MTC, BATA Issue Statement on Regional Headquarters Purchase

Oakland, CA — The Metropolitan Transportation Commission (MTC) and the Bay Area Toll Authority (BATA) today issued the following statement regarding the state Legislative Counsel’s May 4, 2012 opinion on the October 2011 purchase of an office building at 390 Main Street in San Francisco by the Bay Area Headquarters Authority (BAHA):

1. The Metropolitan Transportation Commission (MTC) and Bay Area Toll Authority (BATA) – acting through a joint powers authority known as the Bay Area Headquarters Authority (BAHA) – underwent a thorough, deliberative, and transparent public process culminating in the purchase of a new office building in October 2011 adequate to meet the agencies’ growing needs. In keeping with that deliberative process, MTC/BATA’s legal team has undertaken a serious and respectful review of the Legislative Counsel opinion released by state Senator Mark DeSaulnier a few days ago.
2. Last July, MTC/BATA obtained a legal opinion from its bond counsel, Orrick, Herrington & Sutcliffe LLP (Orrick), a prominent law firm consistently ranked #1 in the country in this specialty area of the law – that the purchase was consistent with state law. Orrick had all the facts of the proposed real estate transaction before it when rendering its opinion. In its May 4th opinion, Legislative Counsel acknowledged that “We do not have all of the facts related to the transaction before us.”
3. Senator DeSaulnier’s May 7th press release claims that the “Legislative Counsel finds that MTC broke the law.” Its opinion does no such thing. Legislative Counsel did not say whether the purchase was legal or illegal. Only courts can declare an action illegal. Legislative Counsel said that the limited information it had available could lead a court to decide against the use of bridge toll revenues to fund the purchase of 390 Main Street.
4. Further, Legislative Counsel stated that “a court considering the issue would take into account all the relevant facts in making a determination regarding the purposes underlying the purchase of 390 Main Street, and would give deference to determinations made by BAHA in that regard, if found to be reasonable.” As noted above, Legislative Counsel admitted it did not have all the facts about the purchase before it, nor did it give deference to BAHA’s determinations as a court would be required to do.
5. The Legislative Counsel opinion rests much of its adverse conclusion on the fact that MTC/BATA acquired 390 Main Street for its own use as well as for other regional public agencies such as the Association of Bay Area Governments (ABAG), Bay Area Air Quality Management District (BAAQMD) and Bay Conservation and Development Commission (BCDC). Legislative Counsel opined that these entities “are not, in our view, related to associated transportation projects or purposes authorized to be undertaken by either BATA or MTC.” But these other three regional agencies are significantly involved in the transportation mission of MTC/BATA – ranging from their common membership in the statutorily-created Joint Policy Committee to their partnership on federal air quality planning to their joint activities implementing SB 375 (Steinberg). Thus, much of the foundation of the opinion rests on a faulty assumption about MTC/BATA’s relationship with these other regional agencies.
6. The opinion also hinges on the fact that 390 Main Street includes more office space than is currently required by MTC and BATA. There is nothing in California law, however, that requires a public agency only to purchase or lease space that is minimally sufficient for its current needs. Nor does the law define any “bright line” below which excess office space is defensible, but above which it is not. In fact, public agencies routinely purchase or construct buildings with excess space that they will grow into at a later date. Some examples include:
   
   • The new Transbay Transit Center is an example of a joint powers authority (JPA) developing leasable space to support transit activities. The space being developed is not limited to the current needs but looks to the future needs of the community.
   • The County of Sacramento issued Certificates of Participation in 1997 to purchase an existing building, the Bank of America building on 8 th and I Street in the City of Sacramento. The purchased building was planned to be leased to the City or used by the County but due to changing space needs was leased to commercial tenants.
   • In the year 2000, the Truckee Public Financing Authority issued taxable and tax-exempt bonds to purchase a building that substantially exceeded its needs for a new City Hall and extra space was subleased to public and commercial tenants.
   • In 1993, the Mid-Peninsula Regional Open Space District purchased an existing building for its headquarters building. Initially, the District occupied 60% of the building and leased 40% to commercial tenants.
   • The Port of San Francisco has substantial real estate holdings that it leases to commercial tenants.
   • One of the parties to the 390 Main Street transaction – the Bay Area Air Quality Management District – purchased its current building and for many years rented out a substantial portion of it to the San Francisco Redevelopment Agency, until the space was needed for BAAQMD’s expanding staff.
7. MTC/BATA’s legal team remains confident that the purchase of 390 Main Street in San Francisco with bridge toll funds was fully consistent with state law.

BATA, which is directed by the same policy board as MTC, administers toll revenues from the Bay Area's seven state-owned toll bridges. MTC is the transportation planning, financing and coordinating agency for the nine-county San Francisco Bay Area.

Contacts:

Randy Rentschler, (415) 778-6780