Departmental Issues

Capital Outlay

Department of Justice (0820)

The Department of Justice (DOJ) operates ten regional criminalistic laboratories throughout the state. The laboratories provide analysis of all types of physical evidence and controlled substances and, when requested, assist local law enforcement agencies in processing and analyzing crime scenes (including clandestine drug laboratories). The department also operates a state DNA analysis laboratory in Berkeley.

The 1999-00 Governor's Budget proposes $52.1 million--$1.9 million from the General Fund and $50.2 million from new lease-payment bond authorizations--for six new criminalistics laboratories to replace existing laboratories. Five of these projects have previously been considered by the Legislature. (We discuss below a concern with the costs of these five projects.) The sixth project--a replacement laboratory in Redding--is proposed for the first time. In our Crosscutting Issue, "Managing the Capital Outlay Program" (earlier in this chapter), we recommend deferral of $710,000 for land acquisition and preliminary plans for the Redding project due to delays in implementing the currently funded capital outlay program.

Crime Laboratory Replacement

We withhold recommendation on $51.4 million for five crime laboratory projects pending review with the department on modifications to the projects to bring them in line with the budgets previously approved by the Legislature.

The budget proposes $51.4 million for projects to replace five crime laboratories. This total includes $1.2 million from the General Fund and $50.2 million in lease-payment bonds. Two of the projects--Central Valley and Riverside--were funded in the current year for construction. The other three projects--Fresno, Santa Barbara, and Santa Rosa--were funded in 1998-99 for acquisition and/or preliminary plans. Figure 1 shows the amount requested for each project.

Figure 1
Department of Justice Laboratory Replacement Projects
(Dollars in Thousands)
Location	Building Size (Gross Square Feet)	Phases^a	Budget Bill Amount

Central Valley	31,933	C	$11,694
Fresno	36,007	WC	14,132
Riverside	38,477	C	14,076
Santa Barbara	13,804	WC	5,572
Santa Rosa	14,646	WC	5,877
Total	--	--	$51,351

^a W=working drawings and C=construction.

The amounts proposed in 1999-00 are 30 to 40 percent higher than the construction costs previously approved by the Legislature. These higher amounts are based on construction bids that were received in 1998 for the Central Valley laboratory (the only laboratory project that has been bid). This project was bid twice and both times the lowest bids were significantly higher than the budgeted amount, thus a construction contract could not be awarded.

Construction bids provide an indication of what contractors believe it will cost to build a project as designed. To the extent bids are much higher than anticipated, one must ask whether design changes could be made to reduce costs while still adequately addressing program requirements. In the case of the Central Valley laboratory, changes were made to the design after the initial bids were received. The second bidding of the project, however, still resulted in bids that were too high to award a contract.

After reviewing the design documents for the Central Valley project, we believe that the department can make additional changes to significantly reduce costs from the amounts proposed for each laboratory project. For example, the costs for electrical and mechanical systems in the laboratories are 70 percent of total building costs--an unusually high level. For a comparison, we reviewed three University of California (UC) laboratory building projects that the state has funded in recent years. (Two of the UC projects were medical research facilities and the third included teaching and research laboratories.) The combined electrical and mechanical systems costs for these three projects ranged from 38 to 53 percent of total building costs--far below the level proposed for the crime laboratories. In addition, the proposed laboratories include extensive security systems, such as electronic locks for most doors inside the building, motion detectors throughout the building, and closed circuit television surveillance inside and outside the building. Based on our review, significant savings could be achieved by revising these and other elements in the proposed laboratories.

Consequently, we withhold recommendation on all five laboratory projects pending a review with the department on modifications to the proposals to bring the projects in line with the budgets previously approved by the Legislature.

Franchise Tax Board (1730)

Security Improvements

We recommend deletion of $963,000 for three security improvement projects because the Legislature should first consider what level of security is appropriate at state office sites frequently visited by the public. (Delete $963,000 from Item 1730-301-0001.)

The budget proposes $963,000 for security improvements at the following Franchise Tax Board (FTB) office sites: Los Angeles ($438,000), Santa Rosa ($249,000), and Stockton ($276,000). These FTB offices are located within the state office building in each city. The offices include public service counters where citizens can obtain tax information, file returns, and make payments. The security improvement projects include installing (1) bullet-resistant glass between the public waiting areas and the secured office space, (2) stainless steel nonricochet deal trays and bullet-resistant service windows, and (3) security video cameras in the public waiting areas.

The budget proposal indicates that in 1996 the three state tax agencies--FTB, the Board of Equalization, and the Employment Development Department--adopted facility design standards for physical security and information security sytems. The departments plan to incorporate the standards into new state-owned buildings and leased facilities when leases are renewed. These design standards have not been submitted to the Legislature for review or approval, and we are unaware of any capital outlay proposals from the other two tax agencies specifically for security improvements.

It is certainly necessary to provide a safe working place for state employees. The degree of security measures necessary to accomplish this, however, should be fully documented and justified. This information could then be reviewed by the Legislature to determine if it believes the measures are both necessary and create an environment that citizens should encounter when they visit a state service facility. One could also argue that the same security measures proposed by FTB should be adopted at all state public service counters, such as Department of Motor Vehicle field offices. Information to base such a determination, however, has not been submitted to the Legislature.

Instead of proceeding with these projects, we recommend that the administration submit (1) documentation and justification for the proposed security measures and (2) the administration's policy, plans, and rationale for security measures at similar state facilities with public counters. The Legislature could then consider whether such security measures are necessary at these and other state sites with public visitation.

