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.


    Was the state collecting all the rent it was due?

    A state lawmaker used an East Bay example today to illustrate his request an investigation into whether the State Lands Commission has failed to collect fair market value in rent for publicly-owned lands held in trust, even during the height of the real-estate boom.

    Dave CogdillState Sen. Dave Cogdill, R-Modesto, sent a letter asking that the Joint Legislative Audit Committee (of which he’s a member) authorize the State Auditor to examine the issue.

    “The State Lands Commission, effectively the state’s landlord for publicly-owned properties, may have been shortchanging California taxpayers for decades by charging tenants rock-bottom rent for prime properties, even during the height of the real estate boom,” Cogdill, who chairs the Senate Select Committee on Surplus Property, said in a news release.

    A 1984 state audit recommended that the Commission change how it collects rent and appraises properties, yet there has been no follow-up to verify that those changes were made, he said.

    As an example he cited 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.

    Cogdill, who formerly owned a real-estate appraisal business, also says a formula the Commission uses to calculate lease rates hasn’t been updated since 1980.

    “Considering these are just a few examples of mismanagement out of the 4.5 million acres of public land managed by the State Lands Commission, potentially millions in taxpayer dollars have been lost,” he said. “Ensuring the state collects fair market value in rent for our taxpayer-owned properties plays a vital and timely role in easing our state’s continued budget crisis.”

    The Joint Legislative Audit Committee will vote at its Aug. 4 hearing on whether to approve Cogdill’s audit request.


    ‘Enough is enough’ … or not

    State Senate President Pro Tem Darrell Steinberg, D-Sacramento, addressed reporters late last night at the State Capitol:

    A short while later, the Senate Republican Caucus ousted Dave Cogdill, R-Modesto, as its leader because he’d agreed to some tax increases as part of the budget solution. The new leader is Dennis Hollingsworth, R-Murrieta, who has vowed not to support any tax increases at all.

    In other words: Back to square one.


    Jerry Brown urged to probe GOP vote-trading

    First the state budget was under negotiation, then in litigation, and now in unending confrontation, all the while subject to bloviation and obfuscation. Next up: Prosecution?

    Labor and environmental groups have asked California Attorney General Jerry Brown to investigate whether Republican state lawmakers are engaging in illegal vote trading during budget talks.

    “It’s a serious question and we’re reviewing the matter carefully,” Brown responded in a statement issued through a spokesperson.

    The California Labor Federation, the State Building and Construction Trades Council, Sierra Club California and the Planning and Conservation League wrote a letter to Brown on Wednesday – and sent a copy to U.S. Attorney General Eric Holder, too – citing reports that the Legislature’s GOP leaders are withholding their votes on a state budget while attempting to win votes on unrelated matters.

    “Specifically, they have demanded that legislators vote for proposals to weaken labor and environmental standards as a condition for any ‘aye’ vote from Republican caucus members on the overall budget,” the letter says.

    It claims such horse-trading violates California Penal Code Section 86, which prohibits lawmakers from giving or promising to give “any official vote in consideration that another Member of the Legislature shall give this vote either upon the same or another question.” Violations are punishable by two, three or four years in prison.

    “The budget negotiations, both as reported privately and publicly, clearly violate this anti-bribery statute,” the letter says. “Vote trading is illegal under any circumstance. Vote trading during this deep fiscal crisis is unconscionable. Political gamesmanship threatens the livelihood of millions of California taxpayers, workers, and vendors.”

    See the Republican responses and more context, after the jump… Continue Reading


    Isn’t this the Legislature’s job?

    Gov. Arnold Schwarzenegger signed an executive order today creating a bipartisan “Commission on the 21st Century Economy” to “re-examine and modernize California’s out-of-date revenue laws that contribute to our feast-or-famine state budget cycles.”

    The 12-member panel — six appointed by the governor, three each by the Assembly Speaker and State Senate President Pro Tem — is supposed to report by April 15 on “changes that will result in a revenue stream that is more stable and reflective of our economy,” according to the news release from the governor’s office.

    “Unlike our diverse economy, our state’s revenue system is the epitome of boom or bust and right now we are paying the price,” Schwarzenegger said in this release. “That is why I have worked with the legislative leaders to find a long-term solution to our revenue problem. And today, I am signing an executive order creating a bipartisan Commission on the 21st Century Economy to study our revenue system and help California achieve the long-term fiscal stability our state needs and our people deserve.”

