BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 286 HEARING: 4/6/11
AUTHOR: Wright FISCAL: Yes
VERSION: 4/27/11 TAX LEVY: No
CONSULTANT: Weinberger
REDEVELOPMENT AGENCIES
Revises numerous provisions of the Community Redevelopment
Law.
Background
The Community Redevelopment Law allows local officials to
set-up redevelopment agencies, prepare and adopt
redevelopment plans, and finance redevelopment activities.
A redevelopment agency keeps the property tax increment
revenues generated from increases in property values within
a redevelopment project area. When it adopts a
redevelopment plan for a project area and selects a base
year, the agency "freezes" the amount of property tax
revenues that other local governments receive from the
property in that area. In future years, as the project
area's assessed valuation grows above the frozen base, the
resulting property tax revenues --- the property tax
increment --- go to the redevelopment agency instead of
going to the underlying local governments.
The diversion of property tax increment financing never
harms schools because the State General Fund automatically
backfills the difference between what a school district
receives in property tax revenues and what the district
needs to meet its revenue allocation limit. When a
redevelopment agency diverts property tax revenues from a
school district, the State General Fund pays the
difference.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating redevelopment
agencies on July 1, 2011 and returning billions of dollars
of property tax revenues to schools, cities, and counties
to fund core services in future years. AB 101 (Assembly
SB 286 -- 4/27/11 -- Page 2
Budget Committee, 2011) and SB 77 (Senate Budget and Fiscal
Review Committee, 2011) contain the implementing language.
Some legislators oppose the complete elimination of
redevelopment in California. Instead, they want to
preserve tax increment financing for local economic
development while revising the Community Redevelopment Law
to reduce redevelopment's State General Fund impact and
improve redevelopment agencies' performance and
accountability.
Proposed Law
Senate Bill 286 makes numerous changes to provisions of the
Community Redevelopment Law affecting redevelopment
agencies':
Tax increment allocations.
Project area creation and expansion.
Prohibitions against assisting specified types of
development.
Redevelopment activities.
Blight findings.
Reporting requirements.
Audit requirements.
Pass-through payments
Statements of indebtedness.
Administrative expenses.
Interest payments.
I. Tax increment allocations . The California Constitution
authorizes property tax increment financing (Article XVI,
§16). State law lets redevelopment agencies divert other
local governments' property tax increment revenues to fight
physical and economic blight. When a redevelopment agency
diverts property tax increment revenues from a school
district, the State General Fund pays the difference,
providing an indirect state subsidy to redevelopment
agencies. Senate Bill 286 requires that any funds
considered educational entity property tax revenues must be
excluded from any taxes levied, divided, and allocated
under the statute that governs the allocation of revenues
from taxes levied on taxable property within a
redevelopment project. This requirement applies to tax
increment revenues generated from a redevelopment project
established on or after January 1, 2012. ÝSee §16 and §17
of the bill.]
SB 286 -- 4/27/11 -- Page 3
II. Project area creation and expansion . Senate Bill 286
prohibits a community from adopting a redevelopment plan or
a plan amendment to add territory to a project area if the
proposed project area or area to be added, when aggregated
with all other project areas within the community, would
result in having:
25% of a city's total land area included within the
combined redevelopment project areas, or
10% of a county's, or city and county's, total
unincorporated land area included within redevelopment
project areas.
The prohibition applies only to a project area for which a
final redevelopment plan is adopted on or after January 1,
2012 or to an area that is added to a project area by a
redevelopment plan amendment adopted on or after January 1,
2012. The prohibition does not apply to a redevelopment
plan or plan amendment to add territory to a project area
pursuant to state laws governing the redevelopment of
closed military bases. ݧ4.]
III. Prohibitions against assisting specified types of
development . The Community Redevelopment Law prohibits
redevelopment officials from providing any direct
assistance to auto dealerships on sites that had not been
developed for urban uses and developments of five acres or
more which had not been developed for urban uses and which
generate sales or use tax revenues (AB 1290, Isenberg,
1993). Redevelopment official are also prohibited from
providing direct assistance to casinos (AB 2063, Isenberg,
1996). In addition to those prohibitions, SB 286 prohibits
redevelopment officials from providing any form of direct
assistance to:
A development that will be or is on a parcel of
land of 20 acres or more which has not been previously
developed for urban uses. This restriction does not
apply to land that is both in a project area and
within the boundaries of a former military base.
