The Local Agency Public Construction Act prescribes procedures for contracting by local public agencies, including specific provisions for cities.

Existing law permits a governmental agency to solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction by, and may lease to, private entities, for specified types of fee-producing infrastructure projects. Existing law permits these agreements to provide for the lease of, or ownership of, infrastructure facilities owned by a governmental entity, but constructed by a private entity, to that private entity for a period of up to 35 years.

This bill, notwithstanding the act and any other law, would authorize the City of Long Beach to contract and procure a project for the revitalization and redevelopment of the Long Beach Civic Center, as defined, in accordance with prescribed procedures for proposal evaluation and contract award. The bill would authorize the lease of all or a portion of the project to, or ownership by, a private entity or entities, for a term of up to 50 years. The bill would make a statement that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

The Local Agency Public Construction Act prescribes procedures for contracting by local public agencies, including specific provisions for cities.

Existing law permits a governmental agency to solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction by, and may lease to, private entities, for specified types of fee-producing infrastructure projects. Existing law permits these agreements to provide for the lease of, or ownership of, infrastructure facilities owned by a governmental entity, but constructed by a private entity, to that private entity for a period of up to 35 years.

This bill, notwithstanding the act and any other law, would authorize the City of Long Beach to contract and procure a project for the revitalization and redevelopment of the Long Beach Civic Center, as defined, in accordance with prescribed procedures for proposal evaluation and contract award. The bill would authorize the lease of all or a portion of the project to, or ownership by, a private entity or entities, for a term of up to 50 years. The bill would make a statement that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

The Local Agency Public Construction Act prescribes procedures for contracting by local public agencies, including specific provisions for cities.

Existing law permits a governmental agency to solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction by, and may lease to, private entities, for specified types of fee-producing infrastructure projects. Existing law permits these agreements to provide for the lease of, or ownership of, infrastructure facilities owned by a governmental entity, but constructed by a private entity, to that private entity for a period of up to 35 years.

This bill, notwithstanding the act and any other law, would authorize the City of Long Beach to contract and procure a project for the revitalization and redevelopment of the Long Beach Civic Center, as defined, in accordance with prescribed procedures for proposal evaluation, evaluation and contract award. The bill would authorize the lease of all or a portion of the project to, or ownership by, a private entity or entities, for a term of up to 50 years. The bill would make a statement that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

The Local Agency Public Construction Act prescribes procedures for contracting by local public agencies, including specific provisions for cities.

Existing law permits a governmental agency to solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction by, and may lease to, private entities, for specified types of fee-producing infrastructure projects. Existing law permits these agreements to provide for the lease of, or ownership of, infrastructure facilities owned by a governmental entity, but constructed by a private entity, to that private entity for a period of up to 35 years.

This bill, notwithstanding the act and any other law, would authorize the City of Long Beach to contract and procure a project for the revitalization and redevelopment of the Long Beach Civic Center, as defined, in accordance with prescribed procedures for qualification, solicitation, proposal evaluation, and contract award. The bill would authorize the lease of all or a portion of the project to, or ownership by, a private entity or entities, for a term of up to 65 50 years. The bill would make a statement that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

The Local Agency Public Construction Act prescribes procedures for contracting by local public agencies, including specific provisions for cities.

Existing law permits a governmental agency to solicit proposals and enter into agreements with private entities for the design, construction, or reconstruction by, and may lease to, private entities, for specified types of fee-producing infrastructure projects. Existing law permits these agreements to provide for the lease of, or ownership of, infrastructure facilities owned by a governmental entity, but constructed by a private entity, to that private entity for a period of up to 35 years.

This bill, notwithstanding the act and any other law, would authorize the City of Long Beach to contract and procure a project for the revitalization and redevelopment of the Long Beach Civic Center, as defined, in accordance with prescribed procedures for qualification, solicitation, proposal evaluation, and contract award. The bill would authorize the lease of the project to, or ownership by, a private entity or entities, for a term of up to 65 years. The bill would make a statement that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

 UNFINISHED BUSINESS  

Bill No: SB 562

Author: Lara (D)

Amended: 6/16/15

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 5/6/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SENATE FLOOR: 36-0, 5/18/15

AYES: Allen, Anderson, Bates, Beall, Block, Cannella, De León, Fuller, Gaines, Galgiani, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Morrell, Nguyen, Nielsen, Pan, Roth, Runner, Stone, Vidak, Wieckowski, Wolk

NO VOTE RECORDED: Berryhill, Hall, Pavley

ASSEMBLY FLOOR: 79-0, 7/13/15 - See last page for vote

SUBJECT: Infrastructure financing: City of Long Beach Civic Center

SOURCE: Author

DIGEST: This bill allows the City of Long Beach to use a public-private partnership procurement method to develop a new civic center.

Assembly Amendments declare that this bill’s provisions must not be construed to authorize the City of Long Beach to use tidelands trust revenues that are subject to specified state laws for general municipal purposes or any other purpose unconnected with the public trust. Amendments also make several non-substantive clarifying amendments to this bill’s provisions.

ANALYSIS:

Existing law:

1. Authorizes local governments to enter into public-private partnerships (P3s) for fee-producing infrastructure projects that might not be feasible without private-sector involvement.

2. Allows local governments may solicit proposals and enter into agreements with private entities for the study, planning, design, financing, construction, maintenance, rebuilding, improvement, repair, or operation by private entities of specific types of fee-producing infrastructure (AB 2660, Aguiar, Chapter 1040, Statutes of 1996).

3. Requires that a P3 agreement for the construction of fee-producing infrastructure by a private entity must provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years.

This bill:

1. Allows the City of Long Beach (City) to use a P3 agreement to contract and procure a project to revitalize and redevelop the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities.

2. Allows the City to enter into a P3 with one or more private entities for delivery of the project through a concession agreement, design-build agreement, design-build-finance agreement, project agreement, lease-leaseback, or other appropriate agreements that combine one or more major elements of these agreements.

3. Requires the City to award the contract to the private entity or entities whose proposal or proposals the City determines, in writing, to be the most advantageous by providing the best value in meeting the best interests of the City.

4. Requires the negotiation process to specifically prohibit:

1. Practices that may result in unlawful activity, including rebates, kickbacks, or other unlawful consideration.

2. City employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract that would subject those employees to specified statutory prohibitions against financial conflicts of interest.

5. Allows the City to terminate the project prior to project award should the City determine that the project is not in the best interests of the City or should the negotiations with the private entity or entities otherwise fail.

6. Requires that all documents related to the project must be subject to disclosure under the California Public Records Act, except those exempted from disclosure under that Act.