For the above reasons, we recommend deletion of the three proposed projects. If the Legislature decides that the FTB's proposal is meritorious, we would nevertheless recommend a one-year deferral of these three projects due to delays in implementing the currently funded capital outlay program. (See our Crosscutting Issue, "Managing the Capital Outlay Program," earlier in this chapter.)

Department of General Services (1760)

The budget includes $25.6 million for the Department of General Services (DGS) capital outlay program. This amount includes $788,000 in general obligation bonds for continued management of projects to improve the earthquake safety of state buildings, $4.5 million from the General Fund, and $21.1 million in proposed lease-payment bonds.

The department's program consists of the following projects:

Fire/life safety corrections to two buildings in Sacramento--the Blue Anchor Building ($1.1 million) and the Resources Building ($2.1 million). As discussed in our Crosscutting Issue, "Managing the Capital Outlay Program," due to delays in implementing the currently funded capital outlay program, we recommend deferral of most new projects proposed in the budget. Because these two projects address fire and life safety issues, we recommend proceeding with preliminary plans in 1999-00.
A study ($275,000) of two state buildings in Sacramento that will be vacated upon completion of the new East End Complex. In the same Crosscutting Issue mentioned above, we recommend deferring this study in 1999-00. The East End project will not be completed until 2003, hence it is not necessary to begin the study next year.
$21.1 million for renovation of the Food and Agriculture Building in Sacramento. We recommend approval of this project contingent on the receipt of preliminary plans that are consistent with the scope and cost approved by the Legislature.
$1.1 million for asbestos abatement in the Los Angeles State Building. This proposal is discussed below.

Los Angeles State Building

We recommend deletion of $1.1 million for construction to remove hazardous materials because the department recently indicated that the project is being canceled. (Delete $1,083,000 from Item 1760-301-0001 [4].)

The budget proposes $1.1 million from the General Fund to remove hazardous materials (asbestos and lead paint) from the state office building at 107 South Broadway in Los Angeles. The building will be vacated this summer when the tenants move to a former department store in downtown Los Angeles that the state purchased and is completing renovations for state offices. In the 1998-99 Budget Act, the Legislature appropriated $309,000 to prepare preliminary plans and working drawings for removal of the hazardous material. The removal of this material from the building was part of an agreement between the state, the County of Los Angeles, and the City of Los Angeles to convey the property to the Los Angeles Unified School District. (The school district would receive the property in exchange for district property that was made available to the federal government for military housing.) Under the agreement, the county and city were to share in the costs to remove the materials and then the district would take ownership of the building.

The DGS recently indicated that the federal government chose not to use the school district property, hence the agreement with the county, city, and school district is no longer in effect. The department intends to cancel this project and instead will sell the property, as is, on the open market. We therefore recommend deletion of the $1,083,000 under Item 1760-310-0001 (4).

Department of Transportation (2660)

The Department of Transportation (Caltrans) occupies 453 facilities, including 397 maintenance stations, 11 traffic management centers, 10 material laboratories, 22 equipment shops, and 13 general offices. The budget proposes $833,000 from the State Highway Account of the State Transportation Fund for three office projects. It also requests authority to enter into negotiations for a lease-with-purchase-option-agreement with a private developer to procure an office building in San Diego having an estimated future cost of $43 million.

Seismic Retrofit--Eureka Office

We recommend deletion of $604,000 for planning and working drawings for seismic strengthening of the Eureka office because the building is not a high priority seismic project. (Delete $604,000 from Item 2660-311-0042 [2].)

In 1990 the people approved the "Earthquake Safety and Public Buildings Rehabilitation Bond Act" (Proposition 122), which authorized $300 million in general obligation bonds. In response to that legislation, the Department of General Services (DGS), in consultation with the Seismic Safety Commission, established a methodology for evaluating seismic risk. It used the methodology to assess the risk associated with each of the state's 14,000 buildings (exclusive of the California State University [CSU] and the University of California [UC]). The DGS system defined seven levels of risk, I being lowest and VII highest. In this system the overriding consideration is life safety, and the acceptability of risk varies depending on its occupancy (as an example, a level IV risk is deemed "unacceptable" in a hospital but only "questionable" in an office building). Figure 1 summarizes the acceptability in office buildings of the risk to life associated with each of these risk levels.

The Legislature has not provided funding to seismically strengthen state buildings with a risk level lower than V. In 1998 it adopted supplemental report language expressing its intent not to fund seismic retrofit projects at the CSU, UC, and community colleges unless they similarly were evaluated to be risk level V or higher.

Figure 1
Department of General Services Buildings Seismic Risk Evaluation System Acceptability of Risk to Life in Office Buildings

Risk Level	Risk to Life	Acceptability of Risk

I	Negligible	Acceptable
II	Negligible	Acceptable
III	Minor	Acceptable
IV	Moderate	Questionable
V	Substantial	Questionable
VI	Extensive, but not imminent	Unacceptable
VII	Imminent	Unacceptable

This $604,000 proposal is for preliminary plans and working drawings to seismically strengthen the Caltrans Eureka District Office, which has been rated a level IV seismic risk by the DGS. The future cost for construction is estimated to be $5.1 million. As discussed above, risk level IV buildings are considered only a moderate life safety risk, and as such the Legislature has in the past only funded seismic improvements for buildings with a higher life safety risk. There is no apparent reason to make an exception for this building. Furthermore, DGS has surveyed 29 Caltrans facilities and has identified several as seismic risk level V or VI (see Figure 2, next page). Seismic strengthening of these buildings should be undertaken before consideration is given to strengthening any risk level IV buildings. Consequently, we recommend the Legislature delete this $604,000 request for planning and working drawings.