A development or business for the acquisition,
construction, improvement, rehabilitation, or
replacement of property that is, or would be, used for
a golf course or for a racetrack, speedway, or other
racing venue.
A development or business for the acquisition,
construction, improvement, rehabilitation, or
replacement of property that is, or would be, used for
SB 286 -- 4/27/11 -- Page 4
a stadium, coliseum, arena, ballpark, or other sports
facility that is intended for use by a professional
sports franchise unless the proposed assistance or
another component of the financing for the proposed
project is submitted to the electorate that resides in
the territorial jurisdiction of the agency providing
assistance and is approved by a majority of the voters
voting on the proposed development.
ݧ7.]
IV. Redevelopment activities . The Community Redevelopment
Law describes three redevelopment activities:
The alteration, improvement, modernization,
reconstruction, or rehabilitation of structures.
The provision of open space, public or private
buildings, structures, and improvements.
The replanning, redesign, or development of
undeveloped areas that meet certain conditions.
Senate Bill 286 lets redevelopment officials provide direct
assistance to businesses within project areas in connection
with new or existing facilities for industrial or
manufacturing uses of statewide benefit, where the
assistance provided is reasonably expected to result in the
retention of at least 25 full-time equivalent jobs within
the project area. This direct assistance can include
loans, loan guarantees, or the provision or replacement of
machinery and equipment in new or existing facilities for
industrial or manufacturing uses in the project area. SB
286 declares that the purpose of this provision is to
clarify existing law to provide redevelopment agencies with
additional authority to assist businesses in order to
encourage the retention of existing employment
opportunities and the attraction of new employment
opportunities. The bill declares that these activities and
programs constitute redevelopment as prescribed in
specified statutes. ݧ9.]
The Community Redevelopment Law allows redevelopment
agencies to loan money to rehabilitate commercial buildings
within project areas. Metropolitan planning organizations
(MPOs) must prepare a "sustainable communities strategy" as
a component of their regional transportation plans (SB 375,
Steinberg, 2008). This strategy is a blueprint for
communities to achieve a region's greenhouse gas emissions
reduction target. SB 286 allows redevelopment agencies to
provide loans or grants to owners or tenants to improve,
SB 286 -- 4/27/11 -- Page 5
rehabilitate, or retrofit buildings or structures within a
project area to increase energy efficiency or reduce
greenhouse gas emissions resulting from such building or
structures, or to facilitate infill development of areas
targeted for such development in an approved sustainable
communities strategy that applies to the agency's
jurisdiction. ݧ8.]
The Community Redevelopment Law requires redevelopment
officials to adopt an implementation plan for a
redevelopment project area every five years. Beginning
with the implementation plan adopted after January 1, 2012,
SB 286 requires that an implementation plan must contain
the specified goals and objectives of the agency for the
project area and the specific programs and projects that
will cause at least 50% of its net unencumbered revenue
during the next five years to be spent for one or more of
the following:
Development, including rehabilitation, resulting in
significant job retention or creation.
Remediation of contaminated properties.
Infill and transit oriented development.
Military base conversion.
Public infrastructure, excluding buildings.
Housing affordable to persons of very low and
extremely low income.
SB 286 defines "net unencumbered revenue" as all revenue
received by the agency less:
Debt service on bonds, notes, and other obligations
entered into prior to January 1, 2012.
Pass-through payments to taxing entities.
Deposits in the agency's low- and moderate-income
housing fund.
SB 286 requires an agency to obtain the recommendation of
the project area committee before approving an
implementation plan under the bill's new requirements. If
a project area committee does not exist, SB 286 requires an
agency to obtain the recommendation of a representative
community advisory body designated by the local legislative
body. The agency may consider the implementation plan
without a recommendation if the project area committee or
community advisory body doesn't make a recommendation
within 60 days of receiving the proposed implementation
plan.
SB 286 -- 4/27/11 -- Page 6
SB 286 requires the implementation plans adopted five and
10 years after the first implementation plan adopted under
the bill's new requirements to evaluate the agency's
progress in achieving specified goals and objectives. If a
project area committee or community advisory body
recommends against adoption of the implementation plan that
is to be adopted after 10 years, the agency must only adopt
that implementation plan upon a 2/3-vote of all of its
members. Until that implementation plan has been approved,
an agency cannot undertake any activity not provided for in
the existing implementation plan. ݧ12.]
