BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 345|
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THIRD READING
Bill No: AB 345
Author: Torres (D), et al.
Amended: 8/21/12 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Redevelopment
SOURCE : Author
DIGEST : This bill reforms , beginning January 1, 2018,
how redevelopment agencies spend their Low and Moderate
Income Housing Funds.
Senate Floor Amendments of 8/21/12 delete the prior version
of the bill, which dealt with traffic control devices, and
instead add the current language.
Note:This bill is nearly identical to SB 450 (Lowenthal)
which passed the Senate (39-0) on June 2, 2011, and
again when Assembly amendments were concurred with on
September 8, 2011, by a 40-0 vote. SB 450 was vetoed.
ANALYSIS : The Community Redevelopment Law (CRL) requires
that each redevelopment agency submit the final report of
any audit undertaken by any other local, state, or federal
government entity to its legislative body and to
additionally present an annual report to the legislative
body containing specified information.
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Existing law requires that funds used for purposes of
increasing, improving, and preserving a community's supply
of low- and moderate-income housing be held in a separate
Low and Moderate Income Housing Fund (L&M fund) until used.
Existing law limits the planning and general
administrative costs which may be paid with moneys from the
L&M fund.
Existing law requires, except as specified, each agency to
expend over each 10-year period of the implementation plan,
the moneys in the L&M fund to assist housing for persons of
moderate, low, and very low income according to specified
calculations.
Existing law requires an agency that has failed to expend
or encumber excess surplus in the L&M fund within one year
to disburse the surplus voluntarily to the appropriate
county housing authority or another public agency or to
expend or encumber the surplus within two additional years.
Whenever low- or moderate-income housing dwelling units are
destroyed or removed from the low- and moderate-income
housing market as part of a redevelopment that is subject
to a written agreement with the agency, or where financial
assistance has been provided by the agency, the agency is
required to provide replacement housing within four years
of the destruction or removal.
This bill:
1. Requires redevelopment agencies (RDAs) to post a copy of
their annual report on the agency's or the community's
Internet Web site.
2. Requires RDAs to include the following information as
part of the annual report:
A. The percentage of funds from the L&M fund used for
planning and general administration costs;
B. An itemized list of planning and general
administration expenditures from the L&M fund and an
explicit description of how the expenditures are
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necessary for the production, improvement or
preservation of low- and moderate-income housing;
C. Information describing the employees that are paid
from the L&M fund including the title, salary, wages,
benefits, and the nature of the employee's activities
eligible to be paid out of the L&M fund;
D. A list of the overhead costs that are paid
directly or indirectly from the L&M fund;
E. A statement of the amount and percentage of funds
deposited into the L&M fund exclusive of debt
proceeds expended for planning and administration in
each of the preceding five fiscal years that begin
after December 31, 2011;
F. A list of all the properties owned by a RDA
purchased with L&M funds, the date of acquisition for
each property, a RDA's intended purpose for the
property, and the amount if any of L&M funds used to
acquire and maintain the property;
G. For each fiscal year since the agency's last
adopted implementation plan, a list of the
replacement housing obligations of the RDA including
the number of units that must be replaced, location,
and status of the replacement and production units;
and,
H. For each housing projects for which a RDA
designates encumbered funds, or amends an existing
designation or encumbrance during the fiscal year and
where the RDA's financing constitutes more than 50
percent of the total cost of the housing project
provide the project name, location, number of
affordable units, affordability level, amount of
agency financing and total cost of the low- and
moderate-income units.
3. Provides an agency that has deposited less than $100,000
in the L&M fund is exempt from providing the information
required by (A) through (H) above.
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4. Requires the legislative body to adopt a separate
written resolution finding that based on the annual
report the actual planning and general administrative
expenses do not exceed the limits allowed.
5. Requires the Controller, on or before April 1 of each
year, to post of its Web site a list of RDA's with major
audit violations.
6. Allows the Controller to consult with locally affected
community groups as part of determining if an agency has
corrected a major audit violation.
7. Allows a RDA that is subject to a court order as a
result of a major audit violation to continue to issue,
sell, or deliver bonds or incur debt to increase,
improve, preserve, or assist in the construction, or
rehabilitation of housing units for extremely low, very
low, low, or moderate income housing.
8. In the 60 day window between a court's initial finding
of a major audit violation and a final ruling, allows an
RDA to pay the budgeted operation and administration of
the agency, as opposed to only 75 percent of the
budgeted amount.
