BILL ANALYSIS                                                                                                                                                                                                    



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          ASSEMBLY THIRD READING
          AB 2406 (Blakeslee)
          As Amended  April 28, 2010
          Majority vote 

           HOUSING             9-0                                         
           
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          |Ayes:|Torres, Arambula, Bradford,   | |                          |
          |     |Eng, Gilmore, Knight,         | |                          |
          |     |Saldana, Torlakson, Tran      | |                          |
          |     |                              | |                          |
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           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  








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               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  
            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  








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            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,  
            2020. 

           FISCAL EFFECT  :   None

           COMMENTS  :  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 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  








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          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 individuals and families, 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 (Dutra).  The only significant  
          change from the sunset statute is that pooled funds could only  
          be spent to construct or substantially rehabilitate  
          extremely-low income housing units versus very-low or low-income  
          units. 
           
          AB 2041 (Dutra) required redevelopment agencies to report to HCD  
          if they pooled funds.  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.    
           

          Analysis Prepared by  :    Lisa Engel / H. & C.D. / (916) 319-2085  









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