State Senate Committee Advances Bill That Could Extend Taxpayer Payments To Civic Center Deal's Private Developer/Operator To 50 Years; No Committee Member Raises Locally Controversial Aspects of Transaction
Dems (incl. bill author Sen. Lara), city and port reps + trade union rep praise transaction and urge passage; neither of the Committee's two Repubs, including Sen. Nguyen who reps SE LB, raise issues or oppose
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(May 7, 2015) -- As flashed on LBREPORT.com's front page moments after the vote, the state Senate Governance and Finance Committee voted 7-0 on May 6 -- with its only two Republicans (Senators Janet Nguyen and John Moorlach) joining in -- to advance a bill by state Sen. Ricardo Lara (D, LB-Huntington Park) designed to help facilitate the controversial Long Beach Civic Center transaction in which the City Council voted (Dec. 2014) to let a private developer/operator finance, design, build, operate and maintain a new Civic Center in exchange for annual escalating city taxpayer payments (CPI) and conveyance to the private developer/operator of the prime located land under the former LB courthouse for the firm's development and profit.
SB 562 would extend the allowable period for the lease with the private developer/operator to 50 years (after Long Beach city management told the public and the Council that lease to the private developer/operator would run for roughly 30 years, then 30+ years, and most recently, 40 years. As noted in the Committee's own legislative analysis, extending the financing period typically means making more payments and raising the ultimate cost to the buyer (in this case the taxpayer.)
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State Sen. Ricardo Lara (D, LB-Huntington Park), a member of the Committee and of the state Senate's Dem leadership, is carrying the bill at the request of the City of Long Beach. Sen. Lara presented the bill at the Committee hearing. Testifying in support alongside Senator Lara was Mark Taylor, Chief of Staff to Mayor Robert Garcia, along with a representative of the Port of Long Beach and a representative of southern CA building and trade unions. There was no testimony in opposition.
LBREPORT.com provides extended audio (unedited) of the Committee proceedings on the bill below.
Proponents noted that the Civic Center transaction was approved in unanimous votes (Dec. 2014) by the City Council and the non-elected Port of Long Beach, but with the exception of the leadership of some downtown business interests and nearby neighborhood groups, public testimony on the transaction over time was mainly negative. Some city officials touted the "public-private-partnership" transaction as a way to avoid a vote of the people on the matter, which be required to approve a bond to finance a less ambitious retrofit of LB's City Hall (built less than 40 years earlier.)
City management contended that LB's 1970's era City Hall had become "functionally obsolete" and argued that the building's seismic issues (known since 2007) gave the city an "opportunity" to create an entirely new Civic Center that it said would provide a better use of public space. LB's current Civic Center includes a large Main Library, which under the new transaction will be replaced by a smaller size library. The new Civic Center will include an area for private development (possibly a hotel) on what is now publicly-owned land under the now-former LB courthouse.
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The state Senate Committee, despite the presence of a representative of the Port of LB, didn't inquire about the financial involvement of the Port, which operates on state Tidelands, and agreed to participate financially in the transaction by agreeing to co-locate its new Port headquarters building as part of the new Civic Center.
Although the City organized multiple study sessions and public meetings describing the transaction's asserted benefits, the City Council held only one "study session" on the transaction's financial details (with Power Point slides, no accompanying text memo) a little over a month before the Council's decisional voted action. The Council invited no formal presentations from independent witnesses or experts regarding seismic retrofits or other alternatives...and during study sessions and Council sessions preceding the final vote, taxpayers were allowed 180 seconds per person at the public speaker's podium.
On December 14, 2014 (timed to occur during the low news impact holiday period), the Long Beach City Council voted 8-0 to approve pursuing the Civic Center transaction with a chosen developer/operator.
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From 2007 to the present, the City didn't seek or obtain bids for a seismic retrofit of its current City Hall (built less than 40 years ago) while simultaneously citing the building's seismic deficiencies as its basis for pursuing an entire Civic Center rebuild. At least two separate sources -- a Long Beach architect experienced in adaptive reuse retrofits and a Columbia University graduate student -- independently indicated that a retrofit should cost significantly less than the sum city management estimated. Under the Council-approved Civic Center transaction, a new City Hall isn't expected to be completed [last stated city staff estimate] until late 2019.
Former LB Redevelopment Agency boardmember Terry Jensen authored detailed commentary pieces [published by LBREPORT.com] itemizing fiscal grounds for questioning the transaction, none of which have been denied on the merits by city officials. Mr. Jensen says some of his fiscal points have been effectively acknowledged on numerical grounds by city staff.
The Committee's legislative analysis of the bill stated in part:
[Committee legislative analysis text]
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 [public-private-partnership] 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.
In Committee colloquy on the measure, Committee chair Bob Hertzberg (D., Los Angeles-SFV), a longtime Sacramento lawmaker, commented that before his government tenure he had been very involved in Long Beach and "it's staggerng how well you guys have done. It's really impressive, all across the board, it's a great, really well run city, it's doing good stuff." Sen. Lara replied, "you've helped us a lot." Hertzberg added, "It's all good; I was in the game."
Committee member Senator Moorlach [a taxpayer hero in OC for having spotted and warned about risky County investments in the 1990s (which ultimately led to the County's bankruptcy] asked if the Civic Center transaction used the same financing model as used for the newly completed LB courthouse, was told by the Committee chair Herzberg that it was (Hertzberg said it had "worked really well") and Sen. Moorlach asked nothing further.
[As reported in multiple media outlets, including LBREPORT.com, the state Legislative Analyst Office issued a report criticizing the P3 financing model as used in the courthouse transaction. LBREPORT.com coverage at this link ("New Long Beach Courthouse, Built w/ "Public Private Partnership" Praised By Local Pols, May Cost As Much As $160 Million More Than Using Traditional Procurement, State Legislative Analyst Office Says") Terry Jensen has also itemized his criticism of the courthouse P3 transaction, applicable to the Civic Center transaction, in an opinion piece at this link. ("Public Private Partnership Isn't Panacea, May Invite Higher Cost To Rebuild Long Beach Civic Center")]
Senator Nguyen, elected in Nov. 2014 to represent a district that includes part of SE Long Beach, raised no substantive taxpayer issues. She stated, "I just want to thank Sen. Lara. This is a, you know, this is an excellent project, private-public partnership, stimulate the economy in the local area, bring jobs and also public benefits as well. I mean these aging buildings, are not, you know, are not safe and you're growing. Long Beach has done a phenomenal job and so I just want to thank, you know, the Mayor, the Council and the Senator for bringing this forweard and so I'll be very supportive of it."
"Thank you," Sen. Lara replied. "Excellent," chair Hertzberg added. The Committee vote was 7-0 to advance the measure to the full Senate floor.
When SB 562 reaches the state Senate floor, proponents can now state that it had bipartisan support and no opposition in the Senate Committee. Assuming state Senate passage, it will then head to the Assembly.