9. Prohibits a RDA that is subject to a court order as
result of a major audit violation to exercise the power
of eminent domain.
10.Removes the statutory caps on the amount of a monetary
sanction that a court can order a RDA to pay for a major
audit violation and permits the court to determine a
sanction that is commensurate with the violation.
11.Prohibits a RDA from paying a court sanction from the
L&M fund or any other special fund related to housing.
12.Provides that an action filed by a court to compel an
RDA to correct a major audit violation does not preclude
an action by any other interested party or a resident of
the jurisdiction.
13.Makes failure to comply with the restrictions regarding
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eligible expenditures for planning and general
administration from the L&M fund a "major audit
violation."
14.Requires the Department of Housing and Community
Development (HCD) to conduct audits of RDAs to ensure
compliance with the housing provisions of the CRL.
15.Requires HCD to review all of the following in audits of
RDAs:
A. Agency compliance with production and replacement
of housing obligations;
B. Recording and monitoring of affordability
covenants;
C. Provision of relocation assistance;
D. Propriety of deposits to and expenditures from the
L&M fund;
E. Compliance with the debt limit of the agency;
F. Adoption of a legally sufficient implementation
plan;
G. Major audit violations as defined in the Health
and Safety Code Section 33080.8; and,
H. Accounting practice or provision of the CRL in the
discretion of the department.
16.Requires RDAs to annually remit .05 percent of the L&M
tax increment to HCD to conduct redevelopment audits.
17.Requires HCD to determine, on or before April 1 of each
year, whether an audit or investigation from the
previous year, contains a major audit violation and post
those on the HCD Internet Web site.
18.Requires on or before June 1 of each year, HCD to
determine if a major audit violation has been corrected
by consulting with each affected agency and locally
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affected community groups.
19.Requires HCD to direct RDAs to take action to correct
audit violations.
20.Provides that if HCD determines that an RDA has not
taken action within 180 days to correct an audit
violation, it must forward all relevant documents to the
Attorney General (AG) for action.
21.Requires HCD to forward a copy of any audit or
investigation of a RDA to the AG and the Controller.
22.Requires HCD to notify an RDA and its legislative body
when it sends an audit violation to the AG.
23.Prohibits HCD from initiating or settling any litigation
or to resolve any audit or investigation in a manner
contrary to law.
24.Allows the Controller to conduct quality control reviews
of RDA audits to the extent feasible within existing
resources and to communicate the results of the review
to the RDA and the independent auditor.
25.Requires that if the Controller finds that an audit was
conducted in an unprofessional manner, to refer the case
to the California Board of Accountancy (Board).
26.Provides that if the Board determines that the
independent auditor conducted the audit in an
unprofessional manner then the auditor is prohibited
from performing any RDA audits for three years and the
Board may impose additional penalties.
27.Provides that whenever the Controller determines through
two consecutive quality control reviews that an audit
was not performed in substantial conformity with
guidelines in state law, the Controller will notify the
auditor and the Board in writing.
28.Gives the auditor 30 days after receiving the
Controller's notice to file an appeal or the
Controller's determination is final.
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29.Provides that if the auditor files an appeal, the Board
will investigate and may find that the Controller's
determination will not be upheld and has no effect or
schedule an appeal for hearing.
30.Provides that if the Controller's determination becomes
final, the auditor is prohibited from conducting audits
for three years and is subject to any additional
conditions ordered by the Board.
31.Provides that no later than March 1, following the date
at which the Controller's determination becomes final,
the Controller will notify each RDA of the auditors that
are ineligible as a result of misconduct.
32.Allows the Board to take any disciplinary action against
an auditor that it deems appropriate under the law.
33.Requires a RDA that is found to have deposited less into
the L&M fund then required by law or to have spent money
from the L&M fund for purposes other than increasing,
improving, and preserving the community's supply of
affordable housing, to repay the funds with interest,
plus an additional 50 percent of that amount and
interest.
34.Applies the 10-year statute of limitations for failure
to deposit or expend L&M funds correctly to merged
redevelopment project areas and to any other moneys that
any agency must deposit in the L&M fund in addition to
tax increment.
35.Prohibits repayment of any L&M funds required to meet
the set-a-side requirements to come from any other funds
designated for affordable housing.
36.Establishes a double cap on the amount of L&M funds that
an RDA can spend on planning and general administrative
costs.