San Diego Office Building--Lease-With-Purchase-Option

We recommend the Legislature not authorize the department to negotiate a lease-with-purchase-option agreement with a developer to procure a new office building in San Diego because it is less expensive for the state to design and construct the building directly. (Delete Provision 6 under Item 2660-001-0042.)

Figure 2
Caltrans Buildings Rated Seismic Risk Level V or VI

Building	Seismic Risk Level

District 3, District Office Building, Marysville	V
District 4, District Office Building, Oakland	V
District 11, District Office Building, San Diego	VI
District 12, District Office Building, Santa Ana	VI
Headquarters, Annex I/II, Sacramento	V/VI
Equipment Shop, Sacramento	VI
Transportation Laboratory, Sacramento	VI

Proposed budget bill language would authorize the department to enter into negotiations for a lease with option to purchase agreement with a private developer to procure a new office building in San Diego (District 11). The District 11 headquarters is currently in a state-owned 105,000 gross square feet (gsf) building that has been evaluated by DGS as a level VI seismic risk. Caltrans estimates that it would cost $38.1 million to seismically retrofit the building. The building is located on 13 acres of state-owned land near Old Town San Diego. District 11 also leases space in ten other buildings in the San Diego area so that the current office space totals 199,000 gsf. The department proposes to acquire a new 200,000 gsf building having an estimated project cost of $43 million and consolidate all employees into the new building.

The DGS prepared an economic analysis for the project in which it compared three alternatives, all involving an agreement with a private developer. These were:

Lease-With-Purchase-Option. The state would enter into an agreement with a private developer to construct a new building on state-owned land and lease it to the state for two years, at which time the state would purchase the building. Construction and interim financing for the two-year lease period would be by the developer at commercial rates. After two years the state would buy the building with a one-time appropriation from the State Highway Account (SHA) of the State Transportation Fund or finance the purchase price over 23 years with lease-payment bonds.

Lease-Purchase. The state would enter into an agreement with a developer, as above, but the developer would lease the building to the state for 25 years, after which the state would take ownership. Construction and permanent financing for the 25-year period of the lease would be by the developer at commercial rates.

Lease. A private developer would provide construction and permanent financing at commercial rates and construct and lease the building to the state for 25 years, and would retain ownership thereafter.

Of these alternatives, the DGS's analysis found the lease-with-purchase-option to be the most cost-effective, and this is the alternative Caltrans has proposed in the budget.

Caltrans and DGS, however, did not consider the option of the state designing and constructing the building using either direct appropriations from the SHA or lease-payment bonds. The interest rate for commercial construction and interim or permanent financing available to a developer is currently about 8 percent, which would be an average of about $2.3 million per year on a project of this size with a 25-year amortization period. Interest costs on state lease-payment bonds is about 5 percent, or an average of about $1.5 million per year over the same period. If a direct appropriation is used, these interest costs would be avoided. In addition to interest cost savings, the state would benefit by avoiding the developer's profit, which is likely to be substantial.

Caltrans is proposing to use a lease-with-option-to-purchase, in which the state would purchase the building after two years. Caltrans does not, however, commit to a specific method for financing the purchase at that time. It indicates it is investigating the capacity of the SHA to fund this project, but has not reached a conclusion. The department also indicates it may sell the eight acres underlying the new building to the developer, and may sell the remaining five acres of the parcel to the developer ". . . to reduce the overall development costs." Nothing in this proposal indicates the amount the state would receive for all or any part of this 13 acres of state-owned land or the amount of reduction there would be in overall development costs.

We believe it would not be prudent for the Legislature to authorize the proposed project without knowing how the state's purchase of the building would be funded and what benefit the state would receive in exchange for the land it owns. For these reasons, we recommend the Legislature not authorize Caltrans to negotiate the proposed lease-with-option-to-purchase agreement. Caltrans should instead develop a proposal for a new building with direct appropriations with state design and construction. (Delete Provision 6 under Item 2660-001-0042.)

Department of the California Highway Patrol (2720)

The California Highway Patrol (CHP) operates 166 major facilities in addition to its headquarters and academy. The department's five-year capital outlay plan totals $49.6 million. The Governor's budget proposes $20.4 million for major projects and $0.8 million for minor projects. The proposed funding consists of $4.8 million from the State Highway Account and $4.4 million from the Motor Vehicle Account of the State Transportation Fund, and $11.2 million from lease-payment bond funds.

We recommend that the Legislature not fund five projects totaling $3.5 million because of a large backlog of projects that are not completed. This issue is discussed in our Crosscutting Issue, "Managing the Capital Outlay Program," earlier in this section of the Analysis.

South Lake Tahoe and Monterey--New Facilities

We recommend the Legislature delete $2,730,000 from the Motor Vehicle Account for these projects because insufficient documentation has been provided to verify the scope and cost of the proposed facilities. If additional documentation is provided, the projects may warrant legislative consideration. (Delete $1,151,000 from Item 2720-301-0044 [4] and $1,579,000 from Item 2720-301-0044 [6].)

The budget includes $1.2 million and $1.6 million for land acquisition, preliminary plans, and working drawings for an area office in South Lake Tahoe and Monterey, respectively. The CHP has not identified the future cost to complete these projects.

