What AB 2525 Means for Mission Bay Park

Background

California Assembly Bill 2525, authored by Assemblymember Christopher Ward and endorsed by the San Diego City Council (Resolution R-2026-396, adopted following unanimous Community & Neighborhood Services Committee approval on March 19, 2026), amends California Government Code Section 54221 to add a narrow exemption from the Surplus Land Act (SLA) for Mission Bay Park lands held by the City of San Diego. The bill responds to a specific procedural concern that originated with the 2023 legislative amendments to the SLA and the effective 15-year cap those amendments imposed on long-term leases of land that could be classified as surplus.

The 2023 SLA amendments and the 15-year lease ceiling

The Surplus Land Act has been amended substantially in recent years to broaden its scope and tighten its housing-priority requirements. Two bills passed during the 2023 California legislative session — SB 747 (Caballero) and AB 480 (Ting) — took effect January 1, 2024 and made significant changes to how the SLA treats long-term leases of surplus land.

Under the 2023 amendments, the definition of "dispose" in Government Code §54221(d)(1)(B) was expanded to include any lease of surplus land for a term longer than 15 years, inclusive of any extension or renewal options. Previously, the disposition threshold for leases had been five years. Leases of 15 years or less are not "dispositions" under the amended Act (§54221(d)(2)(A)) and do not trigger the SLA's notice, priority-buyer, or housing-set-aside provisions. Leases of more than 15 years — or shorter leases that, with renewal options, exceed 15 years — do.

The practical consequence for Mission Bay Park has been an effective 15-year ceiling on lease modernizations involving land that could be classified as surplus. The City and Mission Bay leaseholders have been navigating this ceiling since January 2024. The capital structure of Mission Bay's existing commercial leaseholds, however, is incompatible with a 15-year ceiling: modernization-grade investment in a major hotel, resort, marina, or conference facility typically requires lease terms in the 30 to 50 year range to amortize the capital expenditure required to bring aging properties up to current standards. A 15-year ceiling effectively forecloses the kind of substantial reinvestment the 1994 Master Plan envisioned, leaving leaseholders to choose between short-term renewals that don't justify modernization investment, or long-term renewals that trigger the full SLA framework — including the SLA's requirement that surplus land first be offered to affordable-housing developers under §54222.

What AB 2525 changes

AB 2525 responds to that 15-year ceiling by adding subparagraph (T) to Government Code §54221(f)(1), creating a new category of "exempt surplus land" for Mission Bay Park lands meeting the conditions of newly proposed §54222.3.2. For lands that qualify, the SLA's lease-disposition framework — including the 15-year ceiling and the housing-priority sequence — would no longer apply, allowing the City and existing leaseholders to enter long-term lease modernizations without SLA exposure on those lands.

The bill's underlying objective — restoring the legal pathway for long-term lease modernization on Mission Bay's existing commercial leaseholds — addresses a real and documented operational constraint. The exemption it creates is not unconditional, however. As detailed below, §54222.3.2(b) requires that the City make a deposit of 10% or 30% of disposition value into a local housing-specific set-aside account each time it disposes of qualifying Mission Bay land. The brief that follows examines the bill's statutory mechanics and the secondary implications those mechanics carry for the park.

How the bill operates

AB 2525 makes two changes to existing law. First, it adds subparagraph (T) to Government Code §54221(f)(1), creating a new category of "exempt surplus land": "Lands comprising Mission Bay Park, located within the City of San Diego, that meet the conditions of Section 54222.3.2." Second, it adds proposed §54222.3.2 in full, establishing the conditions, deposit obligations, restrictions, and enforcement mechanisms specific to Mission Bay Park.

The exemption is conditional. Mission Bay Park land is "deemed exempt surplus land" only if all four of the following requirements in §54222.3.2(a)(1) are satisfied:

• The land is identified in the Mission Bay Park Master Plan Update (adopted August 1, 1994; updated July 9, 2002).
• The land contains existing commercial, retail, hotel, parking, or conference use as of January 1, 2026 (§54222.3.2(a)(1)(A)).
• An expansion of an existing use does not encroach on land used for open space, public recreation, or park purposes — though "intensifying" an existing use through demolition and redevelopment is not deemed an expansion (§54222.3.2(a)(1)(B)).
• The land is subject to a lease agreement (§54222.3.2(a)(1)(C)).

Beyond eligibility, the bill requires public-meeting findings (§54222.3.2(a)(2)), HCD notification 30 days prior to disposition (§54222.3.2(a)(3)), and compliance with the City Charter's 25 percent commercial-use cap on Mission Bay (Charter Section 55).

