BILL ANALYSIS
AB 2406
Page 1
Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 2406 (Blakeslee) - As Amended: April 28, 2010
SUBJECT : Redevelopment: pooled housing funds
SUMMARY : Allows redevelopment agencies in adjoining cities to
form a joint powers authority (JPA) for the purpose of pooling
their Low- and Moderate-Income Housing (L&M) Funds to construct,
rehabilitate and preserve extremely low-income affordable
housing units. Specifically, this bill :
1)Makes legislative findings including the benefits of pooling
funds for the purpose of providing affordable housing.
2)Allows redevelopment agencies in adjoining cities within a
single metropolitan statistical area (MSA) to create a JPA to
pool L&M funds for constructing, rehabilitating, or preserving
extremely low income affordable housing units.
3)Requires redevelopment agencies to make a finding based on
substantial evidence, and after a public meeting, the pooling
of funds will not exacerbate racial, ethic, or economic
segregation.
4)Allows redevelopment agencies to transfer a portion of their
housing funds to a JPA to do the following:
a) Determine the kinds of housing projects or activities to
be assisted;
b) Loan, grant or advance housing funds to a receiving
entity for an eligible housing development with in the
participating agencies jurisdiction; and
c) Issue bonds and use pooled funds to leverage other funds
to assistance eligible developments including loans from
private intuitions and assistance from governmental
agencies.
5)Requires each participating agency must have an adopted
up-to-date housing element that has been determined to be in
compliance by the Department of Housing & Community
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Development (HCD).
6)Requires each participating agency to have met, in the current
or previous housing element cycle, 50% or more of its share of
the region's affordable housing needs in the very-low and
low-income categories.
7)Requires each participating agency to hold a public meeting 45
days prior to transferring funds to the JPA.
8)Prohibits the transfer of funds from a project area that has
indebtedness to its L&M fund.
9)Prohibits the transfer of funds from an agency that has not
met its need for replacement housing, unless the agency has
encumbered or contractually agreed to commit sufficient funds
to meet those requirements.
10)Requires pooled funds to be used within the participating
agencies jurisdictions.
11)Requires a JPA to ensure that the funds received comply with
the agreement.
12)Requires funds transferred to a JPA must be expended or
encumbered within two years of the transfer.
13)Provides funds that are transferred and that are not spent or
encumbered in two years will be returned to the original
agency and deemed excess surplus funds.
14)Prohibits the transfer of excess surplus funds to a JPA.
15)Requires a JPA to submit a report to HCD that includes the
amount of funds received and expended for housing assistance
activities.
16)Prohibits the use of housing funds for planning and
administrative costs, offsite improvements, fees or exactions
levied solely for the development projects constructed,
substantially rehabilitated or preserved with pooled funds;
17)Requires pooled funds to be spent within the project area of
a participating agency
18)Sunsets the authority created by this bill on January 1,
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2020.
EXISTING LAW :
1)Requires redevelopment agencies to set aside 20% of their
property tax increment revenues for "increasing, improving,
and preserving" affordable housing (Health & Safety Code
Section 33334.2).
2)Requires the 20% "set aside" to be deposited into a L&M Fund
(Health & Safety Code Section 33334.3).
3)Allows an agency to spend their L&M Funds, either inside or
outside the redevelopment project area that generated the
money, but use outside the project area is permitted only if
the agency and legislative body find that it will benefit the
project area (Health and Safety Code Section 33334.2).
4)Requires an agency, which accumulates an "excess surplus" in
L&M Funds, must spend the surplus within three years. Failure
to do so results in the agency losing the funds and are
prohibited from spending any other redevelopment funds.
Defines "excess surplus" as the greater of $1 million or the
total amount deposited in the fund during the previous four
years (Health & Safety Code Section 33334.12).
5)Provides that local governments have specific authority to
enter into agreements with one another, as well as the federal
government, the state or an adjoining state to exercise "any
power common to the contracting parties" (Government Code
Section 6502; see generally Government Code Sections 6500 and
6516).
FISCAL EFFECT : None.
COMMENTS :
Background : Legislative findings declare that the fundamental
purpose of redevelopment is to expand the supply of low- and
moderate-income housing, employment opportunities and provide an
environment for "social, economic and psychological growth and
well-being for all citizens."
Redevelopment agencies must annually set aside 20% of their
property tax increment revenues into an L&M Fund for
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"increasing, improving and preserving" affordable housing.
Agencies are required to spend these funds within three years
and the money must benefit low- and moderate- income families
and individuals. Redevelopment agencies generally spend their
affordable housing funds inside the project areas that generated
the revenue. Redevelopment agencies have relatively broad powers
in expending monies from L&M Fund including acquiring land,
donating the land, acquiring and rehabilitating buildings,
providing subsidies in certain circumstances and maintaining the
community's supply of mobilehomes. They can spend the money
outside the project areas but still inside the city limits, if
they make a finding that the housing benefits the project area.
Redevelopment agencies' ability to use L&M Funds for purposes
other than "increasing, improving and preserving" is limited.
Health & Safety Code Section 33334.3(d) states, it is the intent
of the Legislature, that to the maximum extent possible, L&M
funds be spent to defray the costs of production, improvement
and preservation of low- and moderate-income housing, and that
the amount spent on planning and general administrative
activities not be disproportionate to the amount spent on
production, improvement and preservation. Planning and
administrative activities that can be funded out of the L&M Fund
are limited to the activities necessary to develop affordable
housing and specifically to the salaries of agency's staff,
services of contractors and costs to a nonprofit corporation,
which are not directly associated with a specific project.
Redevelopment agencies are prohibited from paying for operation
and maintenance expenses for public buildings.
AB 2041 (Dutra), Chapter 552, Statutes of 2000, gave
redevelopment agencies in contiguous cities authority to pool
their L&M funds to build affordable housing in one of the city's
redevelopment project areas. The redevelopment agencies could
exercise this authority by creating a JPA, provided that the
agencies had met specified standards including that each city
must have met 50% of its regional housing needs for very low and
low income, that the proposed use of pooled funds would not
exacerbate racial segregation, and that each city had an
up-to-date housing element. This authority sunset on January 1,
2010.
This bill would reinstate the statute allowing cities to pool
L&M funds created by AB 2041. The only significant change from
the sunset statute is that pooled funds could only be spent to
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construct or substantially rehabilitate extremely-low income
housing units versus very-low or low-income units.
AB 2041 (Dutra) (Chaptered 552 in 2000) required redevelopment
agencies to report to HCD if they pooled funds and how many
housing units were produced. According to HCD, no cities
submitted a report indicating that they had used this authority.
The purpose of this bill : According to the author, the cities
of Arroyo Grande and Grover Beach are contiguous cities in San
Luis Obispo County that share many demographic similarities.
The cities are both small, with fewer within 20,000 residents at
the time of the last census, and they do not have adequate
funding to support the affordable housing projects they would
like to develop. AB 2406 will allow these cities flexibility to
pursue a qualified redevelopment project that will mutually
benefit each community with many appropriate safeguards,
including that each city are in compliance with their housing
requirements as determined by the HCD.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file.
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085