BILL ANALYSIS                                                                                                                                                                                                    

                        Senator Patricia Wiggins, Chair

          BILL NO:  SB 530                     HEARING:  5/6/09
          AUTHOR:  Dutton                      FISCAL:  No
          VERSION:  4/28/09                    CONSULTANT:   

                           Background and Existing Law  

          State law lets redevelopment agencies divert other local  
          governments' property tax increment revenues so that they  
          can fight physical and economic blight.  To alleviate the  
          financial burden and detriment that these other taxing  
          entities may incur as a result of the adoption of a  
          redevelopment plan, redevelopment officials must return a  
          portion of their tax revenues from redevelopment projects  
          adopted or amended after January 1, 1994 to other local  
          taxing entities in the form of mandatory "pass-through"  
          payments (AB 1290, Isenberg, 1993).

          After reviewing the practices employed by school districts,  
          community colleges, and redevelopment agencies related to  
          the distribution and reporting of these pass-through  
          revenues, the California State Controller's Office issued a  
          report in May 2008 which found that:
                 Many school districts and community colleges  
               understated the amount of pass-through payments they  
               receive from redevelopment agencies. 
                 Some redevelopment agencies failed to make their  
               mandatory pass-through payments.
                 Redevelopment agencies made numerous reporting  
               errors which resulted in an understatement of  
               pass-through payments made to schools.
          The State Controller estimated that the cumulative effect  
          of these problems resulted in an excess State General Fund  
          obligation to schools of $33.8 million in 2005-06 and $29.4  
          million in 2006-07.

          In response to the Controller's report, a State Budget  
          trailer bill enacted procedures to identify and recover  
          pass-through payments that redevelopment agencies failed to  
          make to K-14 education agencies for fiscal years 2003-04  
          through 2007-08 and ensure proper payments in 2008-09 (AB  
          1389, Assembly Budget Committee, 2008). 


           SB 530 -- 4/28/09 -- Page 2

          Redevelopment officials want the Legislature to fix  
          problems that they have identified as their agencies try to  
          comply with the new procedures.

                                   Proposed Law
          Senate Bill 530 applies the redevelopment pass-through  
          reporting and repayment requirements enacted by last year's  
          State Budget to redevelopment project areas that were  
          formed before January 1, 1994 and amended after January 1,  
          1994 to:
                 Increase the limitation on the number of dollars to  
               be allocated to the agency,  or 
                 Increase, or eliminate the time limit on the  
               establishing of loans, advances, and indebtedness,  
               pursuant to specified statutes,  or  
                 Lengthen the period during which the redevelopment  
               plan is effective if the redevelopment plan being  
               amended contains specified provisions. 

          1.   A consensus correction  .  There is consensus among  
          redevelopment officials, county officials, and the State  
          Controller's Office staff that pre-1994 project areas that  
          have been amended since 1994 were inadvertently omitted  
          from the redevelopment language in AB 1389, last year's  
          budget trailer bill.  SB 530 corrects that error.  However,  
          significant disagreements over the implementation and  
          interpretation of last year's redevelopment pass-through  
          reporting and repayment requirements remain unresolved.   
          Discussions continue on how to reconcile redevelopment  
          agencies' last five years of pass-through payments.   
          Legislators should expect additional amendments to SB 530  
          once the stakeholders reach agreements on some of these  
          remaining disputes.

          2.   Double referral  .  The Legislature's fiscal committees  
          review bills that appropriate money, change state  


           SB 530 -- 4/28/09 -- Page 3

          departments' duties, affect state revenues and spending,  
          and create new state mandated local programs.  Although the  
          Legislative Counsel's Digest does not identify SB 530 as a  
          fiscal bill, the Senate Rules Committee has nevertheless  
          ordered a double-referral; first to the Senate Local  
          Government Committee for a policy review and then to the  
          Senate Appropriations Committee.  Because the pass-through  
          payments that redevelopment agencies make to school  
          districts offset State General Fund spending, SB 530's  
          changes to redevelopment agencies' pass-through payments  
          may result in costs to the State General Fund.

                         Support and Opposition  (4/30/09)

           Support  :  California Redevelopment Association.

           Opposition  :  Association of California School  
          Administrators, California Association of School Business