BILL ANALYSIS Ó
AB 26 X1
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 26 X1 (Budget Committee)
As Amended June 15, 2011
Majority vote. Budget Bill Appropriation Takes Effect Immediately
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|ASSEMBLY: | |(June 3, 2011) |SENATE: |21-15|(June 15, |
| | | | | |2011) |
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(vote not relevant)
SUMMARY : Makes various changes to state laws to implement
provisions relating to redevelopment in the 2011-12 budget
agreement and is the first of two budget trailer bills that
address redevelopment agencies (RDAs). This bill eliminates
redevelopment agencies and directs the resolution of their
activities. The second bill, SB 15 X1 or AB 27 X1, creates an
alternative voluntary redevelopment program. This bill would not
become effective unless the second bill also becomes effective.
The requirements of this bill would affect RDAs that elect not to
participate in the alternative voluntary redevelopment program.
The Senate amendments delete the Assembly version of this bill,
and instead:
Addresses the suspension of RDA activities; dissolution of
existing RDAs; establishment and duties of Successor Agencies;
establishment and duties of Oversight Boards; use of property tax
revenues that would otherwise have gone to RDAs and other matters
described below.
Existing Redevelopment Agencies:
RDAs would no longer exist under the provisions of the bill as of
October 1, 2011 and would be dissolved as of that date. In
addition, as of the effective date of the adoption of this
legislation, activities of RDAs would be curtailed, and an orderly
wind-down process instituted for redevelopment activities.
Specifically:
1)Prohibit, as part of the process of reducing RDAs activity prior
to their elimination, an RDA from:
a) issuing new or expanded debt of any type (except emergency
refunding bonds, under certain conditions);
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b) making loans or advances or grants or entering into
agreements to provide funds or financial assistance;
c) executing new or additional contracts, obligations or
commitments;
d) amending existing agreements or commitments;
e) selling or otherwise disposing of existing assets;
f) acquiring real property for any purpose by any means;
g) transferring or assigning any assets, rights or powers to
any entity;
h) accepting financial assistance from any public or private
source that is contingent on the issuance of debt;
i) adopting or amending redevelopment plans or making new
findings with respect to blight;
j) entering into new partnerships, imposing new assessments,
or increasing staff or compensation; and,
aa) other actions that would result in ongoing commitments or
a depletion of assets.
2)Require RDAs to continue to make all scheduled payments for
enforceable obligations (described below), perform obligations
established pursuant to enforceable obligations, set aside
required reserves, preserve assets, cooperate with Successor
Agencies (described below), and to take all measures to avoid
triggering a default under an enforceable obligation. Would
also require the RDAs to prepare an enforceable obligation
payments schedule, containing all payments obligated to be made
and provide this to the county auditor-controller within 60 days
of the effective date of this bill. This schedule would be
reviewed by the county auditor-controller, the State Controller
and the Department of Finance. The bill would require that
unencumbered RDA funds be conveyed to the county
auditor-controller for distribution to the taxing entities in
the county, including cities, counties, a city and a county,
school districts and special districts.
3)Extend the time period allowed for challenges to the validity of
an RDA's bonds or other obligations or to agency and legislative
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body determinations and findings issued or adopted after January
1, 2011. These challenges could be brought two years following
approval of the action, as opposed to the current 60 day and 90
day review periods.
4)Require the county auditor-controller to complete a financial
audit of each RDA in the county by March 1, 2012, in order to
establish each agency's assets, liabilities, pass-through
payment obligations to other taxing entities, the amount and
terms of indebtedness, and to certify the initial Recognized
Obligation Payment Schedule (defined below). The audits are to
be submitted to the State Controller by March 15, 2012.
Successor Agencies:
Successor Agencies would be established under the bill and would
typically be the city, county, or city and county that established
the RDA. Each Successor Agency would be responsible for
maintaining payments on enforceable obligations. Specifically:
1)Establish Successor Agencies to the RDAs that would, except in
certain situations, such as those involving an RDA based on a
joint powers authority, be the entity that created the
redevelopment agency. If no local agency elects to be the
Successor Agency, a designated local authority would be formed,
whose three members would be appointed by the Governor.
2)Require Successor Agencies to make payments on legally
enforceable obligations using property tax revenues when no
other funding source is available or when payment from property
tax revenues is required by an enforceable obligation.
