BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 2406| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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. CONTINUED AB 2406 Page 2 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 CONTINUED AB 2406 Page 3 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 CONTINUED AB 2406 Page 4 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 : CONTINUED AB 2406 Page 5 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 **** END **** CONTINUED