The information submitted to justify these projects does not include definitive information about the scope of work, proposed location of the facility (other than the general area) or a detailed cost estimate. Lacking this information, the Legislature has no basis for determining if the scopes of the projects are appropriate or if the amounts requested are reasonable. Consequently, we recommend the Legislature not approve these requests. If such information is submitted, the projects may warrant legislative consideration.

Department of Forestry and Fire Protection (3540)

The budget proposes $34.2 million for capital outlay for the Department of Forestry and Fire Protection (DFFP). This amount includes $27 million for 49 major and 17 minor projects (less than $500,000 per project) to be funded from the General Fund and $7.2 million from lease-payment bond funds to fund seven projects. The future cost of the projects in the budget totals $114 million. The total cost of the department's five-year plan is $376 million.

We have recommended that 45 new projects in the budget be deleted because there is such a large backlog of work at the Department of General Services (DGS) and DFFP that needs to be completed before more new projects are added to the current workload. This issue is discussed under "Managing the Capital Outlay Program" in the Crosscutting Issues portion of this section.

No Master Plan for the Public Safety Microwave Network

We recommend that the Legislature (1) delete $5.3 million from the General Fund for new telecommunications towers and vaults and (2) not fund any additional tower and vault projects until a master plan is prepared to indicate the overall cost and schedule for upgrading the Public Safety Microwave Network. (Delete $5,253,000 under Item 3540-301-0001 [49].)

The budget requests $5.3 million from the General Fund for preliminary plans, working drawings, and construction of towers and vaults which are part of the Public Safety Microwave Network, which is a key communication system for public safety and other public agencies in California. It serves 36 state agencies, three federal agencies, and three counties. The DFFP is one of the major users of the network, using 17 percent of the "circuit-miles" of the network (that is, one circuit between two points one mile apart is one "circuit-mile").

The initial state microwave system was created in 1953 to support what is now the Office of Emergency Services. Other agencies then began creating their own, sometimes overlapping, microwave networks. In 1978, the Legislature enacted legislation which established the DGS as the central owner and manager of the network. In 1994, DGS undertook a study of the ability of the network to meet the needs of the users. Part of this study included an evaluation of the comparative merits of the existing analog network and a new digital network. The report concluded that the network should be converted to digital technology because of its substantially greater capability and a decreasing availability of analog equipment.

The 1995-96 Budget Act appropriated $10 million for DFFP to replace 22 towers with ones having the proper configuration and structural capacity for digital technology. Bids for construction of towers funded by this appropriation came in substantially higher than estimated, and it was not possible to construct 22 towers as planned. Subsequently, in 1997 the Legislature adopted supplemental report language directing that the 1995-96 appropriation be used to fund the 11 highest priority towers and vaults. These projects are currently being implemented. The Legislature also appropriated $9.1 million in the 1998-99 Budget Act to replace another nine towers. Thus, to date, $19.1 million has been appropriated to replace 20 towers.

Analyst's Concerns. In our analysis of DGS (please see the General Government chapter earlier in this Analysis), we point out several concerns about the future of the microwave network. Specifically, we note that DGS has significantly underestimated the costs of upgrading the towers and vaults consistent with its 1994 recommendations. We believe that the upgrades have now become a significant capital outlay program, for which the Legislature has not been given a comprehensive master plan that identifies the total cost of the program, a schedule for completion, and addresses the issue of how that cost burden should be allocated among state agencies and others that use the network.

In addition, we have concerns about how the analog-to-digital conversion should be allocated among the users of the network, both state and nonstate. The DFFP uses 17 percent of the network capacity compared to 44 percent by the California Highway Patrol (CHP) and 25 percent by the Department of Transportation (Caltrans). Current plans indicate DFFP will bear a larger proportion of the cost of upgrading tower and vault facilities than may be warranted by its use of the network. The CHP and Caltrans do not appear to be bearing a proportion of this cost commensurate with their use of the network. This is an important consideration because of the different funding sources these departments use. The DFFP relies on the General Fund for funding whereas Caltrans and the CHP have the State Transportation Fund and federal funds as resources.

For these reasons, in our DGS analysis we recommend that the Legislature direct DGS--in cooperation with the network landlords, user state agencies, and nonstate users--to complete a comprehensive master plan of the microwave network by December 1, 1999. Further, we recommend that the Legislature not fund additional changes to the network until the master plan is completed. Thus, we recommend that the proposed funds be deleted. (We also have recommended deletion of the tower and vault projects in the budget because of the backlog of a large number of projects statewide, as discussed in the Crosscutting Issues portion of this section.)

Department of Parks and Recreation (3790)

The budget proposes $22.9 million for capital outlay for the Department of Parks and Recreation (DPR). This amount includes $7.4 million from the General Fund, $10.8 million from the Off-Highway Vehicle Trust Fund, $2.5 million from the Habitat Conservation Fund, $0.8 million from the California Wildlife, Coastal and Park Land Conservation Fund of 1988, $0.6 million in federal funds, $0.5 from the Recreation and Fish and Wildlife Enhancement Fund, and $0.3 million from the Environmental License Plate Fund. The budget also proposes $25.5 million in local assistance, which includes $2 million from the Habitat Conservation Fund, $16.6 million from the Off-Highway Vehicle Trust Fund, $4.5 million from the Recreational Trails Fund, and $2.4 million from the Federal Trust Fund.

We have recommended the deletion of two projects, one at Sonoma Coast State Beach and the other at Sugar Pine State Park, because the department has a large backlog of incomplete projects and we recommend no new projects be started until this backlog is reduced substantially. These projects are discussed further under Crosscutting Issues earlier in this section of the Analysis.

