State’s vast portfolio of surplus properties draws new attention from state lawmakers

Stymied attempts to sell off billions of dollars worth of the state’s
surplus and ill-used properties are getting a second look–courtesy of an
evolving fiscal and administrative scandal at the University of California.

UC is required by law to submit annual reports to the Legislature detailing
its property holdings, but Senate critics say the university has fully met
its reporting obligation only once in 18 years–a contention rejected by UC,
which noted that it began on Wednesday posting its property holdings on the
Web for the first time.

But the university’s administrative high command, already under fire for
secretly approving lucrative pay and benefits packages at the same time it
was raising student fees, now faces new pressures in the Capitol
because of its handling of surplus property reporting.

UC says it provided extensive data to the Legislature and Department of
General Services. Gordon Schanck, UC’s director of real estate, said UC
collected data and provided it to the Legislature after the law was
approved. Delivery of the data was delayed, in part by budget restraints and
also by a reporting moratorium approved by the Legislature itself. “We were
out of compliance about a year, but we did it,” Schanck said.
Republicans in the Senate were not convinced.

“UC never responded to us,” said Sen. Jim Battin, R-La Quinta, who has
authored unsuccessful legislative efforts to force compliance with the 1988
law. “We were pretty much told, ‘We appreciate your interest, but we don’t
have any requirement to respond to you.'” Sen. Jeff Denham, R-Merced, who
joined Battin in bills to force surplus property sales, agreed.

“They have the fiscal obligation to provide information to the Legislature,”
added Denham, who has authored SB1117, a majority-vote bill that requires
the university to report its property holdings. Denham’s bill declares that
the Legislature’s intention is to pursue a constitutional amendment to strip
UC of its autonomy if the university doesn’t comply. Such an amendment would
require voter approval.

Denham noted that his bill was prompted by UC’s disputed compensation
practices, but that UC’s handling of its property inventory gives greater
urgency to the legislation and could woo support from Democrats and boost
the measure’s chances for passage. The bill is awaiting action in the
Democrat-controlled Senate Rules Committee.

UC put together information on the surplus property issue for
Capitol Weekly. Some have noted that disposing of UC’s surplus property
is a complex process, partly because of the university’s constutional protections, partly because UC has property bequeathed to it by private donors who want the university to retain control.

The stakes are enormous. No comprehensive listing of the thousands of
state-owned properties exists. There is no formal estimate as to the dollar
value of the state’s property holdings. Also, there is no number of
properties that are defined as surplus or under-used. By one informal
estimate, the state owns 10,000 properties and could sell about $1 billion a
year worth of surplus property over the next decade. “But that’s a seat of
the pants guesstimate. Nobody knows,” a staffer said. The lack of reporting
and comprehensive inventory applies to many state agencies, not just UC.
Caltrans, for example, is a major landlord of properties obtained through
eminent domain.

But some think that estimate is too low. An unidentified bureaucrat, hearing
that Battin wanted to put together a list of surplus or under-used
properties worth $1 billion, late one night slipped an unsigned note under
his door that listed 10 properties.

“We were told, ‘Just take any three of the properties on that list and
you’ll come up with a billion dollars worth.’ We did,” said a Battin aide.

The list included San Quentin Prison in Marin County, which sits on 275
acres then valued at $660 million, the 300-acre Lanterman Development Center
in Pomona and 406 acres of Del Mar Fair property in coastal San Diego
County.

In the case of San Quentin, the property could be sold and another prison
built elsewhere for half that amount. In the other two, some of the acreage
could be sold, or could be leased out at market rates.

There are numerous examples of the state getting below-market rates. Perhaps
the most dramatic, widely reported, is a state-owned parcel used as part of
a golf course in a residential area near Piedmont, east of San Francisco. An
independent appraisal valued the property at $2 million; the state receives
about $850 a year in lease revenue. Other properties, such as the Los
Angeles Memorial Coliseum and the Cow Palace south of San Francisco, capture
large revenues but provide little income to the state.

A listing called a Non-Operating Property Inventory compiled by the Senate
from Caltrans data shows hundreds of unused properties. The document was
created in January 2005. The listings include a $6.9 million office building
in Sacramento, a 19.4-acre parcel in Auburn acquired for $340,000 and now
worth $990,000, a commercial building in Walnut Creek worth $5.2 million and
8.35 acres worth $2.27 million in Moreno Valley.

Although Democrats, led by then-Senate Leader John Burton, signed off on
efforts to get UC and other agencies to disclose their holdings, bipartisan
agreement remains elusive. Democratic majorities in both houses have
hitherto blocked most of the attempts to force surplus state property sales,
including a 10-bill package backed by Battin, Denham and other Republicans.

Two years ago, a bill that put some 60 properties on the block made it
through the Senate and most of the Assembly, but was gutted in the final
hours of the session by Democrats seeking to protect properties in their
districts. In the end, only two properties were left in the final bill. Last
year, a surplus property bill emerged from the Legislature but was vetoed by
the governor because it contained a poison-pill provision inserted by
Democrats.

Gov. Schwarzenegger issued an executive order in May 2004 requiring the
state to produce an inventory of its properties, then identify those that
are surplus, high-value properties that could be sold on the open market.

That task is not completed. Attempts to create a commission that would
oversee the disposal of surplus state property–a commission patterned after
the federal military base-closure model–has failed twice.

At the ballot box, however, the story has been different. Voters two years
ago approved a measure to sell properties, but require the proceeds to be
used to pay down budget deficit bonds. The provision was attached to a
bipartisan proposal to protect the state’s closed party primary system.

Backers of surplus property legislation say the voter-approved restriction
is too narrow, and the money could be used for other things, including
infrastructure or health services.

In the end, lawmakers, reflecting their constituents’ interests, resist
selling off properties in their own districts.

“The problem is that we get all wrapped up in intramural politics,” Battin
said.