Successor Agencies would be responsible for preparing on a
semi-annual basis the Recognized Obligation Payment Schedule
that would set forth a schedule of obligated payments including
the date, amount, and source of funds for each payment.
3)Require the Successor Agencies' Recognized Obligation Payment
Schedule to be certified by an external auditor approved by the
county auditor-controller, and approved by the Oversight Board
(as described below), the State Controller and the Department of
Finance. The first Recognized Obligation Payment Schedule would
be submitted by December 15, 2011, with a draft of the schedule
due November 1, 2011. The Recognized Obligation Payment Schedule
would be established pursuant to the identification of
enforceable obligations, which are obligations that were entered
into by the RDA and are legally enforceable.
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4)Define enforceable obligations for Successor Agencies to
include, but not limited to:
a) bonds, including debt service, reserves, or other required
payments;
b) loans borrowed by the agency for a lawful purpose
including loans from the Low and Moderate Income Housing
Fund;
c) payments required by the federal government;
d) pre-existing obligations to the state or obligations
imposed by state law;
e) legally enforceable payments to agencies' employees,
including pension obligations and other obligations conferred
through a collective bargaining agreement;
f) judgments and settlements entered into by a court or
arbitration, retaining appeal rights;
g) legally binding contracts that do not violate the debt
limit or public policy; and,
h) contracts necessary for administration of the agency, such
as for office space, equipment and supplies, to the extent
permitted.
Enforceable obligations would not include any agreements,
contracts, or arrangements between the city, county, or city and
county that created the RDA and the former RDA.
5)Require Successor Agencies to take control of all assets,
properties, contracts, books and records, buildings and
equipment of the RDAs on October 1, 2011. Successor Agencies
are to dispose of RDAs' assets as directed by the Oversight
Board with the proceeds transferred to the county
auditor-controller for distribution to taxing agencies within
the county. Governmental facilities, such as roads, school
buildings, and fire or police stations would be conveyed to the
appropriate public jurisdiction. The bill would require the
Successor Agencies to compensate the taxing agencies for the
value of property and assets retained by the Successor Agencies
in an amount proportional to the taxing agencies' share of the
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property tax. The value of any assets retained by the Successor
Agencies would be at market value as determined by the county
assessor for the 2011 property tax lien date, unless some other
agreement is reached between the parties.
6)Authorize the Successor Agencies to prepare for the Oversight
Board a proposed administrative budget that includes estimated
administrative expenses, proposed sources of payment and
proposals for services to be provided, but does not include
funding for retained development projects, which must be funded
from the Successor Agency's own budget.
Oversight Boards:
Oversight Boards established under the bill would be required to
approve various actions by the Successor Agencies, including the
Recognized Obligation Payment Schedule and various other
activities outlined below. Specifically:
1)Establish a seven-member Oversight Board for each Successor
Agency that would generally consist of the following
representatives: i) one member appointed by the County Board of
Supervisors; ii) one member appointed by the mayor of the city
that formed the RDA; iii) one member appointed by the largest
special district; iv) one member appointed by the county
superintendent of education; v) one member appointed by the
Chancellor of the California Community Colleges; vi) one member
of the public appointed by the county board of supervisors; and,
vii) one member appointed by the mayor or the chair of the board
of supervisors from the largest representative employee
organization of the former RDA. Special appointment rules would
apply if a county, county and city, or joint powers authority
formed the RDA. Beginning July 1, 2016, one Oversight Board
will be formed in each county.
2)Require Oversight Boards to approve the following actions of the
Successor Agencies:
a) establishment of new repayment terms for outstanding loans
where such terms have not been established prior to July 1,
2011;
b) issuance of refunding bonds;
c) set-aside of reserves as required by bond indentures;
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d) merger of project areas;
e) acceptance of federal or state grants that are conditioned
upon the provision of matching funds in an amount greater
than 5%;
f) retention of RDA properties by city, county or city and
county;
g) establishment of the Recognized Obligation Payment
Schedule;
h) requests to hold portions of moneys in the housing fund in
order to pay recognized obligations related to housing; and,
i) requests to pledge or enter into an agreement for the
pledge of property tax revenues to provide financing for an
approved development project.