Budget Includes Double Funding For Capital Outlay Staff Work

We recommend the deletion of $488,000 that has been double-budgeted for staff work on six capital outlay projects. (Delete $15,000 from Item 3790-301-0001 [1], delete $133,000 from Item 3790-301-0001 [2], delete $44,000 from Item 3790-301-0001 [8], delete $28,000 from Item 3790-301-0001 [10], delete $31,000 from Item 3790-301-0001 [11], and delete $237,000 from Item 3790-301-0140.)

The budgets for the department are divided into three parts: support, local assistance, and capital outlay. The cost of salaries and wages of employees and their associated operating and equipment expenses are funded in the support items of the budget. The capital outlay portion of the budget covers the cost of service and construction contracts with private parties and interagency agreements with other public agencies. The capital outlay budget does not include salaries and wages for department employees unless the capital outlay appropriation reimburses the support appropriation.

The budgets for six of DPR's capital outlay projects contain funds for "salaries and wages" as an expense for "agency retained items." These costs are for work to be performed by the department's planning staff. The staff work will consist of the evaluation of cultural and natural heritage features of the project, development of mitigation strategies, environmental design, preparation of interpretive displays, and related activities. See Figure 1.

Figure 1
Salary and Wage Expenses Included in Capital Outlay Proposals

Project	Phase^a	Salary and Wages Budgeted for:	Amount Budgeted

Morro Bay State Park (SP): Campground Rehabilitation and Day Use Area	W	Cultural and natural heritage and interpretative staff	$15,000
Cuyamacha Rancho SP: Rehabilitation of Paso Picacho Campground	C	Cultural and natural heritage and interpretive staff	133,000
Sonoma Coast SP: Trail Rehabilitation and Development	SP	Cultural and natural heritage and environmental design staff	44,000
Sugar Pine SP: Rehabilitation Day Use Area	PW	Cultural and natural heritage, interpretive, and environmental design staff	28,000
Bodie State Historic Park: Health and Safety Mitigation	PWC	Cultural heritage and environmental design staff	31,000
Anza Borrego Desert SP: General Plan	S	Cultural and natural heritage and environmental design	237,000
Total			$488,000

^a S=study; P=preliminary plans; W=working drawings; and C=construction.

These requests duplicate funding for DPR staff that is already provided in the department's support budget. Consequently, we recommend the Legislature delete the $488,000 included in the proposed projects for this staff work. We also recommend the department be advised to review the cost estimates for projects in its five-year plan and delete similar salary and wage costs that may be included in future capital outlay project budgets.

Capital Outlay Projects Not Identified

We recommend the Legislature delete the request for a lump-sum $3 million General Fund appropriation and its related $3 million reimbursement because specific projects to be funded have not been identified. If projects are identified and the need for each substantiated, the proposal may warrant legislative consideration. In that case, however, we would recommend that any appropriation for these purposes be from the State Parks and Recreation Fund rather than the General Fund. (Delete $3,000,000 from Items 3790-301-0001 [6] and [12].)

The budget includes a proposed $3 million lump-sum appropriation from the General Fund for unspecified capital outlay projects, offset by reimbursements. The department indicates it has opportunities during the budget year to apply for grants from other departments and entities to fund projects, and that frequently the terms of the grant require the department to fund and complete the work before receiving the grant funds. Examples of programs that have provided such grant funding in the past are two administered by the state Department of Transportation--the federal Transportation Enhancement Activities Program (TEAP) and the Environmental Enhancement Mitigation Demonstration Program (EEMDP). In addition to the General Fund appropriation, proposed budget language under Item 3790-301-0001 would allow the DPR to borrow funds from the State Parks and Recreation Fund (SPRF) at no interest cost to advance cash for authorized reimbursement-funded projects.

Our first concern with this proposal is that no projects have been identified that the department proposes be funded by these grants. Without the projects at least being identified, the Legislature has no basis for evaluating their priority and appropriateness for the expenditure of state funds. There are also no scope definitions and cost estimates to document and verify the reasonableness of the requested amount.

If specific projects are identified and the need for each substantiated, the proposals may warrant legislative consideration. In this case, however, we would recommend the appropriation be from the SPRF, not the General Fund. The budget already contemplates using the SPRF to provide the interim funding needed to construct projects when grant reimbursements are not disbursed until construction is finished. Provision 1 to this item authorizes the department to borrow from the SPRF to provide interim financing for reimbursement-funded projects, so there is no need for a General Fund appropriation.

Fresno Area--Site Acquisition

We recommend the Legislature delete this $5.3 million request from the Off-Highway Vehicle Trust Fund for a study and acquisition of an off-highway vehicle recreation area in the Fresno/southern San Joaquin Valley region because it is uncertain if a site that has been identified by the department that can reasonably be acquired. (Delete $5,305,000 from Item 3790-301-0263 [3].)

The 1998-99 Budget Act appropriated $295,000 for planning and acquisition of a site for an off-highway vehicle recreation area in the Fresno/southern San Joaquin Valley region. Up to $100,000 of this amount was to be available to obtain an option to purchase an appropriate site. The budget now proposes $5 million for acquisition of a site and $305,000 for an environmental impact report, but there is uncertainty about whether the site currently being evaluated by the department can be acquired. The future cost of the facility is estimated to be $4.2 million, for a total project cost of $9.8 million.

