BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: ab 2508
          SENATOR ALAN LOWENTHAL, CHAIRMAN               AUTHOR:  caballero
                                                         VERSION: 5/3/10
          Analysis by: Mark Stivers                      FISCAL:  no
          Hearing date: June 29, 2010






          SUBJECT:

          Infill Infrastructure Grant Program and minimum densities

          DESCRIPTION:

          This bill allows a city or county to petition the Department of  
          Housing and Community Development for an exception to the  
          density requirements of the Infill Infrastructure Grant Program.  
           

          ANALYSIS:

          In November 2006, California voters approved Proposition 1C, the  
          $2.85 billion Housing and Emergency Shelter Trust Fund Act of  
          2006.  Among other things, Proposition 1C included $850 million  
          for grants for capital projects related to housing and  
          housing-related infill development and for brownfield cleanup  
          that promotes housing and housing-related infill development.   
          Ultimately, the Legislature appropriated $790 million to the  
          Infill Infrastructure Grant (IIG) Program, to be administered by  
          the Department of Housing and Community Development (HCD).  SB  
          86 (Budget Committee), Chapter 179, Statutes of 2007,  
          established the statutory framework for the IIG Program, which  
          offers gap financing grants to cover the costs of infrastructure  
          improvements necessary for the development of infill housing.

          Under current law, to be eligible for an IIG grant, an infill  
          project or infill area must meet the following criteria:  

           Be located in a city or county that has an HCD-approved  
            housing element.
           Include not less than 15 percent affordable units.
           Have an average residential density equal to or greater than  
            the "Mullin densities" described below or greater than 10  




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            units per acre in rural areas.
           Be located in an area designated for mixed-use or residential  
            development in a local or regional land use plan.  

          Under housing element law, each city and county must adopt a  
          housing element to its general plan that identifies and analyzes  
          existing and projected housing needs, identifies adequate sites  
          with appropriate zoning to meet its share of the regional  
          housing need for each income group, and ensures that regulatory  
          systems provide opportunities for, and do not unduly constrain,  
          housing development.  HCD reviews both draft and adopted housing  
          elements to determine whether or not they are in substantial  
          compliance with the law.  

          For the purposes of housing element law, current statute uses  
          density as a proxy for affordability.  In order to show that it  
          can accommodate lower-income housing, a city or county must show  
          that is has sites zoned to allow higher-density multifamily  
          housing in one of two ways:

           Provide an analysis demonstrating how the adopted densities  
            accommodate lower-income housing, based on market demand,  
            financial feasibility, or recent development experience.
           Meet or exceed the following default densities established in  
            statute and known as the "Mullin densities":

             ?    30 units per acre for metropolitan jurisdictions,  
               generally defined as any city or county (except for  
               jurisdictions of less than 25,000 population) in a  
               Metropolitan Statistical Area (MSA) with a population of 2  
               million persons or greater and any city or county over  
               100,000 population in any size MSA.
             ?    20 units per acre for suburban jurisdictions, generally  
               defined as cities and counties in an MSA of less than 2  
               million persons (except for jurisdictions over 100,000  
               population) and jurisdictions under 25,000 population in  
               larger MSAs. 
             ?    15 units per acre for incorporated cities within  
               non-metropolitan counties and for non-metropolitan counties  
               that have micropolitan areas (i.e., Del Norte, Humboldt,  
               Lake, Mendocino, Nevada, Tehama, and Tuolumne Counties).
             ?    10 units per acre for unincorporated areas in all  
               non-metropolitan counties.

           This bill allows a city or county, with respect to the IIG  
          Program only, to petition HCD for an exception to the Mullin  




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          densities if the agency believes it is unable to meet this  
          requirement.  The petition shall include the reasons for the  
          exception and provide information supporting the need for the  
          exception.

          COMMENTS:

           1.Purpose of the bill  .  Current law defines the City of Salinas  
            as a "metropolitan" jurisdiction for purposes of the IIG,  
            requiring projects to have an average density of 30 units per  
            acre to be eligible for funding.  According to the author,  
            this designation is not accurate because Salinas in neither a  
            central city nor an urban core.  Moreover, the city "lacks the  
            overall infrastructure to develop at a density of 30 units per  
            acre."  As a result, the author believes that the city cannot  
            qualify for IIG funds and introduced this bill to establish a  
            process for cities or counties to petition HCD to lower the  
            density requirements applicable to IIG projects in their  
            jurisdictions.  