3)Require that the Oversight Boards direct the Successor Agencies
to:
a) dispose of all assets and properties except expeditiously
and in a manner aimed at maximizing value;
b) cease performance in connection with and terminate all
existing agreements that do not qualify as enforceable
obligations;
c) transfer housing obligations and low and moderate
set-aside funds to the applicable entity;
d) terminate any agreement between the former RDA and any
public entity in the county which obligates the former RDA to
provide funding for debt service or other payments if in the
best interest of the taxing entities;
e) determine whether any contract, payments or agreements
between the former RDA and private parties should be
dissolved or renegotiated based on taxing entities best
interests; and,
f) submit repayment schedules for repayment of amounts
borrowed from the housing fund.
4)Establish that all Oversight Board actions are subject to review
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by the Department of Finance. The Department of Finance will
notify the Oversight Board within 72 hours of the action that it
wishes to review the decision. In the event the Department of
Finance decides to review the action, it will have 10 days to
either approve the action or return it to the Oversight Board
for reconsideration.
Property Tax Revenues:
Property Tax Revenues that went to former RDAs would be used for
the following purposes: continue pass-through payments to schools
and local governments; fund outstanding former RDA debt and other
enforceable obligations; and, provide funding for education and
local governments. Specifically:
1)Create the Redevelopment Obligation Retirement Fund and the
Redevelopment Property Tax Trust Fund. Property tax revenues
associated with each former RDA in each county will be deposited
in the Redevelopment Property Tax Trust Fund which will be
administered by the county auditor-controller. Estimates of the
amounts to be allocated and distributed from this account will
be provided to the Department of Finance semi-annually.
2)Require the county auditor-controller to determine the amount of
property tax increment that would have been allocated to each
RDA and to deposit that amount in a Redevelopment Property Tax
Trust Fund. The county auditor-controller is charged with
administering this fund for the benefit of holders of agency
debt and the taxing agencies that receive pass-through payments.
3)Require the county auditor-controller to allocate funds from the
Redevelopment Property Tax Fund in the following order:
a) Local agencies, school districts and community college
districts in the amount that would have been received by such
agencies as their share of the property tax base and that
would have been paid pursuant to statutory and contractual
pass-through agreements;
b) Redevelopment Obligation Retirement Fund for Successor
Agencies' payments listed in the Recognized Obligation
Payment Schedule and administration; and,
c) Cities, the county, schools, community college districts,
and non-enterprise special districts in the proportional
shares of what would have been received absent redevelopment
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and adjusted for pass-through agreements.
Other Matters:
1)Allow for the continuation of housing activities by Successor
Agencies, which would be permitted to assume responsibility for
housing obligations and to use the existing balance in the Low
and Moderate Income Housing Fund set-aside for these purposes.
If a Successor Agency chooses not to assume the housing activity
responsibilities, the funds would be transferred to the local
housing authority or to the Department of Housing and Community
Development.
2)Provide that the terms of existing memoranda of understanding
with employee organizations representing former RDA employees
would remain in force, unless a new agreement is reached. The
Successor Agency will become the employer of all employees of
the former RDA upon its dissolution and will assume all
obligations under any existing memoranda of understanding then
in force.
3)Specify that beginning for fiscal years 2012-13, the amounts of
additional property tax received by school districts, county
offices of education, charter schools and community college
districts, as a result of the elimination of RDAs, would be in
addition to the Proposition 98 minimum funding guarantee. These
amounts (as well as amounts going to other taxing agencies)
would increase over time as enforceable obligations expire.
4)Establish that if a community elects to participate in the
alternative voluntary alternative redevelopment program
established in SB 15 X1 or AB 27 X1, and later fails to comply
with the provisions established in that bill governing the
program, then the provisions of this bill apply with conforming
changes to implementation and reporting dates.
5)Appropriate $500,000 to the Department of Finance for costs of
administration under the legislation.
6)Adds an appropriation allowing this bill to take effect
immediately upon enactment.
AS PASSED BYTHE ASSEMBLY , this bill expresses the intent of the
Legislature to enact statutory changes relating to the 2011 Budget
Act.
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FISCAL EFFECT : This legislation, together with SB 15 X1 or AB 27
X1, will result in $1.7 billion in additional funding as part of
the 2011-12 Budget.
COMMENTS : It is anticipated that cities and counties with RDAs
would choose to participate in an alternative voluntary
redevelopment program as set forth in SB 15 X1 and AB 27 X1. This
alternative program would allow RDAs to continue but require that
cities or counties within which RDAs are located to provide
voluntary payments that would partially offset the use of property
tax increment for RDA purposes.
Analysis Prepared by : Mark Ibele / BUDGET / (916) 319-2099FN:
0001298