CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1900

Author:(Jones-Sawyer and O'Donnell)

As Amended Ver:August 19, 2016

2/3 vote. Urgency

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:
   1. The sale complies with Judicial Council's responsibilities and authorities with regard to court facilities as provided by law and as applicable;
   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.
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).)
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:
   1. 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.
   2. 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.)
   3. 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:
      1. The Judicial Council shall consult with the county concerning the disposition of the facility.
      2. 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:
   1. 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.
   2. 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.
   3. For trial court operations, as provided. (Section 70371.5.)

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. 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.

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 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

 THIRD READING  

Bill No: AB 1900

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/21/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16

AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

ASSEMBLY FLOOR: 79-0, 4/21/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Judicial Council of California

DIGEST: This bill authorizes the Judicial Council to sell the San Pedro superior courthouse, which has not been in use for three years, as specified. This bill also requires that the County of Los Angles receive the opportunity to purchase the property at fair market value before the property is offered to others for purchase. This bill requires the net proceeds from the sale to be deposited into the Immediate and Critical Needs Account of the State Court Facilities Construction Fund (ICNA).

Senate Floor Amendments of 8/19/16 ensure that the proceeds from the sale are transferred to the Judicial Council’s ICNA fund and remove the appropriation from the same account. These amendments also clarify that the disposition of the property authorized in this bill does not constitute a sale or other disposition of surplus state property within the meaning of the California Constitution and shall not be subject to specified law.

ANALYSIS:

Existing law:

1. Establishes the ICNA fund and limits how ICNA funds may be spent.
2. 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.
3. Provides that notwithstanding any law, the Controller may use ICNA funds for cash flow loans to the General Fund as specified.
4. Establishes the Special Fund for Economic Uncertainties (SFEU).
5. Requires that proceeds from the sale of surplus state property be deposited into the SFEU after paying the principal and interest on the 2004 Economic Recovery Bond Act.
6. Provides that upon legislative authorization, the Department of General Services (DGS) may sell or dispose of excess property, as specified.
7. 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.
8. 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.

This bill:

1. Provides 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.
2. Provides that the sale of the San Pedro Courthouse must be at fair market value and upon the terms and 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 fair market value before otherwise offering the property for sale.
3. Provides that notwithstanding any other law, the net proceeds from the sale of the courthouse shall be deposited into the ICNA.
4. Provides that the disposition of the property does not constitute a sale or other disposition of surplus state property within the meaning of Section 9 of Article III of the California Constitution and shall not be subject to subdivision (g) of Section 11011 of the Government Code.

1. Makes related legislative findings and contains an urgency clause.

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 SFEU. 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 authorizes the Judicial Council to sell the San Pedro Courthouse and provides that the net proceeds be deposited into the ICNA fund. This bill requires 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.

Comments

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.

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.

Under the California Constitution, the proceeds from the sale of the San Pedro Courthouse (surplus property) must be directed into the 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 requires the net proceeds from the sale of the San Pedro Courthouse to be directed into the ICNA fund. The author notes that the Legislature has approved several bills that disposed of surplus property in the same manner (AB 826, Jones-Sawyer, Chapter 505, Statutes of 2013 and SB 798, Committee on Governmental Organization, Chapter 798, Statutes of 2012).

Existing 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriation Committee:

• Sale proceeds: Redirection of one-time revenue potentially in excess of several million dollars from the SFEU to the ICNA fund. 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 § 70391(c)(1).
• 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.
• Operations/maintenance: Future cost savings (General Fund-Trial Court Trust 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 § 70343(a)(2).

SUPPORT: (Verified 8/21/16)

Judicial Council of California (source)

County of Los Angeles

OPPOSITION: (Verified 8/21/16)

None received

ASSEMBLY FLOOR: 79-0, 4/21/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Ridley-Thomas

Prepared by:

8/22/16 20:37:42

**** END ****

 THIRD READING  

Bill No: AB 1900

Author:

: 8/16/16 in Senate

Vote:

SENATE JUDICIARY COMMITTEE: 7-0, 6/21/16

AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: 7-0, 8/11/16

AYES: Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

ASSEMBLY FLOOR: 79-0, 4/21/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Judicial Council of California

DIGEST: This bill authorizes the Judicial Council to sell the San Pedro Courthouse, which has not been in use for three years, and to use the net proceeds to pay for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. This bill also requires that the County of Los Angles receive the opportunity to purchase the property at fair market value before the property is offered to others for purchase.