V. Blight findings . The Community Redevelopment Law
requires an ordinance adopting a redevelopment plan for a
project area to include the local legislative body's
finding, based on clearly articulated and documented
evidence, that the project area is a blighted area. AB 1290
(Isenberg, 1993) enacted the first statutory definition of
blight. Partially in reaction to the protests following
the U. S. Supreme Court's Kelo decision the Legislature
subsequently tightened the blight definition (SB 1206,
Kehoe, 2006). Senate Bill 286 deletes the requirement that
a local legislative body's blight finding must be based
clearly articulated and documented evidence. Instead, SB
286 requires a local legislative body to support a finding
that a project area is blighted with empirical and, to the
greatest extent feasible, quantifiable evidence
demonstrating the prevalence of specified physical and
economic conditions that cause blight that is so
substantial that it causes a reduction of, or lack of,
proper utilization of the entire project area. Evidence
must be reasonable in nature, credible, and of solid value.
Conclusions not based on documented evidence of specific
conditions are insufficient. ݧ6.]
VI. Reporting requirements . The Community Redevelopment
Law requires every redevelopment agency to file an annual
report with its city council or county board of
supervisors. Redevelopment officials must also send a copy
to the State Controller, who must compile and publish, by
May 1, annual reports on redevelopment agencies' financial
transactions (SB 1387, Marks, 1984). Redevelopment
agencies' annual reports must contain:
An independent financial audit report.
A fiscal statement.
SB 286 -- 4/27/11 -- Page 7
A description of the agency's housing activities.
A description of the agency's progress in
alleviating blight.
A list and status report of loans in default.
A description of the agency's properties and
property acquisitions.
A list of the fiscal years that the agency expects
specified time limits to expire.
Any other information that the agency believes
useful.
The Controller must develop and periodically revise the
guidelines for the content of these reports and must
appoint an advisory committee to advise in the development
of the guidelines. Senate Bill 286 specifies that the
Controller must review and revise the guidelines at least
every five years, following consultation with the advisory
committee. ݧ1.]
The Community Redevelopment Law requires the California
Department of Housing and Community Development to publish
annual reports on redevelopment agencies' activities.
Beginning with the 2013-14 fiscal year, SB 286 requires the
Controller to compile and publish the annual reports, and
repeals:
The authority for the annual reports to contain a
biennial review of relocation assistance required by
state law.
A requirement that the annual reports must list
project areas that are not subject to state law
governing the replacement of housing units within a
redevelopment project area.
A requirement that specified redevelopment agencies
must receive copies of the reports and executive
summaries.
ݧ2.]
SB 286 requires the Department of Housing and Community
Development (HCD) to develop guidelines establishing
specific measures and standards to evaluate redevelopment
agency performance in specific areas, including:
A uniform method of calculating and reporting job
creation and retention.
Standards for measuring the efficiency and
effectiveness of expenditures for affordable housing.
Standards for measuring and reducing poverty levels
SB 286 -- 4/27/11 -- Page 8
in project areas.
Standards for measuring and reducing crime in
project areas.
Methods for measuring reductions in vehicle miles
traveled accomplished through redevelopment projects
including assistance provided to infill and transit
oriented development.
Standards for reporting on brownfield cleanup and
hazardous waste mitigation.
SB 286 requires HCD to appoint an advisory committee to
assist and advise in developing the guidelines. The
committee must include representatives with demonstrated
experience in redevelopment, local government metrics that
measure any one or more of the specified standards, or any
other fields that HCD deems necessary and appropriate.
Beginning with the 2013-14 fiscal year, a redevelopment
agency 's annual report to its legislative body must
include a discussion of the redevelopment agency's
performance based on the guidelines prepared by HCD. ݧ3.]
SB 286 requires the Controller, following consultation with
an advisory committee, to issue regulations, by January 1,
2013, revising and consolidating reporting for
redevelopment agencies. The goal of the regulations must
be to:
Unify and simplify redevelopment agencies'
reporting requirements.
Focus reporting requirements on information that
will be of greatest utility in monitoring the
activities of redevelopment agencies and their
compliance with the Community Redevelopment Law.
Produce consistent and comparable data using a
user-friendly, self-checking electronic data reporting
system.
SB 286 requires the Controller, by January 1, 2013, to
prepare, or cause to be prepared, a management study that
evaluates redevelopment agencies' reporting and recommends
any new management systems, including required technology,
needed to implement the proposed regulations.
ݧ20.]
