State Lands Commission leaves millions on table

California’s State Lands Commission is doing a poor job of managing its more than 4,000 leases, leaving millions of dollars of potential state revenues on the table, the State Auditor’s office reported today.

The commission – which consists of the lieutenant governor, the state controller and the state finance director – is responsible for managing lands that California acquired from the federal government at statehood, including the beds of navigable rivers and lakes, submerged land along the State’s coast, and school lands granted to the State for the benefit of public education.

The audit found the commission has missed chances to generate millions of dollars in revenues for the state’s beleaguered General Fund — as much as $8.2 million for just some of the leases in the sample of 35 reviewed. Specifically, the audit found the commission:

  • lacks policies and procedures specifying steps needed for managing leases and is ineffective or inconsistent in seeking payment from or evicting lessees whose rent is past due; more than 10 percent of the revenue-generating leases were past due on rent and yet some of the lessees have remained on state land without paying rent for up to 22 years.
  • does not take timely action to renew its expired leases, conduct rent reviews, or appraise properties; the commission lost up to an estimated $269,000 for the leases the audit reviewed that have not been extended or renewed.
  • lost $6.3 million in increased rent that it may have been able to receive on a sample of leases because it failed to promptly conduct rent reviews, which frequently result in increased rent amounts.
  • may be losing up to $174,000 each year for a sample of pipeline leases reviewed because it has not updated the rate — established in 1981— to use when calculating rent.
  • is not appropriately tracking the status of some of its leases – its Application Lease Information Database has inaccurate and incomplete data and staff do not always use it to track lease information.
  • lacks a plan for monitoring its revenue-generating leases, in particular those leases that are potentially the most profitable because they involve the extraction of oil and gas from state properties.
  • hasn’t taken sufficient steps to quantify its need for additional staff.
  • “We agree with many of the Bureau’s recommendations and, in fact, are implementing or plan to implement most of them,” commission executive director Curtis Fossum wrote to the auditor’s office Aug. 1. “We do appreciate the efforts of the Bureau in providing constructive criticism and analyses of past and present practices, as well as its recommendations, which we look forward to implementing where feasible and appropriate. Many of the recommendations suggested by the Bureau are practical and achievable if the Commission is provided the opportunity to acquire and retain adequate staff to address these areas.”

    Former state Sen. Dave Cogdill, R-Modesto, who had chaired a Senate Select Committee on Surplus Property, called for this audit last year, citing various anecdotes of waste. Among those examples was USS-POSCO, a steel company that continued to occupy 490 acres of state-owned land in Pittsburg for 12 years after the lease expired. The property originally was leased at $235,137 per year, but the commission only collected a total of $66,784 in back rent during the 12 year period even as California’s land prices peaked.

    Josh Richman

    Josh Richman covers state and national politics for the Bay Area News Group. A New York City native, he earned a bachelor’s degree in journalism from the University of Missouri and reported for the Express-Times of Easton, Pa. for five years before coming to the Oakland Tribune and ANG Newspapers in 1997. He is a frequent guest on KQED Channel 9’s “This Week in Northern California;” a proud father; an Eagle Scout; a somewhat skilled player of low-stakes poker; a rather good cook; a firm believer in the use of semicolons; and an unabashed political junkie who will never, EVER seek elected office.