    Said soon-to-be-gone Senate President Pro Tem Don Perata, D-Oakland: “California’s tax system is antiquated and long overdue for an overhaul. Our state is one of the most advanced economies of the 21st century, but it relies upon an outdated and volatile tax model that no longer makes sense. This commission will examine how to best capture revenue in California’s dynamic economy and put the state’s finances on the stable and sound footing needed to remain a global leader.”

    And Senate Republican Leader Dave Cogdill, R-Modesto, said, “Keeping California competitive in a global economy is the key to a strong and healthy state budget. I applaud the Governor for working with legislative leaders to address California’s broken budget system and I look forward to reviewing revenue-neutral recommendations from the commission, not just on fixing our revenue system, but also on how the state can adjust its spending levels to come into alignment with revenues.”

    But isn’t it the Legislature’s job to be the stewards of California’s long-term fiscal well-being? We wouldn’t need a blue-ribbon commission if our lawmakers weren’t so intransigent, so apt to put ideology over reality. It’s abundantly clear that California doesn’t take in enough money to meet its needs for schools, prisons, health care and the like; we can’t keep cutting our way out of the problem, and claiming that we can is ludicrously irresponsible.

    Yet even after the absurd standoff this summer and the resultant massive crap-heap that’s now masquerading as a state budget, it seems lawmakers still aren’t willing or able to do what must be done on their own.

    Maybe this commission is meant to give some political cover to lawmakers who still feel their careers are endangered by doing the right thing for California. If so, whatever; just get it done.

    But if this turns out to be (to borrow from the words of REM) “a way to talk around the problem,” and we’re still having the same tired ideological debate after this commission’s report has come and gone, it oughta be clobberin’ time for this Legislature. It’ll be a pretty compelling argument for doing away with the constitutional requirement that budget and tax bills need a two-thirds majority in each legislative chamber, a requirement so awesomely effective at bollixing up the works that it exists only in California, Arkansas and Rhode Island.


    Perata, Bass to roll out joint budget plan

    State Senate President Pro Tem Don Perata, D-Oakland, has just announced that he and Assembly Speaker Karen Bass, D-Los Angeles, will hold a news conference Wednesday morning to roll out their Conference Committee budget agreement.

    Perata’s office said the plan rejects Gov. Arnold Schwarzenegger’s proposed deep cuts in education and health care and includes $9.7 billion in new revenue by raising taxes on the state’s wealthiest residents and closing corporate tax loopholes; that’s $1.8 billion lower than what the Senate recommended and $2.7 billion more in new revenue than what the Governor proposed.

    On the spending side, this budget:

  • Provides $2.3 billion more for K-12 education than Schwarzenegger had recommended;
  • Restores $1.5 billion in health and human services the Governor cut, including nearly $200 million in health care services to some of the state’s most vulnerable residents, the reimbursement rate for Medi-Cal providers and federal pass-through funds for the aged, blind and disabled;
  • Cuts prison spending by $300 million with a reform package that helps lower the prison population; and
  • Restores $57 million in financial assistance for college students.
  • On the revenue side, this plan:

  • Reinstates the tax brackets on the wealthiest Californians by reinstating the 10 percent income tax rate for taxpayers filing joint returns with taxable income above $321,000 and the 11 percent rate for those with incomes above $642,000, generating about $5.6 billion;
  • Closes a corporate tax loophole for large corporations by suspending for three years companies’ permission to carry forward a portion of their losses incurred in one year for use as a deduction against earnings in later years, generating about $1.1 billion;
  • Suspends a tax adjustment for upper-income Californians, generating about $815 million;
  • Rolls back the nonrefundable dependent income tax credit (in 2007, $294) for taxpayers with adjusted gross income of more than $150,000 so that it’s equal to the personal exemption credit for all taxpayers (in 2007, $94 for single taxpayers and $188 for couples), generating about $215 million;
  • Rolls back the 1997 cut in the franchise tax, raising it from the current 8.84 percent rate to 9.3 percent, in order to raise about $470 million; and
  • Steps up tax enforcement — partly collecting money already owed to the state, partly accelerating revenues that would be paid in the future — to generate another $1.5 billion.
  • Perata’s release notes the state has cut $12.3 billion during the last three budgets, meaning “the fat is long gone, that a cuts-only approach would go deep into the bone of what the state provides. There is no free lunch: Quality education, health care, fire protection and law enforcement all require additional revenue.”

    In other words, “Perata and Bass to Cogdill and Villines: GAME ON!”

    UPDATE @ 1:48 P.M. WEDNESDAY: Here’s video of this morning’s news conference…