BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Hannah-Beth Jackson, Chair 2015-2016 Regular Session AB 1900 (Jones-Sawyer) Version: March 31, 2016 Hearing Date: June 21, 2016 Fiscal: Yes Urgency: Yes ME SUBJECT San Pedro Courthouse DESCRIPTION This bill would authorize the Judicial Council to sell the San Pedro Courthouse, which has not been in use for three years, and to use the proceeds to pay for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. This bill also requires that the County of Los Angeles receive the opportunity to purchase the property at a fair market price before the property is offered to others for purchase. BACKGROUND There have been 53 courthouse closures and 215 courtroom closures throughout California since 2008. Los Angeles County alone has suffered 78 courtroom and 8 courthouse closures since 2008. The San Pedro Courthouse was closed by the Superior Court of Los Angeles in June 2013 due to budget cuts and remains closed to this day. Nonetheless, the Judicial Council continues to fund the maintenance of the San Pedro Courthouse, including payment for utilities, landscaping, and vandalism prevention. The Judicial Council recently declared the San Pedro Courthouse as surplus property pursuant to their requirement under Government Code Section 11011 to identify real properties that are no longer needed. The Judicial Council, sponsor of this bill, seeks legislative authorization to sell the San Pedro Courthouse and legislative direction to use the proceeds to pay for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. Under current law, proceeds from the sale of the San Pedro Courthouse, or any courthouse, would be directed into the Special Reserve for AB 1900 (Jones-Sawyer) PageB of? Economic Uncertainties. Additionally, under current law, the Judicial Council is required to consult with the County in which the surplus property is located and if the County expresses an interest in purchasing the property, the Judicial Council is also obligated to offer the surplus property to the County at fair market value prior to offering the property to another state agency or local government agency. (Gov. Code Sec. 70391(c)(2).) In a letter dated March 30, 2015, the County of Los Angeles confirmed it wants to purchase the San Pedro Courthouse after it is declared surplus. This bill would authorize the Judicial Council to sell the San Pedro Courthouse and provide that the proceeds could only be used for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. The bill would also require the Judicial Council to give the County of Los Angeles the right to purchase the San Pedro Courthouse for fair market value before otherwise offering the property for sale. CHANGES TO EXISTING LAW Existing law establishes the Immediate and Critical Needs Account of the State Court Facilities Construction Fund (ICNA) and limits how ICNA funds may be spent. (Gov. Code Sec. 70371.5.) Existing law permits ICNA funds to only be used for the following purposes: planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities; repayment for moneys appropriated for lease of court facilities pursuant to the issuance of lease-revenue bonds; payment for lease or rental of court facilities or payment of service contracts, including those made for facilities in which one or more private sector participants undertake some of the risks associated with the financing, design, construction, or operation of the facility; or trial court operations. (Gov. Code Sec. 70371.5(a)(1)-(4).) Existing law provides that notwithstanding any law, the Controller may use ICNA funds for cash flow loans to the General Fund as specified. (Gov. Code Sec. 70371.5(g).) AB 1900 (Jones-Sawyer) PageC of? Existing law establishes the Special Fund for Economic Uncertainties. (Gov. Code Sec. 16418.) Existing law requires that proceeds from the sale of surplus state property be deposited into the Special Fund for Economic Uncertainties after paying the principal and interest on the 2004 Economic Recovery Bond Act. (Cal. Const. art. 3, Sec. 9; Gov. Code Sec. 11011(g).) Existing law provides that upon legislative authorization, the Department of General Services may sell or dispose of excess property, as specified. (Gov. Code Sec. 11011 et seq.) Existing law directs each state agency to annually review lands under their jurisdiction to determine what lands are in excess of their foreseeable needs and to report on their findings to the DGS. (Gov. Code Sec. 11011.) Existing law provides that the Judicial Council has authority with regard to court facilities, including, to: exercise full responsibility, jurisdiction, control and authority as an owner would have over trial court facilities, the title of which is held by the state, including, but not limited to, the acquisition and development of facilities; exercise the full range of policymaking authority over trial court facilities, including, but not limited to, the acquisition and development of facilities, planning, construction, and operation of court facilities, to the extent not expressly otherwise limited by law; and dispose of surplus court facilities following the transfer of responsibility for court facility from the county to the Judicial Council, as specified, including consulting with the county concerning the disposition of the facility and offering the surplus facility to the county at fair market value prior to offering it to other state agencies or local government agencies, when the transferring county requests it. (Gov. Code Sec. 70391.) This bill would provide that notwithstanding any other law, the Judicial Council may sell the San Pedro Courthouse located at 505 South Centre Street with Assessor