The deposit calculation

§54222.3.2(b) establishes the financial mechanism that conditions the exemption. Each qualifying disposition — defined in existing law as a sale or a lease of more than 15 years, including extensions — triggers a deposit into "a local housing-specific set-aside account." The deposit amount depends on which of two paths the City qualifies for:

• 10% rate (§54222.3.2(b)(1)). Applies only if the City has disposed of surplus land in the prior five years that resulted in at least 4,000 housing units being planned, entitled, permitted, or built, with at least 50% affordable to lower-income households, and has not received an HCD notice of violation in the prior five years. The deposit is 10% of the disposition value or fair market value, whichever is greater.
• 30% rate (§54222.3.2(b)(2)). The default rate when the 10% conditions are not met. The deposit is 30% of the greater of final sale price or fair market value, or — for leases — the discounted net present value of fair market value as of the lease execution date (§54222.3.2(f)).

Qualifying for the 10% rate: the Midway Rising dependency

San Diego's qualification for the lower 10% rate depends almost entirely on a single project: the Midway Rising / Sports Arena redevelopment. The City declared the 48.5-acre Sports Arena site surplus on August 3, 2021 and selected the Midway Rising team in September 2022 under SLA "first priority" status. The proposal entitles approximately 4,254 total housing units, of which roughly 2,000 are affordable — an affordable share of ~47%, calibrated to households at or below 80% of area median income. As of late 2025, the project faces material delivery uncertainty: a California appellate court overturned the voter-approved removal of the Midway-area 30-foot height limit, and the Mayor extended the Exclusive Negotiating Agreement with Midway Rising to December 4, 2026.

The §54222.3.2(b)(1) threshold for the 10% rate requires both 4,000 or more total units AND at least 50% affordable in the prior five years. Midway Rising as currently entitled clears the unit count (4,254 > 4,000) but falls just below the affordability threshold at ~47%. If Midway delivers exactly as currently entitled, the affordability ratio could disqualify the City from the 10% rate even with the unit count met. If the project stalls or is materially reduced, the default 30% rate applies on its own terms. No other City of San Diego surplus land disposition in the past five years approaches the 4,000-unit / 50%-affordable threshold individually. The practical implication is that the City's path to the lower deposit rate is narrower than the headline unit count alone suggests — a roughly three-percentage-point shortfall on affordable share is the difference between a 10% and a 30% obligation across the entire Mission Bay lease-renewal cycle.

Applying the rate to lease net present value

For leases — the dominant disposition type for Mission Bay's commercial leaseholds — §54222.3.2(f) directs that the rate be applied to "the discounted net present value of the fair market value of the lease as of the date the lease was entered into." Mission Bay's existing major commercial leaseholds include Marina Village, Dana Landing, Bahia Resort Hotel, Catamaran Resort Hotel, Sportsmen's Seafoods, Hilton San Diego Resort, Paradise Point Resort, and others. While exact NPV figures are subject to lease-specific terms and current market conditions, the cumulative discounted net present value of all major Mission Bay commercial leases is widely understood to be in the multi-hundred-million-dollar range. A 30% deposit obligation against that base, applied across a full lease-renewal cycle, represents hundreds of millions of dollars in cumulative deposits from the park's revenue stream.

Estimated cumulative deposit obligation

The dollar magnitude of the deposit obligation can be estimated using standard net-present-value math. The following analysis is illustrative — actual NPVs are determined by appraisal at each disposition and the exact figures will depend on lease-specific terms set by the City and individual leaseholders. The analysis is offered to help readers understand the order of magnitude implied by the bill's deposit framework.

The valuation formula

§54222.3.2(f) directs that the fair market value of a lease be calculated as "the discounted net present value of the fair market value of the lease as of the date the lease was entered into." Standard practice for valuing a stream of growing future rent payments is the growing-annuity NPV formula:

Where g is the annual rent escalator (typical CPI assumption: 2–3%), r is the discount rate (typical municipal-lease range: 5–6.5%), and n is the lease term in years.

Modeled scenarios

The table below applies the formula to a working assumption of $40 million in aggregate annual lease revenue across Mission Bay's existing major commercial leaseholds, modeled across realistic combinations of lease term, discount rate, and rent escalator. The $40 million figure is an illustrative working assumption based on recent fiscal reports; actual annual lease revenue varies year to year (FY2025 reported revenue was in the approximately $36–37 million range), and a brief based on the City's official audited figures would substitute that specific number for the same calculation. Each row represents the total NPV that would be calculated at signing across the renewed leases, and the corresponding deposit obligation under §54222.3.2(b) at both the 30% default rate and the 10% conditional rate.