State law requires a redevelopment agency to set aside 20%
of its property tax increment revenues to increase,
improve, and preserve the supply of affordable housing,
SB 286 -- 4/27/11 -- Page 9
unless it makes specified findings, by resolution. Within
10 days of making such a finding, a redevelopment agency
must send the Department of Housing and Community
Development a copy of the finding including factual
information supporting the finding and other specified
information. SB 286 requires that a redevelopment agency
must also send a copy of the finding and additional
information to the State Controller. ݧ5.]
State law requires a redevelopment agency to notify the
Department of Housing and Community Development at least 30
days before adopting an ordinance to merge redevelopment
project areas. SB 286 requires a redevelopment agency to
also notify the State Controller at least 30 days before
adopting an ordinance to merge redevelopment project areas.
ݧ11.]
VII. Audit requirements . The Bureau of State Audits,
under the direction of the State Auditor, performs
financial, compliance, performance, and contract audits of
local governments, either as required by statute or as
requested by the Joint Legislative Audit Committee (JLAC).
Senate Bill 286 creates the Redevelopment State Audit Fund
in the State Treasury and makes it available, upon
appropriation, to the State Auditor for specified purposes.
SB 286 prohibits transferring moneys in the fund to any
other fund except the Surplus Money Investment Fund,
subject to specified conditions. SB 286 requires an
redevelopment agency to deposit one quarter of one-tenth of
1% of the tax increment received by the agency after the
amount to be deposited in the Low and Moderate Income
Housing Fund has been deducted, into the Redevelopment
State Audit Fund. SB 286 requires that money deposited
into the Fund must solely be used by the State Auditor to
pay for performance audits of selected redevelopment
agencies to ensure compliance with the Community
Redevelopment Law's requirements. The performance audits
must include reviews of the agencies' independent audits
from the previous year. The State Auditor must require
that each agency take action to correct any audit
violations found through the performance audit. If the
State Auditor determines that an agency has not corrected
an audit violation within 180 days of a final audit report,
it must forward all relevant documents to the Attorney
General for action under a statute that lets the Attorney
General sue an agency for failing to correct a major audit
SB 286 -- 4/27/11 -- Page 10
violation. ݧ§10 and 19.]
VIII. Pass-through payments . The Community Redevelopment
Law requires redevelopment officials to make pass-through
payments to schools and other local governments to mitigate
the long-term fiscal effects of property tax increment
financing (AB 1290, Isenberg, 1993).
In a May 2008 report, the California State Controller's
Office 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.
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). Despite a recent
Attorney General's opinion and appellate court decision on
the topic, local officials still disagree about how
redevelopment agencies should calculate, pay, and report
their pass-through payments to local taxing entities.
Senate Bill 286 requires the State Controller to develop a
simple, uniform, and consistent methodology for
calculating, paying, and reporting pass-through payments
that is consistent with published case law and Attorney
General opinions. SB 286 requires the Controller to
appoint an advisory committee to advise in developing the
methodology. The Committee must include representatives
from the Chancellor of the California Community Colleges,
the State Department of Education, the California
Redevelopment Association, county auditor-controllers, and
any other authorities in the field that the Controller
deems necessary or appropriate. ݧ14.]
IX. Statements of indebtedness . The Community
Redevelopment Law requires redevelopment officials to file
an annual "statement of indebtedness" identifying an
agency's bonds, loans, and other debts. The State
SB 286 -- 4/27/11 -- Page 11
Controller must prescribe a uniform form of statement of
indebtedness and reconciliation statement. Senate Bill 286
requires the State Controller to review the uniform form of
statement of indebtedness and reconciliation statement
prescribed by state law and to revise it, including the
types and amounts of indebtedness to be reported. Before
making revisions, the Controller must obtain input from
county auditor-controllers, the California Redevelopment
Association, the Society of Certified Public Accountants,
and any other authorities in the field that the Controller
deems necessary and appropriate. SB 286 requires the
Controller to review the uniform form of statement of
indebtedness and reconciliation statement prescribed by
state law on or before January 1, 2013, and periodically
after that date. ݧ18.]
X. Administrative expenses . The Community Redevelopment
Law allows a local legislative body to appropriate money to
a redevelopment agency, either as a grant or a loan, to pay
for the agency's administrative expenses and overhead.
Senate Bill 286 lets an agency enter into an agreement with
its community's legislative body to reimburse the
administrative body for administrative expenses and
overhead of the agency paid by the legislative body. SB
286 prohibits an agency from paying the costs of providing
services, materials, or facilities which do not directly
benefit the redevelopment project. ݧ15.]