The funds appropriated in 1998 for planning were sufficient to identify the site, and to provide an acquisition cost estimate, conceptual development drawings, and development cost estimates. The $100,000 made available to purchase an option to buy specific land was intended to address the department's concern that lack of acquisition funding might result in it being unable to purchase a desirable site in a timely manner. The department has inquired as to the interest of the owners of specific properties near Hensley Lake in selling to the state. The department, however, has not provided information about the owners' response. Without at least an indication that specific property with probable willing sellers has been identified, the department has not completed the work funded by the 1998 planning appropriation. Consequently, we recommend the Legislature delete this $5.3 million request. If the department should provide additional information, the request for acquisition funds may warrant legislative consideration.

Oceano Dunes State Vehicular Recreation Area-- LaGrande Tract

We recommend the Legislature delete this $2.2 million request because much of the property is owned by the County of San Luis Obispo and operated and managed by the Department of Parks and Recreation. Because the land is currently in public ownership and operated as an state vehicular recreation area, there is no need for the state to acquire title to the property. (Delete $2,200,000 from Item 3790-301-0263 [6].)

Oceano Dunes State Vehicular Recreation Area (SVRA) is located in San Luis Obispo County. It consists of two areas, north and south, with the 500 acre La Grande Tract located on beach sand dunes between the two. La Grande Tract became a subdivision at the turn of the century but was never successfully marketed and parcels totaling 317 acres are now owned by the County of San Luis Obispo. It has been managed as part of Oceano Dunes SVRA by the DPR since the early 1980s under the terms of an agreement with the county.

The department proposed last year to acquire the La Grande Tract parcels owned by San Luis Obispo County, but the proposal was not approved by the Legislature. The current proposal is identical to the one disapproved last year. We continue to recommend that, given the current public ownership and operating agreement, there is no reason for the state to spend $2.2 million to acquire title to the property. The property is open and available to the public for off-highway vehicle recreation and there would be no change if the state acquired the land. The department has not presented any information indicating that if the county-owned parcels are not acquired, the county will withdraw from its operating agreement with DPR and terminate the availability of the land for recreational use by the public. Consequently, we recommend that the Legislature delete this $2.2 million request.

Grants for Off-Highway Vehicle Projects Not Substantiated

We recommend deletion of $16.6 million of proposed grants from the Off-Highway Vehicle Trust Fund because no information has been provided to justify the expenditures. (Delete $16,555,000 from Item 3790-101-0263.)

The 1999-00 budget proposes $16.5 million for ". . . grants to cities, counties, or special districts . . . " as indicated in Figure 2.

Figure 2
Proposed Grants from the Off-Highway Vehicle Trust Fund

Recipient	Amount

U.S. Bureau of Land Management, Bureau of Reclamation and Forest Service--for operation and maintenance	$8,021,000
U.S. Bureau of Land Management, Bureau of Reclamation and Forest Service--for capital outlay	$7,789,200
California cities, counties, and special districts--for operation, maintenance and capital outlay	$744,000
Total	$16,554,200

No information has been submitted to substantiate the need for these expenditures and their amounts. One grant to the U.S. Bureau of Land Management is for $6.5 million and the only information provided about it is that it is for the "El Mirage Acquisition." The information about other grant proposals is equally slight. There is also no explanation for the state granting $7.8 million to the federal government for capital outlay projects and an additional $8 million for operation and maintenance. Without information to substantiate these expenditures, and an explanation of why the department is proposing to provide grants to the federal government, the Legislature cannot evaluate this proposal. Accordingly, we recommend the Legislature not approve this proposed $16.6 million appropriation. If additional information is submitted, the proposal may warrant legislative consideration. If grants to the federal government are determined to be warranted, we recommend the budget bill be amended to include the federal government among those entities eligible to receive grant funds under this appropriation.

Health and Welfare Agency Data Center (4130)

The Health and Welfare Agency Data Center (HWDC) provides computer processing and telecommunications services to those departments within the agency.

Acquisition of Leased Facility

We withhold recommendation on $5.5 million from the General Fund pending receipt of an economic analysis of the building's value to the state if the data center is relocated.

The budget proposes to exercise the purchase option on one of two buildings currently leased by the HWDC in Sacramento. The state cannot exercise the option on the smaller of the two buildings (75,000 square feet) before July 2000. The budget includes $5.5 million from the General Fund to exercise the option for the larger building (118,000 square feet) based on the purchase price as of July 1999. Of this amount, $4 million is a loan to be repaid from the HWDC Revolving Fund over the next six years.

The data center purchase was proposed in last year's budget, but was rejected by the Legislature. The Legislature did, however, adopt supplemental report language requiring the Department of Information Technology (DOIT) to develop a plan by January 1, 1999 to include a schedule and budget for siting and configuration of the state's data centers. In 1998, the state's other main data center (Stephen P. Teale Data Center--TDC) entered into a long-term lease agreement for a new facility that is currently under construction in Rancho Cordova. The facility is on a site that will allow for expansion if the two data centers eventually consolidate. The development of the plan by DOIT was a condition of the Joint Legislative Budget Committee's concurrence with the TDC lease proposal. (Under current law, the joint committee reviews all state leases with a five-year or longer firm term.) During the budget process, DOIT agreed to prepare the required plan, but in fall 1998 DOIT indicated that it would not be doing the study and that the issue of data center consolidation would be left for the new administration.

A major reason cited by the TDC in its request for a new facility was the need to move from its current location within the Sacramento flood plain. The HWDC building proposed for purchase is also located in the flood plain. Furthermore, a 1997 consultant's study on data center consolidation concluded that neither the prior TDC site nor the current HWDC site was preferred for long-term operations because of flood disaster exposure.

