BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 2406|
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                                 THIRD READING


          Bill No:  AB 2406
          Author:   Blakeslee (R)
          Amended:  4/28/10 in Assembly
          Vote:     21

           
           SENATE TRANS. & HOUSING COMMITTEE  :  9-0, 6/29/10
          AYES:  Lowenthal, Huff, Ashburn, DeSaulnier, Harman, Kehoe,  
            Pavley, Simitian, Wolk

           ASSEMBLY FLOOR  :  74-0, 5/13/10 - See last page for vote


           SUBJECT  :    Redevelopment:  pooled housing funds

           SOURCE  :     Author


           DIGEST  :    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. 

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          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 2041 (Dutra), Chapter 552, Statutes of 2000, gives  
          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 requires 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 are 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  

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             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:

             A.    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. 

             B.    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.

             C.    A JPA must spend or encumber the L&M funds it  
                receives within two years of receipt or return them  
                to the agency from which they came, which would  
                then face prescribed penalties.

             D.    A JPA must also make a finding that the pooled  
                funds will not exacerbate racial or economic  
                segregation.

             E.    A JPA must submit an annual report to HCD  
                documenting the amount of L&M funds its received  
                and expended for housing assistance. 

          3. 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.

          4. 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.

          5. Sunsets the authority to create a new project under its  

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             pooling authority on January 1, 2020.
           
          Comments

           The Legislature and Governor have several times authorized  
          the pooling of L&M funds among jurisdictions.  The broadest  
          authorities for pooling included:  (1) for seven years from  
          1993 to 2000, redevelopment agencies had 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, and (2)  
          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. 
          
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          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's office 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. 

           ASSEMBLY FLOOR  : 

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          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Beall,  
            Bill Berryhill, Tom Berryhill, Blakeslee, Block,  
            Blumenfield, Bradford, Brownley, Buchanan, Charles  
            Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De  
            La Torre, De Leon, DeVore, Emmerson, Eng, Evans, Feuer,  
            Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,  
            Galgiani, Garrick, Gilmore, Hall, Harkey, Hayashi,  
            Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,  
            Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,  
            Monning, Nava, Nestande, Niello, Nielsen, V. Manuel  
            Perez, Portantino, Ruskin, Salas, Saldana, Silva, Smyth,  
            Solorio, Swanson, Torlakson, Torres, Torrico, Tran,  
            Villines, Yamada, John A. Perez
          NO VOTE RECORDED:  Caballero, Hagman, Norby, Skinner, Audra  
            Strickland, Vacancy


          JJA:do  7/2/10   Senate Floor Analyses 

                       SUPPORT/OPPOSITION:  NONE RECEIVED

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