BILL ANALYSIS Ó AB 1900 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1900 (Jones-Sawyer and O'Donnell) As Amended August 19, 2016 2/3 vote. Urgency -------------------------------------------------------------------- |ASSEMBLY: |79-0 |(April 21, |SENATE: |39-0 |(August 23, | | | |2016) | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: JUD. SUMMARY: Authorizes the sale of the San Pedro Courthouse and moves proceeds from the sale to the Immediate and Critical Needs Account, a fund that provides for court construction and other facility-related projects. Specifically, this bill: 1)Authorizes Judicial Council to sell the San Pedro Courthouse at fair market value, upon the terms and conditions that Judicial Council deems in the best interests of the state, as long as the following requirements are met: a) The sale complies with Judicial Council's responsibilities and authorities with regard to court facilities as provided by law and as applicable; b) The Judicial Council consults with the County of Los AB 1900 Page 2 Angeles on the sale; and c) The Judicial Council offers the County of Los Angeles the right to purchase the property at fair market value. 2)Provides that the proceeds from the sale of the San Pedro Courthouse shall be deposited into the Immediate and Critical Needs Account of the State Court Facilities Construction Fund. 3)Makes needed findings and declarations. 4)Provides that the act is an urgency statute, and it is necessary that it take effect immediately to enable the sale of the San Pedro court facility to occur as soon as possible. 5)Provides that the disposition of the property shall not constitute a sale of surplus state property within the meaning of the California Constitution. The Senate amendments provide that the disposition of the property shall not constitute a sale of surplus state property within the meaning of the California Constitution and make technical changes. EXISTING LAW: 1)Requires proceeds from the sale of surplus state property, after paying the principal and interest on the 2004 Economic Recovery Bond Act, to be deposited into the Special Fund of Economic Uncertainties, or any successor fund. (California Constitution, Article IV, Section 9; Government Code Section 11011 (g).) AB 1900 Page 3 2)Provides that upon legislative authorization, the Department of General Services may sell or dispose of the excess property upon any terms and conditions and subject to any reservations and exceptions as the Department of General Services may deem to be in the best interests of the state. (Government Code Section 11011 et seq. Unless stated otherwise, all further statutory references are to that code.) 3)Directs each state agency to annually review lands under its jurisdiction to determine what, if any, land is in excess of its foreseeable needs and to report its finding to the Department of General Services. (Id.) 4)Provides that the Judicial Council, as the policymaking body for the judicial branch, shall have certain responsibilities and authorities with regard to court facilities, including, among other things, the following: a) 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. b) Exercise the full range of policymaking authority over trial court facilities, including, but not limited to, planning, construction, acquisition, and operation, to the extent not expressly otherwise limited by law. (Section 70391.) c) Dispose of surplus court facilities following the transfer of responsibility for court facilities from the county to the Judicial Council, subject to, among other things, the following requirements: i) The Judicial Council shall consult with the county AB 1900 Page 4 concerning the disposition of the facility. ii) When requested by the transferring county, a surplus facility shall be offered to that county at fair market value prior to being offered to another state agency or local government agency. The Judicial Council shall consider whether the potential new or planned use of the facility is: compatible with the use of other adjacent public buildings; unreasonably departs from the historic or local character of the surrounding property or local community; has a negative impact on the local community; unreasonably interferes with other governmental agencies that use or are located in or adjacent to the building containing the court facility; and is of sufficient benefit to outweigh the public good in maintaining it as a court facility or building. (Id.) 5)Establishes the Immediate and Critical Needs Account of the State Court Facilities Construction Fund, whose proceeds shall only be used for any of the following: a) The 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. b) 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. c) For trial court operations, as provided. (Section 70371.5.) AB 1900 Page 5 FISCAL EFFECT: According to the Senate Appropriations analysis: 1)Sale proceeds: Redirection of one-time revenue potentially in excess of several million dollars from the Special Fund for Economic Uncertainties (SFEU) to the Immediate and Critical Needs Account (ICNA). Under existing law, the proceeds from the sale of surplus state property are to be deposited into the SFEU (now that the principal and interest on the 2004 Economic Recovery Bonds have been fully paid). The 2016 Budget Act reflects a 2016-17 ending balance of $1.75 billion in the SFEU. Absent the declaration of the courthouse as "surplus property," the net proceeds of the sale would potentially be subject to reversion to the General Fund and the State Court Facilities Construction Fund pursuant to Government Code Section 70391(c)(1). 