BILL ANALYSIS
AB 650
Page 1
ASSEMBLY THIRD READING
AB 650 (Hill)
As Amended June 2, 2009
Majority vote
LOCAL GOVERNMENT 5-2 APPROPRIATIONS 12-5
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|Ayes:|Caballero, Arambula, |Ayes:|De Leon, Ammiano, Charles |
| |Davis, Krekorian, Skinner | |Calderon, Davis, Fuentes, |
| | | |Hall, John A. Perez, |
| | | |Price, Skinner, Solorio, |
| | | |Torlakson, Krekorian |
| | | | |
|-----+--------------------------+-----+---------------------------|
|Nays:|Knight, Duvall |Nays:|Nielsen, Duvall, Harkey, |
| | | |Miller, |
| | | |Audra Strickland |
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SUMMARY : Directs the state to loan $10 million to the City of
Half Moon Bay (City) to assist in the purchase of the Beachwood
Property. Specifically, this bill :
1)Provides that the state shall loan the City $10 million to be
repaid over 20 years, after a five-year delay, with no
interest.
2)Specifies that the loan shall be made up of $2.5 million from
each the following budgetary accounts:
a) Regional Planning, Housing, and Infill Incentive Account
within Proposition 1C of 2006;
b) Habitat Conservation Fund;
c) San Francisco Bay Area Conservancy Account within the
State Coastal Conservancy Fund; and,
d) State Coastal Conservancy Fund.
3)Specifies that this loan is made to assist the City relating
to its settlement agreement in the case of Yamagiwa v. City of
Half Moon Bay (N.D. Cal. 2007) 523 F. Supp.2d 1036, involving
certain property known as the Beachwood Property in the City
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of Half Moon Bay.
4)Requires the City, prior to the disbursement of any funds, to
obtain an independent appraisal of the Beachwood Property that
conforms to the Uniform Standards of Professional Appraisal
Practice.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Zero-interest loan to the City of $10 million, to be repaid in
equal annual installments over 20 years, following a five-year
deferral.
2)The loan will come from the following sources and in the
following amounts:
a) $2.5 million from Proposition 1C 53545(b)(1)(A) - Infill
Development Parks;
b) $2.5 million from the Habitat Conservation Fund;
c) $2.5 million from San Francisco Bay Area Conservancy
Account, State Coastal Conservancy Fund; and,
d) $2.5 million from the State Coastal Conservancy Fund.
COMMENTS : On November 28, 2007, a federal district court ruled
that the City of Half Moon Bay's construction activities caused
man-made wetlands to form on private property, precluding
previously-approved residential development and constituting a
physical taking of the property by the city. The court awarded
the owner of the property approximately $37 million. Attorneys'
fees, pre-judgment interest and other costs increased the city's
liability to approximately $41.1 million.
According to the sponsor of this bill, the City of Half Moon
Bay, it faced two difficult options as a result of this
judgment: 1) Pay the $41.1 million, which would likely bankrupt
the city and severely disrupt its basic services and functions;
or, 2) litigate a costly appeal with a risk that the appeal
would not succeed. Faced with near-certain bankruptcy on one
hand and an extremely high-risk gamble on the other, the city
entered into settlement negotiations with the owner of the
property.
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The final settlement agreement on April 2, 2008, obligates the
city to approve the entitlements to develop the Beachwood
Property by June 29, 2009; or, pay the owner $18 million for the
property by August 29, 2009. Failure to meet this payment
deadline requires the city to pay the owner an interest penalty
assessment of 6% annually retroactive to December 2007, and
until the amount of the settlement amount and accrued interest
are paid in full.
The city states that while the settlement agreement
significantly reduced the city's liability, Half Moon Bay's
financial situation remains extremely dire. The city's fiscal
year (FY) 2008-2009 Budget includes $9 million in general funds,
$6 million in special funds, for a total annual municipal budget
of $15 million. The financial obligation of the settlement
agreement represents 120% of the city's total budget.
During the 2007-2008 legislative session, AB 1991(Mullin) sought
relief for the city by authorizing development on the property
consistent with a tentative subdivision map previously approved
by the city in 1990. The bill exempted the proposed development
from obtaining a coastal development permit under the California
Coastal Act or the city's certified local coastal program. AB
1991 would have exempted the proposed development from obtaining
any permits or approvals (other than existing approvals at the
time) under the California Environmental Quality Act (CEQA),
California Endangered Species Act, the California Fish and Game
code, the Porter Cologne Water Quality Act, and certain state
highway encroachment permits. AB 1991 passed the Assembly 46-18
and was held in the Senate Rules Committee.
This bill seeks a different approach to meet the financial
burden of the City of Half Moon Bay. Under this bill, the city
will be able to protect the Beachwood Property from future
development. This bill provides partial financial relief to
meet the terms of the settlement agreement and preserve the
property for purposes as a public park.
During the last 20 years, the Legislature has bailed out local
governments, school districts, community colleges, and other
local entities facing extraordinary financial challenges. The
amount of these bailouts have totaled over several hundred
million dollars. In each case, the financial relief has taken
various forms to meet the specific needs of the individual
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entity facing its own unique circumstance. Examples of this
include:
Merced County was unable to pay $5 million to the California
Department of Forestry (CAL FIRE) in 1995 for contracted fire
prevention and suppression services. The state allowed Merced
County to pay back these funds over a 10-year period.
Butte County officials announced that they were $3.5 million
short in balancing their FY 1989-1990 budget. Within a
three-year period, the Butte County's costs for state required
programs grew by $4.7 million while revenue only grew by $4
million. Revenue for discretionary spending declined by 21%
during this same period. The Department of Finance responded by
authorizing Butte County to defer payment of $2.8 million for
CAL FIRE fire services and several other adjustments.
The Legislature approved AB 2680 (Adams) in 2008, which forgave
$777,084 of a loan owed to the state by a private water company,
so that the County of San Bernardino could acquire a failing
water system and rebuild it for the citizens of Cedar Glen;
without this debt forgiveness it would not have been financially
feasible for San Bernardino County to rebuild the water system.
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958
FN: 0001405