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. SB 1156 (STEINBERG) Page 2 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. SB 1156 (STEINBERG) Page 3 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 SB 1156 (STEINBERG) Page 4 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 SB 1156 (STEINBERG) Page 5 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 SB 1156 (STEINBERG) Page 6 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 SB 1156 (STEINBERG) Page 7 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 SB 1156 (STEINBERG) Page 8 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 SB 1156 (STEINBERG) Page 9