Recent changes to the Surplus Land Act promise streamlining and flexibility: Should public agencies rejoice?

The Surplus Land Act (Act) was enacted in 1968 in response to the massive statewide housing shortage. The Act provides affordable housing developers with a right of first refusal on all public agency-owned land. Other local agencies, such as school districts and park districts, have priority rights to acquire surplus land, but affordable housing developers have the highest priority.

The Act establishes complex procedures that govern a local agency's disposition of all surplus property, including the selling or leasing of surplus property. The Act applies to all local agencies, including cities, counties, and all special districts, including utility, water, sewer, school, and park districts, as well as housing authorities, joint powers authorities, successor agencies, and other political subdivisions of the state.

Notably, in 2019, Gov. Gavin Newsom signed Assembly Bill 1486 (AB 1486) into law. Fully effective Jan. 1, 2021, AB 1486 amended the Act by strengthening reporting requirements and enforcement provisions to promote increased compliance by public agencies. Over time, public agencies have adapted to the reporting requirements outlined in AB 1486, including the requirement of formal findings by a local agency's legislative body declaring the proposed disposed land as surplus or exempt surplus. The reporting requirements and penalties provisions established by AB 1486 made the Act much more stringent.

Public agencies were hopeful that Senate Bill 747 (SB 747) and Assembly Bill 480 (AB 480) would provide much-needed clarification and flexibility for the disposal of surplus property. SB 747 (Caballero) and AB 480 (Ting) amend Government Code §§ 54222, 54222.5, 54223, 54224, 54225, 54226, 54227, 54230, 54230.5, and 54234 of, and amends and repeals § 54221, effective January 1, 2024.

SB 747 operates as a clean-up bill. It amends the Act by modifying certain categories of exempt surplus land. It creates new categories of exempt surplus land, including land owned by public-use airports, certain lands transferred to community land trusts, and certain lands owned by agencies whose primary purpose is public transportation. SB 747 also offers local agencies the ability to streamline the disposal of specified types of exempt surplus land without making a declaration at a public meeting if the local agency identifies the land in a notice that is published and available for public comment and provides that notice to the appropriate entities at least 30 days before the exemption takes effect. Specified types of exempt surplus land include land to be used to provide housing affordable to persons and families of low or moderate income, certain land used for open-space or low and moderate-income housing, certain school districts and community college district facilities, or land owned by public-use airports.

The disposition of publicly owned land is regarded as a long and drawn-out process. AB 480 was intended to provide public agencies with a special exception to the Act by allowing public agencies that entered into exclusive negotiating agreements (ENAs) before the exemption deadline of Dec. 31, 2022, to comply with the pre-AB 1486 version of the Act. Under AB 480, the new exemption deadline is Dec. 31, 2027; this means that public agencies that previously entered into an ENA but did not complete disposition now have additional time to complete the transaction.

On Feb. 23, 2024, the California Department of Housing and Community Development (HCD) released its revised Draft Guidelines (Draft Guidelines) for the implementation of the Act, which incorporates the statutory changes made to it through SB 747 and AB 480. HCD last updated its Guidelines in 2021. Interestingly, the Draft Guidelines seem to go beyond the changes provided in SB 747 and AB 480. The California Special District Association (CSDA) has commented that the Draft Guidelines propose significant changes affecting special district services. Further, it has been suggested that the proposed revisions to the Draft Guidelines contain problematic provisions. https://www.csda.net/blogs/vanessa-gonzales/2024/02/27/revisions-to-surplus-land-act-guidelines-could-imp?utm_source=informz&utm_medium=email&utm_campaign=electronic%20newsletter&_zs=Xk3iQ1&_zl=IiHN7

On March 6, 2024, HCD held a webinar to discuss its Draft Guidelines. Representatives from various public agencies spoke in support of and against the proposed changes outlined in the Draft Guidelines. The comments included concerns regarding inconsistencies of the proposed Draft Guidelines with the plain statutory language of the Act and legislative intent behind the Act, the subjective and open-ended definition of "good faith negotiations," and that HCD notices of violations provide an unaccountable interference with local agency operation.

The public comment period on the Draft Guidelines closes on March 25, 2024.