7. Requires the Long Beach Civic Center project to comply with the California Environmental Quality Act (CEQA) before project construction commences and directs that neither the act of selecting a private entity, nor the execution of an agreement with the private entity, requires prior compliance with CEQA.

8. Requires that the City must own the public portion of the project, unless the City elects to provide for ownership of the project by the private entity through a separate lease agreement.

9. Allows a lease agreement to provide for the lease of all or a portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years and requires the agreement to provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

10. Prohibits the private portion of the project from being financed or developed by the P3 or otherwise using public or tax-exempt financing.

11. Directs that:

1. The plans and specifications for the project must comply with all applicable governmental design standards for that particular infrastructure project.

2. The studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination, of the project must utilize private sector firms. However, a facility leased to a private entity, during the term of the lease, must be deemed to be public property for purposes of identification, maintenance, enforcement of laws, and for purposes of the Government Claims Act.

3. All public works constructed pursuant to this bill’s provisions must comply with specified provisions of the California Labor Code relating to public works projects.

12. Defines the following terms:

1. “Best interests of the city” means a procurement process that is determined by the City to provide the best value and an expedited delivery schedule while maintaining a high level of quality workmanship and materials.

2. “Best value” means a value determined by objective criteria that must include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

3. “Business entity” means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, engineering, financial, operations, management, facilities maintenance, and other services for development of a new Long Beach Civic Center.

4. “City” means the City of Long Beach and its departments, including the City of Long Beach Harbor Department.

5. “Long Beach Civic Center” means the area bounded by Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia Avenue, containing approximately 14.98 acres and the parcel on the south side of 3rd Street between Pacific Avenue and Cedar Avenue, containing approximately 0.89 acres.

6. “Private entity” means an individual, business entity, or combination of individuals and business entities.

7. “Private portion of the project” means those parcels of land within the Long Beach Civic Center to be conveyed to a private entity and developed as residential, retail, hospitality, institutional, or industrial facilities.

8. “Project” means the revitalization and redevelopment of the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities.

9. “Public portion of the project” means those parcels of land within the Long Beach Civic Center to be developed as a city hall, port headquarters, public park, public library, or other government facilities.

10. “Public-private partnership” means a cooperative arrangement between the public and private sectors, built on the expertise of each partner, that best meets the City’s needs through the appropriate allocation of resources, risks, and rewards for the purposes of, and, including studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

13. Prohibits its provisions from being construed to authorize the City to use tidelands trust revenues that are subject to specified state laws for general municipal purposes or any other purpose unconnected with the public trust.

14. Contains legislative findings and declarations regarding the necessity and benefits of using a P3 to develop a new Long Beach Civic Center.

15. Directs that its provisions are severable.

Background

Confronted by aging infrastructure, growing populations, and limited revenue sources, local governments sometimes turn to non-traditional financing techniques to pay for the construction of new public infrastructure and the replacement of existing facilities.

Long-term lease-leaseback financing is one method that local governments use as an alternative to issuing general obligation bonds to pay for public infrastructure. Under this approach, a local government leases public property to a third-party that undertakes improvements to the property and leases the improved property back to the local government. The rights to receive the lease payments from the local government are used to secure debt that was issued to pay for the costs of acquiring and improving the public property.

In 1996, the Legislature authorized local governments to enter into P3s for fee-producing infrastructure projects that might not be feasible without private-sector involvement. Local governments may solicit proposals and enter into agreements with private entities for the study, planning, design, financing, construction, maintenance, rebuilding, improvement, repair, or operation by private entities of specific types of fee-producing infrastructure. A P3 agreement for the construction of fee-producing infrastructure by a private entity must provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years.

In 2007, the City identified seismic deficiencies in its City Hall and Main Library Buildings and found that substantial seismic renovations would be required to protect lives during a major earthquake. The City evaluated the costs of retrofitting the existing structures and concluded that the City Hall and Main Library buildings should be replaced rather than repaired. In 2013, the City initiated a procurement process for development of a new Civic Center through a P3 agreement. The City officials want to clarify their authority under state law to finance the Long Beach Civic Center improvements through a P3 agreement that combines elements of state laws that authorize cities to enter into lease-leaseback financing and design-build-finance-operate-maintain financing agreements.

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

SUPPORT: (Verified 7/14/15)

City of Long Beach

Downtown Long Beach Associates

Los Angeles/Orange Counties Building and Construction Trades Council

Port of Long Beach

OPPOSITION: (Verified 7/14/15)

None Received

ASSEMBLY FLOOR: 79-0, 7/13/15

AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, 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, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins

NO VOTE RECORDED: Cooper

Prepared by: Brian Weinberger / GOV. & F. / (916) 651-4119

7/15/15 9:46:02

**** END ****

SENATE THIRD READING

STR Bill Id:SB 562

Author:(Lara)

As Amended Ver:June 16, 2015

Majority vote

SENATE VOTE: 36-0

SUMMARY: Allows the City of Long Beach (City) to use a public-private partnership procurement (P3) method to develop a new civic center. Specifically, this bill:

1. Allows the City to contract and procure the project (the revitalization and redevelopment of the Long Beach Civic Center), pursuant to the following:

   1. Requires the City to evaluate the project proposals it solicits and receives and choose the private entity or entities whose proposal is, or proposals are, judged as providing the best value in meeting the best interests of the City;

   2. Allows the City to enter into a P3 through a concession agreement, design-build agreement, design-build-finance agreement, project agreement, lease-leaseback, or other appropriate agreements combining one or more major elements of the foregoing agreements, with one or more private entities for delivery of the project;

   3. States that the City retains the rights to terminate the project prior to project award should the City determine that the project is not in the best interests of the City or should the negotiations with the private entity or entities otherwise fail;

   4. Requires the contract award for the project to be made to the private entity or entities whose proposal or proposals are determined by the City, in writing, to be the most advantageous by providing the best value in meeting the best interests of the City;

   5. Provides that the negotiation process shall specifically prohibit practices that may result in unlawful activity, including, but not limited to, rebates, kickbacks, or other unlawful consideration, and shall specifically prohibit city employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract pursuant to the bill's provisions that would subject those employees to the general prohibition for conflict of interest contained in the California Political Reform Act; and,

   6. Requires the documents related to the project to be subject to disclosure under the California Public Records Act (CPRA), except those exempted from disclosure under the CPRA.

2. Provides that the project is subject to compliance with the California Environmental Quality Act (CEQA), and that neither the act of selecting a private entity, nor the execution of an agreement with the private entity shall require prior compliance with CEQA. Provides that appropriate compliance with CEQA shall thereafter occur before project construction commences.

