BILL ANALYSIS �
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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
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BILL NO: AB 1943 HEARING DATE: June 24, 2014
AUTHOR: Chesbro URGENCY: No
VERSION: March 24, 2014 CONSULTANT: Toni Lee
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: Tidelands: City of Eureka.
BACKGROUND AND EXISTING LAW
Existing law, under the Public Trust Doctrine, defines sovereign
or public trust lands as lands under the ocean and navigable
streams owned by the public and held in trust for the people by
government. Uses of these trust lands are generally limited to
those that are water dependent or related, and include commerce,
fisheries and navigation, and environmental preservation and
recreation. Because public trust lands are held in trust for all
citizens of California, they must be used to serve statewide, as
opposed to purely local, public purposes.
Existing law (Public Resources Code (PRC) �6301) grants the
California State Lands Commission (SLC) exclusive jurisdiction
over all tidelands and submerged lands including public trust
lands. SLC may also grant these lands to local jurisdictions as
specified.
Existing law, the Kapiloff Land Bank Act of 1982 (PRC �8600),
creates the Land Bank Fund (LB Fund) in the State Treasury and
continuously appropriates monies in the fund to the SLC for
certain public trust purposes. The act authorizes the SLC to use
monies in the LB Fund to further state policy, which declares
wetlands essential and that facilitating the completion of
projects on public trust lands is in the state's interest. The
LB Fund may receive revenues for mitigation, title settlements,
property acquisition, or the management of public trust property
held by SLC.
Existing law grants the City of Eureka (City) all the right,
title, and interest of the State of California to certain
tidelands and submerged lands located in Humboldt Bay in trust
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for specified purposes including the establishment of harbors,
commercial and industrial uses, aviation and other
transportation uses, the construction of public buildings,
wildlife conservation, and advertisement to maximize public use
(Section 3 of Ch. 1086, Stats. 1970, as amended by Section 1 of
Ch. 1068, Stats. 1982). The law provides that the City must
establish the Humboldt Bay Fund (Harbor Fund) and deposit all
monies received from the tide and submerged lands into the
Harbor Fund to support the purposes of the land grant. Prior to
June 30th of each year, the City must send to the State
Controller at least 15% of the money deposited by the City in
the Harbor Fund as a condition of a $750,000 state loan to the
City in 1970 from the Tidelands Oil Revenue Account.
In 1970, the City initiated a lawsuit to protect a state grant
of sovereign tide and submerged lands at the City's edge and
Humboldt Bay from private encroachment. The grant was intended
to assist the City in its redevelopment efforts and conferred
management and control responsibilities to the City. In
subsequent years, the City found that it could no longer
financially support the lawsuit. Because SLC found that defense
of the litigation was essential to statewide public trust
interests and it would be more expensive and time consuming for
the state to enter into its own litigation to protect those
interests, the state entered a unique agreement to loan the city
$250,000 in 1971. By 1976, the city required additional
financial assistance to continue the on-going legal defense. The
City and SLC entered an agreement to forgive the 1971 loan and
replace it with a new loan of $750,000 (Ch. 1095, Stats. 1978).
In return, the City agreed to undergo very strenuous grant
oversight in a number of ways, including audits of its books and
oversight of leases of the granted lands. Finally in 1982, there
was a slight revision of the loan agreement that credited the
City for approximately $88,000 of funds that were never
borrowed.
There have been several previous attempts to modify the loan
repayment provisions. SB 1126 (Chesbro, 2006) would have allowed
Humboldt Bay Harbor District to transfer the obligations from
the refinanced 1982 loan to a sub-account in the Harbor Fund.
The bill was vetoed with the message that "this bill is contrary
to the original agreement memorialized in Chapter 1095, Statues
of 1978, which specified that the grant was contingent upon
Eureka's agreement to make an annual remittance to the State in
perpetuity." Governor Schwarzenegger also noted that revenue
reduction was not prudent at the time, given the state's fiscal
condition. SB 742 (Chesbro, 2005) would have ended the 1970 loan
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agreement to the City that was renegotiated in 1982. The veto
message was substantially similar to the veto message for SB
1126.