Highlighted row reflects the headline scenario used in the bottom-line estimate below (50-year term, 5% discount, 2.5% growth, $40M annual revenue). NPV multiplier is the ratio of present value to first-year rent under the standard growing-annuity formula with end-of-period cash flows. FMV figures are rounded to the nearest million. The 10% rate applies only if §54222.3.2(b)(1) conditions are met; otherwise the 30% default applies.

Bottom-line estimate

For the headline scenario — 50-year average lease term, 5% discount rate, 2.5% rent escalator, $40M aggregate annual revenue — the growing-annuity formula yields an aggregate NPV of approximately $1.12 billion (an NPV multiplier of ~28× first-year rent). The cumulative deposit obligation under AB 2525 across the renewed Mission Bay leases works out to approximately:

• $336 million at the 30% default rate (§54222.3.2(b)(2)).
• $112 million at the 10% conditional rate (§54222.3.2(b)(1)) — available only if the City independently meets the 4,000-housing-unit / 50%-affordable threshold, which depends materially on Midway Rising delivery and on the project hitting at least 50% affordable share.

Across the broader sensitivity range, the 30% deposit obligation falls between approximately $205 million and $371 million, and the 10% deposit obligation between approximately $68 million and $124 million. For comparison: the entire 1994 Master Plan's identified capital improvement backlog has been estimated in the multi-hundred-million-dollar range, and the City's FY2027 General Fund operating budget for Mission Bay & Shoreline Beaches is $19.24 million annually. The deposit obligation, even at the conditional 10% rate, represents several years of the park's entire operating budget extracted from its dedicated revenue base.

Caveats

The figures above are presented as an order-of-magnitude analysis under stated assumptions. Several factors will determine the actual obligation:

• These are illustrative, not appraised. Each disposition's NPV will be determined by a qualified real-estate appraiser at the time of disposition. The City's appraiser sets the official figure on which the deposit is calculated.
• The $40M aggregate is a stated assumption. Mission Bay's actual annual lease revenue varies year to year and depends on which leases are active and current rent terms.
• Each lease is treated as a separate disposition. The 30%/10% deposit applies on a per-lease basis. The cumulative figures above aggregate across all renewals in the 20-year window; the actual cash-flow impact is spread out over time as individual leases are renewed.
• The applicable rate may change over the renewal cycle. If Midway Rising delivers, the 10% rate could apply to early renewals; if a future cycle's threshold is not met, later renewals could revert to the 30% default rate.
• Lease term assumptions are central. If renewal terms are pushed shorter than typical (e.g., 25 years instead of 50) to reduce the deposit base, that may materially undercut the bill's stated objective of enabling long-term modernization investment.

Restricted use of deposited funds

§54222.3.2(c)(1) restricts the use of all deposited funds to a single purpose: "housing that is affordable to extremely low, very low, or low-income households." If funds remain unspent within three years of deposit, §54222.3.2(c)(2) requires that they revert to the State (Building Homes and Jobs Trust Fund or Housing Rehabilitation Loan Fund) for housing in the same jurisdiction.

By statutory design, none of the deposited funds may flow back to Mission Bay Park — not to operations, not to capital improvements, not to De Anza Natural restoration, and not to deferred maintenance. Whatever the funds ultimately accomplish for housing, they leave the park's revenue base.

The De Anza Cove exclusion

§54222.3.2(a)(1)(A) restricts eligibility for the exemption to land that contains "existing commercial, retail, hotel, parking, or conference use as of January 1, 2026." This date-anchored test has a structural consequence the bill does not resolve.

The De Anza Natural plan, currently advancing through the California Coastal Commission process on a separate track from AB 2525, contemplates new lease activity at De Anza Cove: new recreation facilities, a nature center, potential camping and RV uses, and other revenue-generating activities not present as of January 1, 2026. While certain pre-existing recreational leaseholds in the De Anza area — for example, Campland on the Bay and Mission Bay RV Resort — may meet the eligibility criteria of §54222.3.2(a)(1)(A) if they constitute "existing commercial, retail, hotel, parking, or conference use as of January 1, 2026" and otherwise satisfy the other conditions, the majority of new lease activity contemplated under the De Anza Natural plan would not qualify. Land in the De Anza area that the City might later declare surplus for newly contemplated uses would remain subject to the full Surplus Land Act, including its housing-priority provisions.

The result is differential statutory treatment of two parts of the same park: existing commercial leaseholds receive the conditional exemption, while new lease activity at De Anza — the area where most new park-related development is planned over the next decade — remains exposed to the full SLA framework.

The "intensification" carveout

§54222.3.2(a)(1)(B) clarifies that demolition and redevelopment of an existing parcel constitutes "intensifying" an existing use, not "expansion." This drafting choice preserves the exemption for substantial modernization work — a leaseholder may demolish and rebuild an aging facility on its existing footprint without losing eligibility, provided the new use does not encroach on open-space or public-recreation land.