3. Requires the public portion of the project, at all times, to be owned by the City, unless the City, in its discretion, elects to provide for ownership of the project by the private entity through a separate lease agreement. Provides that the agreement shall provide for the lease of all or portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years. Provides that the agreement shall provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

4. Prohibits the private portion of the project from being financed or developed by the public-private partnership or otherwise using public or tax-exempt financing.

5. Requires the plans and specifications for the project to comply with all applicable governmental design standards for that particular infrastructure project. Requires the private entity studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project, to utilize private sector firms for studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

6. Provides that a facility, subject to this bill's provisions and leased to a private entity during the term of the lease, shall be deemed to be public property for the purposes of identification, maintenance, enforcement of laws, and for purposes of claims and actions against public entities and public employees (the Government Claims Act).

7. Requires all public works constructed, pursuant to this bill's provisions, to comply with statute regarding public works related to public works and public agencies contained in the Labor Code.

8. Provides that this bill's provisions shall not be construed to authorize the City use tidelands trust revenues or any other applicable granting state for general municipal purposes or any other purpose unconnected with the public trust.

9. States that the provisions of this bill are severable, and provides, if any provision of this bill or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

10. Defines the following terms:

    1. "Best interests of the city" to mean a procurement process that is determined by the city to provide the best value and an expedited delivery schedule while maintaining a high level of quality of workmanship and materials;

    2. "Best value" to mean a value determined by objective criteria that shall include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience;

    3. "Business entity" means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, engineering, financial, operations, management, facilities maintenance, and other services for development of a new Long Beach Civic Center;

    4. "City" to mean the City of Long Beach and its departments, including the City of Long Beach Harbor Department;

    5. "Long Beach Civic Center" to mean the area bounded by Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia Avenue, containing approximately 14.98 acres, and the parcel on the south side of 3rd Street between Pacific Avenue and Cedar Avenue, containing approximately 0.89 acres;

    6. "Private entity" means an individual, business entity, or combination of individuals and business entities;

    7. "Private portion of the project" to mean those parcels of land within the Long Beach Civic Center to be conveyed to a private entity and developed as residential, retail, hospitality, institutional, or industrial facilities;

    8. "Project" to mean the revitalization and redevelopment of the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, public library, or other governmental facilities;

    9. "Public portion of the project" to mean those parcels of land within the Long Beach Civic Center to be developed as a city hall, port headquarters, public park, public library, or other government facilities; and,

    10. "Public-private partnership" to mean a cooperative arrangement between the public and private sectors, built on the expertise of each partner, that best meets the city's needs through the appropriate allocation of resources, risks, and rewards for the purposes of, and, including, but not limited to, studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

11. Makes a number of findings and declarations regarding the necessity and benefits of using a public-private partnership to develop a new Long Beach Civic Center.

12. Finds and declares that a special law is necessary and that a general law cannot be made application within the meaning of California Constitution Article IV, Section 16 because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

EXISTING LAW:

1. Authorizes, pursuant to the California Infrastructure Finance Act, local government agencies to use P3s for specified types of infrastructure projects, and requires P3 agreements to contain a number of elements, including security for the construction of the facility to ensure its completion.

2. Requires, for P3s, the governmental agency soliciting proposals and entering into agreements with private entities for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, by private entities for fee-producing infrastructure projects to ensure that the contractor is selected, pursuant to a competitive negotiation process.

3. Defines "fee-producing infrastructure project" or "fee-producing infrastructure facility" to mean the operation of the infrastructure project or facility will be paid for by the persons or entities benefited by or utilizing the project or facility.

4. Allows projects to be proposed by the private entity and selected by the governmental agency at the discretion of the governmental agency, and allows a project to be proposed and selected individually or as part of a related or larger project.

5. Requires the competitive negotiation process to utilize, as the primary selection criteria, the demonstrated competence and qualifications for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, of the facility. Requires the selection criteria to also ensure that the facility be operated at fair and reasonable prices to the user of the infrastructure facility services.

6. Prohibits the competitive negotiation process from requiring competitive bidding, and prohibits the competitive negotiation process from including practices that may result in unlawful activity, including, but not limited to, rebates, kickbacks, or other unlawful consideration. Prohibits governmental agency employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract under this section that would subject those employees to the prohibition for conflict of interest contained in the California Political Reform Act.

7. Provides, other than the criteria mentioned above and applicable provisions related to providing security for the construction and completion of the facility, that the governmental agency soliciting proposals is not subject to any other provisions of the Public Contract Code, as specified, that relates to public procurements.

8. Provides that infrastructure constructed by a private entity shall, at all times, be owned by a governmental agency, unless the governmental agency, in its discretion, elects to provide for ownership of the facility by the private entity during the term of the agreement. Provides that the agreement shall provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years, and in consideration therefor, the agreement shall provide for complete reversion of the privately constructed facility to the governmental agency at the expiration of the lease at no charge to the governmental agency.

9. Provides that the agreement between the governmental agency and the private entity shall include compliance with CEQA. Provides that neither the act of selecting a proposed project or a private entity, nor the execution of an agreement with a private entity, shall require prior compliance with CEQA. Requires appropriate compliance with CEQA to occur before project development commences.

10. Requires performance bonds as security to ensure completion of the construction of the facility and contractual provisions that are necessary to protect the revenue streams of the project.

11. Requires adequate financial resources of the private entity to design, build, and operate the facility, after the date of the agreement.

FISCAL EFFECT: None

COMMENTS:

1. Background on P3s and Lease-Leaseback Financing. P3s place a wide range of project responsibilities and risks onto private entities, some of which were traditionally borne by public agencies alone. A typical P3 agreement calls on the private entity to design and build a facility, and also to finance, operate and maintain it, and in exchange, the private entity may be entitled to tolls or user fees that the facility generates, or may receive direct payments from the government.

California law authorizes the use of P3s for Caltrans, the Judicial Branch, the High-Speed Rail Authority, and local government agencies. AB 2660 (Aguiar), Chapter 1040, Statutes of 1996, known as the California Infrastructure Act, authorizes local governments to utilize private sector investment capital for carrying out "fee-producing infrastructure facilities." AB 2660 applies to cities, counties, school districts, community college districts, public districts, county boards of education, joint powers authorities, transportation authorities, and any public or municipal corporations.

Long-term lease-leaseback financing is one method that local governments use as an alternative to issuing general obligation bonds to pay for public infrastructure. Under this approach, a local government leases public property to a third-party that undertakes improvements to the property and leases the improved property back to the local government. The rights to receive the lease payments from the local government are used to secure debt that was issued to pay for the costs of acquiring and improving the public property.

