BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 530
                                                                  Page  1

          Date of Hearing:  June 30, 2010

                                Cameron Smyth, Chair
                    SB 530 (Dutton) - As Amended:  April 28, 2009

           SENATE VOTE  :  36-1
          SUBJECT  :  Redevelopment: payments to taxing entities.

           SUMMARY  :  Applies specified redevelopment pass-through reporting  
          and repayment requirements to redevelopment project areas that  
          were formed before January 1, 1994, and amended after January 1,  
          1994, as prescribed.   Specifically,  this bill:

           1)Applies specified redevelopment pass-through reporting and  
            repayment requirements to redevelopment project areas that  
            were formed before January 1, 1994, and amended after January  
            1, 1994 to:

             a)   Increase the limitation on the number of dollars to be  
               allocated to the agency;

             b)   Increase, or eliminate the time limit on the  
               establishing of loans, advances, and indebtedness, pursuant  
               to specified statutes; or,

             c)   Lengthen the period during which the redevelopment plan  
               is effective if the redevelopment plan being amended  
               contains specified provisions. 

           EXISTING LAW  :

          1)Requires redevelopment agencies (RDA) to report all payments  
            calculated and paid to affected local taxing agencies from tax  
            increment revenues. 

          2)Specifically establishes a reporting process with the  
            following requirements:

             a)   Each RDA must submit a report by October 1, 2008, to the  
               county auditor and each affected local taxing entity  
               (including K-14 education agencies) that describes each 
             post-1993 project area or expansion, the amounts of  
               statutorily required pass-through payments that the RDA was  


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               obligated to make from 2003-04 through 2007-08, the amount  
               of payments that it actually disbursed, and the portion of  
               the pass-through payments or obligations to K-14 education  
               agencies that must be reported as property tax revenues  
               (43.3% for K-12 districts, 47.5% for community colleges,  
               and 19% for county offices of education).  The report must  
               identify pass-through obligations outstanding as 
             of June 30, 2008, and the dates on which they were paid or  
               will be paid.  Each RDA must provide a similar report for  
               the 2008-09 fiscal year (FY) by October 1, 2009;

             b)   The county auditor must review each report and issue a  
               finding of concurrence or return the report to the RDA for  
               revision.  An RDA that revises its report to gain  
               concurrence may also file a statement of dispute if it  
               continues to disagree with the auditor;

             c)   By December 15, 2008, and annually thereafter through  
               2014, county auditors must report to the State Controller  
               and identify RDAs that have remaining unpaid pass-through  
               obligations to K-14 education agencies for FYs 2003-04  
               through 2008-09.  The State Controller (Controller), in  
               turn, must provide an annual report by February 1 to the  
               Legislative Analyst's Office and the Department of Finance  
               that identifies, by RDA, the status of their report and  
               concurrence by the auditor and the status of pass-through  
               obligations to K-14 education agencies.  The Controller  
               also must report at that time to the State Department of  
               Education (CDE) and the Board of Governors of the  
               California Community Colleges (Board) the amounts of  
               payments received by K-14 educational agencies from RDAs  
               for pass-through obligations for 2003-04 through 2008-09.   
               CDE and the Board are to adjust revenue limit  
               apportionments or funding allocations to correct any  
               underreporting (or over reporting) of property tax from  
               pass-through payments.  
             If necessary to avoid fiscal hardship, these adjustments can  
               be made over a period of up to eight years (for K-12) or  
               five years (for community colleges);

             d)   After February 1, 2009, any RDA that has not reported or  
               obtained concurrence for its reports, or that has an unpaid  
               outstanding net pass-through obligation to a K-14 education  
               agency for the 2003-04 through 2007-08 period (and for  


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               2008-09 starting in 2010) will be prohibited from spending  
               money for any obligations incurred after June 30, 2008,  
               with limited exceptions, and its monthly operation and  
               administration spending would have to be reduced by 25%.   
               Furthermore, after February 1, 2009, interest would start  
               to accrue 
             at 150% of the Pooled Money Investment Account rate on any  
               unpaid outstanding obligation to K-14 education agencies,  
               with accrual beginning 60 days after the end 
             of the FY for which the payment was due.  The Controller,  
               with the concurrence of the Director of Finance could waive  
               these provisions for up to one year if the Controller finds  
               that payment of a disputed amount would impose a fiscal  
               hardship on an RDA, the RDA has met all other requirements  
               and made all other required payments, and the dispute is  
               likely to be resolved in the RDA's favor;

             e)   The percentage of any outstanding unpaid pass-through  
               obligations to K-14 education agencies that is treated as  
               property tax revenue must be paid into the county  
               Educational Revenue Augmentation Fund (ERAF), with the  
               remainder paid to the school district, county office of  
               education, or community college district.  The ERAF  
               payments will offset General Fund school apportionment  
               obligations and will not be subject to "excess ERAF"  
               allocations to local governments.  This ERAF recovery  
               mechanism applies only to pass-through obligations incurred  
               by RDAs from 2003-04 through 2008-09 that have not been  
               disbursed to K-14 education agencies by October 1 of 2008  
               or 2009 (for 2008-09); and,

             f)   Counties may require RDAs to reimburse their costs for  
               carrying out these provisions.

           FISCAL EFFECT  :  None

           COMMENTS  :   

          1)Assembly Bill 1389 (Committee on Budget) Chapter 751, Statutes  
            of 2008, requires the Controller to submit a report  
            summarizing specified information reported by redevelopment  
            agencies regarding their tax increment payments to local  
            taxing entities.  AB 1389 resulted 

          from two reviews performed by the State Controller's Office  


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            (SCO), which revealed that redevelopment agencies had  
            understated and underreported tax increment pass-through  
            payments to local educational agencies, and that local  
            educational agencies underreported pass-through payments  
            received to CDE and the Board.  The underpayments resulted in  
            excess state General Fund obligations to the local educational  
            agencies (i.e. school districts, community college districts,  
            and county offices of education).

          2)The redevelopment agency reports are required to contain  
            specified information for FYs 2003-04 through 2007-08.  The  
            information includes, but is not limited to, project  
            descriptions, gross tax increment received, pass-through  
            payments required to be made, 
          pass-through payments actually made, outstanding pass-through  
            payment obligations, and the date when the outstanding payment  
            obligations are expected to be made.

            The redevelopment agencies filed their reports with their  
            respective county auditors for review to determine if the  
            county auditor concurred with the information reported.  If  
            the county auditor did not concur, the report was returned to  
            the redevelopment agency for revision.  If the redevelopment  
            agency revised the report to receive concurrence from the  
            county auditor, but still did not agree with the county  
            auditor's calculations, a statement 
            of dispute could be submitted to the county auditor along with  
            the revised report.  After review, the county auditor  
            forwarded the reports to the SCO.  A redevelopment agency that  
            did not receive concurrence, or that had outstanding payment  
            obligations as of February 1, 2009, is subject to severe  

          3)There is consensus among redevelopment officials, county  
            officials, and SCO 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  

           4)Support Arguments  :  Supporters argue that the provisions of  
            this measure eliminate some 
          of the confusion created by the reporting requirements  
            established in AB 1389 and will provide the SCO and RDAs with  
            clarity on who is required to report to the Controller.


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             Opposition Arguments  :  Opposition could argue that there are a  
            myriad of other issues that stemmed out of the AB 1389  
            reporting requirements that still need to be addressed and  
            SB 530 should be amended to address other concerns. 


          CA Redevelopment Association 

          None on file 
          Analysis Prepa00red by  :    Katie Kolitsos / L. GOV. / (916)