BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 1156
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          Date of Hearing:   June 27, 2012

               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
                                 Norma Torres, Chair
                   SB 1156 (Steinberg) - As Amended:  June 20, 2012

           SENATE VOTE  :   21-15
           
          SUBJECT  :   Sustainable Communities Investment Authority 

           SUMMARY  :   Allows local governments to establish a Sustainable 
          Communities Investment Authority after July 1, 2012, to finance 
          specified activities within a sustainable communities investment 
          area.  Specifically,  this bill  :   

          1)Allows the city council and board of supervisors representing 
            a sustainable communities investment area to form a joint 
            powers authority to create a Sustainable Communities 
            Investment Authority (Authority) after July 1, 2012, to carry 
            out Community Redevelopment Law. 

          2)Provides that if the sustainable communities investment area 
            is within an incorporated area, the following apply:

             a)   The city council forms the governing board of the 
               Authority and establishes the parameters of the proposed 
               economic development within the sustainable communities 
               investment area with the county's approval; 

             b)   A governing board for the sustainable communities 
               investment area made up of three members appointed by the 
               city and two by the county; and

             c)   If the city designates a sustainable communities 
               investment area that consists of only one project, 100% 
               percent of the tax increment is invested in the project, 
               with the county's approval.  

          1)If the sustainable communities investment area is within an 
            unincorporated area, the Authority may be formed by the board 
            of supervisors.

          2)Provides that members of any governing board formed for a 
            sustainable communities investment area serve for four year 
            terms and can only be removed by the appointing authority for 








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            cause.

          3)Allows an Authority 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.

          4)Allows an Authority to adopt a plan for a sustainable 
            communities investment area without a finding of blight.

          5)Provides that a plan for a sustainable communities investment 
            area will terminate 30 years from the date of the first 
            issuance of bond indebtedness by the Authority. 
          6)Limits a sustainable communities investment area within the 
            geographic boundaries of a metropolitan planning organization 
            (MPO), where a sustainable communities strategy (SCS) has been 
            adopted and approved by the state Air Resources Board, to 
            including the following:

             a)   A transit priority area, provided the planned major 
               transit stop or the high-quality transit corridor will be 
               scheduled to be completed within the planning horizon 
               established by the Code of Federal Regulations; 

             b)   A transit priority area may include a military base 
               reuse plan with a contaminate site; and 

             c)   Small walkable communities as defined in Section 21094.5 
               of the Public Resources Code, except that small walkable 
               communities may also be designated in a city that is within 
               the sustainable communities investment area of a MPO. No 
               more than one small walkable community project area shall 
               be designated within a city.

             d)   Sites that are restricted to clean energy manufacturing 
               that are consistent with the SCS if they are within the 
               geographic boundaries of a MPO.

          1)Limits clean energy manufacturing to the following:

             a)   Manufacture of components, parts, or materials for the 
               generation of renewable energy resources;

             b)   Equipment designed to make buildings more 
               energy-efficient or the component parts;








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             c)   Public transit vehicles or components parts of public 
               transit vehicles; and

             d)   Alternative fuel vehicles or component parts of 
               alternative fuel vehicles. 

          1)Provides that solely for the purposes of a plan for a 
            sustainable communities investment area, an Authority may 
            receive tax increment funds, if the local government with land 
            use jurisdiction has adopted the following:

             a)   A sustainable parking standards ordinance that restricts 
               parking in transit priority project areas to encourage 
               transit use to the greatest extent feasible;  

             b)   An ordinance creating a jobs plan that describes how the 
               project will create construction careers that pay 
               prevailing wages and create living wage permanent jobs, and 
               that contains a program for community outreach, local hire, 
               and job training;

             c)   For transit priority areas and small walkable 
               communities within an MPO, a plan consistent with the use 
               designation, density, building intensity, and applicable 
               policies for the area in the SCS and that for new 
               residential construction provides a density of at least 20 
               dwelling units per net acre and for nonresidential uses 
               provides a minimum floor area  ratio of 0.75; and

             d)   For small walkable communities outside an MPO, a plan 
               for new residential construction that provides a density of 
               at least 20 dwelling units per net acre and for 
               nonresidential uses provides a minimum floor area ratio of 
               0.75. 
          1)Requires that for small walkable communities, transit 
            projects, and clean energy manufacturing sites within an MPO, 
            an Authority must get the agreement of the MPO that the plan 
            for the sustainable communities investment area is consistent 
            with the use designation, density, building intensity and 
            applicable policies of the SCS. 

          2)Requires the jobs plan to contain programs for outreach to 
            disadvantaged California residents, including veterans of the 
            Iraq and Afghanistan wars, people with a history in the 








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            criminal justice system, and single parent families. 

