BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1424 (Wolk) - State property: tidelands transfer: City of
Martinez.
Amended: April 8, 2014 Policy Vote: NR&W 9-0
Urgency: No Mandate: Yes (see staff comment)
Hearing Date: May 5, 2014 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1424 would grant state trust lands to the City
of Martinez (city) in exchange for a revenue-sharing agreement
with the state.
Fiscal Impact:
Annual costs of approximately $13,000 to the General Fund
for lost lease revenues from the city.
On-going annual costs, likely minor, to the General Fund to
the State Lands Commission (SLC) for administrative and
oversight duties. These costs are to be reimbursed by the
city.
Unknown costs to the General Fund and the Land Bank Fund
(LBF) for forgone revenue-sharing until the city has paid
off loans with the Division of Boating and Waterways within
the Department of Parks (DPR).
Unknown revenues to the General Fund and the LBF after
2038, but potentially later, as a result of a
revenue-sharing agreement.
Background: The state, through the SLC, currently grants certain
tide and submerged lands to the City of Martinez. This land
grant requires the city to return any net revenues generated on
the granted trust lands.
The city has also been leasing a piece of state land that
contains the Martinez Marina. The current lease was renewed in
2010 for 46 years. For the first ten years of the lease, the
city is required to pay an annual rent of $10,000 plus five
percent of the rent collected for marina use. Both the rent and
revenue share will be adjusted according to a specified schedule
beginning of year 11 of the lease.
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The SLC is the trustee of the LBF created pursuant to the
Kapiloff Land Bank Act of 1982 (PRC ��8600). The LBF may be used
for mitigation, title settlements, or the management and
improvement of real property held by the SLC for the public
trust.
According to DPR, the city currently has five outstanding loans
totaling $4.249 million ($2.975 million in principal plus
interest) that it received for improvements made to the Martinez
Marina. These loans were issued between FY1959-60 and FY 1984-85
by the Department of Boating and Waterways, which is now a
division within DPR. The last loan will mature on August 1,
2038. The city is disputing its obligation to repay the largest
of these loans, a $1.3 million loan made in FY 1959-60.
Proposed Law: This bill would repeal the existing land grant and
land lease with the city and would establish a new grant for
these lands that would cover all involved parcels. This new
grant would:
Require the city to hold the lands in trust for the benefit of
all Californians.
Allow the city to lease the lands for terms not to exceed 49
years and only for purposes consistent with the public trust
doctrine.
Require the city to develop, and submit to the SLC for
approval by January 1, 2020, a trust lands use plan describing
any proposed development, preservation, or other use of the
trust lands.
Require the city to submit a report every five years,
beginning in 2025, regarding the utilization of the trust
land.
Require the city to reimburse SLC for all expenses incurred in
the administration of the act, including periodic audits.
Require that the city annually transmit 20% of all gross
revenues generated on the trust lands beginning in 2015. Of
this amount, 80% would be deposited in the General Fund and
20% would be deposited into the LBF. The city would be
exempted from sharing revenues with the state until the DPR
determines that the city has repaid loans it owes to that
department.
Related Legislation: SB 551 (DeSaulnier) Chapter 422, Statutes
of 2011 made a grant to the City of Pittsburg with substantially
similar conditions, except the revenue sharing with the state
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was not contingent on the repayment of loans.
Staff Comments: For most past land grants, including the
existing grant to Martinez, the SLC has only required that net
trust revenues be returned to the state, which effectively has
meant that the state never receives any revenues from granted
trust lands. This grant however would allow the state to receive
20% of gross revenues. The SLC feels that these new revenue
sharing provisions will encourage grantees to appropriately
develop tidelands while assuring revenues for the General Fund.
Currently the General Fund is only receiving approximately
$13,000 a year from the city as a result of the Martinez Marina.
While this bill would result in the loss of these lease
revenues, once the city develops and implements a plan its
granted lands as required by this bill, the General Fund may see
higher revenues.
However, staff notes that the state is highly unlikely to
receive any revenues from this grant for at least 23 years
because the city would be exempt from the revenue sharing until
it has paid off its outstanding loans from the DPR. There are
two substantial issues with this exemption. First, the exemption
arguably serves as a disincentive for the city to fully repay
the DPR loans, especially considering that the city is disputing
its obligation to repay one of the loans. Staff notes that the
exception applies even if the state's portion of revenues
exceeds the city's yearly loan repayment obligation and. The
exception is also irrespective of the amount of the residual
loan. Second, this exception effectively is repaying the loans
off with General Fund monies. That is, the city is repaying the
loans with monies that would otherwise have been deposited in
the General Fund. In essence, this agreement could be
interpreted as forgiving the city of these loans. Staff
recommends that the loan repayment obligation remain with the
city instead of the General Fund.
The LBF is continuously appropriated to the SLC. By requiring
the deposit of revenues in the LBF, this bill makes an
appropriation.
This bill is tagged as a state-mandated local program because of
the requirements on the city. However, as the city is able to
recover the costs through fees or assessments, its costs would
not be reimbursed.
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