Parcel Number 7455-0130901. This bill would provide that the sale of the San Pedro Courthouse must be at fair market value and upon the terms and AB 1900 (Jones-Sawyer) PageD of? conditions and subject to the reservations the Judicial Council deems in the best interests of the state if the following requirements are met: the sale complies with Section 70391 of the Government Code, as applicable; the Judicial Council consults with the County of Los Angeles concerning the sale of the courthouse; and the Judicial Council offers the County of Los Angeles the right to purchase the courthouse at a fair market value before otherwise offering the property for sale. This bill would provide that notwithstanding any other law, the proceeds from the sale of the courthouse shall be deposited into the Special Fund for Economic Uncertainties, and then must be immediately transferred to the ICNA. This bill would provide that the proceeds from the sale of the San Pedro Courthouse shall be appropriated from the ICNA to the Judicial Council and can only be used for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. This bill makes related legislative findings and contains an urgency clause. COMMENT 1. Stated need for the bill The author writes: The bill would declare the existing San Pedro Courthouse surplus property and allow for its disposal by the Judicial Council. The state of California, acting by and through the Judicial Council, holds title to the San Pedro Courthouse. The Courthouse is a shared-use facility, with the Judicial Council holding a 95.15 percent equity interest and the County of Los Angeles holding the remaining 4.85 percent. AB 1900 (Jones-Sawyer) PageE of? The Superior Court of California, County of Los Angeles closed the Courthouse on June 30, 2013, and has since advised Judicial Council staff that the court does not have a current or any future need for the Courthouse. According to a report by the Judicial Council, the County of Los Angeles has expressed its desire to purchase the Courthouse at its fair market value as soon as possible and the court supports the sale to the County. After the Judicial Council declared and proposed legislation required to dispose of the Courthouse as surplus property, the Legislature requested an alternative proposal framed in a manner authorizing the sale not as surplus property so as to allow the Judicial Council to retain the proceeds from its sale. 2. The County of Los Angeles is interested in purchasing the Courthouse The County of Los Angeles, in a "letter of interest" regarding the "San Pedro Courthouse Acquisition," writes that the "County wants to purchase the San Pedro Courthouse after it has been declared surplus." This triggers the Judicial Council's statutory duty to give the County of Los Angeles the right of first refusal to purchase the San Pedro Courthouse for fair market value. It appears that if the Legislature approves this bill, the Judicial Council already has a buyer lined up and will, as quickly as possible be able to sell the property and cease paying maintenance fees. 3. Allows Judicial Council to spend proceeds on court facilities Under the California Constitution, the proceeds from the sale of the San Pedro Courthouse (surplus property) must be directed into the Special Fund for Economic Uncertainties (SFEU). Without legislation, the proceeds would remain in the SFEU and not be redirected to the Judicial Council for court facilities. The Legislature may appropriate funds in the SFEU for any purpose by majority vote. This bill would require the proceeds from the sale of the San Pedro Courthouse to be directed into the SFEU and then appropriated into the Immediate and Critical Needs Account of the State Court Facilities Construction Fund AB 1900 (Jones-Sawyer) PageF of? (ICNA). The author notes that the legislature has approved several bills that disposed of surplus property in the same manner.<1> Current law delineates what ICNA funds may be spent on. ICNA funds may be spent on planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. However, ICNA funds can be spent in other ways including on trial court operations. The bill would further require that the ICNA funds generated from the sale of the San Pedro Courthouse to only be spent on planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. An argument could be made that since the funds are being deposited into ICNA that the Judicial Council should be allowed to spend the funds on everything they can currently use ICNA funds for, including trial court operations. However, because the funds arise from the closure and sale of a courthouse, the funds arguably most appropriately should be used to open new court facilities or ensure that existing facilities remain open. Support : County of Los Angeles Opposition : None Known HISTORY Source : Judicial Council of California Related Pending Legislation : None Known Prior Legislation : SB 1407 (Perata, Ch. 311, Stats. 2008) created the Immediate and Critical Needs Account of the State Court Facilities Construction Funds and authorized the Judicial Council up to $5 billion in bond financing for court construction projects. --------------------------- <1> See e.g. AB 826 (Jones-Sawyer, Ch. 505, Stats. 2013) authorized Department of General Services to dispose of 8 parcels of state property with some of the proceeds being redirected; SB 1580 (Governmental Organization, Ch. 798, Stats. 2012) authorized sale of armories and have proceeds deposited in the Armory Fund. AB 1900 (Jones-Sawyer) PageG of? Prior Vote : Assembly Floor (Ayes 79, Noes 0) Assembly Appropriations Committee (Ayes 20, Noes 0) Assembly Judiciary Committee (Ayes 9, Noes 0) *************