          3)Requires all entities that receive financial support from the 
            Authority to enter into an agreement with the Authority that 
            includes the entity's commitments to fulfill applicable 
            portions of the jobs plans. 

          4)Provides that for purposes of collecting tax increment under 
            Section 16 of Article XVI of the Constitution, the terms 
            "district" and" affected taxing entity" exclude a school 
            district and special districts. 
               
          5)Requires the Authority to approve any bond financing. 

          6)Permits a state or local pension fund system to invest capital 
            in the public infrastructure projects and private commercial 
            residential developments undertaken by an Authority. 

          7)Grants an Authority the ability to exercise the powers of the 
            Marks-Roos Local Bond Pooling Act of 1985.

          8)Allows an Authority to implement local transaction and use 
            tax, except that the resolution authorizing the tax may 
            designate the use of the tax.

          9)Establishes a process to prequalify developers for 
            construction contracts in excess of $1,000,000.

          10)Requires the Department of Industrial Relations to monitor 
            and enforce compliance with prevailing wage requirements for 
            projects that include funds from an Authority and shall charge 
            each awarding body or developer for the reasonable and 
            directly related costs of monitoring and enforcing compliance 
            with the prevailing wage requirements of each project.  

          11)Defines, for the purpose of exempting small walkable 
            communities from the California Environmental Quality Act 
            (CEQA), the following terms:

             a)   "Floor area  ratio" as the ratio of gross building area 
               (GBA) of development, exclusive of structured parking 
               areas, proposed for the project divided by the total net 
               lot area (NLA);  

             b)   "Gross building area" as the sum of all finished areas 








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               of all floors of a building included within the outside 
               faces of its exterior walls; and 

             c)   "Net lot area" means the area of a lot excluding 
               publicly dedicated land, private streets that meet local 
               standards, and other public use areas as determined by the 
               local land use authority. 

             1)   Makes legislative findings. 
           
          EXISTING LAW  :

          1)Dissolves redevelopment agencies as of February 1, 2012 
            (Health and Safety Code Section 34170).

          2)Establishes the Community Redevelopment Law (CRL), which 
            governs the authority to establish a redevelopment agency and 
            the authority for a redevelopment agency to function as an 
            agency and to adopt and implement a redevelopment plan (Health 
            and Safety Code Section 33000 et seq.).

          3)Requires the California Law Revision Commission to draft a CRL 
            clean-up bill for consideration by the Legislature no later 
            than January 1, 2013 (Health and Safety Code 34189). 

          4)Defines a "small walkable community project" as a project that 
            is in an incorporated city that is not within the boundaries 
            of an MPO and that satisfies the following requirements:

             a)   Has a project area of approximately one-quarter mile 
               diameter of contiguous land completely within the existing 
               incorporated boundaries of the city;

             b)   Has a project area that includes a residential area 
               adjacent to a downtown retail area; and

             c)   The project has a density of at least eight dwelling 
               units per acre or a floor area ratio for retail or 
               commercial uses of not less than 0.50. 

            (Public Resources Code Section 21094.5)

           FISCAL EFFECT  :   Unknown 

           COMMENTS  :   








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          In 2011, the Legislature approved and the Governor signed two 
          measures, ABX1 26 and ABX1 27 that together dissolved 
          redevelopment agencies as they existed at the time and created a 
          voluntary redevelopment program on a smaller scale.  In 
          response, the California Redevelopment Association (CRA), League 
          of California Cities, along with other parties, filed suit 
          challenging the two measures. The Supreme Court denied the 
          petition for peremptory writ of mandate with respect to ABX1 26. 
          However, the Court did grant CRA's petition with respect to ABX1 
          27.   As a result, all redevelopment agencies were required to 
          dissolve as of February 1, 2012.    

          Over the last sixty years, redevelopment agencies used tax 
          increment to finance affordable housing, community development, 
          and economic development projects.  The dissolution of 
          redevelopment agencies has created a void and an effort to 
          create new tools that would support community and economic 
          development activities.  SB 1156 would allow cities and counties 
          to establish Sustainable Communities Investment Authorities 
          (Authorities) to use tax increment financing, on a limited 
          scale, along with other financing tools to support the goals SB 
          375 (Steinberg), Chapter 728, Statutes of 2008. 