The carveout addresses a practical concern: many Mission Bay leaseholds are decades old and require modernization that goes beyond simple repair. Without this provision, the SLA exemption might apply only to as-is renewals, undermining the bill's stated objective of expediting "rehabilitation and modernization." The bill text explicitly preserves modernization-grade redevelopment within the exemption.

Each such modernization, however, still constitutes a "disposition" within the meaning of Government Code §54221(d)(1)(B) (a lease of more than 15 years, inclusive of extensions). Each disposition triggers the deposit obligation under §54222.3.2(b). The exemption preserves the legal pathway for redevelopment while ensuring that each redevelopment generates a 10% or 30% deposit against its disposition value.

The carveout's narrow framing also constrains the kind of forward-looking visioning that a Master Plan update might contemplate. The exemption preserves modernization of existing commercial uses on existing footprints, but does not extend to:

• New uses on existing parcels. A leaseholder cannot pivot an aging facility to a new use class — for example, from a parking lot to a destination restaurant, from a marina shop to an interpretive center with a café, or from a parcel currently classified as one of the five eligible use types to a new category not listed in §54222.3.2(a)(1)(A) — without potentially losing eligibility for the exemption.
• Expansion of existing leaseholds. A hotel that wishes to add an additional wing, a marina that wishes to extend its slip footprint, or a conference facility that wishes to add new event space — even where those expansions don't encroach on protected open-space or public-recreation land — faces an interpretive question about whether the work qualifies as "intensifying an existing use" or constitutes an "expansion" outside the carveout. The bill's text leaves that line less than fully clear.
• New creative or sustainable revenue concepts. The 1994 Master Plan and the planned Master Plan update both contemplate that the park's authorized uses may evolve over time as community priorities, environmental needs, and visitor patterns change. Eco-tourism partnerships, public-private wellness programs, expanded educational facilities, climate-resilient demonstration projects, and new water-recreation concepts — uses not present as of January 1, 2026 — would not qualify under §54222.3.2(a)(1)(A)'s "existing commercial, retail, hotel, parking, or conference use" eligibility test.

Mission Bay Park's 4,235 acres are among the most valuable public land in California. The Master Plan framework was designed to allow constituent-driven evolution of uses over time, with appropriate environmental review and public process. AB 2525's narrow exemption preserves a portion of that flexibility — specifically, the modernization of existing commercial parcels — while leaving outside its protection the new uses, lateral expansions, and creative concepts that a forward-looking Master Plan update might contemplate. Those activities would either fall under the full Surplus Land Act framework or proceed without the bill's procedural relief, in either case constraining the park's ability to evolve in response to changing community priorities and the kinds of public-private partnerships its constituents may support.

Capacity for future commercial development under Charter §55

The bill's eligibility test in §54222.3.2(a)(1)(A) — protecting only "existing commercial, retail, hotel, parking, or conference use as of January 1, 2026" — has a structural consequence beyond De Anza Cove: it leaves currently unallocated commercial capacity within Mission Bay Park outside the bill's procedural relief. That unallocated capacity is not trivial.

Mission Bay's commercial allocation under Charter §55

San Diego Charter Section 55 establishes a 25% cap on commercial use within Mission Bay Park's land area — a voter-approved limit (Proposition D, 1987) that constrains commercial development to no more than one-quarter of the park's developable acreage. Mission Bay's total park footprint is roughly 4,235 acres of land and water combined, of which approximately 2,100 acres are land. The Charter cap therefore translates to approximately 525 acres as the maximum legally permissible commercial allocation. Current commercial leases occupy approximately 449 acres — about 21.4% of land area — leaving roughly 76 acres of remaining commercial capacity within the Charter limit.

Figures are based on the most recent detailed public analysis (2021 data referenced in 2025 reports). Exact figures shift slightly as leases are renewed, expire, or new ones are added. The 25% Charter cap was approved by voters via Proposition D in 1987.

Why the remaining 76 acres matters

The Mission Bay Park Master Plan framework, the City Charter, and decades of park planning all contemplate that Mission Bay's commercial allocation may continue to develop within the 25% Charter cap. The remaining ~76 acres represents real future opportunity for the park: visitor-serving facilities, recreation concessions, hospitality concepts, education-and-interpretive programs, climate-resilient demonstration projects, or other revenue-generating uses consistent with the park's public-trust purposes. That capacity could fund park improvements, support new constituent-serving activities, and broaden the revenue base over which Mission Bay's deferred maintenance backlog can be addressed.

