BILL ANALYSIS AB 2406 Page 1 ASSEMBLY THIRD READING AB 2406 (Blakeslee) As Amended April 28, 2010 Majority vote HOUSING 9-0 ----------------------------------------------------------------- |Ayes:|Torres, Arambula, Bradford, | | | | |Eng, Gilmore, Knight, | | | | |Saldana, Torlakson, Tran | | | | | | | | ----------------------------------------------------------------- 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 AB 2406 Page 2 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 AB 2406 Page 3 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 AB 2406 Page 4 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 AB 2406 Page 5 FN: 0004200