ANALYSIS:

Existing law:

1. Establishes the Immediate and Critical Needs Account of the State Court Facilities Construction Fund (ICNA) and limits how ICNA funds may be spent.
2. 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.
3. Provides that notwithstanding any law, the Controller may use ICNA funds for cash flow loans to the General Fund as specified.
4. Establishes the Special Fund for Economic Uncertainties (SFEU).
5. Requires that proceeds from the sale of surplus state property be deposited into the SFEU after paying the principal and interest on the 2004 Economic Recovery Bond Act.
6. Provides that upon legislative authorization, the Department of General Services (DGS) may sell or dispose of excess property, as specified.
7. 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.
8. 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.

This bill:

1. Provides 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.
2. Provides that the sale of the San Pedro Courthouse must be at fair market value and upon the terms and 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 fair market value before otherwise offering the property for sale.
3. Provides that notwithstanding any other law, the net proceeds from the sale of the courthouse shall be deposited into the SFEU, and then must be immediately transferred to the ICNA.
4. Provides 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.
5. Makes related legislative findings and contains an urgency clause.

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 SFEU. 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 authorizes the Judicial Council to sell the San Pedro Courthouse and provides that the net proceeds could only be used for planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. The bill requires 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.

Comments

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.

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.

Under the California Constitution, the proceeds from the sale of the San Pedro Courthouse (surplus property) must be directed into the 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 requires the net proceeds from the sale of the San Pedro Courthouse to be directed into the SFEU and then appropriated into the ICNA fund. The author notes that the Legislature has approved several bills that disposed of surplus property in the same manner (AB 826, Jones-Sawyer, Chapter 505, Statutes of 2013 and SB 798, Committee on Governmental Organization, Chapter 798, Statutes of 2012).

Existing 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 further requires 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.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Senate Appropriation Committee:

• Sale proceeds: Redirection of one-time revenue potentially in excess of several million dollars from the SFEU to the ICNA fund. 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 § 70391(c)(1).
• 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.
• Operations/maintenance: Future cost savings (General Fund-Trial Court Trust 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 § 70343(a)(2).

SUPPORT: (Verified 8/15/16)

Judicial Council of California (source)

County of Los Angeles

OPPOSITION: (Verified 8/15/16)

None received

ASSEMBLY FLOOR: 79-0, 4/21/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Ridley-Thomas

Prepared by: Margie Estrada / JUD. / (916) 651-4113

8/16/16 17:33:31

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1900 (Jones-Sawyer) - San Pedro courthouse

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on August 11, 2016

Bill Summary:

AB 1900, an urgency measure, would authorize the Judicial Council to sell the property known as the San Pedro courthouse, a surplus court facility, at fair market value and upon specified terms and conditions. This bill would deposit and transfer the sale proceeds from the Special Fund for Economic Uncertainties to the Immediate and Critical Needs Account (ICNA), and appropriate the funds to the Judicial Council for the planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities.

Fiscal Impact:

• 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 § 70391(c)(1).
• 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.
• 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 § 70343(a)(2).

*Trial Court Trust Fund

Committee Amendments:

Codify the provisions of the bill and make technical changes including adding references to specify the “net” proceeds of the sale.

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SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 1900 (Jones-Sawyer) - San Pedro courthouse

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 1900, an urgency measure, would authorize the Judicial Council to sell the property known as the San Pedro courthouse, a surplus court facility, at fair market value and upon specified terms and conditions. This bill would deposit and transfer the sale proceeds from the Special Fund for Economic Uncertainties to the Immediate and Critical Needs Account (ICNA), and appropriate the funds to the Judicial Council for the planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities.

Fiscal Impact:

• 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 § 70391(c)(1).
• 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.
• Disposition process: Potential one-time costs (General Fund*) to the Judicial Council for expenses incurred for the disposition process including but not limited to an appraisal, title and escrow fees. As the bill requires all sale proceeds (instead of net proceeds) to be transferred to the ICNA, the disposition costs would be charged against the Trial Court Trust Fund.
• 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 § 70343(a)(2).
• Uncodified statutory text: Staff notes the entire provisions of the bill are uncodified. Although uncodified statutory text has the force of law, codifying the statutory text of the bill would facilitate future references to the authorization provided and the specific terms and conditions of the sale.