XI. Interest payments . The Community Redevelopment Law
lets a redevelopment agency borrow money from any public
agency for any redevelopment project within its area of
operation. Agencies may also borrow money or accept
financial or other assistance from any private lending
institution for any redevelopment project. Senate Bill 286
limits the interest rate on any money a redevelopment
agency borrows from its community's legislative body to a
rate that doesn't exceed simple interest on 10-year US
Treasury Bills. SB 286 specifies that this limit becomes
effective on January 1, 2012, and applies to money borrowed
from the legislative body at any time, regardless of the
provisions of any note, agreement, or other written
instrument to the contrary. ݧ13.]
State Revenue Impact
SB 286 -- 4/27/11 -- Page 12
No estimate.
Comments
1. Purpose of the bill . Eliminating redevelopment
agencies to obtain a relatively small amount of one-time
State General Fund relief is shortsighted. Physical and
economic blight hold back many California communities.
Private investors lack confidence in blighted real estate
markets. Local officials' traditional regulatory programs
and public works spending aren't enough to attract and
retain private investment. Without economically strong
urban areas, the pressure for suburban sprawl
increases. Really tough blight requires the really strong
tools that redevelopment provides. At its February 9, 2011
hearing on Governor Brown's proposal to eliminate
redevelopment, the Senate Governance & Finance Committee
heard testimony from numerous local officials about the
difference that redevelopment agencies are making in their
communities. At a time when local governments are
struggling to recover from the Great Recession, eliminating
redevelopment agencies will make it even harder for local
officials to make the public investments that create jobs,
retain businesses, and attract new residents. SB 286
offers an alternative approach that seeks to reduce
redevelopment agencies' impact on the State General Fund in
future years while improving redevelopment agencies'
performance and accountability. The bill makes substantial
reforms to the Community Redevelopment Law, addressing some
of the most controversial aspects of redevelopment
activities. For over 60 years, redevelopment agencies have
literally changed that way that California looks; largely
for the better. SB 286 helps ensure that they will
continue to benefit California's communities for decades to
come.
2. Constitutional questions . On November 2, 2010,
California voters approved Proposition 22, which amended
the California Constitution to prohibit the Legislature
from requiring a community redevelopment agency to:
Pay, remit, loan, or otherwise transfer, directly
or indirectly, taxes allocated to the agency pursuant
to the California Constitution's authorization of tax
increment financing to or for the benefit of the
State, any agency of the State, or any jurisdiction.
SB 286 -- 4/27/11 -- Page 13
Use, restrict, or assign a particular purpose for
tax increment revenues for the benefit of the State,
any agency of the State, or any jurisdiction, other
than for making specified pass-through payments or for
increasing, improving, and preserving the supply of
low and moderate income housing available at an
affordable cost.
To benefit the State General Fund, SB 286 amends the
statutes governing the allocation of property taxes levied
on parcels within a redevelopment area to exclude "any
funds considered educational entity property tax revenues"
from the tax increment that is allocated to project areas
established after January 1, 2012. The Committee may wish
to consider whether SB 286 violates Proposition 22 by
including a specific category of funds in some project
areas' tax increment, but excluding those funds, to offset
State General Fund spending on schools, from other project
areas' tax increment. The Committee also may wish to
consider whether SB 286 violates Proposition 22 by
requiring redevelopment agencies to deposit a small
percentage of their tax increment revenues into the State
Treasury to pay for performance audits conducted by the
State Auditor.
3. Definition . SB 286 doesn't define the phrase "any
funds considered educational entity property tax revenues,"
which is not used anywhere else in statutes. Do
"educational entity property tax revenues" include revenues
that are deposited into a county's Educational Revenue
Augmentation Fund? Do they include revenues that would go
to "basic aid" school districts, which do not receive a
backfill from the State General fund? By using the word
"considered," SB 286 seems to give someone - perhaps a
county auditor - discretion to choose what property tax
revenues to exclude from a new project area's tax increment
allocations. Rather than forcing local officials to
interpret this unclear phrase, the Committee may wish to
consider amending SB 286 to provide a detailed definition
of what revenues are to be excluded from tax increment
allocations to new redevelopment project areas.
