BILL ANALYSIS
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THIRD READING
Bill No: AB 1422
Author: Bass (D), et al
Amended: 5/21/09 in Assembly
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM. : 7-4, 6/23/09
AYES: Lowenthal, DeSaulnier, Kehoe, Oropeza, Pavley,
Simitian, Wolk
NOES: Huff, Ashburn, Harman, Hollingsworth
ASSEMBLY FLOOR : 54-25, 5/28/09 - See last page for vote
SUBJECT : Redevelopment: affordable housing
SOURCE : California Redevelopment Association
DIGEST : This bill allows a redevelopment agency until
2013 to use its economic development funds to address the
mortgage crisis.
ANALYSIS : The Community Redevelopment Law allows local
governments to establish redevelopment areas and capture
all of the increase in property taxes that is generated
within the area (referred to as "tax increment"). The law
requires redevelopment agencies to deposit 20 percent of
tax increment funds into a Low & Moderate Income Housing
Fund (L&M Fund) to be used to increase, improve, and
preserve the community's supply of low and moderate income
housing at affordable housing cost. The other 80 percent
of tax increment funds, known as economic development
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funds, are to be used to eradicate blight.
Existing law sets income limits for persons and families
(adjusted for family size) of low and moderate-income based
on countywide median incomes:
Moderate income < 120%
Low income < 80%
Very low income < 50%
Extremely low income < 30%
All of these income groups are eligible for housing
assistance financed through the L&M Fund, but a
redevelopment agency must spend its L&M funds for housing
for low- and very low-income households in at least the
same proportion as these households' needs bear to the
total housing needs for moderate-, low- and very-low-income
households, as determined through the community's housing
element of its general plan.
L&M funds can be spent on housing anywhere in the
jurisdiction upon the agency making a general finding of
benefit to the project areas within that jurisdiction.
Economic development funds, however, must be spent within a
project area, unless a redevelopment agency makes a
specific finding of benefit from spending specific funds
outside of a project area.
This bill:
1. Makes findings about the mortgage crisis and declares
that redevelopment agencies should be given greater
flexibility on a temporary basis to respond to the
crisis through acquiring or refinancing mortgages or
acquiring homes.
2. Defines "eligible homeowner" as the borrower of a
subprime or nontraditional mortgage who occupies the
home as his or her principal place of residence and
who has a mortgage payment that is 30 days or more
past due with either a scheduled interest rate
increase that will create a financial hardship likely
to produce a default or has had a default notice
recorded against the home.
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3. Permits an agency to expend money from the
non-housing portion (i.e., the 80 percent for economic
development) of its tax increment revenues anywhere
within its jurisdiction to purchase, assume, or
refinance or to assist lenders or developers to
purchase, assume, or refinance mortgages on homes
owned by eligible homeowners with household incomes of
up to 150 percent of area median.
4. Limits the amount an agency may expend per home for
mortgage assistance to the current market value of the
home less any Federal Housing Administration required
down payment amount.
5. Permits an agency to expend funds from the
non-housing portion of its tax increment revenues
anywhere in its jurisdiction to purchase or assist
lenders or developers in purchasing homes that have
been foreclosed and are vacant for sale to any
purchaser regardless of income. These homes may be
managed, maintained, and rented prior to resale, but
the amount an agency spends per home is not limited to
market value less down payment.
6. Allows an agency to spend funds from the non-housing
portion of its tax increment revenues to provide
credit counseling services to existing or prospective
homebuyers with household incomes of up to 150 percent
of area median.
7. Provides that, where there is a conflict, its
provisions supersede existing redevelopment law.
8. Sunsets on January 1, 2013.
Prior Legislation
Last year the Legislature passed AB 2594 (Mullin), which
was identical to this bill. AB 2594 passed the Senate by a
vote of 22-13. The governor vetoed that bill, and his veto
message read in part:
If this bill was signed into law, it would be in
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conflict with the recently enacted budget trailer
legislation. By allowing redevelopment agencies to
use tax increment revenue to purchase, assume, or
refinance nontraditional and subprime mortgages, the
bill would reduce the tax increment available for
transfer to the Educational Revenue Augmentation
Funds, as the budget trailer legislation requires.
For this reason, I am returning this bill without my
signature.
On April 30, 2009, the Superior Court ruled in the case of
California Redevelopment Association v. California
Department of Finance that the transfer of $350 million
from redevelopment agencies to the state in the 2008-09
budget was unconstitutional. The state is appealing this
decision, but at this point, the funds are available for
the activities authorized by this bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 6/26/09)
California Redevelopment Association (source)
California Association of Realtors
California Bankers Association
California State Association of Counties
City of Los Angeles
CRLA Foundation
League of California Cities
Western Center on Law and Poverty
ARGUMENTS IN SUPPORT : According to the author's office,
the current foreclosure crisis can be largely attributed to
the defaults in sub-prime and non-traditional mortgages
that have reset to unaffordable levels. In March 2009, the
UC Santa Barbara Economic Forecast Project indicated that
California has had 236,572 homes foreclosed upon during the
current crisis. This totals about two percent of the
housing stock in the state. Many more sub-prime and
non-traditional mortgages are due to reset later this year
and in coming years.
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The author points out that home foreclosure negatively
impacts a homeowner as well as neighboring homeowners,
local governments, and California's greater economy. These
damaging effects, according to the author, include
increases in abandonment and vandalism, an estimated $100
billion loss in property value, and an estimated $4 billion
loss of property and sales tax revenues for local
governments.
The author introduced this bill to allow redevelopment
agencies to use tax increment funds, not held in an
agency's L&M Fund, to acquire, assume, or refinance loans
to eligible homeowners with subprime or nontraditional
mortgages in default or at risk of default, so that the
state can more quickly recover from the home foreclosure
crisis.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Arambula, Beall, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fong, Fuentes, Furutani,
Galgiani, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
Jones, Krekorian, Lieu, Bonnie Lowenthal, Ma, Mendoza,
Monning, Nava, John A. Perez, V. Manuel Perez,
Portantino, Price, Ruskin, Salas, Saldana, Skinner,
Solorio, Swanson, Torlakson, Torres, Torrico, Yamada,
Bass
NOES: Anderson, Bill Berryhill, Tom Berryhill, Blakeslee,
Conway, DeVore, Duvall, Fuller, Gaines, Garrick, Gilmore,
Hagman, Harkey, Jeffries, Knight, Logue, Miller,
Nestande, Niello, Nielsen, Silva, Smyth, Audra
Strickland, Tran, Villines
NO VOTE RECORDED: Fletcher
JA:nl 6/26/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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