BILL ANALYSIS Ó AB 936 Page 1 Date of Hearing: May 4, 2011 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Cameron Smyth, Chair AB 936 (Hueso) - As Amended: May 2, 2011 SUBJECT : Redevelopment: debt forgiveness: public notice. SUMMARY : Requires if, a local legislative body considers any matter on a meeting agenda to forgive a loan, advance, or indebtedness of a redevelopment agency, then the matter be considered in a public meeting at least two weeks prior to the adoption of any action. Specifically, this bill : 1)Requires if, a local legislative body considers any matter on a meeting agenda to forgive a loan, advance, or indebtedness of a redevelopment agency, then the matter be considered in a public meeting at least two weeks prior to the adoption of any action. 2)Requires the local agencies' chief financial officer to be present at the public meeting to provide information as to the status of the potential impact of forgiveness of that loan, advance, or indebtedness on the financial health of the city, county, or agency. 3)Prohibits the adoption of any redevelopment agency debt forgiveness proposal from being placed on a consent calendar. EXISTING LAW : 1)Authorizes a redevelopment agency to accept financial or other assistance from any public or private source, for the agency's activities, powers, and duties, and expends any funds so received for any of the purposes of redevelopment law. 2)Authorizes a redevelopment agency to borrow money or accept financial or other assistance from the state or the federal government or any other public agency for any redevelopment project within its area of operation, and may comply with any conditions of such loan or grant. 3)Requires each redevelopment agency to prepare or cause to be prepared, and approve, a redevelopment plan for each project AB 936 Page 2 area and for that purpose may hold hearings and conduct examinations, investigations, and other negotiations. 4)Authorizes the legislative body of a redevelopment agency by ordinance to adopt amendments to a redevelopment plan following a public hearing. 5)Requires notice of the public hearing to be mailed to the governing body of each of the affected taxing entities at least 30 days prior to the hearing. 6)Requires the notice to also be published in a newspaper of general circulation in the community at least once, not less than 10 days prior to the date of the public hearing. 7)Requires if a redevelopment agency is amending its plan notice of the hearing shall be published for three weeks prior to the date of hearing in a newspaper of general circulation, printed and published in the community, or, if there is none, in a newspaper selected by the agency. 8)Requires the notice of plan amendment to include a legal description of the boundaries of the project area by reference to the description recorded with the county recorder and of the boundaries of the land proposed to be added to the project area, if any, and a general statement of the purpose of the amendment. 9)Requires, under the Ralph M. Brown Act (Brown Act), that all meetings of a legislative body of a local agency be open and public and all persons be permitted to attend unless a closed session is authorized. 10)Requires, at least 72 hours before a regular meeting, the legislative body of the local agency, or its designee, to post an agenda containing a brief general description of each item of business to be transacted or discussed at the meeting, including items to be discussed in closed session. FISCAL EFFECT : Unknown COMMENTS : 1)When establishing a redevelopment agency, cities and counties AB 936 Page 3 may provide some capital to the agency in the form of a loan. The loan is used to allow the redevelopment agency to show debt on their statement of indebtedness so that the agency has something to bond against. In some communities, the loan is made with a high interest rate, creating more debt to bond against and generate tax increment to fund redevelopment projects. Loans have also been issued recently to help redevelopment agencies make their payment to the Supplemental Educational Revenue Augmentation Fund (SERAF) pursuant to 2009 Budget actions ÝAB 26 4X (Committee on Budget), Chapter 21, Statues of 2009]. 2)In a case provided by the author, the City of San Diego (City) capitalized the redevelopment agency by using Community Development Block Grant (CDBG) funds. The redevelopment agency carried amounts equal to CDBG allocations and the United States Department of Housing and Urban Development (HUD) Section 108 loan proceeds as part of the agency debt to the City. The City was audited by HUD which required that the City initiate the redevelopment agency's repayment of CDBG funds to the City in the amount of $139,201,997. The repayment agreement between the City and the redevelopment agency stated " the Agency and the City desire to provide, by and through this Agreement, the terms for the Agency's repayment of the CDBG Debt to the City in the total amount of Seventy Eight Million Seven Hundred Eighty Seven Thousand Dollars ($78,787,000) to be paid annually over a ten year period in accordance with this Agreement." The agreement went on to say the parties determined that the proposed repayment plan serves a public purpose in that: (a) the agency will be reducing its indebtedness to the City; (b) the City will benefit from the resolution of certain HUD concerns raised in the 2008 OIG Audit Report and from the provision of additional CDBG Program funds to be allocated to eligible projects and activities, used for administration and planning, and committed to decease certain outstanding HUD Section 108 Loan Guarantee Program loans; and (c) the City has benefitted, and will continue to benefit, significantly from the Agency's redevelopment projects. 3)AB 936 would require that if a local governing body meets to consider the forgiveness of a debt of the redevelopment agency, the chief financial officer must be present at the meeting and the item is prohibited from being on consent. In AB 936 Page 4 addition, forgiveness of the loan or indebtedness must be considered two weeks prior to taking any action on the forgiveness of debt. According to the author this measure is needed "to ensure that the public has the opportunity to understand the financial implications of the debt forgiveness. This bill does not hinder the ability, of a city to forgive a loan to a redevelopment agency. The two week notice will ensure that the public has the opportunity to evaluate these important financial decisions." 4)Support arguments: Supporters argue that AB 936 brings transparency to the activities of redevelopment agencies. Redevelopment agencies have recently been under fire for lack of accountability in some cases and this measure will help ensure that redevelopment agencies fulfill their obligations. Opposition arguments: Opposition could argue that the Brown Act already provides for notice and posting of information prior to a public meeting and that AB 936 just adds another level of requirements on local governments. 5)This bill was heard by the Housing and Community Development Committee on April 27, 2011, and passed with a 7-0 vote. REGISTERED SUPPORT / OPPOSITION : Support CA Professional Firefighters ÝSPONSOR] CA Rural Legal Assistance Foundation Stockton Professional Firefighters, Local 456 Western Center on Law and Poverty Opposition None on file Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958 AB 936 Page 5