Due to decisions outside the control of HWDC, the Legislature is once again being asked to approve this acquisition without knowing the administration's position on data center consolidation. The budget proposal indicates that, regardless of whether the HWDC remains in the building, the purchase still makes sense because either (1) the state could use the entire building for general office space or (2) the state could sell the building for an amount greater than the purchase price. (A February 1997 appraisal concluded that the building is worth about $7 million.) If the data center moved from the building, however, renovation of the computer areas into office space would involve costs that were not accounted for in the appraisal. Moreover, the site has limited parking, which could become a barrier to more intensive state office use or to a potential buyer.

If the administration concludes--and the Legislature agrees--that the HWDC can remain within the flood plain for the long term, then the proposed purchase would make sense. If the data center were to relocate, and the administration can demonstrate that continued state use or sale of the facility would be an economic benefit to the state, then the purchase should go forward.

We therefore withhold recommendation on the $5.5 million pending receipt of an economic analysis of reusing the facility if the data center is relocated.

Department of Mental Health (4440)

The Department of Mental Health (DMH) operates four state hospitals--Atascadero, Metropolitan, Napa, and Patton. The department's capital outlay program totals $40.1 million, including: $9.5 million from the General Fund, $22.7 million from proposed lease-payment bonds, $4.8 million from currently authorized general obligation bonds, and $3.1 million in federal reimbursements. The program includes $536,000 for minor projects (less than $250,000 per project) and the following three major projects:

Patton State Hosptial--EB Building fire and life safety improvements. Working drawings are scheduled to be completed in April and we recommend approval of $6.6 million proposed for construction.
Metropolitan State Hospital--Replace "R and T" and administration buildings. As discussed in our Crosscutting Issue, "Managing the Capital Outlay Program" (earlier in this chapter), we recommend approval of construction funding for this project pending completion of preliminary plans that are consistent with the scope and cost approved by the Legislature.
Sexually Violent Predator Facility. This proposal is discussed below.

Sexually Violent Predator Facility

We recommend deletion of $16 million in lease-payment bond funding for preliminary plans and working drawings because (1) only preliminary plans can be completed for this $300 million project in the budget year and (2) the preliminary plans should be funded from the General Fund. (Delete $16,025,000 from Item 4440-301-0660 [1] and add an Item 4440-301-0001 [4] for $7 million.)

The budget includes $16 million to prepare preliminary plans and working drawings for a new state facility to house sexually violent predators (SVPs). These individuals are currently housed at Atascadero State Hospital. By mid-2002, the total number of Judicially Committed/Penal Code patients (including SVPs) is projected to exceed the capacity of the four state hospitals where they are housed. Therefore, it was determined that a separate facility will be needed to house up to 1,500 SVPs. The current estimated cost of the facility is $297 million.

In the 1998-99 Budget Act, the Legislature appropriated $5.5 million for activities related to locating and designing this facility. These activities are underway and include:

Determination of the appropriate treatment program, licensing category, staffing ratio, and architectural programming for the facility.
Search and evaluation of potential sites in order to select three alternative sites for the facility.
For each of the alternatives, development of an environmental impact report, site master plan, conceptual facility design, and cost estimates.
Conceptual construction phasing.

The Governor's budget indicates that the $16 million budget proposal for the SVP facility is a "placeholder" estimate, and it is our understanding that a revised proposal will be submitted in the spring. Assuming that the department is able to locate a suitable site for the facility, and make sufficient progress on the other work listed above, it would be appropriate to fund the preliminary plan phase of the project ($7 million) in 1999-00. Based on the size (current estimate is one million gross square feet of building space) and nature of this facility, we do not believe that funding will also be needed in 1999-00 for the working drawing phase.

In addition, the preliminary plans should not be funded with lease-payment bonds. Even if it is assumed that the construction phase of the project will also use this funding method, the bonds will probably not be sold for three to four years. In the interim, the state will pay for the preliminary plans by borrowing from the Pooled Money Investment Account (PMIA) and then will repay the borrowed amount plus interest to the PMIA when the lease-payment bonds are sold. The amount of funds repaid to the PMIA become part of the principal amount of the bonds, for which the state will then pay additional interest for up to 25 years. We think it makes little sense to incur these interest costs for project design activities and instead recommend a direct General Fund appropriation of $7 million.

Finally, as discussed in our Crosscutting Issue, "Pay-As-You-Go for Capital Outlay," we recommend that the Legislature at least maintain the $195 million level of direct General Fund spending proposed by the Governor and that any General Fund savings from legislatively approved reductions to specific projects be redirected to reduce lease-payment authorizations. We recommend that the $7 million for the preliminary plans be the highest priority for these redirected funds.

Department of Corrections (5240)

The California Department of Corrections (CDC) operates 33 prisons and 38 fire and conservation camps throughout the state. The prison system also includes 14 community correctional facilities operated by private firms, cities, or counties under contract with the CDC and two county jails leased and operated by the department. As of December 31, 1998, the system housed 159,000 inmates.

The budget includes $154 million for capital improvements at existing state institutions. This total consists of $29.7 million from the General Fund and $124.3 million in lease-payment bonds. The estimated future cost to complete these projects is $82.8 million. The budget includes the following proposals:

$62.4 million to construct ten administrative segregation housing units--one each at ten institutions. These projects were previously funded from the General Fund in Chapter 502, Statutes of 1998 (SB 491, Vasconcellos and Brulte). The budget proposes to change the fund source to lease-payment bonds.
$49.8 million for 26 projects related to health care and mental health treatment programs.
$34.8 million for 23 projects to renovate or replace buildings and infrastructure.
$5.5 million for minor capital outlay projects (costs of less than $250,000 per project).
$1.4 million for planning and studies.