2)Appropriation to Judicial Council: One-time appropriation potentially in excess of several million dollars to the Judicial Council from the ICNA. Annual revenues to the ICNA have been declining, and the 2016 Budget Act reflects a 2016-17 ending balance of $87.8 million in the ICNA. 3)Operations/maintenance: Future cost savings (General Fund*) to the Judicial Council in avoided maintenance and operations costs. Despite the closure of the courthouse at the end of June 2013, the Judicial Council continues to share responsibility with the county for maintenance and operations costs pursuant to Government Code Section 70343(a)(2). *Trial Court Trust Fund COMMENTS: Due to the Judicial Council's ongoing budget constraints, many of California's courts have closed. Indeed, since 2008, 53 courthouses have closed, which has resulted in a closure of 215 courtrooms statewide. Presently, 48 courthouses and 200 courtrooms remain closed. In order to preserve access to justice, ideally those courthouses should be re-opened. AB 1900 Page 6 Realistically, however - given the courts' funding challenges - not all courthouses will be able to be re-opened. According to Judicial Council staff, it has become unsustainable to have as many courthouses as the State once did. Of all these closures, eight of the courthouses and 78 of the courtrooms are in the County of Los Angeles. In June 2013, the Superior Court of Los Angeles County closed the San Pedro Courthouse, and shifted the court's caseload to the new Deukmejian Courthouse in Long Beach. Currently, there are no plans to reopen the San Pedro Courthouse. Although the San Pedro Courthouse has been vacated since its closure, the Judicial Council continues to pay for the costs of the operations and the maintenance of that site. This bill authorizes Judicial Council to sell the San Pedro Courthouse at fair market value, upon the terms and conditions that Judicial Council deems in the best interests of the state, as long as the following requirements are met: 1) the sale complies with Judicial Council's responsibilities and authorities with regard to court facilities; 2) the Judicial Council consults with the County of Los Angeles on the sale; and 3) the Judicial Council offers the County of Los Angeles the right to purchase the property at fair market value. Upon the sale of the San Pedro Courthouse, the proceeds are to be transferred to the Immediate and Critical Needs Account of the State Court Facilities Construction Fund. Immediate and Critical Needs Account. The Immediate and Critical Needs Account of the State Court Facilities Construction Fund (ICNA) was established by SB 1407 (Perata), Chapter 311, Statutes of 2008, and provides funds for court construction projects and other facility-related expenses. Under SB 1407, Judicial Council is authorized up to $5 billion in bond financing for court construction projects repayment funded by increases in civil and criminal fines and fees and other revenue. AB 1900 Page 7 Of course, Judicial Council cannot fund every facilities project. In deciding which projects to undertake, Judicial Council is required to consider construction proposals that are in "immediate and critical need." ICNA also prohibits Judicial Council from approving projects that cannot be fully financed with the fund's revenue. With that in mind, Judicial Council initially selected 41 immediate and critical need projects. However, due to a decrease in revenue from civil and criminal fines and fees and other reduction in available funds, Judicial Council has cancelled and indefinitely delayed 15 of those projects in order to preserve the ICNA funds. But even with these cancelled projects, the ICNA fund cannot support all the critical court projects. Indeed, even if Judicial Council completes the remaining 26 facility projects, ICNA is estimated to become insolvent by 2023-24. In an attempt to improve this outcome, this bill provides that proceeds from the sale of the San Pedro Courthouse be deposited into ICNA. Although the sale of the San Pedro Courthouse is unlikely to resolve the ongoing revenue problem with ICNA, it seems appropriate that proceeds from the sale of a courthouse be deposited into a fund that re-invests in courts that are in the most immediate and critical need. This Bill Correctly Places the Authority of the Sale of the San Pedro Courthouse with the Judicial Council, Rather than the Department of General Services. Current law gives the Department of General Services (DGS) the responsibility of managing and disposing surplus property. Since this bill provides that the sale does not constitute the sale of surplus state property, the provisions relating to DGS do not apply. Instead, this bill provides that Judicial Council has the responsibility of managing the sale of the San Pedro Courthouse. Given that the proceeds are distributed back to building additional courts or providing for operational costs, it seems appropriate for the Judicial Council to manage the sale of the San Pedro courthouse. This Bill Allows the County of Los Angeles to be Given the Option to First Purchase the Property, Similar to Existing Law. Existing law provides that when Judicial Council disposes of AB 1900 Page 8 court facilities, it must consult with the county concerning the disposition, and offer to the county at fair market value prior to being offered to another state or local governmental agency. Similar to existing law, this bill requires Judicial Council to consult with the County of Los Angeles on the sale, and to offer to the County of Los Angeles the right to purchase the courthouse. Analysis Prepared by: Eric Dang / JUD. / (916) 319-2334 FN: 0004906