It is also where some of the most creative future planning lies. The De Anza Natural plan, for instance, contemplates new revenue-generating leases as part of its restoration funding strategy; new long-term partnerships with educational institutions, environmental organizations, or wellness providers may emerge through the Master Plan update; visitor patterns at the park have evolved substantially since 1994 and the park's authorized uses are likely to evolve in response.

How AB 2525's eligibility test forecloses this capacity

None of these prospective new commercial uses on the remaining ~76 acres of Charter-permissible commercial capacity would qualify for AB 2525's exemption. §54222.3.2(a)(1)(A) restricts eligibility to land containing "existing commercial, retail, hotel, parking, or conference use as of January 1, 2026." Land that does not currently host one of those uses, by definition, does not meet the test — including land within Mission Bay that the City has reserved or allocated for future commercial use under the Master Plan and Charter framework.

The practical effect: any new long-term commercial lease (more than 15 years) on currently undeveloped Mission Bay land would be subject to the full Surplus Land Act framework as amended in 2023. Under that framework, the land must first be offered to entities prioritized by the SLA — principally, affordable-housing developers under §54222 — before it could be made available for commercial development. The procedural relief AB 2525 provides for existing leaseholds is not available to support development of the park's remaining 76 acres of commercial capacity.

The combined effect of the existing-use eligibility test and the SLA's housing-priority framework is therefore a structural cap on the park's commercial revenue base at approximately current activity. The bill protects the modernization of existing leases (subject to the deposit obligation analyzed above) while making the development of new commercial activity on the park's remaining 76 acres meaningfully more difficult — either subject to housing-priority requirements or foreclosed altogether for non-housing uses. The Master Plan envisions an evolving park; this provision encloses that evolution within the boundaries of January 1, 2026.

Historical context — Mission Bay's revenue and reinvestment trajectory

Mission Bay Park's revenue base did not begin with AB 2525, and the question of how that revenue is allocated has a documented sixty-year history. The deposit obligation proposed in §54222.3.2(b) is most usefully understood against that backdrop.

The legal dedications

Mission Bay Park lease revenues are subject to four overlapping legal frameworks, each adding a layer of dedication or restriction:

• 1945 California State tidelands conveyance. The State conveyed Mission Bay to the City of San Diego "in trust" for the public-trust purposes of navigation, fisheries, recreation, and visitor-serving facilities. Public-trust assets in California are subject to the Public Trust Doctrine, which has been consistently applied by California courts to require that revenues generated from such assets be used for trust purposes.
• 1962 Ordinance O-8628. San Diego perpetually dedicated Mission Bay as a public park.
• San Diego Charter Section 55. Caps commercial development within Mission Bay at 25% of the total acreage and limits commercial use to public-supporting purposes.
• San Diego Charter Section 55.2 (Proposition C, 2008; modified by Proposition J, 2016). Establishes the formula for allocating Mission Bay lease revenue. Under the current Prop J formula, the first $20 million in annual lease revenue flows to the City General Fund. Of revenue above that threshold, 65% is deposited in the Mission Bay Park Improvement Fund (MBIF) for capital improvements within Mission Bay; 35% is deposited in the Regional Parks Improvement Fund (RPIF) for capital improvements at other San Diego regional parks.

The historical pattern

From the park's dedication in 1962 through the passage of Proposition C in 2008 — roughly 46 years — all Mission Bay lease revenues flowed to the City's General Fund. There was no statutory restriction directing any portion of that revenue back to park reinvestment. Estimates of cumulative nominal lease revenue over that 46-year period vary, but the order of magnitude is in the high hundreds of millions to roughly $1 billion in nominal dollars, with substantially higher inflation-adjusted figures.

From 2008 to the present, the Charter formula has directed a portion of Mission Bay lease revenue back to park improvements through MBIF (with a smaller share to RPIF for other regional parks). The City's own projections at the time of Proposition C's passage estimated that the combined Prop C / Prop J revenue streams would generate approximately $1.5 billion by 2069, of which the majority would flow to MBIF and RPIF. The FY2027 budget shows MBIF at $13.8 million for the year — available for park capital improvements but not for day-to-day operations.

Despite Mission Bay being a substantial revenue generator across its history, the park has simultaneously accumulated a deferred capital and maintenance backlog widely estimated in the multi-hundred-million-dollar range. The 1994 Master Plan identified extensive capital needs that remain only partially funded; the De Anza Natural restoration program contemplates additional substantial capital expenditure; and the FY2027 General Fund operating budget for Mission Bay & Shoreline Beaches stands at $19.24 million annually — a figure documented in the Conservancy's Three-Year Budget Trajectory report as currently subject to a proposed 14.5 FTE reduction.

