BILL ANALYSIS �
AB 35
Page 1
Date of Hearing: April 26, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 35 (Solorio) - As Amended: April 7, 2011
SUBJECT : State property: 32nd District Agricultural
Association.
SUMMARY : Authorizes the Board of Directors (Board) of the
Orange County Fair (OCF) to enter into a revenue-sharing plan
related to real and personal property assets owned by the 32nd
District Agricultural Association (32nd DAA) if the plan
generates over $100 million.
EXISTING LAW :
1)Authorizes the Department of General Services (DGS) to sell
all or any portion of the property that composes the OCF, by
means of a public bidding process deemed to be the fair market
value for the property and designed to obtain the highest,
most certain return for the State from a responsible bidder.
2)Requires DGS, 30 days prior to executing a sale transaction,
to report to the chairs of the fiscal committees of the
Legislature the financial terms of the transaction, a
comparison of fair market value for the real property and any
basis for agreeing to terms and conditions other than fair
market value.
3)Requires DGS to report to the Legislature on or before June
30th of each year on the status of the OCF's sale.
4) Requires that the proceeds of the OCF sale be deposited in
the General Fund (GF).
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "AB 35
adds a provision to the law authorizing the �OCF] sale that
would allow the Governor to enter into a revenue-sharing
agreement between the state and the Board or their agents if the
AB 35
Page 2
agreement would generate a minimum of $100 million in revenue.
"AB 35 would allow the state to keep this important asset, but
still generate revenue to replace the amount projected by the
proposed �OCF] sale. During a time of economic crisis, all
possibilities should be on the table. A revenue-sharing plan
could mean a win-win. The State would still own the fairgrounds
and generate revenue at least equal to what was proposed through
a sale, and Orange County residents could keep OCF."
Background . OCF conducts business by hosting events that
generate revenues of approximately $28 million through
admissions, carnival, food and beverage, attractions, and
parking. OCF also generates revenue through its on-site
Equestrian Center, farmer's markets, weekend swap meets, and
parking rentals. According to the District Economic Impact
report, OCF creates 2,184 local jobs, generates $2.5 million
annually in local tax revenue, and contributes more than $185
million annually to the local economy. As of October 31, 2010,
OCF's cash on hand was approximately $12.2 million, and its
year-to-date revenues exceeded expenses by approximately $3.2
million. OCF is self-sufficient from its fair and event
operations and does not rely on state funding.
In 1949, the 32nd DAA purchased the current OCF land in the City
of Costa Mesa for $130,195 from the federal government's War
Assets Administration in the wake of World War II using revenue
earned from the 32nd DAA's operations and state grant money
originating from horse racing proceeds. While the 32nd DAA,
more commonly referred to as OCF, is a state division, the 32nd
DAA holds the title to the OCF with the Board operating as its
stewards.
ABX4 22 (Evans), Chapter 20, Statutes of 2009, authorized DGS to
sell OCF as part of an effort to balance the 2009-10 state
budget. In October 2009, DGS began soliciting bids for the OCF
sale, while the City of Costa Mesa worked on a ballot measure to
issue a restrictive covenant on OCF use with the intent to
preserve and maintain the existing attractions at OCF. The
Orange County Counsel (Counsel) raised concerns to the Attorney
General about the OCF sale, claiming that the Board illegally
formed the Orange County Fair and Event Center Foundation
(Foundation) in order to purchase OCF for personal financial
gain. The Board used public funds to contract with a firm to
lobby Governor Schwarzenegger's office regarding the terms and
AB 35
Page 3
conditions of the OCF sale. Counsel questioned the Board's
decision to use its funds to influence the OCF sale terms
because some Board members were also Foundation members and
would stand to personally benefit financially from the OCF sale
under the Board's requested terms. Thus, the use of public
funds for private benefit would be illegal and void. The
District Attorney launched a criminal investigation into the use
of public funds.
In March 2010, DGS rejected all bids for the OCF sale, and the
State commenced negotiations with the City of Costa Mesa for the
OCF sale. In August 2010, DGS put the OCF property out to bid
again, and Facilities Management West (FMW) was selected as the
winning bid. The author of this bill, Senator Correa, local and
state officials, the OCF Preservation Society, and business
leaders filed a lawsuit to halt the OCF sale to FMW. In
February 2011, after assuming office, Governor Brown halted the
OCF sale.
Concerns have also been raised about the constitutionality of
ABX4 22 because it attempts to circumvent a mandate in the state
constitution requiring the sale of surplus state property to
service bond debt by requiring that the proceeds of the OCF sale
be deposited in the GF.
ABX4 22 declares that the OCF sale "does not constitute a sale
or other disposition of state surplus property within the
meaning of Section 9 of Article III of the California
Constitution," thereby freeing the money for other uses. A
preliminary consultation with Legislative Counsel indicates that
a statute may not amend the California Constitution, and thus,
ABX4 22 may be invalid.
Support . According to the Service Employees International
Union, Local 1000, "Despite the economic impacts that will
result from the proposed sale, there are a number of legal and
ethical activities that could jeopardize a fair assessment of
the OCF's commercial value. The most prominent legal issue
regarding the sale includes the legality of selling the OCF as
state surplus property. Additionally, the State has not
followed best practices for the sale and by not doing so the
sale will set a bad precedent for future surplus property sales.
AB 35 will allow the State to keep a valuable asset and at the
same time, allow for a revenue-sharing plan."
Previous Legislation . AB 1590 (Solorio) of 2009, would have
AB 35
Page 4
repealed DGS authorization to sell OCF property. This bill was
later amended to specify legislative intent that DGS maximize
state revenue for any sale, lease, or exchange of state-owned
property. This bill was held on the Assembly Floor.
AB 1790 (Solorio) of 2009, would have repealed DGS authorization
to sell OCF property. This bill was held in the Assembly
Business, Professions and Consumer Protection Committee.
ABX4 22 (Evans), Chapter 20, Statutes of 2009, authorized DGS to
sell the property known as the OCF.
REGISTERED SUPPORT / OPPOSITION :
Support
Service Employees International Union, Local 1000
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301