BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: SB 1156
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  steinberg
                                                         VERSION: 3/29/12
          Analysis by:  Carrie Cornwell                  FISCAL:  yes
          Hearing date:  April 24, 2012



          SUBJECT:

          Community Development and Housing Joint Powers Authority

          DESCRIPTION:

          This bill authorizes a city and county that included the 
          territory of a redevelopment agency to form a Community 
          Development and Housing Joint Powers Authority to carry out 
          Community Redevelopment Law, using the assets of a former 
          redevelopment agency as well as new revenues that the bill 
          authorizes.

          ANALYSIS:

          Historically, the Community Redevelopment Law allowed a local 
          government to establish a redevelopment area and capture all of 
          the increase in property taxes 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.  AB 26X established successor agencies, typically 
          the city that established the agency, to take control of all 
          redevelopment agency assets, properties, and other items of 
          value.  Successor agencies are to dispose of an agency's assets 
          as directed by an oversight board, made up of representatives of 
          local taxing entities, with the proceeds transferred to the 
          county auditor-controller for distribution to taxing agencies 
          within each county.




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          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, and thus become a 
          successor housing agency.  If the host city or county chooses 
          not to become the successor housing agency, a local housing 
          authority or the state's Department of Housing and Community 
          Development (HCD) may do so. 

          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 2011, 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 dissolved on February 1, 2012 and local 
          jurisdictions are in the process of implementing AB 26X's 
          provisions to distribute former redevelopment assets and pay its 
          remaining obligations.

          SB 375 (Steinberg), Chapter 728, Statutes of 2008, required the 
          Air Resources Board (ARB), by September 30, 2010, to provide 
          each region that has a metropolitan planning organization (MPO) 
          with a greenhouse gas emission reduction target for the 
          automobile and light truck sector for 2020 and 2035, 
          respectively.  Each MPO, in turn, is required to include within 
          its regional transportation plan a sustainable communities 
          strategy (SCS) designed to achieve the ARB targets for 
          greenhouse gas emission reduction.  Each MPO must submit its SCS 
          to ARB for review.  ARB must accept or reject the MPO's 
          determination that the SCS submitted would, if implemented, 
          achieve the greenhouse gas emission reduction targets.

           This bill  :

          1.Permits a city and county representing the geographic 
            territory covering the area served by a former redevelopment 
            agency to form a Community Development and Housing Joint 
            Powers Authority (authority) after July 1, 2012 to carry out 
            the Community Redevelopment Law.  If a county formed a 
            redevelopment agency, then the county may form an authority.  
            An authority so formed may adopt a redevelopment plan for a 
            project area.  This plan must terminate on a specified date 
            not more than 30 years after the first issuance of bond 
            indebtedness by the authority.   




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          2.Limits possible project areas to only the following:

               a.     Within an MPO.  For regions with an adopted SCS that 
                 ARB has accepted, possible project areas may include 
                 transit priority areas identified in a SCS and for each 
                 jurisdiction, one small walkable community, as defined. 

               b.     Within or outside of an MPO.  Sites that have land 
                 use approvals or other controls that restrict the sites 
                 to clean energy manufacturing and are consistent with the 
                 SCS strategy, where applicable.  The bill defines clean 
                 energy manufacturing as the manufacture of components, 
                 parts, or materials for the generation of renewal energy 
                 resources for alternative fuel vehicles.

            If the project area is based on proximity to a planned major 
            transit stop or a high-quality transit corridor, the stop or 
            the corridor must be scheduled to be completed within the 
            planning horizon established by specified federal regulations 
            governing the metropolitan transportation planning process.  
            The bill specifies that a transit priority area can include a 
            military base reuse plan that meets the definition of a 
            transit priority area and a contaminated site within a transit 
            priority area.

          3.Retains in the Sustainable Economic Development and Housing 
            Trust Fund, which can be created under SB 1151, also on 
            today's agenda, the existing L&M fund of the former 
            redevelopment agency for use in accordance with existing 
            redevelopment law.  If the L&M funds are not contracted for 
            use within 60 months from the effective date of this bill, 
            then the local agency shall transfer the L&M fund monies to an 
            agency designated by the governor for use as grants to the 
            authority for the provision of affordable housing.   