*Trial Court Trust Fund

Background:

As reported by the Legislative Analyst’s Office in “Completing the Goals of Trial Court Realignment,” (September 28, 2011), although the state assumed responsibility for funding the operations of trial courts in 1997, the state did not begin to take over the responsibility for and ownership of trial court facilities from counties until 2002 with the enactment of SB 1732 (Escutia) Chapter 1082/2002, more commonly referred to as the Trial Court Facilities Act of 2002. In contrast to the Legislature's decision to decentralize control of court employees to individual trial courts, SB 1732 realigned responsibility for facilities to the Judicial Council. SB 1732 included the following key components:

Transfer of Responsibility for Trial Court Facilities. The legislation authorized the transfer of title and all management responsibility for most court facilities from the counties to the state by June 30, 2007, and required the Judicial Council and the California State Association of Counties to establish a process for transferring facilities on a building–by–building basis. Moreover, the Judicial Council—not individual trial courts—was given the primary responsibility for the provision of court facilities, as well as the authority to own and construct future court facilities. The Judicial Council has since assumed responsibility from the counties for all trial court facilities.

Required County Facility Payment. Although the state would assume responsibility for trial court facilities, the legislation required counties to make annual payments into a newly created Court Facilities Trust Fund based on the amount the county had historically spent on the maintenance and operation of the transferred facilities. The state would be responsible for all operation and maintenance costs above the fixed county payment.

Established State Court Facility Construction Fund (SCFCF). In order to support the improvement of existing court facilities and the construction of new facilities, the legislation increased fines and fees, the resulting revenues of which are deposited into the SCFCF. These funds were used to finance $1.5 billion in lease–revenue bonds to support 13 trial court facility projects.

Existing law provides that the Judicial Council, as the policymaking body for the judicial branch, has the responsibility and authority to dispose of surplus court facilities following the transfer of responsibility from the counties to the state pursuant to trial court realignment, subject to all of the following:

(1) If the property was a court facility previously the responsibility of the county, the Judicial Council shall comply with the requirements of Government Code (GC) § 11011 [DGS surplus property statutes], and as follows, except that, notwithstanding any other provision of law, the proportion of the net proceeds that represents the proportion of other state funds used on the property other than for operation and maintenance shall be returned to the fund from which it came and the remainder of the proceeds is to be deposited in the State Court Facilities Construction Fund.

(2) The Judicial Council is required to consult with the county concerning the disposition of the facility. Notwithstanding any other law, including GC § 11011, 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.

(3) The Judicial Council is required to 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; or is of sufficient benefit to outweigh the public good in maintaining it as a court facility or building.

(4) All funds received for disposal of surplus court facilities shall be deposited by the Judicial Council in the State Court Facilities Construction Fund.

(5) If the facility was acquired, rehabilitated, or constructed, in whole or in part, with moneys in the State Court Facilities Construction Fund that were deposited in that fund from the state fund, any funds received for disposal of that facility shall be apportioned to the state fund and the State Court Facilities Construction Fund in the same proportion that the original cost of the building was paid from the state fund and other sources of the State Court Facilities Construction Fund.

(6) Submission of a plan to the Legislature for the disposition of court facilities transferred to the state, prior to, or as part of, any budget submission to fund a new courthouse that will replace the existing court facilities transferred to the state. (GC § 70391 (c).)

Proposed Law:

This bill, an urgency measure, would state the intent of the Legislature to specifically authorize the Judicial Council, with certain participation by the County of Los Angeles, to sell property known as the San Pedro courthouse, a surplus court facility that is unsuitable for the needs of the judicial branch, and appropriate those sale proceeds to the Judicial Council for the planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities. Specifically, this bill:

• Authorizes the Judicial Council to sell the property, at fair market value and upon the terms and conditions and subject to the reservations the Judicial Council deems in the best interests of the state, if all of the following requirements are satisfied:

(1) The sale complies with Section 70391 of the Government Code, as applicable.

(2) The Judicial Council consults with the County of Los Angeles concerning the sale of the property.

(3) The Judicial Council offers the County of Los Angeles the right to purchase the property at a fair market value before otherwise offering the property for sale.

• Requires the proceeds from the sale of the property to be deposited into the Special Fund for Economic Uncertainties and then to be immediately transferred to the Immediate and Critical Needs Account (ICNA) of the State Court Facilities Construction Fund.
• Appropriates the proceeds from the sale of the property from the ICNA to the Judicial Council for the purposes of the planning, design, construction, rehabilitation, renovation, replacement, or acquisition of court facilities.
• Specifies “property” shall mean the San Pedro courthouse located at 505 South Centre Street, in the City and County of Los Angeles, Assessor Parcel Number 7455-013-901.
• Provides this act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: To enable the sale of the surplus San Pedro court facility to occur as soon as possible, it is necessary that this act take effect immediately.

Prior Legislation:

SB 1407 (Perata) Chapter 311/2008 created the ICNA and authorized the Judicial Council up to $5 billion in bond financing for court construction projects.

