BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 654
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: steinberg
VERSION: 1/4/12
Analysis by: Mark Stivers FISCAL: YES
Hearing date: January 10, 2012
SUBJECT:
Redevelopment housing funds
DESCRIPTION:
This bill allows the host city or county of a dissolving
redevelopment agency to retain the funds on deposit in the
agency's housing fund and expands the types of agency loans from
the host city or county that are considered enforceable
obligations.
ANALYSIS:
Historically, the Community Redevelopment Law has allowed a
local government to establish a redevelopment area and capture
all of the increase in property taxes that is generated within
the area (referred to as "tax increment") over a period of
decades. The law requires redevelopment agencies to deposit 20
percent of tax increment into a Low and Moderate Income Housing
Fund (L&M fund) to be used to increase, improve, and preserve
the community's supply of low and moderate income housing
available at an affordable housing cost.
In 2011, the Legislature enacted two bills, AB 26X (Blumenfield)
and AB 27X (Blumenfield), Chapters 5 and 6, respectively, of the
First Extraordinary Session. AB 26X eliminated redevelopment
agencies and established procedures for winding down the
agencies, paying off enforceable obligations, and disposing of
agency assets. In defining "enforceable obligations," AB 26X
included a loan agreement between an agency and its host city or
county that was executed within two years of the date of
creation of the redevelopment agency. AB 26X also included
provisions allowing the host city or county of a dissolving
redevelopment agency to retain the housing assets and functions
previously performed by the agency, except for funds on deposit
in the agency's L&M fund. If the host city or county chooses
not to retain these assets and functions, a local housing
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authority or the state's Department of Housing and Community
Development (HCD) may assume them.
AB 27X allowed redevelopment agencies to avoid elimination if
they made payments to schools in the current budget year and in
future years. In December, the California Supreme Court in
California Redevelopment Association v. Matosantos upheld AB 26X
and overturned AB 27X. As a result, all of the state's roughly
400 redevelopment agencies will dissolve on February 1, 2012.
This bill makes the following changes to AB 26X, the
redevelopment agency elimination bill:
Allows a host city or county of a dissolving agency to retain
the funds on deposit in the agency's L&M fund and requires the
city or county to expend those funds in compliance with the
housing provisions of the Community Redevelopment Law. If the
city or county chooses not to retain these funds, the local
housing authority or HCD may do so.
Requires, rather than permits, an entity assuming the housing
functions of an agency to enforce affordability covenants on
affordable housing properties.
Expands the definition of an "enforceable obligation" to
include two additional types of loan agreements between an
agency and its host city or county: 1) a loan that was
executed within two years of the date of creation of a project
area, if the loan is specific to that project area; and 2) a
loan to fund the agency's 2009-10 SERAF payment to schools.
COMMENTS:
1.Purpose of the bill . According to the author, this bill is
intended to preserve for affordable housing the roughly $2
billion in outstanding balances in the L&M funds maintained by
redevelopment agencies throughout the state. In the absence
of this legislation, those funds will be liquidated and
distributed as property tax revenues to local agencies, as
prescribed in AB 26X. Late last year, the Legislature
supported these same changes in SB 8X (Budget and Fiscal
Review), but Governor Brown vetoed that bill, stating that it
was "premature" in light of the then-pending litigation.
2.Undoing a last minute change . The Controller's Community
Redevelopment Agencies Annual Report for the fiscal year ended
June 30, 2010 shows a statewide aggregate "unreserved
designated" balance of $967 million and an "unreserved
SB 654 (STEINBERG) Page 3
undesignated" balance of $391 million in agency L&M funds.
The language of Governor Brown's initial proposal to eliminate
redevelopment agencies would have allowed host cities and
counties to retain the L&M fund balances of a dissolving
agency. The bill that the Legislature ultimately enacted,
however, reversed this authority. At the time, staff stated
that the change was made out of a concern that allowing
retention of L&M fund balances potentially could be viewed as
a reallocation of property tax and thus trigger a 2/3 vote
requirement for all of AB 26X. Legislative Counsel has since
settled on the view that L&M funds are assets of the
redevelopment agencies under Article XVI, Section 16 of the
State Constitution and not property taxes under Section 1 of
Article XIII A. This view is reflected in the majority vote
key for this bill. This bill restores the governor's original
proposal to allow cities and counties to keep L&M fund
balances and continue to use them to develop affordable
housing.
3.Start-up loans . Because it often takes years after the
adoption of a project area for a redevelopment agency to begin
receiving sufficient tax increment to issue bonds, most host
cities and counties jump-start work in project areas by making
loans to the agency to be repaid with future tax increment.
AB 26X only recognizes as "enforceable obligations" loans made
within two years of the creation of the agency, which
practically only affects an agency's first project area. Many
agencies have multiple project areas. This bill adds to the
definition of "enforceable obligations" loans made within the
first two years of the adoption of a project area, provided
that the loan is specific to that project area. The bill does
not recognize loans made at a later date, in which case the
host city or county may not receive repayment of those later
loans.
4.Urgency needed . Given that, under the recent Supreme Court
decision, redevelopment agencies will be winding down and
transferring assets during 2012, this bill needs an urgency
clause to ensure that a host city or county may elect to
retain L&M fund balances before the balances are
redistributed.
POSITIONS: (Communicated to the committee before noon on
Wednesday, January
4, 2012)
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SUPPORT: None received.
OPPOSED: None received.