Forward-looking trajectory

If Mission Bay's annual lease revenue continues at approximately $40 million with 2.5% annual growth, the nominal cumulative revenue over the next 50 years would be approximately $3.9 billion; the discounted net present value at a 5% rate would be approximately $985 million. AB 2525's deposit obligation of $256–371 million at the 30% rate (or $85–124 million at the 10% rate) over the next 20 years' renewal cycle would represent roughly 26–38% of the present value of the next 50 years of park revenue — or 8–11% of nominal forward revenue — directed outside the park's dedicated revenue base under §54222.3.2(c)(1).

An asymmetric funding pattern

A structural pattern across municipal and state budget cycles is that parks function more frequently as a source of revenue and budget reductions than as a destination for additional public investment. Parks need funding; they typically lose contests for discretionary General Fund allocation to public-safety, social-service, infrastructure, and other competing priorities. The pattern is well-documented in San Diego specifically:

• The City's FY2027 Proposed Budget reduces 14.5 front-line FTE positions from the Mission Bay & Shoreline Beaches Division. Per the Conservancy's Three-Year Budget Trajectory report, this is the third consecutive budget cycle proposing significant front-line reductions to Mission Bay operations.
• The Parks & Recreation Department's FY2027 General Fund total is growing by $4.7 million while losing 94 front-line positions citywide. Even when overall department spending increases, front-line park operations contract — resources flow to non-discretionary obligations (salary & benefit adjustments, retiree healthcare, utilities, insurance) rather than to park service capacity.
• Mission Bay's General Fund operating budget for FY2027 is $19.24 million annually, against a park that contains 4,235 acres of land and water, hosts more than 100,000 visitors on peak summer days, and is projected to generate approximately $1.5 billion in lease revenue through 2069 under the Prop C / Prop J formula.
• The 1994 Master Plan's identified capital improvement backlog has remained substantially unfunded for over thirty years. The deferred-maintenance backlog at Mission Bay is widely estimated in the multi-hundred-million-dollar range.

The asymmetry is structural, predates AB 2525, and is not unique to San Diego. California municipal budget patterns over decades show parks departments operating under chronic capital and operating shortfalls while their underlying assets — the parks themselves — generate substantial economic value: tourism revenue, lease income, property-tax effects, public-health benefits, environmental services, and quality-of-life outcomes that inform housing and labor markets.

Against this backdrop, the AB 2525 deposit framework operates in a particular direction: it draws revenue out of the park system to fund a separate competing priority (affordable housing) that has its own resource constraints and underfunding history. The Conservancy expresses no view on which competing priority warrants more total public investment — the analytical point is only that AB 2525's deposit mechanism reallocates among underfunded public goods rather than adding new resources to either. The bill does not increase the total pool of funds available for housing, parks, or any other purpose; it shifts a portion of one underfunded need's revenue base to another. In a budget environment where parks consistently lose discretionary allocation contests, a mechanism that further redirects park-generated revenue away from park needs compounds the existing pressure on the park's revenue base.

The first-order observation is straightforward: parks are typically subjects of funding need, not sources from which funding is extracted. The recent FY2027 budget reductions at Mission Bay are evidence of this dynamic in real time. AB 2525's deposit framework adds a state-law layer to a pattern already well-established at the municipal budget level.

Legal questions raised by the deposit framework

The deposit framework in §54222.3.2(b)–(c) raises several legal questions that are likely to be considered by counsel for affected parties as the bill advances. The Conservancy is not a law firm and offers no legal opinion; the questions below are identified as analytical observations a reader may wish to consider, and stakeholders should consult their own counsel for specific legal analysis.

1. Public Trust Doctrine

   Mission Bay was conveyed to the City of San Diego by the State of California in 1945 in trust for navigation, fisheries, recreation, and visitor-serving uses. California courts have repeatedly held — from Marks v. Whitney (1971) through National Audubon Society v. Superior Court (1983, the Mono Lake case) — that public-trust assets and the revenues they generate must be administered consistent with the trust's purposes. §54222.3.2(c)(1) restricts deposited funds to housing affordable to extremely low, very low, or low-income households — a use that is not within the four trust purposes enumerated in the 1945 conveyance. Whether the deposit framework is consistent with the Public Trust Doctrine, particularly when applied to revenues derived from public-trust commercial leaseholds, is a question that has not yet been addressed by California courts.