2. P3 Requirements for Local Agencies. Under AB 2660, a local agency can contract with private entities to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair or operate fee-producing infrastructure facilities. In order to use the P3 method, existing law requires the governmental agency soliciting proposals to use a "competitive negotiation process", which does not require competitive bidding. As part of the agreement, the local agency can also grant private parties with ownership or lease rights to such facilities for up to 35 years. Existing law for P3s requires compliance with CEQA, but provides that "neither the act of selecting a proposed project or a private entity, nor the execution of an agreement with a private entity, shall require prior compliance with CEQA" and requires "appropriate compliance with CEQA to occur before project development commences."

Existing law for P3s requires the plans and specifications for the project to comply with all applicable governmental design standards for that particular infrastructure project, and requires the private entity studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project, to utilize private sector firms for studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project. A facility built using the P3 method and leased to a private entity during the term of the lease, according to existing law, shall be deemed to be public property for the purposes of identification, maintenance, enforcement of laws, and for purposes of claims and actions against public entities and public employees (the Government Claims Act). Existing law requires all public works constructed to comply with statute regarding public works and public agencies contained in the Labor Code.

These P3 provisions, with one exception, have been essentially unchanged since their enactment.

3. Author's Statement. According to the author, "The Long Beach City Hall and Main Library have been found to be seismically deficient. Under the hybrid public-private partnership model authorized by this bill, the City has the opportunity to use existing budgeted dollars that are currently spent on maintenance and offsite leases to fund the construction of a new Civic Center, potentially at no additional cost to the taxpayer over what is currently paid, adjusted for inflation. This financing mechanism will allow the City to address public health and safety concerns in the earliest possible timeframe, and without significantly impacting the City's General Fund or requiring a tax increase.

"The public portions of the project include a new seismically safe Long Beach City Hall, Port of Long Beach Headquarters and Main Library. The private portions of the project include transit-oriented mixed-used developments, high-rise condominiums and retail. All new developments will be built on 15.87 acres of land in downtown Long Beach under a Project Labor Agreement and in accordance with the City's award winning Downtown Plan."

4. Bill Summary. This bill allows the City of Long Beach to use a hybrid public-private partnership procurement method to develop a new civic center, and specifies the requirements of the P3, by adding a new section of law right after the existing P3 statutes. Many of the provisions in this bill are modeled after P3 law for local agencies, with some exceptions:

   1. Competitive Negotiation Process. Current P3 law requires a "competitive negotiation process" that utilizes, "as the primary selection criteria, the demonstrated competence and qualifications for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, of the facility." The process does not require competitive bidding.

This bill, however, allows the City of Long Beach to evaluate the project proposals it solicits and receives and to choose the private entity or entities whose proposal is, or proposals are, judged as providing the "best value" in meeting the "best interests" of the City. This bill defines "best interests" to mean a procurement process that is determined by the City to provide the best value and an expedited delivery schedule while maintaining a high level of quality workmanship and materials, and defines "best value" to mean a value determined by objective criteria that shall include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

2. Term. Existing law allows the P3 agreement to provide for the lease of facilities to, or ownership by, the private entity for up to 35 years. This bill, however, allows a lease agreement to provide for the lease of all or a portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years and requires the agreement to provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

3. Contents of the Agreement. Current P3 law specifies that the contents of the agreement between the governmental agency and the private entity must include provisions to ensure a variety of issues – compliance with CEQA, that the private entity has adequate financial resources to design, build, and operate the facility, authority for the governmental agency to impose user fees (for 'fee-producing infrastructure'), and preparation of an annual audited report accounting for the income received and expenses to operate the facility, among other requirements. This bill contains similar CEQA requirements for the project, but does not require other items to be in the agreement between the City and the private entity. According to the sponsor, this is because a city hall (like the one being proposed as part of the project) is not "fee-producing" and therefore those provisions in P3 law are not applicable to this project.

This bill is sponsored by the City of Long Beach.

5. Prior P3 Legislation. Recent legislation to alter the P3 statutes for local agencies include:

   1. AB 1261 (Caballero) of 2007, would have made a number of changes to local government P3 statutes, such as: extending the allowable lease period from 35 years to 50 years; altering the criteria local governments must use to select a contractor; and, allowing sanitary sewer systems, power transmission facilities, and power distribution facilities to be constructed under P3 agreements. AB 1261 passed the Assembly Local Government Committee with a 7-0 vote on April 18, 2007, but subsequently died on the Senate Floor.

   2. AB 878 (Caballero) of 2009, was nearly identical to AB 1261. AB 878 was referred to the Assembly Local Government Committee, but was never heard.

   3. AB 164 (Wieckowski), Chapter 94, Statutes of 2013, requires the use of performance bonds and payment bonds in local government infrastructure projects that are financed through public-private partnerships.

6. Arguments in Support. Supporters argue that this bill will provide greater project stability for the City's groundbreaking public-private development and will create much needed jobs, revitalize downtown Long Beach and result in seismically safe government buildings that will be used to serve public needs.

7. Arguments in Opposition. None on file.

Analysis Prepared by: Debbie Michel / L. GOV. / (916) 319-3958 FN: 0001130

Date of Hearing: July 1, 2015

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Brian Maienschein, Chair

SBPCA Bill Id:SB 562

Author:(Lara) – As Amended Ver:June 16, 2015

SENATE VOTE: 36-0

SUBJECT: Infrastructure financing: City of Long Beach Civic Center.

SUMMARY: Allows the City of Long Beach to use a public-private partnership procurement (P3) method to develop a new civic center. Specifically, this bill:

1. Allows the City of Long Beach (City) to contract and procure the project (the revitalization and redevelopment of the Long Beach Civic Center), pursuant to the following:

   1. Requires the City to evaluate the project proposals it solicits and receives and choose the private entity or entities whose proposal is, or proposals are, judged as providing the best value in meeting the best interests of the City;

   2. Allows the City to enter into a P3 through a concession agreement, design-build agreement, design-build-finance agreement, project agreement, lease-leaseback, or other appropriate agreements combining one or more major elements of the foregoing agreements, with one or more private entities for delivery of the project;

   3. States that the City retains the rights to terminate the project prior to project award should the City determine that the project is not in the best interests of the City or should the negotiations with the private entity or entities otherwise fail;

   4. Requires the contract award for the project to be made to the private entity or entities whose proposal or proposals are determined by the City, in writing, to be the most advantageous by providing the best value in meeting the best interests of the City;

   5. Provides that the negotiation process shall specifically prohibit practices that may result in unlawful activity, including, but not limited to, rebates, kickbacks, or other unlawful consideration, and shall specifically prohibit city employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract pursuant to the bill's provisions that would subject those employees to the general prohibition for conflict of interest contained in the California Political Reform Act; and,

   6. Requires the documents related to the project to be subject to disclosure under the California Public Records Act (CPRA), except those exempted from disclosure under the CPRA.

