Report 2010-125 Recommendation 2 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 #2 To: Lands Commission, State

To ensure that it receives rent from the lessee that reflects the approximate value for the State's property at those times when a lessee disputes a modification to the rental amount after the commission exercises its right to perform a rent review or because the lease expired, the commission should include in its lease agreements a provision that requires lessees to pay the commission's proposed increased rental amount, which would be deposited into an account within the Special Deposit Fund. The increased rental amounts deposited, plus the corresponding interest accrued in the account, should then be liquidated in accordance with the amount agreed to in the final lease agreement.

Annual Follow-Up Agency Response From November 2017

As stated in previous responses, staff sees no advantage to the State in implementing this recommendation as it would result in additional costs in staff time and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues upon receipt does not diminish the lessee's subsequent appeal rights to the Commission, in which case the monetary difference and interest would have to be calculated and refunded. Failure of the lessee to pay increased rents in a timely manner is subject to penalty and interest and a breach in the lease which could result in a trespass action. The potential penalties that could be levied once the enforcement regulations are in place will also serve to motivate recalcitrant lessees to submit timely payment. For these reasons and those stated previously, this recommendation will not be implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


Annual Follow-Up Agency Response From October 2016

As stated in previous responses, staff sees no advantage to the State in implementing this recommendation as it would result in additional costs in staff time and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues upon receipt does not diminish the lessee's subsequent appeal rights to the Commission, in which case the monetary difference and interest would have to be calculated and refunded. Failure of the lessee to pay increased rents in a timely manner is subject to penalty and interest and a breach in the lease which could result in a trespass action. The potential penalties that could be levied once the enforcement regulations are in place will also serve to motivate recalcitrant lessees to submit timely payment. For these reasons and those stated previously, this recommendation will not be implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


Annual Follow-Up Agency Response From September 2015

As stated in previous responses, staff sees no advantage to the State in implementing this recommendation as it would result in additional costs in staff time and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues upon receipt does not diminish the lessee's subsequent appeal rights to the Commission. Failure of the lessee to pay increased rents in a timely manner is subject to penalty and interest and a breach in the lease which could result in a trespass action. The potential penalties that could be levied once the enforcement regulations are in place will also serve to motivate recalcitrant lessees to submit timely payment.

For these reasons and those stated previously, this recommendation will not be implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


Annual Follow-Up Agency Response From October 2014

As stated in previous responses, staff sees no advantage to the State in implementing this recommendation as it would likely result in additional costs in staff time that the Commission would have to absorb and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues does not diminish the lessee's subsequent appeal rights to the Commission. Failure of the lessee to pay increased rents in a timely manner is also subject to penalty and interest and a breach in the lease which could result in a trespass action. For these reasons and those stated previously, this recommendation will not be implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


Annual Follow-Up Agency Response From October 2013

As stated in the October 2012 response, staff sees no advantage to the State in implementing this recommendation as it would likely result in additional costs in staff time that the Commission would have to absorb and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues does not diminish the lessee's subsequent appeal rights to the Commission. Failure of the lessee to pay increased rents in a timely manner is also subject to penalty and interest and a breach in the lease which could result in a trespass action. For these reasons and those stated previously, this recommendation will not be implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


Annual Follow-Up Agency Response From October 2012

The aggressive strategies that staff has been implementing should preclude the need for use of a Special Deposit Fund. Rents placed in special deposit funds are not available to the State whereas rent deposited to the General Fund would be. In those rare instances where a rental rate would be reduced, administrative processes are in place to promptly refund the difference from the current revenue stream. Staff sees no advantage to the State in implementing this recommendation as it would likely result in additional costs in staff time that the Commission would have to absorb and would result in no revenues to the General Fund until the dispute is resolved. Depositing the rents as revenues does not diminish the lessee's subsequent appeal rights to the Commission. Failure of the lessee to pay increased rents in a timely manner is also subject to penalty and interest and a breach in the lease which could result in a trespass action.

California State Auditor's Assessment of Annual Follow-Up Status: Will Not Implement


All Recommendations in 2010-125

Agency responses received after June 2013 are posted verbatim.


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