BILL ANALYSIS �
AB 1421
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 1421 (Committee on Accountability and Administrative Review)
- As Introduced: March 21, 2013
SUBJECT : Surplus state property: realtors and landlocked
properties.
SUMMARY : Provides for the selection of local real estate
brokers to sell state surplus property and expands the types of
properties in current law that the Director of the Department of
General Services (DGS) may sell, convey, or exchange at fair
market value under specified circumstances to include
landlocked, remainder, and remnant parcels. Specifically, this
bill :
1)Authorizes DGS, to employ a licensed real estate broker, with
regard to the sale of a surplus property, who is located
within the vicinity of the surplus property.
2)Requires DGS' selection of a local licensed real estate broker
to be based on the location of the property, the broker's
knowledge of the local real estate market and success in
selling real property in the local market, and the broker's
demonstrated competence and professional qualifications.
3)Requires DGS to adopt specific criteria relating to
competence, qualifications, and customary commission rates in
implementing the selection method specified above.
4)Adds landlocked, remainder, and remnant parcels to the types
of properties in current law that the Director of DGS may
sell, convey, or exchange at fair market value under specified
conditions if the sale, conveyance, or exchange is with the
owner of an adjoining property.
5)Deletes existing law requiring lands acquired through
foreclosure, seizure, or court order, and lands valued at less
than $25,000 to be declared surplus prior to sale.
EXISTING LAW :
1)Allows DGS to employ a licensed real estate broker to sell
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surplus property only when DGS determines that the employment
of a broker would result in a cost savings to the state.
2)Authorizes the Director of DGS to sell, convey, or exchange
properties that are not needed by any state agency at fair
market value following 30-day notice to the Joint Legislative
Budget Committee (JLBC) and the applicable members of the
Senate and Assembly who represent the district in which the
properties are located. This applies under any of the
following circumstances:
a) Property of no more than five acres to a local
governmental agency for the purpose of local public works
projects;
b) Property received by the state as the result of a
foreclosure, seizure, or court action;
c) Property that is being encroached on by an adjacent
landowner, and the Attorney General, state agency, and
adjacent landowner agree that the best way to resolve the
matter is through a sale of the property or an exchange of
property of equal value; and,
d) Property with a fair market value of less than $25,000.
3)Requires properties acquired through foreclosure, seizure, or
court action, and properties worth less than $25,000 pursuant
to the above provisions to be declared surplus prior to sale.
FISCAL EFFECT : Unknown
COMMENTS : DGS is sponsoring this bill to streamline current
real property management practices and provide savings to the
state. According to DGS, this bill maximizes the opportunity
for the sale of hard-to-sell, remote, or unusual surplus
properties through a local licensed real estate broker located
in the vicinity of the property and will result in faster, less
costly sales of state property. This bill will also ensure that
landlocked, remainder, and remnant parcels of state land are
properly disposed of and help generate additional revenue for
the state.
Under current law, DGS would exercise its authority to employ a
real estate broker in instances where there is some condition
existing with the property that does not warrant the cost or
time for DGS to market the property through the traditional
public bid process. Examples of such properties include land in
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a remote location; land that is low-valued; a property that DGS
previously put out to public bid without success; or, an unusual
property that is not typical of properties that DGS sells. The
current contract solicitation method requires DGS to post a
lengthy and formal Request for Proposal (RFP) in the State
Contracts Register, a process that, according to DGS, can take
several months without producing a desirable result.
For example, in 2012, DGS hired a licensed real estate broker to
market a surplus property located in a remote unincorporated
area of Butte County. Attempts to sell the property in a public
bid opening failed. Instead of following an abbreviated
contracting process to employ the broker, DGS complied with
formal contracting requirements and posted a statewide RFP. DGS
reports that it took several months to go through this process
while the land sat vacant and exposed to vandalism and vagrancy.
The broker who was finally selected was from Sacramento,
approximately 80 miles from the location of the property. The
out-of-area broker was not familiar with the Butte County market
and had no local leads to sell the property. Furthermore, the
broker's proximity to the property limited the broker's ability
to respond to requests by interested parties to view the site.
The broker required much assistance from DGS during the
six-month listing period and did not end up bringing a buyer,
until DGS referred a prospective buyer to the broker for
follow-up just before the end of the listing. DGS notes that,
in cases like this that involve hard-to-sell properties, the
lengthy RFP and statewide advertising process do not provide
cost savings to the State on the sale and instead result in
added costs and time delays.
To realize the cost savings of obtaining the services of a
broker to sell these types of problematic properties in the area
where they are located, DGS needs to employ a solicitation
method that is streamlined and cost effective. This bill
expedites the solicitation process by allowing DGS to forgo
statewide advertising and target only real estate brokers who
are located in the vicinity of the surplus property and familiar
with local market trends, land values, and commission rates in
the area.
DGS is authorized to sell certain types of state land that are
not typical of land that DGS routinely acquires or that DGS
typically disposes of through a public bid process if 30-day
notice is given to the JLBC and the applicable members of the
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Senate and Assembly who represent the district in which the
lands are located. This bill adds landlocked, remainder, and
remnant parcels to the types of properties DGS may sell, convey,
or exchange, because, in most cases, the only logical buyer for
these properties is an adjoining landowner. This is
particularly true for landlocked parcels where only an adjoining
owner has access to the property.
Lastly, this bill eliminates the requirement in current law for
lands acquired through government loan default, seizure, or
court order, and lands valued at less than $25,000 to be
declared surplus prior to sale. DGS indicates this requirement
is unnecessary because the costs to sell these types of
properties through the traditional public bid process are often
higher than the property is worth. According to DGS, low value
lands and properties seized through court actions or foreclosure
are often difficult to sell and sit vacant, unprotected and
exposed to vandalism and vagrancy. Removing the requirement to
declare these properties surplus prior to sale will enable DGS
to dispose of them in a more timely and cost-efficient manner.
RECOMMENDED AMENDMENTS : The committee will be accepting the
following amendments at the request of DGS:
1)Limit the landlocked and remainder or remnant parcels added by
this bill to 50 and 15 acres, respectively; and,
2)Clarify that the acreage limitation shall not apply to
property acquired for public purposes if the written request
for the sale, conveyance, or exchange of remainder or remnant
parcels is made within one year of acquisition.
PRIOR LEGISLATION : SB 1645 (Mountjoy), Chapter 731, Statutes
of 1998, authorizes the Director of DGS to sell, convey, or
exchange properties that are not needed by any state agency at
fair market value under specified circumstances if 30-day notice
is provided to the JLBC and the applicable Members of the Senate
and Assembly who represent the district in which the properties
are located.
REGISTERED SUPPORT / OPPOSITION :
Support
Department of General Services (sponsor)
AB 1421
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Opposition
None on file.
Analysis Prepared by : Cassie Royce / A. & A.R. / (916)
319-3600