37.Places a 10 percent cap on the amount of L&M funds that
a RDA can spend on general administrative costs
including:
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A. Employee compensation costs and related
non-personnel costs, such as travel and training,
paid to or on behalf of any agency, city, or county
employee whose duties include permissible L&M housing
activities other than direct program and project
administration (i.e., line staff);
B. Employee compensation costs and related
non-personnel costs paid to or on behalf of any
agency, city, or county employee who supervises or
manages line staff or who provides general
administrative services, such as finance, legal, and
human resources that indirectly support permissible
L&M housing activities;
C. Overhead costs, such as rent, equipment, and
supplies; and,
D. The total value of any contracts for agency
planning or administrative services that are related
to permissible housing activities and that are not
associated with a specific development project.
38.Places a 10 percent cap on the amount of L&M funds that
a RDA can spend on program and project staff costs,
including employee compensation costs and related
non-personnel costs that are directly and necessarily
associated with development of a specific housing
development project including, negotiation and project
management of disposition and development agreements,
land leases, loan agreements and similar affordable
housing agreements, redevelopment agency work on
entitlements for eligible affordable housing
developments, loan processing, and servicing, inspection
for new rehabilitation units, construction monitory and
monitoring affordable housing units.
39.Allows a RDA to spend up to two percent of their L&M
fund on code enforcement provided that the RDA complies
with relocation and replacement rules if tenants are
displaced or homes destroyed as a result of code
enforcement activities.
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40.Allows a RDA to spend any difference between the cap on
"general administrative and planning" (employee
compensation for executive management cost and overhead
costs) and actual administrative expenditures on
"program and project staff costs."
41.Requires employee compensation for executive and
management staff, to be justified by an independent cost
allocation study that is no more than six years old and
not represent a greater proportion of the employees
total compensation than the proportion of employees
working directly and exclusively on activities required
for the L&M fund in comparison to the total number of
employees supervised, managed and directly supported by
the employee
42.Provides that the limitations planning and
administrative costs do not apply to a specific project
area during the first five years.
43.Provides that the planning and administrative costs
apply to project areas where the project area is amended
or if the tax increment of a new or amended project area
is deposited into an L&M fund covering more than one
project area.
44.Prohibits an RDA from spending L&M funds on any of the
following:
A. Code enforcement;
B. Land use planning or development of or revision of
the housing element except for the payment of normal
project-related planning fees that is applicable to
similar development projects, except that an RDA may
spend L&M funds on the cost of staff participation in
the development of the housing element provided that
those costs are counted toward the 10 percent cap on
planning and administration costs;
C. Lobbying; and,
D. Administration of non-redevelopment activities
that are not related to the activities required under
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the L&M fund.
45.Provides that the completion of the current 10-year
implementation plan for a RDA (provided the 10-year
period began before January 1, 2010), the
proportionality requirements dictated by regional
housing needs assessment no longer apply, and funds must
be expended from the L&M fund as follows:
A. Requires at least 75 percent of each RDA's
expenditures from the L&M fund shall directly assist
the new construction, acquisition, and substantial
rehabilitation or preservation of housing for persons
of extremely low, very low, or low income;
B. Requires at least 50 percent of each RDA's
expenditures from the L&M fund shall directly assist
the new construction, acquisition, and substantial
rehabilitation or preservation of housing for persons
of extremely low or very low income; and,
C. Requires that at least 25 percent of each RDA's
expenditures from the L&M fund shall directly assist
the new construction, acquisition, and substantial
rehabilitation or preservation of housing for persons
of extremely low income.
46.Allows an RDA to count expenditures for extremely
low-income housing toward the percentages required for
very low-income and to count expenditures for extremely
low- and very low-income toward the percentages required
for low-income.
47.Deletes the ability of an agency to adjust the
proportionality requirement for units constructed with
non-redevelopment funds.
48.Requires a RDA to demonstrate in each implementation
plan at the end of five years that the agency's
aggregate expenditures from the L&M fund exclusive of
debt service payments from the onset of the new
proportionality requirements satisfy the requirements.
49.Defines "preservation" as preserving affordability of an
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assisted housing development that is eligible for
prepayment for termination or the rental restrictions
may expire within five years.
50.Defines "housing for persons of extremely low income" as
housing that is available at a rent or housing cost that
is affordable to households earning 30 percent of the
area median income or 30 percent of the statewide median
income, whichever is greater.
