BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1943|
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THIRD READING
Bill No: AB 1943
Author: Chesbro (D)
Amended: 6/30/14 in Senate
Vote: 27
SENATE NATURAL RESOURCES AND WATER COMMITTEE : 8-1, 6/24/14
AYES: Pavley, Cannella, Evans, Hueso, Jackson, Lara, Monning,
Wolk
NOES: Fuller
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 72-0, 5/8/14 - See last page for vote
SUBJECT : Tidelands: City of Eureka
SOURCE : City of Eureka
DIGEST : This bill revises the statutory obligation for the
City of Eureka (City) to remit certain funds to the state
related to tidelands and submerged lands located in Humboldt Bay
that were granted to the City in the 1970s.
ANALYSIS :
Existing law:
1.Grants to the City all the right, title, and interest of the
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State of California in and to certain tidelands and submerged
lands located in Humboldt Bay in trust for specified purposes.
2.Requires the City to establish the Humboldt Bay Fund (Fund)
and to deposit all monies received directly from, or
indirectly attributable to, the tide and submerged lands into
the Fund.
3.Requires the City, prior to June 30 of each year, to pay to
the State Controller at least 15% of the money deposited by
the City in the Fund during the preceding fiscal year as a
condition of a $750,000 loan made to the City by the state in
1970.
4.Establishes the Kapiloff Land Bank Act of 1982 (Act), for the
purpose of facilitating public trust settlements and
mitigation projects.
5.Creates, under the Act, the Kapiloff Land Bank Fund (KLB Fund)
and continuously appropriates monies in the LB Fund subject to
a statutory trust to the State Lands Commission (SLC), acting
as the Land Bank Trustee, to acquire real property or any
interest in real property for the purposes of public trust
title settlements and for mitigation of adverse environmental
impacts.
6.Requires that the City to submit to the SLC, on or before
September 30 of each year for the preceding fiscal year, an
annual statement of financial condition and operations.
This bill:
1.Deletes the statutory obligation that requires the City to
remit to the Controller, annually, a sum not less than 15% of
the amount of money deposited by the City into the Fund during
the preceding fiscal year as a condition of a $750,000 loan
made to the City by the state in 1970.
2.Requires, on June 30, 2015, and at the end of every fiscal
year thereafter, 4% of all gross revenue generated from the
trust lands, to be transmitted to the SLC and deposited in the
KLB Fund for expenditure by the SLC for management of the
SLC's granted lands program.
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3.Requires that the annual statement of financial condition and
operations be submitted to the SLC on or before December 31 of
each year for the preceding fiscal year.
Background
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. In
1978, the City and SLC entered an agreement to forgive the 1971
loan and replace it with a new loan of $750,000. 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 [s]tate
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 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
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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 AB 26X1
(Blumenfield, Chapter 5, Statutes of 2011, First Extraordinary
Session), 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Revenue losses of $30,000 to $60,000 to the General Fund from
eliminated payments from the City.
Increased revenues of $8,000 to $16,000 to the KLB Fund
(special) from the City.
SUPPORT : (Verified 8/15/14)
City of Eureka (source)
State Lands Commission
OPPOSITION : (Verified 8/15/14)
Department of Finance
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 [C]ity 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 to place all of its
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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 author continues, "The City states that the City pays 15% of
gross revenues from the City's Harbor Fund to the Controller's
Office as repayment for assistance in litigation of tidelands
boundaries. These payments amount to between $30,000 and
$59,000 annually. Passage of this bill will 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 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.
ASSEMBLY FLOOR : 72-0, 5/8/14
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Fong, Fox, Frazier, Beth Gaines,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Grove, Hagman,
Hall, Harkey, Roger Hern�ndez, Holden, Jones-Sawyer, Levine,
Linder, Logue, Lowenthal, Maienschein, Medina, Melendez,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez,
Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber,
Wieckowski, Wilk, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Ch�vez, Donnelly, Eggman, Gorell, Jones,
Mansoor, V. Manuel P�rez, Vacancy
RM:k 8/16/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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