2. San Diego Charter inconsistency

   Charter Section 55.2 establishes a specific allocation formula for Mission Bay lease and concession revenue. Under the structure adopted by Proposition C (2008) and refined by Proposition J (2016), the first $20 million in annual Mission Bay lease and concession revenue flows to the City's General Fund baseline. Of any revenue above that threshold, the greater of 35% or $3.5 million is dedicated to RPIF (the Regional Parks Improvement Fund, supporting other regional park capital improvements), and the remainder — up to 65% — is dedicated to MBIF (the Mission Bay Park Improvement Fund, supporting Mission Bay capital improvements). The Charter does not contemplate a category for off-park housing-related deposits. If §54222.3.2(b)'s deposit is funded from MBIF or RPIF dollars, that would directly contravene the Charter's express dedication. If funded from the General Fund baseline, the question is whether the General Fund's discretionary nature accommodates a use the Charter framework was designed to constrain. Either pathway raises Charter-consistency questions that would likely be examined in the event of a legal challenge.

3. Master Plan consistency

   The 1994 Mission Bay Park Master Plan, adopted by the City Council and updated in 2002, governs land uses and the deployment of park resources within Mission Bay. Affordable housing is not among the authorized uses identified in the Master Plan; nor is the funding of off-park housing development from Mission Bay-derived revenues contemplated within it. The Master Plan represents a binding planning document under California land-use law, and any expenditure of Mission Bay-derived revenues for purposes not contemplated by the Plan may be challengeable as inconsistent with the Plan's framework.

4. State preemption and the original conveyance

   AB 2525 is state legislation, and California's general preemption framework permits state law to override local Charter provisions on matters of statewide concern. The question this bill raises, however, is more specific: Can the State, in 2026, redirect revenues derived from a public-trust asset that the State itself conveyed in 1945 to the City "in trust" for specific public-trust purposes — for a state-level purpose (housing) not within the original trust? The interaction between the State's later legislative action and its own original conveyance presents preemption questions that have not been litigated in this specific factual posture. A reviewing court would likely consider whether the State's 1945 conveyance imposes constraints on the State's own subsequent ability to redirect trust-generated revenue.

5. Standing

   If a legal challenge to the deposit framework were brought, potential plaintiffs with standing could include the Mission Bay Lessees Association, Mission Bay Park Committee, individual leaseholders directly affected by the deposit obligation, San Diego City taxpayers under Code of Civil Procedure §526a (which permits taxpayer challenges to illegal expenditures of public funds), and parties with direct beneficial interest in Mission Bay Park's revenue base. The Conservancy notes the existence of these standing pathways without making any assertion about the merits of any particular challenge.

None of the questions identified above represents a legal opinion or a prediction of how courts would rule. Each is offered as a substantive question that affected parties and their counsel may wish to consider as AB 2525 advances. The interaction of the Public Trust Doctrine, San Diego's Charter framework, the Master Plan's land-use authority, and the State's own 1945 conveyance creates a layered legal environment that distinguishes Mission Bay from typical surplus-land contexts and may merit independent legal analysis. These questions are identified for consideration only; the Conservancy offers no legal opinion on their merits.

Statewide precedent considerations

To the Conservancy's knowledge, no other major public park in California currently operates under a Surplus Land Act exemption framework comparable to the one AB 2525 would establish for Mission Bay Park. The bill's design — a park-specific named exemption added to §54221(f)(1) and conditioned on a deposit obligation under §54222.3.2(b) — would, if enacted, become the first instance of this particular legislative architecture applied to a major California municipal park.

Precedent for other San Diego regional parks

San Diego operates several major public parks with active commercial leaseholds that face their own modernization, revenue, and capital-improvement challenges. Balboa Park, the City's other "crown jewel," has long-standing concerns about deferred maintenance and is actively exploring ways to expand revenue from concessions, paid parking, and lease modernization to fund improvements. Several smaller regional parks within San Diego's Mission Trails, Otay Valley, and Penasquitos systems likewise rely on a mix of leases and visitor revenue.

If AB 2525's structure becomes the template for resolving Surplus Land Act friction at park-classified sites, parks like Balboa — which would benefit substantially from long-term lease modernization to support its own deferred capital needs — would similarly face deposit obligations directing revenue away from the park's own improvement fund. The structural concern is identical: a park's dedicated revenue base would be subject to the same redirection mechanism, regardless of the park's specific facilities, history, or capital needs.

Statewide precedent: dozens of leases under the same 15-year ceiling

The structural constraint AB 2525 addresses — the 15-year ceiling under the 2023 SLA amendments for any long-term lease on land that could be classified as surplus — applies to dozens of other long-term commercial leases on California public-park and public-trust land, none of which falls within Mission Bay Park. Examples include:

• Balboa Park (San Diego) — concession, restaurant, museum-affiliated, and parking leases supporting the park's many institutions, several requiring renewal in the coming years to support modernization of aging facilities.
• Griffith Park (Los Angeles) — the Greek Theatre, Griffith Observatory concessions, the Travel Town operator, and golf course concessions.
• The Lodge at Torrey Pines (San Diego) — a high-value commercial lease on City of San Diego-owned land adjacent to Torrey Pines State Reserve.
• Golden Gate Park (San Francisco) — concessions and venue operators throughout the park.
• Numerous regional and state-park leases for hotels, marinas, golf clubhouses, restaurants, and activity concessions throughout California's public-trust and dedicated-park lands.