51.Provides that if a RDA has deposited less than $2
million in the L&M fund in the first five years after
the onset of the new proportionality requirements, the
RDA has 10 years to fulfill the requirements to spend
the L&M funds in the percentages described above for
extremely low, low and very-low income housing for the
first time.
52.Allows, for purposes of the proportionality
requirements, an agency to count contractually obligated
funds as expended funds, provided that the contract is
with an entity that is independent of the agency or the
community for the development for a specific eligible
housing development.
53.Provides that if a contract to expend funds from the L&M
fund for a specific eligible housing development is
terminated, the funds may no longer be counted towards
meeting the proportionality requirements.
54.Provides that if an RDA fails to meet the
proportionality requirements, they may not expend any
money from the L&M fund for households whose incomes
exceed 50 percent of median income until they have
expended funds for extremely low, very low and
low-income housing that should have been spent in
previous implementation plan periods.
55.Provides that if an RDA fails to spend L&M funds in same
proportion as the number of persons in all age groups,
they may not expend any money from the L&M fund for
senior households until they have expended funds for
all-age housing that should have been spent in previous
implementation plan periods.
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56.Deletes the authority of an agency to disburse excess
surplus funds to the local housing authority.
57.Requires for each interest in real property acquired
using money from the L&M fund, an RDA within five years
of acquiring the property, must do one of the following:
A. Enter into a disposition and development agreement
or a land lease with a third party for the
development of housing affordable to persons and
families of low and moderate income;
B. Obtain final land use entitlements and secure full
financing for agency development for housing that is
affordable to persons and families of low and
moderate income housing; and,
C. Submit a remedial action plan for the property to
the appropriate oversight agency including, but not
limited to, the Department of Toxic Substances
Control, the Regional Water Quality Control Board or
the Office of Human Health Risk Assessment for the
cleanup of contamination.
58.Provides that if a RDA has not completed one of the
above within five years, or if less than 10 percent of
the dwelling units or floor area of a project is
developed within 10 years from the date the agency
originally acquired the property, the agency must
reimburse the L&M fund 150 percent of the amount
expended to acquire and maintain the property or 150
percent the current fair market value of the property
whichever is more.
59.Provides that if a RDA owns two or more adjacent
properties that make up a single redevelopment project
the date of acquisition will be the date of acquisition
for the last acquired property provided that the date is
not later than five years after the acquisition of the
last property.
60.Provides that a RDA may adopt a resolution to petition
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HCD for an extension of the five year deadline and HCD
may grant a single extension of up to five years if the
department makes a finding that the failure to complete
the required activities is beyond the agency's control
and that the agency has a feasible plan for development.
61.Requires HCD to solicit comments from known or expected
parties interested in an extension petition.
62.Requires HCD to establish a schedule of fees to cover
the cost of reviewing the petition and to charge the RDA
from funds other than those designated for affordable
housing.
63.Provides that a RDA must deposit 150 percent of the fair
market value of the property at the time it is sold or
transferred or if the property is not sold or
transferred of the fair market value of the land at the
time a building permits is issued for the property if
either of the following conditions exist:
A. A property acquired using moneys from the L&M fund
is sold or transferred for purpose other than housing
that is affordable to persons and families of low and
moderate income; or,
B. A property that is acquired using money from the
L&M fund is developed such that less than 50 percent
of the floor area or a percentage of the floor area
equal to the amount of L&M moneys that were used to
acquire the property whichever is less, is housing
for persons and families of low and moderate income.
64.Requires that for units destroyed within the project
area on or after January 1, 2012, an RDA is required to
replace vacant units such that the replacement units are
available at affordable housing costs and occupied by
persons and families in the same or lower income
category in the same proportion as the units occupied or
last occupied by low and moderate income households in
the property.
65. Requires generally an RDA to replace destroyed units
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with new construction.
66.Provides that up to 25 percent of the replacement
obligation incurred during a five-year implementation
plan may be fulfilled by either of the following:
A. With units that have been rehabilitated such that
the after-rehabilitation values increased by 50
percent or more of the pre-rehabilitation value and
the units being replaced were either:
(1) At risk of demolition or closure due to
substandard conditions and occupied by extremely
low or very low income households; and,
(2) Vacant due to substandard conditions.
