Report 2010-125 Recommendation 10 Responses

Report 2010-125: State Lands Commission: Because It Has Not Managed Public Lands Effectively, the State Has Lost Millions in Revenue for the General Fund (Release Date: August 2011)

Recommendation #10 To: Lands Commission, State

To complete its rent reviews promptly and obtain a fair rental amount for its leases, the commission should conduct rent reviews on each fifth anniversary as specified in the lease agreements or consider including provisions in its leases that allow for the use of other strategies, such as adjusting rents annually using an inflation indicator.

Annual Follow-Up Agency Response From September 2015

Response: The Commission's new State Lease Information Center (SLIC) database is up and running. Rent reviews for leases are identified a year prior to their deadlines and are being process and considered by the Commission in a timely manner.

Additionally, staff has transitioned a significant portion of all leases to inflation-adjusted rents (CPI). All new General Lease - Recreational Use leases transitioning from rent-free status to rent-generating leases pursuant to Chapter 585/12 (SB 152) are being established with annual CPI adjustments, thus eliminating the future need for rent reviews. Other recreational leases are on a 10-year renewal cycle and will be converted as they expire. Where appropriate and when opportunities arise, other leases will also be converted to annual percentage or CPI increases. This practice will substantially reduce management costs and enhance overall revenue recoveries by specifying rent increases in the lease and requiring no further action by the Commission during the lease term. Inflation adjustments are coded into the database upon entry and subsequent invoices are adjusted automatically without any staff intervention.

Commission staff believes this recommendation is fully implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

The steps the Commission has taken to implement our recommendation appear reasonable and are supported by written guidelines.

Annual Follow-Up Agency Response From September 2014

The rent review processes are currently under review for inclusion in the workflow of the SLIC database. The goal is to ensure all reviews are conducted in a timely manner to ensure maximum recoveries.

Additionally, staff is transitioning a significant portion of all leases to annual fixed percentage or inflation (CPI) adjusted rents as opportunities arise with lease amendments and renewals. All new General Lease - Recreational Use transitioning from rent-free status to rental pursuant to changes per Chapter 585/12 (SB 152) are being established with annual CPI adjustment. Other recreational leases are on a 10-year renewal cycle and will attrition as they expire. Leases of other types can have terms up to 49 years. Where appropriate and when opportunities arise, those leases will also be converted to either CPI or fixed percentage annual increases. This practice should substantially reduce management costs and enhance overall revenue recoveries by specifying rent increases in the lease requiring no further action by the Commission for the term of the lease.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

All Recommendations in 2010-125

Agency responses received after June 2013 are posted verbatim.