Of the 51 major capital outlay projects in the budget, 40 were previously funded for preliminary plans and/or working drawings. The budget proposes to fund the working drawings and/or construction phases for these 40 projects. The 11 other major projects are proposed for initial funding. In our Crosscutting Issue, "Managing the Capital Outlay Program" (earlier in this chapter), we recommend:

Approval of the 40 previously approved projects pending completion of preliminary plans that are consistent with the cost and scope recognized by the Legislature in the Supplemental Report of the 1998-99 Budget Act.
Defer six new projects and only partially fund three new projects due to delays in implementing the currently funded capital outlay program.
Approve two new projects as proposed in the budget.

In addition to the general workload problem discussed in the Crosscutting Issue, we have identified another issue with the project discussed below.

California Medical Facility-- Cell Window Modifications

We recommend deletion of $174,000 for preliminary plans and working drawings because the construction of a lethal electrified fence at the institution should alleviate security concerns posed by the existing windows. Estimated future savings is $2.8 million. (Delete $174,000 under Item 5240-301-0001 [14]).

The budget proposes $174,000 for design costs related to replacing windows at the California Medical Facility in Vacaville. The project would replace 2,400 of the existing 39-inch by 57-inch windows with five-inch slit windows that are typical of those found in the state's new prisons. The estimated future construction cost for the project is $2.8 million. The department indicates that the slit windows are needed because the large windows are a potential security breach. The department cites two 1997 incidents in which inmates escaped from their cells by exiting through these windows. (One of these inmates escaped from the institution.)

We note, however, that the department is also requesting $2.3 million in the budget for the construction phase for a lethal electrified fence at the institution. Completion of the fence in August 2000 should essentially eliminate any risk of escape from the institution. We therefore recommend deletion of the $174,000 to modify all of the existing windows.

Department of the Youth Authority (5460)

The Department of the Youth Authority operates 11 institutions (including two reception centers) and six conservation camps throughout the state. The budget includes $34.2 million for the department's capital outlay program in 1999-00. This amount includes $22.5 million from the General Fund and $11.7 million in lease-payment bonds. The estimated future cost to complete these projects is $10 million. The budget includes the following proposals.

$13.3 million for 11 projects for various security-related improvements, including new personal alarm systems at nine institutions.
$8.5 million for five projects for new or expanded visiting facilities.
$3.9 million for three projects to replace infrastructure and one project to renovate a 40-year-old building used as a lock-up.
$3.3 million to renovate the infirmaries at two institutions.
$1.4 million for two projects to build special education facilities.
$3.5 million for minor capital outlay projects (less than $250,000 per project).
$0.3 million for planning and studies.

Of the 24 major capital outlay projects in the budget, 18 were previously funded for preliminary plans and working drawings, and the budget proposes to fund the construction phase. The six other major projects are proposed for initial funding. In our Crosscutting Issue, "Managing the Capital Outlay Program" (earlier in this chapter), we recommend the Legislature:

Approve the 18 previously approved projects pending receipt of preliminary plans that are consistent with the cost and scope recognized by the Legislature in the Supplemental Report of the 1998-99 Budget Act.
Defer three new projects and only partially fund two new projects due to delays in implementing the currently funded capital outlay program.
Approve one new project as proposed in the budget.

In addition to the workload problem discussed in the Crosscutting Issue, we have identified other issues with two of the new projects, as discussed below.

Heman G. Stark Youth Correctional Facility-- Modify Ward Room Windows

We recommend deletion of $377,000 for preliminary plans and working drawings to modify the windows in ward rooms because the department should instead replace the existing windows in kind. Estimated future savings is $3.1 million. (Delete $377,000 under Item 5460-301-0001 [16].)

The budget proposes $377,000 to prepare preliminary plans and working drawings to replace 1,200 windows in the cells at the Heman G. Stark Youth Correctional Facility. The project would replace the existing 36-inch by 36-inch windows with narrower, 6-inch by 36-inch high prison-type windows and fill in the remaining space with concrete. The estimated future construction cost is $3.1 million.

The department indicates that the existing 39-year-old windows and screen frames have suffered from weather and ward abuse. Wards have removed aluminum flashing from the window frames to make weapons. This results both in assaults on staff and other wards and maintenance costs to constantly replace the flashing.

While the problems with the existing windows and screens are apparent, we believe that the department, instead of undertaking this expensive ($2,900 per window) proposal to modify the window opening, should instead use the less costly alternative of replacing the windows in kind. This alternative would also provide new windows and frames and thus would address the problem of wards using the deteriorated materials for weapons. We therefore recommend deletion of the budget proposal and recommend that the department submit a new proposal for this alternative for legislative consideration. Delete $377,000 under Item 5460-301-0001 (16).

El Paso de Robles Youth Correctional Facility-- Special Education Classrooms

We withhold recommendation on $377,000 for preliminary plans and working drawings because the scope and cost of the project are to be revised in the spring.

The budget proposes $377,000 for preliminary plans and working drawings for a project to build special education classrooms and ancillary support space at the El Paso de Robles Youth Correctional Facility. The estimated future construction cost is $2.9 million. The department indicates that the project scope and cost will be revised in the spring. We therefore withhold recommendation on the project pending receipt and review of the revised project and cost estimate.

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