2. Provides that the project is subject to compliance with the California Environmental Quality Act (CEQA), and that neither the act of selecting a private entity, nor the execution of an agreement with the private entity shall require prior compliance with CEQA. Provides that appropriate compliance with CEQA shall thereafter occur before project construction commences.

3. Requires the public portion of the project, at all times, to be owned by the City, unless the City, in its discretion, elects to provide for ownership of the project by the private entity through a separate lease agreement. Provides that the agreement shall provide for the lease of all or portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years. Provides that the agreement shall provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

4. Prohibits the private portion of the project from being financed or developed by the public-private partnership or otherwise using public or tax-exempt financing.

5. Requires the plans and specifications for the project to comply with all applicable governmental design standards for that particular infrastructure project. Requires the private entity studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project, to utilize private sector firms for studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

6. Provides that a facility, subject to the bill's provisions and leased to a private entity during the term of the lease, shall be deemed to be public property for the purposes of identification, maintenance, enforcement of laws, and for purposes of claims and actions against public entities and public employees (the Government Claims Act).

7. Requires all public works constructed, pursuant to the bill's provisions, to comply with statute regarding public works related to public works and public agencies contained in the Labor Code.

8. Provides that the bill's provisions shall not be construed to authorize the City use tidelands trust revenues or any other applicable granting state for general municipal purposes or any other purpose unconnected with the public trust.

9. States that the provisions of the bill are severable, and provides, if any provision of the bill or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.

10. Defines the following terms:

    1. "Best interests of the city" to mean a procurement process that is determined by the city to provide the best value and an expedited delivery schedule while maintaining a high level of quality of workmanship and materials.

    2. "Best value" to mean a value determined by objective criteria that shall include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

    3. "Business entity" means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, engineering, financial, operations, management, facilities maintenance, and other services for development of a new Long Beach Civic Center.

    4. "City" to mean the City of Long Beach and its departments, including the City of Long Beach Harbor Department.

    5. "Long Beach Civic Center" to mean the area bounded by Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia Avenue, containing approximately 14.98 acres, and the parcel on the south side of 3^rd Street between Pacific Avenue and Cedar Avenue, containing approximately 0.89 acres.

    6. "Private entity" means an individual, business entity, or combination of individuals and business entities.

    7. "Private portion of the project" to mean those parcels of land within the Long Beach Civic Center to be conveyed to a private entity and developed as residential, retail, hospitality, institutional, or industrial facilities.

    8. "Project" to mean the revitalization and redevelopment of the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, public library, or other governmental facilities.

    9. "Public portion of the project" to mean those parcels of land within the Long Beach Civic Center to be developed as a city hall, port headquarters, public park, public library, or other government facilities.

    10. "Public-private partnership" to mean a cooperative arrangement between the public and private sectors, built on the expertise of each partner, that best meets the city's needs through the appropriate allocation of resources, risks, and rewards for the purposes of, and, including, but not limited to, studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

11. Makes a number of findings and declarations regarding the necessity and benefits of using a public-private partnership to develop a new Long Beach Civic Center.

12. Finds and declares that a special law is necessary and that a general law cannot be made application within the meaning of Section 16 of Article IV of the California Constitution because of the unique and special circumstances surrounding the existing Long Beach Civic Center, and the need to immediately, quickly, and efficiently develop the project, and to resolve property issues potentially delaying the project.

EXISTING LAW:

1. Authorizes, pursuant to the California Infrastructure Finance Act, local government agencies to use P3s for specified types of infrastructure projects, and requires P3 agreements to contain a number of elements, including security for the construction of the facility to ensure its completion.

2. Requires, for P3s, the governmental agency soliciting proposals and entering into agreements with private entities for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, by private entities for fee-producing infrastructure projects to ensure that the contractor is selected, pursuant to a competitive negotiation process.

3. Defines "fee-producing infrastructure project" or "fee-producing infrastructure facility" to mean the operation of the infrastructure project or facility will be paid for by the persons or entities benefited by or utilizing the project or facility.

4. Allows projects to be proposed by the private entity and selected by the governmental agency at the discretion of the governmental agency, and allows a project to be proposed and selected individually or as part of a related or larger project.

5. Requires the competitive negotiation process to utilize, as the primary selection criteria, the demonstrated competence and qualifications for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, of the facility. Requires the selection criteria to also ensure that the facility be operated at fair and reasonable prices to the user of the infrastructure facility services.

6. Prohibits the competitive negotiation process from requiring competitive bidding, and prohibits the competitive negotiation process from including practices that may result in unlawful activity, including, but not limited to, rebates, kickbacks, or other unlawful consideration. Prohibits governmental agency employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract under this section that would subject those employees to the prohibition for conflict of interest contained in the California Political Reform Act.

7. Provides, other than the criteria mentioned above and applicable provisions related to providing security for the construction and completion of the facility, that the governmental agency soliciting proposals is not subject to any other provisions of the Public Contract Code, as specified, that relates to public procurements.

8. Provides that infrastructure constructed by a private entity shall, at all times, be owned by a governmental agency, unless the governmental agency, in its discretion, elects to provide for ownership of the facility by the private entity during the term of the agreement. Provides that the agreement shall provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years, and in consideration therefor, the agreement shall provide for complete reversion of the privately constructed facility to the governmental agency at the expiration of the lease at no charge to the governmental agency.

9. Provides that the agreement between the governmental agency and the private entity shall include compliance with CEQA. Provides that neither the act of selecting a proposed project or a private entity, nor the execution of an agreement with a private entity, shall require prior compliance with CEQA. Requires appropriate compliance with CEQA to occur before project development commences.

10. Requires performance bonds as security to ensure completion of the construction of the facility and contractual provisions that are necessary to protect the revenue streams of the project.

11. Requires adequate financial resources of the private entity to design, build, and operate the facility, after the date of the agreement.

FISCAL EFFECT: None

COMMENTS:

1. Background on P3s and Lease-Leaseback Financing . P3s place a wide range of project responsibilities and risks onto private entities, some of which were traditionally borne by public agencies alone. A typical P3 agreement calls on the private entity to design and build a facility, and also to finance, operate and maintain it, and in exchange, the private entity may be entitled to tolls or user fees that the facility generates, or may receive direct payments from the government.

California law authorizes the use of P3s for Caltrans, the Judicial Branch, the High-Speed Rail Authority, and local government agencies. AB 2660 (Aguiar), Chapter 1040, Statutes of 1996, known as the California Infrastructure Act, authorizes local governments to utilize private sector investment capital for carrying out "fee-producing infrastructure facilities." AB 2660 applies to cities, counties, school districts, community college districts, public districts, county boards of education, joint powers authorities, transportation authorities, and any public or municipal corporations.