4. Fiscal relief . The state government has a policy
interest in seeing that redevelopment projects succeed in
boosting local economies and expanding the supply of
affordable housing. The state government also has a fiscal
interest in redevelopment because the State General Fund
SB 286 -- 4/27/11 -- Page 14
subsidizes redevelopment agencies' projects. Although SB
286 contains some substantial reforms that address the
state's policy interests in redevelopment activities, the
bill offer less substantial fiscal relief. The requirement
to exclude educational entity property tax revenues from
tax increment allocations applies only to newly created
project areas. SB 286 doesn't exclude educational entity
property tax revenues from tax increment allocated to
existing project areas that - in the future - annex new
territory, merge project areas, extend time limits for
issuing debt, or increase the ceiling on the amount of
indebtedness that they may incur. The bill may provide no
fiscal relief at all if a court finds its fiscal provision
to be unconstitutional. The Committee may wish to consider
whether SB 286 adequately addresses the state's fiscal
interests in redevelopment.
5. More certainty, potential cost . A 2008 State
Controller's audit of redevelopment pass-through payments
to local taxing entities and subsequent reports from
redevelopment agencies on their pass-through payments
revealed many areas of disagreement among redevelopment
officials and county auditors over how those payments
should be calculated. An Attorney General's opinion issued
last September supported redevelopment agencies'
interpretation of how some calculations should be made. An
appellate court decision earlier this year in Los Angeles
Unified School District v. County of Los Angeles supported
the school districts' interpretation on another question
regarding pass-through payment calculations. SB 286
requires the State Controller to develop a simple, uniform,
and consistent methodology for calculating, paying, and
reporting pass-through payments. The bill does not make it
clear whether the Controller's methodology would be binding
on local governments. The Committee may wish to consider
amending SB 286 to require compliance with the Controller's
pass-through payment methodology. The Committee may also
wish to consider whether greater certainty about
pass-through calculations could come at a cost to the
state. If the methodology developed by the Controller
results in a decrease in the future pass-through payments
redevelopment agencies must make to schools, the State
General Fund will automatically make up the difference.
6. Blight findings and indebtedness . SB 286 builds on the
tighter definition of "blight" enacted by SB 1206 (Kehoe,
SB 286 -- 4/27/11 -- Page 15
2006) by imposing more rigorous standards on the evidence
that redevelopment officials must use to support a finding
that blight exists within a project area. Redevelopment
officials must make a finding that blight exists before
they can create a redevelopment project area, expand a
redevelopment project area, merge redevelopment project
areas, or extend the time limits on a redevelopment project
area. A blight finding is not required before
redevelopment agency officials increase the ceiling on the
amount of indebtedness incurred for a project area. The
Committee may wish to consider amending SB 286 to apply the
bill's more robust blight finding requirement to any
amendment to a redevelopment plan that raises a project
area's "debt ceiling."
7. Implement reforms before adding responsibilities . Some
of SB 286's reforms will significantly change the way that
redevelopment agencies do business, improving their efforts
to promote local economic development and provide housing.
The bill also expands redevelopment agencies' authority to
assist property owners and tenants to increase energy
efficiency, reduce greenhouse gas emissions, and create
infill development. Allowing agencies to issue more debt
for new types of redevelopment activities could offset SB
286's fiscal benefits and detract from efforts to implement
the bill's substantial reforms. The Committee may wish to
consider whether legislators should evaluate the
effectiveness of SB 286's reforms before authorizing new
redevelopment activities.
8. Limited interest . SB 286 caps the interest rate on a
redevelopment agency's "internal" debts to its city council
or board of supervisors at the simple rate of interest on
10-year US Treasury Bills. That cap applies retroactively
to money borrowed at any time, regardless of the terms
under which it was originally borrowed. The California
Constitution prohibits the Legislature from passing any
bill impairing the obligation of contracts. The Committee
may wish to consider whether a court would find SB 286's
retroactive interest rate cap to be an unconstitutional
impairment of a contract.
9. More limited interest . SB 286's interest rate cap
applies only to an agency's internal debts. It is a
response to concerns that local officials can use excessive
interest rates on internal borrowing to generate revenues
SB 286 -- 4/27/11 -- Page 16
for the city or county in which the agency is located.
However, some agencies have also paid exorbitant interest
rates on debts to private lenders. The Committee may wish
to consider amending SB 286 to impose an interest rate cap
on more types of redevelopment debt.
10. Related legislation . SB 286 is not the only bill
containing extensive redevelopment reform proposals.
Senate Bill 450 (Lowenthal, 2011) amends numerous
provisions of the Community Redevelopment Law to reform how
redvelopment agencies spend their low and moderate income
housing funds. That bill is scheduled to be heard in the
Senate Appropriations Committee on May 2.
Support and Opposition (4/28/11)
Support : California Redevelopment Association, League of
California Cities.
Opposition : Unknown.