BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair


          SB 1156 (Steinberg) - Community Development and Housing Joint 
          Powers Authorities.
          
          Amended: April 30, 2012         Policy Vote: G&F 6-3, T&H 5-3
          Urgency: No                     Mandate: No
          Hearing Date: May 14, 2012      Consultant: Mark McKenzie
          
          This bill meets the criteria for referral to the Suspense File. 

          
          Bill Summary: SB 1156 would allow cities and counties to form 
          Community Development and Housing joint powers authorities 
          (JPAs) to administer economic development and housing programs.

          Fiscal Impact: 
              Estimated loss of as much as $700 million in General Fund 
              savings by preventing the general reallocation of 
              approximately $1.36 billion in unreserved Low and Moderate 
              Income (L&M) funds to local governments, including schools.  
              To the extent this bill prevents these revenues from flowing 
              to schools, there would be a corresponding loss of General 
              Fund savings.  Approximately 50 percent of unencumbered L&M 
              funds would be distributed to schools in the near-term, 
              absent this bill.  In general, any property tax proceeds 
              diverted from schools results in an equivalent General Fund 
              cost, pursuant to Proposition 98's minimum funding 
              guarantees.

              Unknown costs to the Department of Finance (DOF), likely 
              exceeding $150,000 annually, to review school mitigation 
              plans and determine impacts on the state budget and whether 
              the impacts are "not unacceptable."  

              Potential for future General Fund impacts to the extent 
              that school districts or DOF approve a school mitigation 
              plan that is deemed to have no impact or an acceptable 
              impact on the state budget.  An impact deemed acceptable now 
              may grow to an unacceptable level in future years, as the 
              redevelopment plan would be in effect for up to 30 years.  
              In addition, the school mitigation plan may be deemed to 
              have no impact on a school district or the state budget 
              during a particular fiscal year, depending on whether we are 








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              in a Test 1, 2, or 3 year pursuant to Proposition 98, or if 
              a school district is basic-aid.  

              Significant diversion of future property tax increment to 
              JPAs to cover staffing and administrative costs associated 
              with new redevelopment activity authorized by the bill.  
              This could be a particularly difficult and costly 
              administrative task for a county that forms JPAs with 
              numerous cities within its boundaries.

          Background: Historically, the Community Redevelopment Law has 
          allowed a local government to establish redevelopment agencies 
          (RDAs) and capture all of the increase in property taxes that is 
          generated within the project area beyond the base year value 
          (referred to as "tax increment") over a period of decades.  RDAs 
          used tax increment financing to address issues of blight, 
          construct affordable housing, rehabilitate existing buildings, 
          and finance development and infrastructure projects.  

          Citing a significant State General Fund deficit, Governor 
          Brown's 2011-12 budget proposed eliminating RDAs and returning 
          billions of dollars of property tax revenues to schools, cities, 
          and counties to fund core services.  Among the statutory changes 
          that the Legislature adopted to implement the 2011-12 budget, AB 
          X1 26 (Blumenfield) Chap 5/2011 dissolved all RDAs and 
          established procedures for winding down RDA activity.  Existing 
          law requires successor agencies to dispose of former RDAs' 
          assets and properties, at an oversight board's direction, in an 
          expeditious manner aimed at maximizing value.  Successor 
          agencies are required to make any payments related to 
          enforceable obligations, as specified in an adopted recognized 
          obligation payment schedule (ROPS) and remit unencumbered 
          balances of RDA funds and proceeds from asset sales to the 
          county auditor-controller for distribution to local taxing 
          entities in the county.  Successor agencies cannot enter into 
          new enforceable obligations.

          SB 375 (Steinberg) Chap 728/2008, requires the Air Resources 
          Board (ARB) 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 








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          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.

          Proposed Law: SB 1156 would authorize a city and county that 
          includes territory of a former RDA to form a Community 
          Development and Housing Joint Powers Authority (JPA) to carry 
          out the Community Redevelopment Law, as specified.  
          Specifically, this bill would do the following:
           Require L&M funds of a former RDA to be retained in the 
            Sustainable Economic Development and Housing Trust Fund 
            (established by SB 1151, the companion measure to this bill).  
            If the L&M funds are not contracted for use within 60 months 
            from the effective date of this bill, the local agency would 
            transfer the L&M funds to an agency designated by the Governor 
            for use as grants to the JPA for the provision of affordable 
            housing.
           Authorize the JPA to enter into financial and other agreements 
            with community colleges, K-12 school districts, and private 
            businesses to "facilitate the development and operation of 
            articulated career technical education pathways."
           Authorize the JPA to adopt a redevelopment plan for a project 
            area that would expire within 30 years of the first issuance 
            of bonded indebtedness.
           Place the specified limits on project area designations: (1) 
            for regions within an MPO with an adopted SCS that has been 
            accepted by ARB, possible project areas may include transit 
            priority areas identified in an SCS and for each jurisdiction, 
            one small walkable community, as specified; or (2) sites that 
            have land use approvals or other controls restricting the site 
            to clean energy manufacturing and sites consistent with the 
            SCS, if those sites are within the geographic boundaries of an 
            MPO.
           Authorize a redevelopment plan to include a provision for the 
            receipt of tax increment funds provided the local government 
            adopts a school mitigation plan, an analysis of public service 
            costs and revenue-generating impacts of development of the 
            provision of basic services, restrictions on parking in 
            transit areas, and other practices consistent with an SCS.
           Specify that an adopted school mitigation plan to offset 
            losses of property tax revenue to schools must be approved by 
            the fiscally affected schools or submitted to DOF, which must 
            approve the plan if there is no impact on the state budget or 








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            if the impacts on the budget are not unacceptable.
           Authorize a state or local public pension fund to invest in 
            public infrastructure projects and private commercial and 
            residential development undertaken by a JPA.
           Authorize a JPA 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.
           Authorize a JPA to issue bonds paid for with authority 
            proceeds in order to carry out the provisions of this bill.
           Authorize a JPA to exercise the powers of an infrastructure 
            financing district to divert property tax increment revenues 
            and issue bonds to pay for public works.
           Authorize a JPA 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.

          Related Legislation: The following bills all plan for the 
          aftermath of redevelopment:
           SB 986 (Dutton), which authorizes successor agencies to use 
            the proceeds of certain bonds issued by former redevelopment 
            agencies to fulfill an enforceable obligation of the former 
            agency or enter into new enforceable obligations funded by 
            those bond proceeds until December 31, 2014.
           SB 1056 (Hancock), which expands the definition of 
            "enforceable obligation" to include financial obligations 
            related to a project funded with both tax increment and 
            federal school construction bonds. 
           SB 1151 (Steinberg), which creates an alternative process by 
            which communities can use their former redevelopment agencies' 
            assets for economic development and housing purposes.  SB 1151 
            is a companion measure to this bill.
           SB 1335 (Pavley), which allows a successor agency to retain 
            former RDA land that is a brownfield site for the purpose of 
            hazardous substance remediation or removal.
           AB 1235 (Hernandez), which provides all the authority, rights, 
            powers, duties, obligations and protections provided by the 
            Polanco Redevelopment Act to successor agencies.
           AB 1585 (Perez), which makes numerous amendments to the 
            statutes governing the redevelopment dissolution process.

          Recommended Amendments: This bill authorizes the formation of 
          JPAs after July 1, 2012.  This timing is necessary because 








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          successor agencies are working now to distribute those assets.  
          Since the bill, as drafted would not take effect until January 
          1, 2013, Staff recommends an amendment to add an urgency clause.