B. With substantially rehabilitated multi-family
units that the agency has substantially rehabilitated
with in the project area, two units for each unit the
agency is obligated to replace, or outside the
project area three units for each unit the agency is
obligated to replace.
67.Requires a RDA to adopt a separate written resolution
after a public hearing that based on substantial
evidence that the rehabilitation of the replacement
dwelling units complies with the replacement unit
requirements.
68.Provides that if a court finds that an RDA has failed to
comply with replacement housing requirements, the court
shall prohibit the agency from issuing any debt for any
project areas except debt from which all proceeds will
be deposited in the L&M fund until the court determines
that the RDA has complied with this section.
69.Adds the following to the information a RDA is required
to include in a replacement housing plan:
A. A description of the occupancy and affordability
restrictions to be imposed on replacement dwelling
units;
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B. Substantial evidence supporting a finding that the
replacement dwelling units will meet the needs of
households in the income categories of the households
displaced from the dwelling units that the
replacement units are intended to replace; and,
C. A declaration of whether the RDA intends to
rehabilitate existing dwelling units.
70.Provides that if an RDA ceases its activities prior to
the end of an affordability covenant, then it will
designate a successor agency that will monitor and
enforce the covenants for the remaining period of the
covenant.
71.Provides that if no successor agency is designated at
the time a RDA ceases its activities then the community
must monitor and enforce the covenants for the remaining
period of the covenant.
72.Includes intent language regarding the need for greater
accountability and more auditing of RDAs.
73.Deletes the authority given to RDAs to offer money in
the L&M fund of a merged project area to the housing
authority for the purpose of constructing or
rehabilitating affordable housing if the funds have been
deposited in the L&M fund for six years but have not
been spent.
74.Adds the following to the list of required information
the implementation plan for an RDA must include:
A. The proposed amount of expenditure for the L&M
fund for new construction, acquisition and
substantial rehabilitation or preservation for
housing for persons of extremely low, very low or low
income during each year of the implementation plan;
B. The replacement units that satisfy each
replacement housing obligation;
C. In the case when replacement units have been
destroyed or removed, but units are not yet complete,
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the proposed location of the replacement units that
are not yet complete; and,
D. A complete accounting for compliance with the
RDA's affordable housing obligation over the life of
the plan including the total number of units the RDA
is obligated to replace and the total number of units
required to be construct before the end for the
project area life.
75.Includes the following information for all affordable
housing units that are replaced, constructed,
rehabilitated or have covenants attached to them and are
included in the database required by existing law:
A. The street address and assessor's parcel number of
the property and for properties that are listed as a
group the number of units;
B. The size of each unit based on the number of
bedrooms;
C. The affordability level of each unit;
D. The year in which the construction or substantial
rehabilitation of the unit was complete;
E. The date of recordation and document number of the
affordability covenants or restrictions;
F. The date on which the covenants or restrictions
expire;
G. For projects developed prior to January 1, 2002, a
statement of the effective period of the land use
controls established in the plan at the time the unit
was developed;
H. For owner-occupied units that have changed
ownership during the previous implementation plan
period the date and document number of the new
affordability covenants or other document recorded to
ensure that the affordability restrictions run with
the land; and,
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I. Whether units count toward replacement units and
the units they are replacing;
76.Requires the following information as part of the
implementation plan for owner-occupied and rental units
that are required to replace units, are counted toward
the RDA's housing obligation and are not included in the
database required by existing law:
A. The streets address and if available assessor's
parcel number of the property;
B. For properties where units are listed as a group,
the number of units;
C. The affordability level of each unit;
D. The date of recordation and document number or
restrictions; and,
E. Whether the units count toward the replacement
obligation and reference the destroyed units they are
replacing.
77.Permits the implementation plan to omit any property
that is used to confidentially house victims of domestic
violence
78.Provides that failure to meet any of the following
obligations will be an ongoing violation until the RDA
has fulfilled the obligation:
A. The deposit and expenditure requirements for the
L&M fund;
B. The obligation to eliminate project deficits to
the L&M fund;
C. The obligation to expend or encumber excess
surplus funds;
D. The obligation to provide relocation assistance;
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E. Replacement and production housing obligations;
F. The obligation to monitor and enforce
affordability covenants; and,
G. The obligation to continue the project past the
effectiveness date of the redevelopment plan in order
to meet unfulfilled housing requirements.
79.Provides this bill becomes operative January 1, 2018.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
JJA:n 8/22/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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