Long-term lease-leaseback financing is one method that local governments use as an alternative to issuing general obligation bonds to pay for public infrastructure. Under this approach, a local government leases public property to a third-party that undertakes improvements to the property and leases the improved property back to the local government. The rights to receive the lease payments from the local government are used to secure debt that was issued to pay for the costs of acquiring and improving the public property.

2. P3 Requirements for Local Agencies. Under AB 2660, a local agency can contract with private entities to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair or operate fee-producing infrastructure facilities. In order to use the P3 method, existing law requires the governmental agency soliciting proposals to use a "competitive negotiation process", which does not require competitive bidding. As part of the agreement, the local agency can also grant private parties with ownership or lease rights to such facilities for up to 35 years. Existing law for P3s requires compliance with CEQA, but provides that "neither the act of selecting a proposed project or a private entity, nor the execution of an agreement with a private entity, shall require prior compliance with CEQA" and requires "appropriate compliance with CEQA to occur before project development commences."

Existing law for P3s requires the plans and specifications for the project to comply with all applicable governmental design standards for that particular infrastructure project, and requires the private entity studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project, to utilize private sector firms for studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project. A facility built using the P3 method and leased to a private entity during the term of the lease, according to existing law, shall be deemed to be public property for the purposes of identification, maintenance, enforcement of laws, and for purposes of claims and actions against public entities and public employees (the Government Claims Act). Existing law requires all public works constructed to comply with statute regarding public works and public agencies contained in the Labor Code.

These P3 provisions, with one exception, have been essentially unchanged since their enactment.

3. Author's Statement. According to the author, "The Long Beach City Hall and Main Library have been found to be seismically deficient. Under the hybrid public-private partnership model authorized by this bill, the City has the opportunity to use existing budgeted dollars that are currently spent on maintenance and offsite leases to fund the construction of a new Civic Center, potentially at no additional cost to the taxpayer over what is currently paid, adjusted for inflation. This financing mechanism will allow the City to address public health and safety concerns in the earliest possible timeframe, and without significantly impacting the City's General Fund or requiring a tax increase.

"The public portions of the project include a new seismically safe Long Beach City Hall, Port of Long Beach Headquarters and Main Library. The private portions of the project include transit-oriented mixed-used developments, high-rise condominiums and retail. All new developments will be built on 15.87 acres of land in downtown Long Beach under a Project Labor Agreement and in accordance with the City's award winning Downtown Plan."

4. Bill Summary. This bill allows the City of Long Beach to use a hybrid public-private partnership procurement method to develop a new civic center, and specifies the requirements of the P3, by adding a new section of law right after the existing P3 statutes. Many of the provisions in the bill are modeled after P3 law for local agencies, with some exceptions:

   1. Competitive Negotiation Process. Current P3 law requires a "competitive negotiation process" that utilizes, "as the primary selection criteria, the demonstrated competence and qualifications for the studying, planning, design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, of the facility." The process does not require competitive bidding.

This bill, however, allows the City of Long Beach to evaluate the project proposals it solicits and receives and to choose the private entity or entities whose proposal is, or proposals are, judged as providing the "best value" in meeting the "best interests" of the City. The bill defines "best interests" to mean a procurement process that is determined by the City to provide the best value and an expedited delivery schedule while maintaining a high level of quality workmanship and materials, and defines "best value" to mean a value determined by objective criteria that shall include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

2. Term. Existing law allows the P3 agreement to provide for the lease of facilities to, or ownership by, the private entity for up to 35 years. This bill, however, allows a lease agreement to provide for the lease of all or a portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years and requires the agreement to provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

3. Contents of the Agreement. Current P3 law specifies that the contents of the agreement between the governmental agency and the private entity must include provisions to ensure a variety of issues – compliance with CEQA, that the private entity has adequate financial resources to design, build, and operate the facility, authority for the governmental agency to impose user fees (for 'fee-producing infrastructure'), and preparation of an annual audited report accounting for the income received and expenses to operate the facility, among other requirements. This bill contains similar CEQA requirements for the project, but does not require other items to be in the agreement between the City and the private entity. According to the sponsor, this is because a city hall (like the one being proposed as part of the project) is not "fee-producing" and therefore those provisions in P3 law are not applicable to this project.

This bill is sponsored by the City of Long Beach.

5. Prior P3 Legislation. Recent legislation to alter the P3 statutes for local agencies include:

   1. AB 1261 (Caballero, 2007) would have made a number of changes to local government P3 statutes, such as: extending the allowable lease period from 35 years to 50 years; altering the criteria local governments must use to select a contractor; and, allowing sanitary sewer systems, power transmission facilities, and power distribution facilities to be constructed under P3 agreements. AB 1261 passed this Committee on a 7-0 vote on April 18, 2007, but subsequently died on the Senate Floor.

2. AB 878 (Caballero, 2009) was nearly identical to AB 1261. AB 878 was referred to this Committee, but was never heard.

3. AB 164 (Wieckowski), Chapter 94, Statutes of 2013, requires the use of performance bonds and payment bonds in local government infrastructure projects that are financed through public-private partnerships.

6. Arguments in Support. Supporters argue that this bill will provide greater project stability for the City's groundbreaking public-private development and will create much needed jobs, revitalize downtown Long Beach and result in seismically safe government buildings that will be used to serve public needs.

7. Arguments in Opposition. None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

City of Long Beach [SPONSOR]

Downtown Long Beach Associates

Port of Long Beach

Opposition

None on file

Analysis Prepared by: Debbie Michel / L. GOV. / (916) 319-3958

 THIRD READING  

Bill No: SB 562

Author: Lara (D)

Amended: 4/14/15

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 5/6/15

AYES: Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach, Pavley

SUBJECT: Infrastructure financing: City of Long Beach Civic Center

SOURCE: Author

DIGEST: This bill allows the City of Long Beach to use a public-private partnership procurement method to develop a new civic center.

ANALYSIS:

Existing law:

1. Authorizes local governments to enter into public-private partnerships (P3s) for fee-producing infrastructure projects that might not be feasible without private-sector involvement.

2. Allows local governments may solicit proposals and enter into agreements with private entities for the study, planning, design, financing, construction, maintenance, rebuilding, improvement, repair, or operation by private entities of specific types of fee-producing infrastructure (AB 2660, Aguiar, Chapter 1040, Statutes of 1996).

3. Requires that a P3 agreement for the construction of fee-producing infrastructure by a private entity must provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years.

This bill:

1. Allows the City of Long Beach (City) to use a P3 agreement to contract and procure a project to revitalize and redevelop the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities.

