BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2406
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: blakeslee
VERSION: 4/28/10
Analysis by: Carrie Cornwell FISCAL: no
Hearing date: June 29, 2010
SUBJECT:
Redevelopment: pooled housing funds
DESCRIPTION:
This bill allows redevelopment agencies in adjoining cities to
pool their low and moderate income housing funds to construct,
rehabilitate, and preserve housing for extremely low-income
persons.
ANALYSIS:
The Community Redevelopment Law allows local governments to
establish redevelopment areas and capture all of the increase in
property taxes that is generated within the area (referred to as
"tax increment"). 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.
Existing law sets income limits for persons and families
(adjusted for family size) of low and moderate-income based on
countywide median incomes:
Moderate income < 120%
Low income < 80%
Very low income < 50%
Extremely low income< 30%
L&M funds can be spent on housing anywhere in the jurisdiction
(i.e., within the city limits) upon the agency making a general
finding of benefit to the project areas within that
jurisdiction, but not outside of the jurisdiction.
AB 2406 (BLAKESLEE) Page 2
AB 2041 (Dutra), Chapter 552, Statutes of 2000, gave
redevelopment agencies in contiguous cities authority, until
January 1, 2010, to pool their L&M funds to build affordable
housing for low- and very low-income households in one of the
city's redevelopment project areas. The redevelopment agencies
could exercise this authority by creating a Joint Powers
Authority (JPA), provided that the agencies had met specified
standards including that each city must have met 50 percent 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 Department of Housing and
Community Development (HCD)-approved housing element.
AB 2041 required redevelopment agencies that pooled funds to
report to HCD on how many housing units were produced.
According to HCD, no agencies submitted a report indicating that
they had used this authority.
This bill :
1.Finds that the transfer of L&M funds to a JPA and the use of
pooled L&M funds within the housing market area of the
participating redevelopment agencies is of benefit to the
redevelopment project area that produced the tax increment.
2.Permits redevelopment agencies located within adjoining cities
within a single metropolitan statistical area to create and
participate in a JPA to pool their L&M funds for the direct
costs of constructing, substantially rehabilitating, and
preserving the affordability of housing units that are
affordable to extremely low income households. To participate:
An agency must make a finding based on substantial
evidence after a public hearing that the aggregation will
not cause or exacerbate racial, ethnic or economic
segregation.
An agency must have met its requirement to replace
housing units its redevelopment activities have destroyed,
have deposited 20 percent of its tax increment funds into
its L&M Fund, and held a public hearing on the agreement to
pool funds at least 45 days before transferring L&M funds
to the JPA.
A JPA must spend or encumber the L&M funds it receives
within two years of receipt or return them to the agency
AB 2406 (BLAKESLEE) Page 3
from which they came, which would then face prescribed
penalties.
A JPA must also make a finding that the pooled funds
will not exacerbate racial or economic segregation.
A JPA must submit an annual report to HCD documenting
the amount of L&M funds its received and expended for
housing assistance.
1.Requires that participating communities have HCD-certified
housing elements and have met in the previous housing element
cycle at least 50 percent of the region's needs in the low-
and very low-income categories.
2.Prohibits spending pooled funds to pay for planning and
administrative costs, offsite improvements, or development
fees. In addition, pooled funds may only be spent within a
project area.
3.Sunsets the authority to create a new project under its
pooling authority on January 1, 2020.
COMMENTS:
1.Purpose . 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. This bill allows these cities flexibility to pursue a
qualified redevelopment project that will benefit both
communities with many appropriate safeguards, including that
each city is in compliance with the housing element
requirements in state law. The author believes that enabling
cities to pool funds for a regional project allows the
community to achieve a greater economy of scale and increases
the cities' ability to leverage capital from other public and
private sources both within and outside the individual cities.
2.But will it be used ? The Legislature and governor have several
times authorized the pooling of L&M funds among jurisdictions.
The broadest authorities for pooling included:
For seven years from 1993 to 2000, redevelopment agencies had
AB 2406 (BLAKESLEE) Page 4
the authority to transfer L&M funds from one agency to another
under certain conditions. No redevelopment agencies took
advantage of this law. The one attempt to use the law was
when the City of Indian Wells offered to transfer some of its
housing funds to the City of Coachella. This transfer was
eventually rejected by the Coachella City Council.
From 2001 through 2010, under AB 2041 (Dutra), agencies had
the authority to pool their funds between adjoining cities
under essentially the same conditions as this bill provides.
Again, no cities took advantage of this law either. Except for
the one pair of cities for which the author introduced this
bill, it is unlikely that any cities would take advantage of
this law.
3.Spending tax increment outside its community of origin . While
current law allows a redevelopment agency to spend L&M funds
outside of a project area but within the territorial limits of
the agency, it does not allow an agency to spend L&M funds
outside the agency's territorial jurisdiction, whether
directly or through a pooling or transfer agreement. Because
tax increment is derived from a given project area in a given
community, the use of those funds should benefit the same
community.
4.Over concentration . Because this bill allows for agencies
across jurisdictions to pool their L&M funds without a
requirement that each agency fulfill some portion its
responsibility to provide housing affordable to extremely
low-income households, this bill could lead to an over
concentration in a single community of such housing.
Assembly Votes:
Floor: 74 - 0
H&CD: 9 - 0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 23, 2010)
SUPPORT: None received.
OPPOSED: None received.