          4.Allows a redevelopment plan adopted pursuant to this bill to 
            include a provision for the receipt of tax increment funds 
            provided that the local government with land use jurisdiction 
            has adopted all of the following:

               a.     A school mitigation plan, which fiscally affected 
                 school districts must approve, to offset the loss of 
                 property tax revenue to schools that serve the project 
                 area.  If the fiscally affected school districts do not 
                 approve this plan, then the Department of Finance may 




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                 approve it and must do so if there is no impact on the 
                 state budget.

               b.     An analysis of public service costs and the 
                 revenue-generating impact of new development with respect 
                 to the provision of basic public services, including 
                 police and fire services.

               c.     A sustainable parking standards ordinance that 
                 restricts parking in transit priority project areas.

               d.     A requirement that 20 percent of the housing in the 
                 project area be affordable to persons of low and moderate 
                 income.

               e.     Within an MPO for transit priority areas and small 
                 walkable communities, a plan must be consistent with the 
                 land use policies in the SCS, and the MPO must concur in 
                 this finding.  In addition, the plan must require a 
                 density of at least 20 dwelling units per net acre, and 
                 for nonresidential uses set a minimum floor area ration 
                 of 0.75.

               f.     Outside of an MPO, a plan for new residential 
                 construction shall provide a density of at least 20 
                 dwelling units per acre, and for nonresidential uses set 
                 a minimum floor area ration of 0.75.  

          5.Permits an authority to enter into financial agreements with 
            community colleges, school districts, and private businesses 
            to facilitate the development and operation of articulated 
            career educational pathways. 

          6.Permits a state or local public pension fund to invest in 
            public infrastructure projects and private commercial and 
            residential development that an authority undertakes.

          7.Authorizes an authority to implement a local transactions and 
            use tax, above the state's base 7.25 percent sales and use 
            tax, provided that the resolution authorizing the tax 
            designates the use of the proceeds of the tax.

          8.Authorizes an authority to issue bonds paid for with authority 
            proceeds in order to carry out the provisions of this bill.

          9.Authorizes an authority to exercise the powers of an 




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            infrastructure financing district to divert property tax 
            increment revenues and issue bonds to pay for public works.

          10.        Allows an authority to finance infrastructure by 
            issuing bonds and lending the proceeds for public works, 
            working capital, and insurance programs as provided in the 
            Marks-Roos Local Bond Pooling Act.
          
          COMMENTS:

           1.Purpose  .  The author introduced this bill to set forth a new 
            vision of local economic development and housing policy for 
            the 21st century, focused on building sustainable communities 
            and creating the high skill, high wage jobs that are the key 
            to our future prosperity. 

            The purpose of bringing together the cities and the counties 
            as equal partners in an inclusive governance structure is to 
            correct the old model of redevelopment that pitted cities 
            against counties and schools for limited tax revenues.  Both 
            cities and counties have land use authority, and both share 
            responsibility for directing growth toward infill and 
            transit-oriented development consistent with SB 375 of 2008.  
            The author asserts that this bill will encourage cooperation, 
            not competition, between cities and counties in furtherance of 
            sustainable economic development.

            This bill recognizes that economic development requires 
            investments both in the physical capital of our infrastructure 
            and the human capital of our workforce, and therefore 
            authorizes financial agreements with community colleges, K-12 
            school districts, and industry to advance career education and 
            credentialing programs. 

           2.How much area does the bill cover  ?  This bill provides for the 
            creation of new Community Development and Housing Joint Powers 
            Authorities to take over the assets of the former 
            redevelopment agencies, to set up a new system of tax 
            increment financing with less impact to the state's finances, 
            to confer new revenue authority, and to retain all the other 
            powers that redevelopment agencies possessed under state law, 
            except it significantly limits the areas that would qualify as 
            project areas.  This bill explicitly states that these project 
            areas need not be blighted, but limits project areas to clean 
            energy manufacturing sites and, for cities and counties within 
            a MPO, to just a single small walkable community in each 




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            jurisdiction plus transit priority areas.  

            It is unclear how much area within the state would actually 
            meet these qualifications, because:

                 The bill defines a clean energy manufacturing site as 
               one with existing land use controls to restrict the site to 
               clean energy manufacturing, which the bill deems to consist 
               of "components, parts, or materials for the generation of 
               renewable energy resources for alternative fuel vehicles."  
               This definition provides no assurance that the clean energy 
               subsidized through this bill would indeed further or even 
               comport with existing state policy and laws on greenhouse 
               gas emissions, air pollution emissions, or renewal energy.  
               The committee may wish to define better what would qualify 
               as "clean energy" manufacturing for purposes of this bill.
          
                 The referenced definition of small walkable community 
               that the bill uses states that a small walkable community 
               cannot be in the area of a MPO, but the bill's provisions 
               describing possible project areas specifically allow small 
               walkable communities within MPOs.  The committee may wish 
               to amend this bill to clarify whether small walkable 
               communities may be included in a project area.