2. Allows the City to enter into a P3 with one or more private entities for delivery of the project through a concession agreement, design-build agreement, design-build-finance agreement, project agreement, lease-leaseback, or other appropriate agreements that combine one or more major elements of these agreements.

3. Requires the City to award the contract to the private entity or entities whose proposal or proposals the City determines, in writing, to be the most advantageous by providing the best value in meeting the best interests of the City.

4. Requires the negotiation process to specifically prohibit:

   1. Practices that may result in unlawful activity, including rebates, kickbacks, or other unlawful consideration

   2. City employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract that would subject those employees to specified statutory prohibitions against financial conflicts of interest.

5. Allows the City to terminate the project prior to project award should the City determine that the project is not in the best interests of the City or should the negotiations with the private entity or entities otherwise fail.

6. Requires that all documents related to the project must be subject to disclosure under the California Public Records Act, except those exempted from disclosure under that Act.

7. Requires the Long Beach Civic Center project to comply with the California Environmental Quality Act (CEQA) before project construction commences and directs that neither the act of selecting a private entity, nor the execution of an agreement with the private entity, requires prior compliance with CEQA.

8. Requires that the City must own the public portion of the project, unless the City elects to provide for ownership of the project by the private entity through a separate lease agreement.

9. Allows a lease agreement to provide for the lease of all or a portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years and requires the agreement to provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

10. Prohibits the private portion of the project from being financed or developed by the P3 or otherwise using public or tax-exempt financing.

11. Directs that:

    1. The plans and specifications for the project must comply with all applicable governmental design standards for that particular infrastructure project.

    2. The studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination, of the project must utilize private sector firms. However, a facility leased to a private entity, during the term of the lease, must be deemed to be public property for purposes of identification, maintenance, enforcement of laws, and for purposes of the Government Claims Act.

    3. All public works constructed pursuant to this bill’s provisions must comply with specified provisions of the California Labor Code relating to public works projects.

12. Defines the following terms:

    1. “Best interests of the city” means a procurement process that is determined by the City to provide the best value and an expedited delivery schedule while maintaining a high level of quality workmanship and materials.

    2. “Best value” means a value determined by objective criteria that must include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

    3. “Business entity” means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, engineering, financial, operations, management, facilities maintenance, and other services for development of a new Long Beach Civic Center.

    4. “City” means the City of Long Beach and its departments, including the Harbor Department.

    5. “Long Beach Civic Center” means the area bounded by Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia Avenue, containing approximately 14.98 acres and the parcel on the south side of 3rd Street between Pacific Avenue and Cedar Avenue, containing approximately 0.89 acres.

    6. “Private entity” means an individual, business entity, or combination of individuals and business entities.

    7. “Private portion of the project” means those parcels of land within the Long Beach Civic Center to be conveyed to a private entity and developed as residential, retail, hospitality, institutional, or industrial facilities.

    8. “Project” means the revitalization and redevelopment of the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities.

    9. “Public portion of the project” means those parcels of land within the Long Beach Civic Center to be developed as a city hall, port headquarters, public park, public library, or other government facilities.

    10. “Public-private partnership” means a cooperative arrangement between the public and private sectors, built on the expertise of each partner, that best meets the city’s needs through the appropriate allocation of resources, risks, and rewards for the purposes of, and, including studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

1. Contains legislative findings and declarations regarding the necessity and benefits of using a public-private partnership to develop a new Long Beach Civic Center.

13. Directs that its provisions are severable.

Comments

1. Purpose of the bill. SB 562 merges existing state laws relating to lease-leaseback P3s and design-build-finance-operate-maintain P3s to allow the City to use a unique hybrid P3 model to finance its Civic Center project. The Long Beach City Hall and Main Library have been found to be seismically deficient. Using a P3 procurement model will allow Long Beach to use General Fund dollars that are currently spent on maintenance and offsite leases to fund the construction of a new Civic Center, potentially at no additional cost to the taxpayer over what is currently paid, as adjusted for inflation. The P3 model is the same mechanism that was used successfully to design, build, finance, operate, and maintain the courthouse the state recently constructed in Long Beach. This financing mechanism will allow the City to address public health and safety concerns in the earliest possible timeframe without significantly increasing the City’s General Fund obligations or requiring a tax increase.

2. Lease term. SB 562’s 50-year limit on a lease agreement for the Civic Center project is shorter than the limits that generally apply to leases on city property. However, 50 years far exceeds the 20 to 30 year terms of bonds or other debt instruments that local governments usually use to finance public infrastructure projects and extends the 35-year maximum lease term established by the 1996 Aguiar bill for local P3 agreements. While allowing for a longer lease term may help ensure that the annual General Fund impact of Long Beach’s Civic Center project doesn’t exceed budgeted amounts, longer financing periods typically result in higher overall borrowing costs, which are ultimately paid by the City’s taxpayers. It is unclear whether authorizing a maximum 50-year term for Long Beach’s public-private infrastructure agreement makes it more difficult to ensure that the public’s interest in the Civic Center project is protected for the duration of any agreement.

3. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 562 contains findings and declarations explaining the need for legislation that applies only to the City of Long Beach.

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

SUPPORT: (Verified 5/7/15)

City of Long Beach

Downtown Long Beach Business Associates

Port of Long Beach

OPPOSITION: (Verified 5/7/15)

None received

Prepared by: Brian Weinberger / GOV. & F. / (916) 651-4119

5/8/15 15:09:24

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

INFRASTRUCTURE FINANCING: CITY OF LONG BEACH CIVIC CENTER

Allows the City of Long Beach to use a public-private partnership procurement method to develop a new civic center.

Background and Existing Law

Confronted by aging infrastructure, growing populations, and limited revenue sources, local governments sometimes turn to non-traditional financing techniques to pay for the construction of new public infrastructure and the replacement of existing facilities.

Long-term lease-leaseback financing is one method that local governments use as an alternative to issuing general obligation bonds to pay for public infrastructure. Under this approach, a local government leases public property to a third-party that undertakes improvements to the property and leases the improved property back to the local government. The rights to receive the lease payments from the local government are used to secure debt that was issued to pay for the costs of acquiring and improving the public property.

In 1996, the Legislature authorized local governments to enter into public-private partnerships (P3s) for fee-producing infrastructure projects that might not be feasible without private-sector involvement. Local governments may solicit proposals and enter into agreements with private entities for the study, planning, design, financing, construction, maintenance, rebuilding, improvement, repair, or operation by private entities of specific types of fee-producing infrastructure (AB 2660, Aguiar, 1996). A P3 agreement for the construction of fee-producing infrastructure by a private entity must provide for the lease of those facilities to, or ownership by, the private entity for up to 35 years.

