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There are several job delivery techniques that can be used by the state to construct capital possessions: Design-Bid-Build (Section 6828), Design-Build (Section 6829), and Lease-Based Development Agreements. This section describes the process for pursuing a Lease-Based Development structure.
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In general, when a brand-new state-owned capital center is proposed, the state's preferred technique is to obtain residential or commercial property for the subject task. For this approach, an acquisition phase is funded through the yearly spending plan process, and the suitable department will engage with the Department of General Services (DGS) to look for suitable websites. Once a residential or commercial property is gotten, future phases for the project will be moneyed through the budget procedure, and the project will be created and built with DGS as the project manager, (or by the suitable firm for non-DGS managed jobs), with oversight by the PWB. Government Code § 14669 licenses the DGS to work with, lease, lease-purchase, or lease with the alternative to purchase any genuine or individual residential or commercial property for the usage of any state firm, based on specified restrictions.

However, in instances where the state is not able to identify and obtain an appropriate website that supports a specific capital project, a lease-based advancement alternative may be thought about. This kind of lease structure is normally described as a Build-to-Suit Lease. Under this lease structure, the state is not required to make any payments, consisting of interim financing, till tenancy.

Generally, there are two kinds of Build-to-Suit lease alternatives the state may pursue:

Capitalized Lease Resulting in Ownership: Sometimes referred to as an "in-substance purchase" or "Lease-Purchase", a capitalized lease is one where the private sector is accountable for acquiring, establishing, and building a facility that is built to state-issued specs. The lease specifies that ownership of the facility transfers to the state at the end of the lease term. Capitalized Lease with a Purchase Option: Similar to a capitalized lease as defined above, but the lease offers the lessee the alternative to buy the leased possession at a specified value at some time during or at the end of the lease period, in some cases referred to as a "Lease with Option to Purchase".

Features of a Build-to-Suit Lease:

The state, in cooperation with the developer, finishes CEQA. The state is accountable for completing real estate due diligence activities. A lease-based job goes through the typical state design and construction oversight (e.g. Construction Inspections Management Branch of DGS, State Fire Marshal, and so on). The state's sovereign status applies, and a lease-based project ought to not be subject to local zoning, allowing or examination. Developer expenses, and revenues are folded into the lease payments. Repair, upkeep and overall operating expense are normally folded into the lease up until the lease ends. The terms of a capitalized lease ought to ensure the center is in great repair work at the end of the lease term, through the lease requirement for a Management System.

Requirements for a Funding Lease: Just like lease-revenue bonds, the state's financial obligation obligations under the lease can not be structured in a manner which would categorize them as constitutional debt. The conditions in the lease should be similar to the lease terms found in a business context for similar kinds of facilities. Features of a funding lease include:

Rental payments are paid only for those periods in which useful use and tenancy of the rented residential or commercial property is readily available to the lessee. If there is no yearly appropriation for lease when the rented residential or commercial property is available for usage and tenancy, the state will remain in default under the lease, and solutions may be readily available against the state. These solutions might consist of the supplier's or lessor's right to continue the lease around and sue the state for each installation of lease as it becomes due. Acceleration of rental payments is not allowed. The obligation to pay rental payments might be from any lawfully offered funds of the department. The lease term need to not extend beyond the awaited helpful life of the leased residential or commercial property, and reasonable market rental value should be paid.

Steps in a Build-to-Suit Lease: After it has actually been figured out that a job website is not offered for a specified task, which a lease structure must be pursued, the following actions should occur:

Statutory Authority: The department submits a Capital Outlay Budget Change Proposal requesting Trailer Bill Language to add statutory authority to pursue a capital task through the capitalized lease structure pursuant to Government Code § 14669. Also, a future appropriation will be necessary to cover the costs of state oversight of building and construction activities. For the year construction is anticipated to be completed, the department submits a Spending plan Change Proposal for one-time moving costs and rent.

Form 9 and 10: After a task has statutory authority to get in into a capitalized lease, the customer company deals with DGS realty personnel to create a Facilities Design Program that details task and program specs. The last result of this activity is memorialized through a Kind 9 "Space Action Request" and Form 10 "Estimate of Occupancy Costs" submittal. Both Forms 9 and 10 should be approved by Finance.

Solicitation for personal development entity: DGS posts a "land advertisement" on the Cal eProcure site to determine the inventory of offered sites in the desired job area owned by private designers. A "short list" of possible sites is produced, and the client company ranks them based on desirability. DGS will issue an RFP to designers on the brief list. Once a firm is picked, DGS will negotiate a lease contract that information the regards to the arrangement, consisting of a lease payment structure.

Legislative Notification: DGS is required to inform the legislature prior to entering into a build-to-suit lease, pursuant to GC 13332.10.

PWB approval of Lease: Although no capital expenditure is made when participating in a capitalized lease, a dedication to a capital acquisition is developed. Therefore, the final lease terms must be authorized by the PWB prior to execution. DGS should also provide to PWB the genuine estate due diligence. All requisite actions under CEQA should be finished within a reasonable time after PWB approval, as a "Condition Precedent" to the lease arrangement. If CEQA is not attained, the state has the right to terminate the lease.

Design Development: Once the last lease is approved, the advancement team will design the task to the state's specifications, and will secure all needed regulative evaluations and approvals, consisting of those from the Department of State Architect and the State Fire Marshal (SFM). In addition, the advancement group will work with local jurisdictions (City and County) to acquire any required approvals.

Facility Occupancy: Once the center is built, the SFM problems a Certificate of Occupancy, and the customer agency authorizes and "accepts" the building for its use and occupancy. The client agency makes annual payments based upon the approved lease terms throughout of the lease. During the lease term, the designer is accountable for running and keeping the building.

Exercising a Purchase Option: For leases with a purchase alternative, a capital outlay appropriation adequate to money the purchase of the capital possession and to cover any extra administrative expenses will be needed. In addition, PWB's authorization is needed to exercise the purchase choice. However, the present requirement is for build-to-suit leases to instantly move to the state at the end of the lease.