There are numerous task delivery approaches 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.

In basic, when a new state-owned capital center is proposed, the state's favored technique is to obtain residential or commercial property for the subject job. For this approach, an acquisition phase is moneyed through the annual spending plan procedure, and the appropriate department will engage with the Department of General Services (DGS) to look for appropriate sites. Once a or commercial property is gotten, future stages for the project will be moneyed through the spending plan procedure, and the task will be created and built with DGS as the job manager, (or by the proper agency for non-DGS handled projects), with oversight by the PWB. Government Code § 14669 licenses the DGS to work with, lease, lease-purchase, or lease with the choice to purchase any genuine or personal residential or commercial property for using any state firm, based on defined limitations.

However, in circumstances where the state is not able to recognize and obtain an ideal website that supports a particular capital task, a lease-based development alternative might be thought about. This kind of lease structure is typically referred to as a Build-to-Suit Lease. Under this lease structure, the state is not required to make any payments, including interim funding, until tenancy.

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

Capitalized Lease Resulting in Ownership: Sometimes referred to as an "in-substance purchase" or "Lease-Purchase", a capitalized lease is one where the economic sector is accountable for acquiring, establishing, and constructing a facility that is constructed to state-issued requirements. 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 specified above, however the lease offers the lessee the choice to acquire the leased property at a defined worth at some time during or at the end of the lease period, in some cases described as a "Lease with Option to Purchase".

Features of a Build-to-Suit Lease:

The state, in collaboration with the developer, completes CEQA. The state is responsible for completing real estate due diligence activities. A lease-based project is subject to the normal state style and construction oversight (e.g. Construction Inspections Management Branch of DGS, State Fire Marshal, and so on). The state's sovereign status uses, and a lease-based task must not go through local zoning, permitting or assessment. Developer expenses, and profits are folded into the lease payments. Repair, upkeep and total operating costs are generally folded into the lease up until the lease ends. The regards to a capitalized lease must ensure the facility remains in good repair at the end of the lease term, through the lease requirement for a Computerized Maintenance Management System.

Requirements for a Funding Lease: As with lease-revenue bonds, the state's financial obligation obligations under the lease can not be structured in a manner which would classify them as constitutional financial obligation. The conditions in the lease should be similar to the lease terms found in a commercial context for comparable kinds of centers. Features of a financing 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 annual appropriation for rent when the rented residential or commercial property is available for usage and occupancy, the state will be in default under the lease, and treatments might be readily available against the state. These treatments may include the supplier's or lessor's right to continue the lease out there and sue the state for each installment of rent as it becomes due. Acceleration of rental payments is not allowed. The obligation to pay rental payments might be from any lawfully available funds of the department. The lease term should not extend beyond the expected useful life of the rented residential or commercial property, and fair market rental worth ought to be paid.

Steps in a Build-to-Suit Lease: After it has actually been figured out that a project site is not offered for a defined project, which a lease structure need to be pursued, the following actions must occur:

Statutory Authority: The department sends a Capital Outlay Budget Change Proposal asking for Trailer Bill Language to add statutory authority to pursue a capital project through the capitalized lease structure pursuant to Government Code § 14669. Also, a future appropriation will be required to cover the costs of state oversight of construction activities. For the year building and 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 project has statutory authority to participate in a capitalized lease, the customer firm deals with DGS genuine estate staff to develop a Facilities Design Program that describes job and program specifications. The last outcome 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 need to be approved by Finance.

Solicitation for personal advancement entity: DGS posts a "land advertisement" on the Cal eProcure website to identify the inventory of offered sites in the wanted task area owned by personal designers. A "list" of potential sites is developed, and the client company ranks them based upon desirability. DGS will issue an RFP to designers on the list. Once a company is chosen, DGS will work out a lease agreement that details the terms of the arrangement, including a lease payment structure.

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

PWB approval of Lease: Although no capital investment is made when entering into a capitalized lease, a commitment to a capital acquisition is created. Therefore, the final lease terms must be authorized by the PWB prior to execution. DGS should also provide to PWB the realty due diligence. All requisite actions under CEQA must be finished within a sensible time after PWB approval, as a "Condition Precedent" to the lease agreement. If CEQA is not achieved, the state can end the lease.

Design Development: Once the final lease is authorized, the advancement team will design the job to the state's specs, and will protect all required regulative reviews and approvals, including 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 get any required approvals.

Facility Occupancy: Once the facility is built, the SFM concerns a Certificate of Occupancy, and the client company authorizes and "accepts" the structure for its usage and occupancy. The customer agency makes yearly payments based upon the approved lease terms for the duration of the lease. During the lease term, the designer is responsible for running and preserving the structure.

Exercising a Purchase Option: For leases with a purchase option, a capital expense appropriation adequate to money the purchase of the capital possession and to cover any additional administrative expenses will be required. In addition, PWB's authorization is essential to work out the purchase choice. However, the current requirement is for build-to-suit leases to immediately move to the state at the end of the lease.