Analysis of the 2006-07 Budget Bill Legislative Analyst's Office February 2006

Judicial Branch (0250)

The Judicial Branch is responsible for Supreme Court and Appellate Court facilities, and in accordance with the Trial Court Facilities Act of 2002, is in the process of assuming responsibility for all county trial court facilities statewide. The Judicial Branch has two Supreme Court buildings, one in San Francisco and the other in Sacramento. There are also ten Appellate Court facilities for the six District Courts of Appeal. These facilities altogether have over 567,000 square feet of space. Currently there are 451 trial court facilities in the state with about 10.1 million usable square feet of space.

For 2006-07, the budget requests $23.6 million for the Judicial Council’s capital outlay program, including $2.4 million from the State Court Facilities Construction Fund, and $21.2 million from the Public Building Construction Fund. The funding would provide for three projects with combined future cost of $28.2 million. These projects include $21.1 million for construction of a new Fourth Appellate District courthouse in Santa Ana, and funding for two trial court construction projects. The trial court projects include $1.9 million for working drawings for a new Antioch courthouse in Contra Costa County and $481,000 for acquisition and preliminary plans for a new Plumas/Sierra Counties joint-use courthouse.

Implementation of the Trial Court Facilities Act

Until 1997, California’s counties were entirely responsible for funding trial court operations. Funding for both court operations and facilities depended on the fiscal stability of the counties and varied widely from one county to another. The Legislature enacted Chapter 850, Statutes of 1997 (AB 233, Escutia and Pringle), which shifted fiscal responsibility for support of the trial courts from the counties to the state.

Chapter 1082, Statutes of 2002, (SB 1732, Escutia)-the Trial Court Facilities Act-shifted responsibility for trial court facilities from the counties to the state. It required the state to oversee the transfer of all existing county trial court facilities to the state and to fund the maintenance and future construction of trial court facilities. Specifically, Chapter 1082 requires the transfer of trial court facilities to the state by June 30, 2007. It also requires the state to negotiate with counties for the transfer of each facility. According to the Administrative Office of the Courts (AOC), it will have to negotiate the transfer of approximately 450 facilities statewide.

There are three possible types of facilities transfers: title transfer, lease transfer, and transfer of responsibility, as shown in Figure 1. The state would hold title, or ownership, of the facility only in the case of a title transfer. In the case of a lease transfer or transfer of responsibility, the state would not have ownership of the facility involved. We have also noted in Figure 1 which entity is liable for the facility and associated responsibilities.

Transfer Workload Is Complicated and Large. To negotiate the transfer of 451 facilities is a very large undertaking for both the counties and the state. Before a trial court facility can be transferred, often extensive work has to be done related to due diligence, seismic inspection, calculation of the county facilities payment (CFP) (discussed below), and conducting deferred maintenance projects. Many counties, especially smaller ones with fewer resources, are finding the process more complicated than initially conceived. Many counties did not hire additional staff to deal with the many due diligence and accounting requirements of the transfer process.

At the state level, the AOC created the Office of Court Construction and Management in 2003 to implement the facilities transfer. The Legislature authorized and funded positions for the office in 2003-04. By 2005, the authorized staffing level had increased to 128 but only 44 of those positions are currently filled.

Trial Court Facility Transfer Hindered by Seismic and Facilities Payment Concerns. As of January 2006, only four facilities-including two in Riverside County, one in Mono County, and one in San Joaquin County-had been transferred from the counties to the state. Given the rate of transfer to date, the deadline will not be met. In our discussions with various counties and court administrators as well as with AOC staff, it appears that in addition to the magnitude of the task, there are two significant factors hindering the transfer of court facilities. These are the liability for seismic retrofit requirements and calculation of the CFP. We discuss each of these factors below.

Seismic Retrofit Requirements Holding Back Transfers

In order to facilitate the transfer of facilities, we recommend the Legislature clarify current law to explicitly specify that counties are responsible for the payment of seismic retrofits of existing court facilities and to allow the use of escrow accounts for these payments.

Before a court facility can be transferred to the state, the facility’s seismic safety is assessed. Seismic safety ratings range from level 1 to level 7, with seismic level 5 and above buildings involving substantial risk to human life in a major earthquake. Consultant engineers hired by AOC have determined that up to 162, or about one-third, of the trial court facilities are level 5 or above seismic hazards. Chapter 1082 prohibits facilities rated level 5 or higher to be transferred unless provision is made for the correction of the seismic deficiency. (Buildings with less than 10,000 square feet can be transferred to the state regardless of seismic status.)