SB 1732 (Escutia) Chapter 1082/2002, commonly referred to as the Trial Court Facilities Act of 2002, sought to implement the recommendations of the Task Force on Court Facilities to transition facilities from county to state control. In contrast to the Legislature's decision to decentralize control of court employees to individual trial courts, SB 1732 realigned responsibility for facilities to the Judicial Council.

Staff Comments:

This bill declares the San Pedro courthouse a surplus court facility and will potentially result in one-time revenue to the state in the millions of dollars.

Under existing law (Section 9 of Article III of the California Constitution), the proceeds from the sale of “surplus state property” occurring on or after November 2, 2004, are required to be used to pay the principal and interest on bonds issued pursuant to the Economic Recovery Bond Act of 2004. Once the principal and interest on those bonds are fully paid (which occurred in 2015), the proceeds from the sale of surplus state property are required to be deposited into the Special Fund for Economic Uncertainties (SFEU), or any successor fund.

Although this bill requires the sale proceeds to be deposited in the SFEU, the bill additionally requires immediate transfer of the sale proceeds to the ICNA, resulting in a redirection of funds that otherwise would have remained in the SFEU.

Staff notes that in the absence of the declaration of the San Pedro courthouse as surplus state property, existing law pursuant to Government Code § 70391(c)(1) provides that the proportion of the net proceeds that represents the proportion of other state funds used on the property other than for operation and maintenance is required to be returned to the fund from which it came, which in the case of the San Pedro courthouse would be the General Fund, and the remainder of the proceeds are to be deposited in the State Court Facilities Construction Fund. Disposition of the property without designating it as “surplus state property” would additionally allow the Judicial Council to utilize a portion of the sale proceeds to cover the costs of the disposition process of the property, as only the net proceeds of the sale are required to be returned to the originating fund source.

Recommended Amendments:

1. Staff notes the entire contents of the measure are uncodified. Although uncodified statutory text has the force of law, the author may wish to consider an amendment to codify the statutory text of the bill (excluding the legislative intent language) to facilitate the future reference to the sale authorization and the specific terms and conditions tied to the sale.
2. To account for the costs incurred in the disposition process of the property (including the appraisal, title and escrow fees, etc.), and to the extent allowable under the authority for sale of the property, the author may wish to consider technical amendments to specify only the net proceeds of the sale are to be deposited, transferred, and appropriated, as specified.
3. Staff recommends the following technical amendment on page 2 in line 19, strike the word “a”.

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SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 1900 (Author:Jones-Sawyer)

Version: March 31, 2016

Hearing Date: June 21, 2016

Fiscal: Yes

Urgency: Yes

Consultant: 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 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).)

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 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.

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 (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.

Prior Vote:

Assembly Floor (Ayes 79, Noes 0)

Assembly Appropriations Committee (Ayes 20, Noes 0)

Assembly Judiciary Committee (Ayes 9, Noes 0)

*************

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. ↑

Date of Hearing: April 13, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1900

Author:(Jones-Sawyer) – As Amended Ver:March 31, 2016

Urgency: Yes State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the sale of the San Pedro Courthouse. Specifically, this bill:

1. Authorizes Judicial Council to sell the San Pedro Courthouse, a surplus property, at fair market value, upon the terms and conditions that the Judicial Council deems in the best interests of the state, conditioned on the Council consulting with LA County on the sale and first offering the County the right to purchase the property at fair market value.
2. Provides that the proceeds from the sale shall be deposited into the Special Fund for Economic Uncertainties, and then immediately transferred to the Immediate and Critical Needs Account (ICNA) of the State Court Facilities Construction Fund.

FISCAL EFFECT:

Up to several million dollars of one-time revenue to the ICNA from the proceeds of the sale, less the Judicial Council's administrative costs, and ongoing savings in avoided operations and maintenance costs for the courthouse.

COMMENTS:

1. Background and Purpose. As a result of budget constraints, since 2008, 53 courthouses (215 courtrooms) were closed statewide. Currently, 48 courthouses and 200 courtrooms remain closed, including eight courthouses and 78 courtrooms in LA County. 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 allows the Judicial Council to sell the San Pedro Courthouse in accordance with authority provided to the Council under current law.
2. 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, to be repaid by revenues from increases in civil and criminal fines and fees and other revenue.

Judicial Council initially selected 41 immediate and critical need projects. However, revenues intended for INCA projects were instead diverted for several years due to court budget shortfalls, hence two projects were cancelled and 11 projects have been delayed indefinitely.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: March 29, 2016

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

ABPCA Bill Id:AB 1900

Author:(Jones-Sawyer) – As Introduced Ver:February 11, 2016

As Proposed to be Amended

SUBJECT: SAN PEDRO COURTHOUSE

KEY ISSUE: SHOULD THE SAN PEDRO COURTHOUSE, WHICH HAS BEEN CLOSED AND VACATED SINCE 2013 AS A RESULT OF BUDGET CUTS, BE DECLARED SURPLUS PROPERTY AND OFFERED FOR SALE AT FAIR MARKET VALUE, AND SHOULD THE PROCEEDS OF THAT SALE BE DISTRIBUTED TO THE judicial council's COURT CONSTRUCTION IMMEDIATE AND CRITICAL NEEDS ACCOUNT?