The Eureka Redevelopment Agency (RDA) was established in 1970 to
revitalize project areas and improve the economic base of the
City. Prior to 2012, RDA received funding primarily from tax
increment revenues as a result of the establishment of three
redevelopment project areas. With passage of ABx1 26
(Blumenfield, 2011), all redevelopment agencies, including the
RDA, were legally dissolved on February 1, 2012 in response to
the state budget deficit. Acting as the Successor Agency, the
City now must assure that the existing debt service and other
obligations of the RDA are properly paid.
PROPOSED LAW
This bill:
Deletes the requirement that the City pay to the
Controller a sum not less than 15% of the money deposited
by the City into the Harbor Fund during the preceding
fiscal year.
Requires, on June 30, 2015 and at the end of every
fiscal year thereafter, that 4% of all gross revenues
generated from the trust lands granted to the City be
transmitted to SLC and deposited in the LB Fund for
expenditure by SLC to manage their granted lands program.
ARGUMENTS IN SUPPORT
According to the author, "The City of Eureka has paid back the
initial loan to the state and then some. To date the city has
repaid $1,167,000 on an $800,000 loan. The loan has greatly
helped the City but the Harbor continues to operate at a
deficit, with a projected operating deficit of $122,748 for
fiscal year 2013-14, further lowering the unrestricted fund
balance deficit to over $800,000. Additionally, the dissolution
of the RDA has saddled the successor agency's continued
repayment of Harbor bonds which amount to about $100,000 per
year, further impacting the Harbor Fund's deficit, and reducing
its ability to become an economically viable proprietary fund."
Removing the requirement for payment to the state will allow the
City of Eureka to place all of its tideland resources into
operating and maintaining its tideland facilities, which will in
turn help the City achieve the State's goals for Public Trust
Tidelands, as well as helping spur local economic development.
The City of Eureka states that the City pays 15% of gross
revenues from the City's Harbor Fund to the State Controller's
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Office as repayment for assistance in litigation of tidelands
boundaries. These payments amount to between $30,000 and $59,000
annually. Passage of the bill would acknowledge Eureka's
repayment to the state, but still require a reduced 4% payment
of Harbor Fund revenues to SLC for ongoing administration of
tideland matters.
ARGUMENTS IN OPPOSITION
The Department of Finance (DOF) states that the original grant
was contingent upon Eureka's agreement to make an annual
remittance to the state, in perpetuity. Dissolution of the RDA
cannot be responsible for the City's claimed financial
difficulties related to harbor operations because, pursuant to
the dissolution statutes, the City receives biannual property
tax apportionments to pay all statutorily recognized debts and
obligations of the former RDA. Any harbor-related funding
shortfalls likely stem from other financial decisions made by
the City.
COMMENTS
1.Should it pass, AB 2764 will amend PRC �6303 to require public
land trustees to annually report to SLC financial information
pertaining to granted lands by December 31. This change
accommodates the needs of SLC, whose staff state that this
deadline allows trustees enough time to finish financial
audits. SB 1424 (Wolk) of this session, relating to tidelands
in the City of Martinez, has been amended in anticipation of
changing this deadline to December 31. This bill requires a
similar amendment to keep the reporting dates consistent.
2.This bill requires a two-thirds vote of each house because it
makes a continuous appropriation of 4% of the Harbor Fund
revenues with no end date.
3.The statutes dealing with repayment of the $750,000 grant do
not include provisions for ending the City's payment
obligations. Instead, they require the City to pay to the
State Controller, in perpetuity, at least 15% of the funds
deposited in the Humboldt Bay Fund on an annual basis.
4.According to the Assembly Appropriations Committee, there are
minor annual costs to the General Fund in the range of $30,000
to $60,000 and minor increases to the Land Bank Fund in the
range of $8,000 to $16,000 annually.
5.According to the Senate Natural Resources and Water Committee
analysis of SB 1126, about $800,000 had been repaid to the
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state by 2004, exceeding the amount of the original loan.
6.Other recent legislation that redirects revenues from granted
public lands to the LB Fund include SB 1424 (Wolk, 2014) and
SB 551 (DeSaulnier, Ch. 422, Stats. 2011).
SUGGESTED AMENDMENT
Amend Section 1 to read:
An annual statement of financial condition and operations, to
conform with those requirements as the State Lands Commission
may prescribe, shall be submitted to the State Lands Commission
by the city on or before September 30th December 31 of each
year for the preceding fiscal year.
SUPPORT
City of Eureka (Sponsor)
California State Lands Commission
OPPOSITION
Department of Finance
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