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  




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          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.  




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            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  




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            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.