING
Bill No: SB 586
Author: Yee (D)
Amended: 5/6/09
Vote: 27 - Urgency
SENATE GOVERNMENTAL ORG. COMMITTEE : 11-1, 4/14/09
AYES: Wright, Benoit, Calderon, Denham, Florez, Oropeza,
Padilla, Romero, Wiggins, Wyland, Yee
NOES: Harman
NO VOTE RECORDED: Negrete McLeod
SENATE APPROPRIATIONS COMMITTEE : 13-0, 5/26/09
AYES: Kehoe, Cox, Corbett, Denham, DeSaulnier, Hancock,
Leno, Oropeza, Runner, Walters, Wolk, Wyland, Yee
SUBJECT : State property: sale
SOURCE : Author
DIGEST : This bill directs the Department of General
Services, in consultation with the Department of Food and
Agriculture, 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.
ANALYSIS : Existing law generally requires the Director
of the Department of General Services (DGS) to perform
various functions with respect to state property and
CONTINUED
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provides for the sale, lease, or transfer of surplus state
property.
Existing law requires the DGS Director 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.
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: (1) the financial terms of the transaction,
(2) a comparison of fair market value for the property and
financial terms, and (3) the basis for agreeing to terms
and conditions other than fair market value.
Existing law, Section 11011 (k) (1) and (2) of the
Government Code, 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.
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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, state agency fairs, which are
managed under the Department of Food and Agriculture (DFA)
within the Division of Fairs and Expositions. Each fair
operates with a degree of 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 Fair and Exposition Fund. Current law
provides the Fair and Exposition Fund will receive $32
million annually from the General Fund.
Proposition 60A of November 2004, SCA 18 (Johnson),
Resolution Chapter 103, Statutes of 2004, which was adopted
by the electorate (73 percent 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.
This bill:
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
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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
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 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. 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 (Proposition 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.
Background
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, Statutes 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.
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Prior Legislation
A similar bill, SB 1527 (Yee), 2007-08 Session, passed the
Senate Floor with a vote of 27-9 on July 14, 2008, but 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."
This bill does not contain the provisions to which the
Governor objected.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
Sale of state property Unknown revenue increase
one time Special*
* Fair and Exposition Fund (assumes the parcel was
initially acquired with moneys from this fund;
otherwise, the revenue from the sale would be
deposited in the Deficit Recovery Bond Retirement
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Sinking Fund Subaccount pursuant to Proposition 60A.
Reimbursement from the net proceeds of the sale of
any DGS costs incurred in the disposition of the
property would be made.
SUPPORT : (Verified 5/28/09)
City of Daly City
Daly City Redevelopment Agency
OPPOSITION : (Verified 5/28/09)
Western Fairs Association
ARGUMENTS IN SUPPORT : According to the author's office,
this bill 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, this bill requires the state to enter into
negotiations to sell, at fair market value, to any
interested party, approximately 13 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 does not have a post office, pharmacy or
grocery store. 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
million dollars. During this period of time, the Fair and
Exposition Fund has been tapped to help close the Cow
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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 this bill provides for
the disposition of the overflow parking lot, at fair market
value, with the proceeds going to the Fair and Exposition
Fund because monies that were expended to initially
purchase the parking lot parcel were derived from the Fair
and Exposition 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 bill is
unnecessary and premature due to the fact that community
needs are already being addressed by the Cow Palace Board
which has begun a Request for Proposal (RFP) process to
develop the 13 acres of the Cow Palace property referenced
in this bill. 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.
TSM:mw 5/28/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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