Each of these leases must, under current law, be structured to avoid the 15-year disposition threshold — or, alternatively, must comply with the full SLA framework when renewed at longer terms, including the requirement to prioritize affordable-housing developers under §54222. AB 2525 carves out only Mission Bay; the structural constraint remains in place for all other locations.

None of these other leases currently faces a deposit obligation of the form AB 2525 would establish. Whether the AB 2525 framework — park-specific named exemption plus housing-deposit obligation — will be replicated in subsequent legislation addressing other California park leases is a forward-looking question, not a present statutory fact. The fact that many leases face the same underlying SLA constraint, however, suggests that legislative responses similar in form to AB 2525 may follow for other locations as those leases approach renewal — with the deposit obligations potentially scaling in proportion to those parks' lease revenues.

The asymmetric-precedent caution

A precedent that establishes "park-specific SLA exemption + housing-deposit obligation" as a workable legislative pattern carries an asymmetric risk profile for park revenue bases. Once the pattern is established at one major park, it may inform legislative responses to similar SLA frictions at other parks, with the deposit obligation potentially scaling in proportion to those parks' lease revenues. The Conservancy notes this consideration without making any prediction about future legislation; the observation is offered for analytical completeness as AB 2525 advances.

Cumulative implications for Mission Bay Park

The brief's analysis surfaces five operational and financial implications for Mission Bay Park:

1. Diversion of dedicated park revenue

   Mission Bay Park lease revenues are dedicated, by the 1945 State tidelands conveyance for navigation, fisheries, recreation, and visitor-serving uses; by the 1962 perpetual park dedication under Ordinance O-8628; by Charter Section 55; and by the 1994 Mission Bay Park Master Plan. The deposit obligation under §54222.3.2(b) results in a redirection of value from that revenue base, with funds directed outside the park's dedicated revenue base under §54222.3.2(c)(1).

2. Reduced lease-modernization investment capacity

   The deposit obligation will be funded from one of two sources: the City's General Fund (currently producing the FY2027 reductions to Mission Bay operations documented in the Conservancy's Three-Year Budget Trajectory report), or through negotiated reductions in lease modernization investments by park tenants. In either case, the dollars available for upgraded facilities, restored habitat, public-access improvements, and Master Plan implementation decrease.

3. Differential treatment of De Anza Cove

   The bill's eligibility test in §54222.3.2(a)(1)(A) statutorily excludes De Anza Cove's contemplated new uses. Two parts of the same park are subject to different SLA frameworks, and the part with the most new development activity remains fully exposed to the SLA's housing-priority provisions.

4. Sensitivity to Midway Rising delivery

   The applicable deposit rate (10% versus 30%) is highly sensitive to a single external project — the Sports Arena redevelopment — whose delivery as of late 2025 is materially uncertain. A reduction or delay in Midway Rising shifts every Mission Bay lease modernization to the higher rate.

5. Precedent regarding dedicated park revenues

   State acceptance that Mission Bay's dedicated lease revenues may be drawn against to fund purposes outside the park, in exchange for procedural protection from the SLA, establishes a precedent that may inform future negotiations involving the park's revenue base, lease modernizations, or Master Plan-adjacent legislation.

6. Unresolved legal questions

   The deposit framework's interaction with the Public Trust Doctrine, San Diego Charter Section 55.2, the 1994 Master Plan's authorized uses, and the State's 1945 trust conveyance presents legal questions that have not been addressed by California courts in this specific factual posture. These questions are summarized in the section above and may merit independent legal analysis by affected parties.

Methodology

This brief is based on the text of AB 2525 as published by the California Legislature; the existing Surplus Land Act (Government Code §§54220–54234); the Mission Bay Park Master Plan (1994; updated 2002); the City of San Diego Charter Section 55; the 1945 State tidelands conveyance to the City of San Diego; the 1962 perpetual park dedication under Ordinance O-8628; the City of San Diego's surplus land disposition records for the Sports Arena / Midway redevelopment; and published municipal and California Coastal Commission planning documents related to De Anza Natural. Specific section references throughout the brief are to AB 2525's proposed text and to the existing Surplus Land Act.

The brief presents factual observations and statutory analysis. It does not constitute a legal opinion, does not advocate for or against the legislation, and is not a substitute for advice from counsel. Stakeholders considering the implications of AB 2525 are encouraged to consult their own legal advisors.