           2.Salinas' status  .  While the MSA in which Salinas is located  
            generally qualifies as a suburban region, the city's  
            population of 153,948 (as of January 1, 2010) qualifies it as  
            a metropolitan jurisdiction for purposes of the IIG Program,  
            as does every other city in the state with a population of  
            greater than 100,000.  

           3.No justification  .  According to the author, the city lacks the  
            overall infrastructure to develop at a density of 30 units per  
            acre.  In its letter of support, the City of Salinas writes  
            that while it is one of the most densely populated communities  
            in the state, "with a few possible exceptions, the Salinas  
            economy cannot support development at 30+ units to the acre.   
            The infrastructure is insufficient; rent levels will not  
            underwrite the development cost; a young populace needs more,  
            not less, open space."  Neither the author nor the city,  
            however, has provided any evidence to back up these claims.  

            Thirty units per acre is not a particularly high density and  
            represents a typical four-story suburban apartment or  
            condominium complex rather than a mid-rise or high-rise  
            building.  The IIG Program only requires that the individual  
            project being proposed have an average density of 30 units per  
            acre.  As a result, even for a "metropolitan" city to  
            participate, it must only locate one single infill site for a  
            suburban-style development.  In fact, the point of the IIG  




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            density requirement is to incentivize cities and counties to  
            push the envelope on densities in order promote more compact,  
            sustainable forms of development.  If a city or county wants  
            state funding, it may have to reach beyond its comfort zone.

            In most cases, infrastructure capacity is a function of the  
            number of units more than the density of development.  If a  
            city has sufficient water or sewer capacity to serve 1000 new  
            homes, the density of the homes will not impact this capacity  
            much.  In fact, higher density development often requires less  
            infrastructure, such as water for landscaping and road  
            capacity, and allows for more open space by reducing the  
            overall acreage of development.  Given the high level of  
            overall development in Salinas over the last decade, it is not  
            clear that the city's infrastructure truly is insufficient to  
            accommodate a single IIG project.  Concerns about density  
            often are political.  Though refuted by numerous academic  
            studies, neighboring residents often fear the impacts of  
            higher-density development, making it politically unpopular  
            for local elected officials.  

            Most importantly, however, the IIG program was specifically  
            created and designed to address infrastructure deficiencies  
            and project financing gaps.  The whole idea was that  
            higher-density infill development is financially infeasible if  
            there are significant infrastructure needs to overcome.  The  
            program provides significant public funding to improve  
            infrastructure so that developers need not cover these cost  
            alone, thereby making more projects feasible.

            Given the purpose of the IIG program to promote higher-density  
            development, the lack of evidence that cities cannot  
            accommodate a single project of 30 units per acre, and the  
            fact that the IIG Program is specifically designed to fill  
            infrastructure and financing gaps, the committee may wish to  
            consider whether it is consistent with the intent of the IIG  
            Program to allow cities and counties to petition for lower  
            density requirements.  
          
           4.No money  .  Proposition 1C provides $790 million for the IIG  
            Program.  HCD has awarded all of the available funds.  It is  
            very unlikely that this program will receive additional  
            funding in the foreseeable future, if ever.  
          
           5.No explicit effect  .  As currently written, the bill allows a  
            city or county to petition HCD for an exception to the IIG  




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            density requirement, but it does not require HCD to evaluate  
            such a petition and does not expressly allow HCD to grant such  
            an exception.  Arguably, the bill allows a jurisdiction to  
            submit a petition and nothing more.  Because HCD has no new  
            duties under the bill, Legislative Counsel has keyed the bill  
            non-fiscal.  

           6.No standards  .  This bill allows a city or county to petition  
            HCD for an exception to the density requirements of the IIG  
            Program based on the jurisdiction's belief that it is "unable"  
            to meet the requirements.  The bill neither defines "unable"  
            nor establishes any criteria by which HCD shall evaluate such  
            a petition.  As a result, HCD could grant exceptions for any  
            reason or for no reason at all, possibly resulting in the  
            effective repeal of the density requirement of the IIG  
            Program.  To the extent that the committee wishes to allow  
            such petitions, it may wish to consider establishing some  
            parameters for the granting of exceptions.  
          
          Assembly Votes:
               Floor:                            72-0
               Local Gov:                          9-0
               HCD:        9-0

          POSITIONS:  (Communicated to the Committee before noon on  
          Wednesday, 
                     June 23, 2010)

               SUPPORT:  California State Association of Counties
                         City of Salinas
                         City of Watsonville
                         League of California Cities

               OPPOSED:  None received.