Given the large number of facilities deemed to be unacceptable in terms of seismic safety, the cost of seismically retrofitting these facilities is substantial. The AOC estimates the statewide costs for the seismic retrofit to be about $0.9 billion.

Counties Disagree With Seismic Retrofit Payments. In negotiating with the state, most counties disagree with AOC’s position that they should pay for the cost of seismic retrofit. Some counties disagree with the state’s assessment of the risk level of some facilities. Some counties-such as San Diego County-have hired independent evaluators who have refuted the state’s analysis. Many counties were surprised by the AOC consultant’s assessment of their court facilities’ seismic condition. Still other counties are refusing to take on the seismic retrofit responsibility because they believe that if the state takes over the building, it should also take the liability that comes with that building.

Where counties are willing to pay, some disagree with the size of the seismic repair payments required. The negotiations over these seismic repair payments are slowing down the transfer of the court facilities to the state. Still other counties do not have the available funds to pay the costs. The payments for seismic retrofit vary by facility but most are at least in the millions of dollars. A county cannot pay for the seismic retrofit with bond funds backed by the building because that asset will be transferring to the state.

Older Seismically Unsafe Facilities Can Be Functionally Obsolete. Compounding the seismic retrofit problem is the fact that many of the older court facilities that are deemed seismically unsafe are also functionally obsolete. The state does not want court facilities that can no longer adequately serve their intended purpose. At a minimum, the state would have to make substantial interior renovations to increase the utility of the building for a modern court. These renovations could cost millions of dollars, depending on the size of the facility and extent of the renovation. Typically, the state considers new construction over renovation when the cost of renovation exceeds 60 percent of the cost for new construction. The combined costs of seismic retrofits and interior renovations could be so large that a replacement facility would be a better alternative. However, current law does not specify the alternatives available to counties in lieu of retrofitting a functionally obsolete building.

Recommend Current Law Be Clarified. We recommend that the Legislature clarify existing law to explicitly specify that counties are responsible for paying for the seismic retrofit of existing court facilities. Current law already requires counties to address serious deficiencies in their buildings before they are transferred. We believe the Legislature intended to include seismic problems in this category. The proposed clarification should facilitate negotiations for court facilities transfer.

In addition, we also recommend that the Legislature clarify how counties can meet their seismic requirements. For example, it is not clear if the law allows counties to place cash payments equal to the seismic retrofit cost into an escrow account to be applied toward the construction of a new facility. Such escrow accounts would avoid situations where a county believes it must physically retrofit a functionally deficient facility before it can transfer the facility to the state. Allowing the payments for seismic retrofit to be applied towards new facility construction would reduce the state’s cost burden, if it determines that a new facility is more cost-effective than retrofitting a seismically unsafe building. Additionally, counties could make incremental payments to the escrow account.

Calculation of the County Facilities Payment

The current method of calculating county facility payments (CFPs) is cumbersome and onerous to some counties, as well as biased against counties with active maintenance programs. We recommend that the Legislature consider simplifying CFP calculations, using alternative methodologies such as basing the payment on a per-square-foot maintenance cost for the facilities.

Chapter 1082 requires counties to make, in perpetuity, CFPs to the state for court facility operation and maintenance costs. The CFP ensures that the state does not assume 100 percent of a very large facility maintenance expense burden. The CFP is calculated based on the average annual expenditures by a county to operate and maintain a court facility between 1995-96 and 1999-00, adjusted for inflation up to the month of the facility transfer. After a court facility is transferred, the county is locked into paying the same amount annually thereafter.

Complicated Calculations. The process for calculating a CFP is complicated and is onerous for some counties. Chapter 1082 specifies the maintenance cost items that will be included in the payment, including all maintenance and repair costs, purchases and installation costs, parking space maintenance, and landscaping. In addition, the CFP includes insurance costs calculated based on private provider rates. The CFP does not provide credit for such items as rental income that counties previously applied toward a facility’s maintenance costs. Some counties have had difficulties retrieving all of the cost information required to do the calculations, such as utility bills and expenditure records for old repairs, due to their limited staff or poor record keeping.