                 SB 375 provided for the creation of transit priority 
               areas, but the financial incentives in this bill could lead 
               over time to a proliferation of these as a means to access 
               the many powers conferred to an authority created under 
               this bill.  

          1.Housing provisions raise many questions  .  This bill retains 
            with the new authorities and trust fund, created in SB 1151, 
            also on today's agenda, the existing L&M fund of the former 
            redevelopment agency for use in accordance with existing 
            redevelopment law.  The bill further provides that if the 
            authority does not contract for use of the L&M funds within 60 
            months from the effective date of this bill, then the local 
            agency shall transfer the L&M fund monies to an agency 
            designated by the governor for use as grants to the authority 
            for the provision of affordable housing.  These housing 
            provisions raise numerous questions, including:

                 Existing law prescribes a process for ensuring that 
               redevelopment agencies spend their L&M funds appropriately 
               and in a timely process over four-year periods (known as 




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               the excess surplus law).  Why does this bill provide five 
               years from the effective date of this bill for contracting 
               to expend these funds, and is this meant to replace 
               existing law for existing L&M balances?

                 Does the bill mean for these provisions to govern new 
               L&M revenues accruing from new tax increment financing or 
               just the remaining, unencumbered L&M fund balance?

                 Given that the tax increment generated from this bill 
               would be much less than that generated from redevelopment 
               project areas, because at least the school share of the 
               property tax would be excluded, is a 20% set aside for the 
               L&M fund sufficient to support an affordable housing 
               program?

                 To what agency would the governor transfer unexpended 
               L&M balances?

                 Why does the bill return L&M funds back as grants to the 
               very entities that did not spend the money on affordable 
               housing in the first place?

                 Finally, this bill also requires that 20 percent of the 
               housing in the project area be affordable to persons of low 
               and moderate income.  To whom will these units be 
               affordable and how will this requirement mesh with existing 
               inclusionary and production requirements in the Community 
               Redevelopment Law?
           
          1.Where are the SB 450 fixes  ?  Last year the Legislature passed 
            SB 450 (Lowenthal), which substantively reformed how 
            redevelopment agencies spend their L&M funds.  That bill 
            passed this committee on April 5, 2011 by a 9-0 vote, but the 
            governor vetoed SB 450, deeming it premature in light of the 
            then pending Supreme Court decision on AB 26X and AB 27X in 
            California Redevelopment Association v. Matosantos.  This 
            bill, however, proposes restoring the use of the redevelopment 
            law, including its housing provisions, but without the changes 
            that SB 450 would have made.  The committee or the author may 
            therefore wish to amend this bill to include the reforms SB 
            450 proposed to how redevelopment agencies spend their housing 
            dollars.

           2.Urgency clause needed  .  This bill lets cities and counties 
            form Community Development and Housing Joint Powers 




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            Authorities to administer economic development and housing 
            programs after July 1, 2012.  This timing is necessary because 
            successor agencies are working now to distribute those assets. 
             But because this bill does not include an urgency clause, its 
            provisions will not take effect until January 1, 2013.  The 
            committee may wish to consider amending the bill to include an 
            urgency clause.

           3.Technical Amendments  . 

                 On page 4, line 26, delete "body" and insert "bodies"
                 On page 5, line 23, delete "agency" and insert 
               "authority"
                 On page 6, line 17, delete "34191.11" and insert 
               "34191.15"
                 On page 7, line 13, after "per" insert "net"
                 On page 8, line 13, delete "proceed" and insert 
               "proceeds"
                 On page 9, line 32, after "per" insert "net"
                 On page 11, line 7, after "per" insert "net"

           1.Committee of second referral  . The Rules Committee referred 
            this bill to the Governance and Finance Committee and to the 
            Transportation and Housing Committee.  This bill passed that 
            committee on April 18 by a 6 to 3 vote.  The Governance and 
            Finance Committee's analysis and hearing of the bill dealt 
            primarily with the provisions of the bill related to the local 
            government finance provisions, leaving the housing provisions 
            for review in this committee.
          
          POSITIONS:  (Communicated to the committee before noon on 
          Wednesday,                                             April 18, 
          2012)

               SUPPORT:  BRIDGE Housing
                         California Infill Builders Association
                         California State Association of Counties 
                         DMB Pacific Ventures
                         Los Angeles Alliance for a New Economy
                         Mission Bay Development Group

          
               OPPOSED:  California Special Districts Association
                         Howard Jarvis Taxpayers Association






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