BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2726 (Daly) - University of California: real property sales.
Amended: March 28, 2014 Policy Vote: GO 6-3
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Mark McKenzie
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 2726 would authorize the University of
California (UC) to sell properties valued at less than $1
million without following specified procedures that require
public notice of the sale to bidders and public acceptance of
the sealed bid that offers the best combination of price and
terms. UC is currently exempt from these competitive bidding
requirements when selling properties valued at $500,000 or less.
Fiscal Impact:
Unknown overall administrative savings to UC, potentially
several hundred thousand dollars annually, by exempting
sales of properties valued between $500,000 and $1 million
from specified public notice, sealed bid, and public
acceptance of offers procedures.
Unknown overall impact on net UC revenues derived from
property sales. There could be revenue gains by increasing
the public notice and sealed bid thresholds, and by
streamlining sales of foreclosed properties. Revenue
impacts related to provisions that authorize consideration
of bidder qualifications in the sealed bid process are
unknown. (see staff comments)
Background: The UC is only subject to legislative control for
specified purposes, including statutes that prescribe
competitive bidding requirements related to construction
contracts, sales of real property, and purchasing materials,
goods, and services. When selling property with an estimated
value that exceeds $500,000, the regents of the UC must give
public notice to bidders by publishing a minimum of six notices
in newspapers between 2 and 12 weeks prior to the day set to
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receive sealed bids, as specified. Existing law requires the UC
to open the sealed bids on the date designated in the public
notice, and accept in public the bid that offers the best
combination of price and terms deemed to be in the university's
best interest, or reject all bids. If the successful bidder
fails to perform under the terms, the regents may accept the bid
that offers the best combination of price and terms from the
remaining bids, without further notice.
Existing law exempts UC from these publication and award
procedures for the following property sales: sales of fractional
ownership interests; sale of a right of use in property; sales
of property subject to specified restrictions, disposition of
property acquired through power of sale through a deed of trust;
sales of public lands under the direction of a federal agent;
sales to persons who will dedicate the property to public use;
sales of properties acquired through eminent domain; and
exchanges to acquire property for university purposes.
Proposed Law: AB 2726 would revise the procedures that UC must
follow when selling property. Specifically, this bill would:
Authorize UC to sell property with an estimated value of
$1 million or less (rather than $500,000 or less) without
following specified requirements to publicly notice the
sale, acceptance of sealed bids, and publicly award to the
bidder offering the best terms and price.
Authorize UC to consider a bidder's qualifications,
including the ability to complete a transaction and secure
development entitlements, and in addition to price and
terms, when accepting a sealed bid that it deems in the
best interests of the university.
Exempt the following sales of UC property from the
specified publication and award procedures: properties
acquired through foreclosure, deed in lieu of foreclosure,
and transactions when a property is accepted in settlement
of a defaulted mortgage or legal settlement.
Related Legislation: AB 738 (Papan), Chap. 576/1997, established
the current $500,000 limit on the estimated value of real
properties owned by UC that must be sold through the specified
public notice, sealed bid, and competitive award procedures.
Staff Comments: To the extent properties valued between $500,000
and $1 million are not subject to the public notice and sealed
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competitive bid procedures, there could be an increase in the
number of responsive buyers, likely resulting in increased
competition and higher sales prices. In addition, there could
be administrative savings and potential higher sales prices
related to provisions that exempt from the public notice and
sealed competitive bid procedures the sale of properties
acquired through foreclosure, deed in lieu of foreclosure, and
transactions when a property is accepted in settlement of a
defaulted mortgage or legal settlement. UC estimates that
revenue gains could be in the hundreds of thousands of dollars
annually.
The revenue impact of provisions that authorize UC to consider a
bidder's qualifications when choosing a winning bid is unknown.
This additional criterion would allow UC to prequalify bidders
and allow them to demonstrate their ability to close
transactions and obtain development entitlements, and describe
conditions for closing escrow and planned approaches to
entitling the property. Consideration of these additional
factors, apart from price and specific terms, could be
advantageous to the university. Staff notes that this could
result in administrative savings and intangible benefits, but
could also result in a lower sales price to the extent other
factors are deemed by the UC to be more important than highest
price.