Current CFP Methodology Biased Against Counties With Active Maintenance Programs. Since the CFP uses expenditures from specific years, counties that conducted major repairs during those years will have higher payments than counties with similar facilities that did not conduct repairs. For example, a county that installed new roofs and air conditioners in addition to routine maintenance would pay more in CFP than a county with similar size facilities that conducted minimal maintenance.

Consider Alternative Methodology to Simplify CFP Calculations, Evening Out County Responsibilities. Instead of the current cumbersome method of calculating CFPs, we recommend that the Legislature consider alternatives to simplify the calculation methodology. One such alternative would be to calculate the CFP based on a per-square-foot maintenance cost for an average facility, rather than accounting for individual expenditure items. Using a per-square-foot cost standard would eliminate bias against counties that have diligently maintained their facilities. Another option is to base the per-square-foot calculation on the number of judges in the county at the time of facility transfer, allowing for a standard amount of space per judge position. This approach assumes that counties should have provided and maintained adequate space for the number of judicial positions in the county, and should provide the same on an ongoing basis after the transfer of their court facilities to the state.

Expand New Antioch Courthouse

The plan for a new Antioch courthouse in Contra Costa County does not meet the current identified workload of the court. As planning and construction of major capital outlay projects takes multiple years, the proposed project will be obsolete in capacity before construction is complete. We withhold recommendation pending the submission of a plan by Judicial Council for a larger courthouse that accommodates workload demands in the near future.

Current Court Facility Does Not Meet Capacity Needs. Currently, the Pittsburg trial court facility in Contra Costa County operates with four full-time courtrooms. Due to the number of filings, the court also uses one converted jury room as a courtroom once a week. In 2005, the Pittsburg court handled about 55,400 filings, and had to direct 6,393 filings (about 10 percent of total filings) to the Martinez courthouse due to overcrowding. The Pittsburg court facility is in poor condition and no longer meets the needs of the court for safety, circulation, holding cell capacity, courtroom size, and Americans With Disabilities Act accessibility.

New Antioch Facility Is Too Small. The Governor’s budget proposes to construct a new trial court facility in Antioch to replace the Pittsburg facility. The new Antioch facility would have four courtrooms. Our review, however, shows that the proposed facility will not provide adequate space to accommodate even the current filings of the Pittsburg court. The filings transferred to Martinez are entirely criminal felonies and family law filings that take up more judge time than other types of filings. If all the filings were now being handled at the Pittsburg facility, it would require more than the current number of courtrooms.

Planning for Future Growth. The planning and construction of a major capital outlay project routinely takes three to five years. Constructing a court facility that does not have the capacity to handle current filings is not a wise investment. Constructing courthouses that are too small or constrained to handle even slight increases in filings is not prudent planning.

Withhold Recommendation. Based on current workload and recent growth in filings, the proposed Antioch courthouse would be over capacity and unable to accommodate its filings workload by the time it is complete in 2009. In order to avoid building a court facility that is too small to accommodate all the filings when construction is complete, we withhold recommendation on the new Antioch courthouse until the department submits a revised proposal that provides adequate courtrooms for the workload that court is expected to handle in 2009.

Need for Budget Bill Language on Project Transfer

We recommend adoption of budget bill language requiring the transfer of the Contra Costa County Pittsburg trial court facility prior to the release of $2 million in State Court Facilities Construction Fund to prepare working drawings.

The Governor’s budget proposes funding for two trial court facilities in 2006-07, including a new Antioch courthouse in Contra Costa County and a joint-use Plumas/Sierra Counties courthouse. However, neither county has transferred the existing courthouses to the state. The Judicial Council estimates that transfers will take place by late spring 2006. In order to encourage the speedy transfer of these court facilities, funding for the new courthouses should be available only upon the transfer of old trial court facilities. Currently, the budget bill includes language requiring the transfer of the Plumas County Portola trial court facility prior to the release of funds. We think that the same language should be applied to the Contra Costa County Pittsburg courthouse. Accordingly, we recommend the adoption of the following budget bill language:

“Notwithstanding any other provision of the law, County of Contra Costa shall transfer responsibility, or responsibility and title, for the Pittsburg Court facility to the state prior to the release of the funds identified in Schedule (1).”