BILL ANALYSIS SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1641 SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: hall VERSION: 5/11/10 Analysis by: Carrie Cornwell FISCAL: no Hearing date: June 22, 2010 SUBJECT: Redevelopment and public housing DESCRIPTION: This bill makes a finding that public housing units over 50 years old may be blighted for purposes of undertaking a redevelopment project. ANALYSIS: The Community Redevelopment Law allows local governments to establish redevelopment project areas and capture all of the increase in property taxes that is generated within a project area (referred to as "tax increment") in order to address conditions of blight within the project area. 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 funds, are to be used to eradicate blight. Since 1994, existing law has defined blight for redevelopment purposes as an area that is predominately urbanized and characterized by one or more specified conditions of physical blight and one or more conditions of economic blight. When a redevelopment project results in housing units being demolished or removed from the market, existing law requires that the redevelopment agency replace those units that housed low- or moderate-income households within four years with units AB 1641 (HALL) Page 2 affordable to those displaced. The replacement units may be anywhere within the jurisdiction of the redevelopment agency (i.e., within the city limits), and they must remain affordable for 55 years for rental units and 45 years for ownership units. In addition, those actually displaced must be given priority in renting or buying the replacement housing. This bill : 1.Makes a legislative finding that blighted areas may include housing areas constructed prior to 1960 as government-owned housing projects and that these areas may be characterized by one or more conditions of either physical or economic blight. 2.Requires a redevelopment project area described by the above finding to include the replacement, on at least a one-to-one basis, of all existing public housing units. These replacement units shall be: For at least 55 years, affordable to and occupied by extremely low, very low, and lower income households at the same or lower income level as the households displaced from the public housing units. Affordable to those actually displaced. Located either in the project area or within five miles of the parcel containing the public housing that is being replaced. Households displaced shall be given priority for a permanent replacement dwelling at the initial time of relocation, unless the household members have decided voluntarily not to accept the replacement unit. 1.Permits a redevelopment project area undertaken at a public housing site to also include market-rate housing, retail, commercial, industrial, educational, recreational, and other uses appropriate to serve the residents of the area plus public improvements inside or adjacent to the project area. COMMENTS: 1.Purpose . The author introduced this bill at the request of the City of Los Angeles, which wants to declare at least two of it public housing complexes to be redevelopment project areas. AB 1641 (HALL) Page 3 Built over 50 years ago, these housing projects include on a single large site thousands of housing units, typically bungalows, that are on city-owned land. Some of these housing projects have suffered from decades of disrepair and neglect. Through the redevelopment project or projects, the city would replace all of the housing in each project with a mixed-use development that includes affordable and market rate housing, retail and commercial facilities, and public amenities. 2.What changes ? Existing law requires local officials to document that blight exists in an area before creating a new project area or expanding an old one to cover the area. This bill makes a legislative finding that older public housing may constitute blight. It does not, however, change the statutory definition of blight and therefore does not change the requirements that any project must meet to qualify for redevelopment. Representatives of the City of Los Angeles indicate that the housing projects the city wants to redevelop do not meet the current definition of blight and because this bill does not change the definition, it is unclear how this bill helps them achieve their objectives to redevelop public housing sites in that city. Most of the Community Redevelopment Law, including the definition of blight, is within the purview of the Senate Local Government Committee, whereas the portions of that law relating to affordable housing fall within this committee's jurisdiction. As noted below, this bill has a second referral to the Senate Rules Committee. Rules Committee may then refer this bill to another policy committee to examine issues outside of the jurisdiction of this committee. The section of this bill that refers to the definition of blight for redevelopment purposes would benefit from a hearing in the Senate Local Government Committee. 3.Protecting displaced residents . This bill ensures that should a city or county, including Los Angeles, turn one of its public housing sites into a redevelopment project area, the residents of the housing will have a place to live. The bill ensures that each household will have an opportunity to live nearby and in a housing unit that is generally affordable to the same income category of the household. These are similar to protections in existing law for redevelopment projects generally. This bill, however, does not keep these residents in public housing, which is even more affordable to the residents than privately-owned housing that includes a 55-year AB 1641 (HALL) Page 4 affordability covenant. Because the premise of this bill is the removal of a public housing site, the author or committee may wish to consider an amendment to ensure that each household displaced from public housing be offered the option of a replacement unit at a rent or other cost affordable specifically to that household rather than generally to that household's income category. 4.Tax increment . Because the housing projects are on city-owned land, the property tax on these properties is currently zero. Thus, under this bill, if a city or county declares a government-owned housing project to be redevelopment project area, then essentially any and all of the property tax from that property for the next several decades will accrue to that city's redevelopment agency as tax increment. In the redevelopment process, much of this property would likely be sold into private ownership, so the amount of property tax over time could be large. The state General Fund subsidizes half of redevelopment agency's tax increment by backfilling the loss of property tax revenues to local schools. The committee may, therefore, wish to consider if it is more appropriate that Los Angeles declare these areas infrastructure financing districts, which it could and which capture all tax increment except that due to the schools. 5.Technical amendment . On page 3, line 4, after "and" insert "shall". 6.Double-referral . The Rules Committee referred this bill to both the Transportation and Housing Committee and to the Rules Committee. Therefore, if this bill passes this committee, it will be referred to the Committee on Rules. Assembly Votes: Floor: 46 - 26 H&CD: 6 - 3 POSITIONS: (Communicated to the Committee before noon on Wednesday, June 16, 2010) SUPPORT: City of Los Angeles (sponsor) OPPOSED: None received.