In 2007, the City of Long Beach identified seismic deficiencies in its City Hall and Main Library Buildings and found that substantial seismic renovations would be required to protect lives during a major earthquake. The city evaluated the costs of retrofitting the existing structures and concluded that the City Hall and Main Library buildings should be replaced rather than repaired. In 2013, the City initiated a procurement process for development of a new Civic Center through a P3 agreement.

City of Long Beach officials want to clarify their authority under state law to finance the Long Beach Civic Center improvements through a P3 agreement that combines elements of state laws that authorize cities to enter into lease-leaseback financing and design-build-finance-operate-maintain financing agreements.

Proposed Law

Senate Bill 562 allows the City of Long Beach to use a public-private partnership agreement to contract and procure a project to revitalize and redevelop the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities. Specifically, the bill:

• Allows the City to enter into a public-private partnership with one or more private entities for delivery of the project through a concession agreement, design-build agreement, design-build-finance agreement, project agreement, lease-leaseback, or other appropriate agreements that combine one or more major elements of these agreements.

• Requires the City to award the contract to the private entity or entities whose proposal or proposals the City determines, in writing, to be the most advantageous by providing the best value in meeting the best interests of the City.

• Requires the negotiation process to specifically prohibit:

  • Practices that may result in unlawful activity, including rebates, kickbacks, or other unlawful consideration

  • City employees from participating in the selection process when those employees have a relationship with a person or business entity seeking a contract that would subject those employees to specified statutory prohibitions against financial conflicts of interest.

• Allows the City to terminate the project prior to project award should the city determine that the project is not in the best interests of the City or should the negotiations with the private entity or entities otherwise fail.

SB 562 requires that all documents related to the project must be subject to disclosure under the California Public Records Act, except those exempted from disclosure under that act.

SB 562 requires the Long Beach Civic Center project to comply with the California Environmental Quality Act (CEQA) before project construction commences and directs that neither the act of selecting a private entity, nor the execution of an agreement with the private entity, requires prior compliance with CEQA.

SB 562 requires that the City of Long Beach must own the public portion of the project, unless the City elects to provide for ownership of the project by the private entity through a separate lease agreement.

SB 562 allows a lease agreements to provide for the lease of all or a portion of the project to, or ownership by, the private entity or entities, for a term up to 50 years and requires the agreement to provide for complete reversion of the public portion of the project to the City at the expiration of the lease or transfer term.

SB 562 prohibits the private portion of the project from being financed or developed by the public-private partnership or otherwise using public or tax-exempt financing.

SB 562 directs that:

• The plans and specifications for the project must comply with all applicable governmental design standards for that particular infrastructure project.

• The studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination, of the project must utilize private sector firms. However, a facility leased to a private entity, during the term of the lease, must be deemed to be public property for purposes of identification, maintenance, enforcement of laws, and for purposes of the Government Claims Act.

• All public works constructed pursuant to bill’s provisions must comply with specified provisions of the California Labor Code relating to public works projects.

SB 562 defines the following terms:

• “Best interests of the city” means a procurement process that is determined by the city to provide the best value and an expedited delivery schedule while maintaining a high level of quality workmanship and materials.

• “Best value” means a value determined by objective criteria that must include a combination of price, financing costs, features, functions, performance, life-cycle maintenance costs and abatement offsets, and development experience.

• “Business entity” means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, engineering, financial, operations, management, facilities maintenance, and other services for development of a new Long Beach Civic Center.

• “City” means the City of Long Beach and its departments, including the Harbor Department.

• “Long Beach Civic Center” means the area bounded by Broadway, Pacific Avenue, Ocean Boulevard, and Magnolia Avenue, containing approximately 14.98 acres and the parcel on the south side of 3rd Street between Pacific Avenue and Cedar Avenue, containing approximately 0.89 acres.

• “Private entity” means an individual, business entity, or combination of individuals and business entities.

• “Private portion of the project” means those parcels of land within the Long Beach Civic Center to be conveyed to a private entity and developed as residential, retail, hospitality, institutional, or industrial facilities.

• “Project” means the revitalization and redevelopment of the Long Beach Civic Center with a new city hall, port headquarters, public library, and public park, and residential, retail, hospitality, institutional, and industrial facilities.

• “Public portion of the project” means those parcels of land within the Long Beach Civic Center to be developed as a city hall, port headquarters, public park, public library, or other government facilities.

• “Public-private partnership” means a cooperative arrangement between the public and private sectors, built on the expertise of each partner, that best meets the city’s needs through the appropriate allocation of resources, risks, and rewards for the purposes of, and, including studying, planning, designing, constructing, developing, financing, operating, maintaining, or any combination thereof, the project.

SB 562 contains legislative findings and declarations regarding the necessity and benefits of using a public-private partnership to develop a new Long Beach Civic Center.

The bill directs that its provisions are severable.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. SB 562 merges existing state laws relating to lease-leaseback public-private partnerships and design-build-finance-operate-maintain public-private partnerships to allow the city of Long Beach to use a unique hybrid public-private partnership model to finance its Civic Center project. The Long Beach City Hall and Main Library have been found to be seismically deficient. Using a P3 procurement model will allow Long Beach to use General Fund dollars that are currently spent on maintenance and offsite leases to fund the construction of a new Civic Center, potentially at no additional cost to the taxpayer over what is currently paid, as adjusted for inflation. The P3 model is the same mechanism that was used successfully to design, build, finance, operate, and maintain the courthouse the state recently constructed in Long Beach. This financing mechanism will allow the city to address public health and safety concerns in the earliest possible timeframe without significantly increasing the city's General Fund obligations or requiring a tax increase.

2. Lease term. SB 562’s 50-year limit on a lease agreement for the Civic Center project is shorter than the limits that generally apply to leases on city property. However, 50 years far exceeds the 20 to 30 year terms of bonds or other debt instruments that local governments usually use to finance public infrastructure projects and extends the 35-year maximum lease term established by the 1996 Aguiar bill for local P3 agreements. While allowing for a longer lease term may help ensure that the annual General Fund impact of Long Beach’s Civic Center project doesn’t exceed budgeted amounts, longer financing periods typically result in higher overall borrowing costs, which are ultimately paid by the city’s taxpayers. It is unclear whether authorizing a maximum 50-year term for Long Beach’s public-private infrastructure agreement makes it more difficult to ensure that the public’s interest in the Civic Center project is protected for the duration of any agreement.

3. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 562 contains findings and declarations explaining the need for legislation that applies only to the City of Long Beach.

Support and Opposition

(4/30/15)

Support: City of Long Beach.

Opposition: Unknown.

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