SYNOPSIS

Since 2008, the State’s funding challenges has resulted in the closure of 53 courthouses and 215 courtrooms statewide. Of all these closures, 8 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. 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, funds that otherwise could be used to support actual courtrooms.

This bill authorizes the Judicial Council, the sponsor of this bill, to manage the sale of the San Pedro Courthouse, and distribute the proceeds to the Immediate and Critical Needs Account to pay for court construction and other facility-related projects. This bill is supported by the County of Los Angeles, and has no opposition.

SUMMARY: Authorizes the sale of the San Pedro Courthouse, a surplus property, and moves proceeds from the sale to the Immediate and Critical Needs Account 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:
   1. The sale complies with Judicial Council’s responsibilities and authorities with regard to court facilities as provided by law and as applicable;
   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.
2. Provides that the proceeds from the sale of the San Pedro Courthouse shall be deposited into the Special Fund for Economic Uncertainties, and then immediately transferred to 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 surplus San Pedro court facility to occur as soon as possible.

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. (Cal. Const., Art. IV, Section 9; Government Code Section 11011 (g).)
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:
   1. 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.
   2. 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.)
   3. 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:
      1. The Judicial Council shall consult with the county concerning the disposition of the facility.
      2. 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:
   1. 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.
   2. 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.
   3. For trial court operations, as provided. (Section 70371.5.)

FISCAL EFFECT: As currently in print this bill is keyed fiscal.

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. 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, 8 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.

What Does the Bill Do? 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, Chap. 311, Stats. 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.

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. This Committee has learned that 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 surplus courthouse be deposited into a fund that re-invests in courts that are in the most immediate and critical need.

It should be noted that the proceeds from the sale of the San Pedro Courthouse are not immediately deposited into ICNA. To satisfy a constitutional requirement, this bill first deposits the proceeds from the sale into the Special Fund for Economic Uncertainties. (Note: The constitutional requirement that proceeds from the sale of surplus property be used to pay bonds issued under the 2004 Economic Recovery Bond Act is not applicable because those bonds have since been retired.) After the proceeds are deposited to the Special Fund for Economic Uncertainties, commonly referred to as the Rainy Day Fund, the proceeds are then immediately transferred to ICNA.

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. Under the existing framework, DGS annually reports to the Legislature the land that is declared excess by other state agencies, and must receive authorization from the Legislature to dispose of that surplus land. Indeed, Assembly Bill 2904 (Committee on Accountability and Administrative Review) is this year’s annual DGS surplus property bill.

After the Legislature grants DGS authority, DGS must go through additional steps before it disposes the surplus property. For example, before it disposes the land, DGS must determine whether the land could first be used by any other state agency, local agency, or nonprofit affordable housing sponsor.

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. To that end, this bill, as proposed to be amended, provides additional clarity that Judicial Council has the responsibility of managing 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, in Accordance with Existing Law. Existing law provides that when Judicial Council disposes of surplus 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.

In accordance with 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. To that end, this bill, as proposed to be amended, provides additional clarity that Judicial Council comply with existing law in executing the sale of the San Pedro courthouse.

Existing law also requires Judicial Council, when disposing of surplus court facilities, to consider whether the potential new or planned use of the facility, among other things, has a negative impact on the local community, and is of sufficient benefit to outweigh the public good in maintaining it as a court facility or building. Although this Committee is unaware of the exact plans should the County of Los Angeles purchase the San Pedro Courthouse, the Committee has learned that the County of Los Angeles seeks to reinvest the property back into the community.

In support of the bill, the County of Los Angeles writes:

The San Pedro Courthouse has served as an anchor for local business and residential activity since its opening in 1969. However, the courthouse has been vacant since its closure by the State, leaving a void in the community. This landmark building should continue to be a focal point of civic activity for the San Pedro community. The State’s proposed disposal of the courthouse provides a prime opportunity for the property to be acquired locally so that it may be used for services that benefit the San Pedro community.

REGISTERED SUPPORT / OPPOSITION:

Support

Judicial Council (sponsor)

County of Los Angeles

Opposition

None on file

Analysis Prepared by: Eric Dang / JUD. / (916) 319-2334