          SB 375 created a new procedure for land use planning that would 
          require local governments to plan in a way that would accomplish 
          the greenhouse gas reduction goals of AB 32: The California 
          Global Greenhouse Gas Reduction Act of 2006.  SB 375 required 
          MPOs to adopt an SCS in their regional transportation plans for 
          the purpose of reducing greenhouse gas emissions, aligning 
          planning for transportation and housing, and creating specified 
          incentives for the implementation of those strategies. This bill 
          would authorize the use of tax increment as well as other 
          funding sources to finance some of the projects-small walkable 
          communities, transit priority areas and clean energy 
          manufacturing --that would be part of the SCS. 

           Purpose of the bill:  According to the author, "this bill sets 
          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 








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          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.  
          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."

           Financing tool  : This bill relies upon tax increment financing, 
          in addition to several other potential funding sources, 
          including Mello Roos, capital investment from public pensions, 
          and local transaction and use taxes, to support the development 
          of transit priority areas, small walkable communities, and clean 
          energy manufacturing.  One of the challenges of using tax 
          increment as a financing tool for community and economic 
          development in the post-redevelopment world is carving out the 
          schools portion of the tax increment.  Section 16 of Article XVI 
          of the California Constitution gives authority to reapportion 
          property taxes among a city, city and county, and district or 
          other public corporation (otherwise known as taxing agencies) 
          for the purpose of redevelopment.  SB 1156 excludes school 
          district and special district from "district" and "affected 
          taxing entity" for purposes of tax increment financing.  This 
          exclusion is intended to protect the general fund by excluding 
          schools, but it could be unconstitutional to statutorily exclude 
          schools and special districts since the Constitution includes 
          them in the authorizing language for tax increment financing. 

           Application of Community Redevelopment Law (CRL)  :  The author's 
          intent is to apply the provisions of the CRL to sustainable 
          communities investment authorities. However, this is not clear 
          in the bill.  The committee may wish to clearly state this 
          intent. 

          Applying the CRL, to sustainable communities investment 
          authorities presents challenges. Definitions and procedures in 
          the CRL will not translate in all cases to the new sustainable 








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          communities investment authority.  Although the bill makes an 
          "authority" the same as an "agency" as defined in the CRL, that 
          is the only definition that is included in the bill to 
          coordinate the CLR and the new Authority.  In order to apply the 
          CRL to Authorities formed under this bill, there would need to 
          be significant reworking of the CRL so that it could be applied 
          appropriately.  For example, the CRL defines project areas as 
          meeting certain requirements, including approval by a project 
          area committee.  It is not clear how this would translate to a 
          sustainable communities investment authority and what role if 
          any the project area committee would play.  

          Additionally, the CRL required redevelopment agencies to set 
          aside 20% of tax increment generated in project areas for the 
          creation, construction, and improvement of housing affordable to 
          low- and moderate-income families and individuals. The CRL also 
          contains inclusionary and production housing requirements 
          (Health and Safety Code Section 33413). In redevelopment project 
          areas, 15% of new and substantially rehabilitated dwellings 
          developed must be available at affordable housing cost to 
          persons of low or moderate-income. To fulfill this requirement, 
          RDAs could cause to be available two units outside the project 
          area, for every one unit within the project area. The committee 
          may wish to consider how this requirement would apply to transit 
          priority areas and small walkable communities financed by the 
          Authority.  By definition, transit priority areas and small 
          walkable communities are smaller geographically than 
          redevelopment project areas.   The committee may wish to 
          consider that this is an area where the inconsistency between 
          the CRL and new model proposed in this bill needs to be a 
          considered and addressed, otherwise this new tool will be 
          unworkable.  

           No finding of blight  : Post-World War II, redevelopment was 
          created as a tool to combat urban decay and eradicate blight.  
          Redevelopment agencies were given fundamental tools including 
          the ability to acquire property through the power of eminent 
          domain, the authority to finance their activities by issuing 
          bonds and taking on debt, and the authority and obligation to 
          relocate people who have interests in the property acquired by 
          an agency.  To establish redevelopment project areas, a 
          redevelopment agency was required to identify both physical and 
          economic blight in the project area that could not be mitigated 
          without the use tax increment.  SB 1156 would allow sustainable 
          communities investment authority to establish a sustainable 








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          communities investment area without making a finding of blight.  
          In order to eradicate blight, redevelopment agencies had 
          authority to use eminent domain. SB 1156 would permit a 
          sustainable   communities investment authority to use eminent 
          domain without a finding of blight. To avoid possible unintended 
          consequences from broadly authorizing the use of the Community 
          Redevelopment Law, the Committee may wish to consider amending 
          SB 1156 to specify which Community Redevelopment Law powers a 
          JPA can use without regard to blight.

           Workability  :  According to the author, "SB 1156 would bring 
          together cities and counties as equal partners in an inclusive 
          governance structure to improve upon the old model of 
          redevelopment that often pitted cities against counties and 
          schools for limited tax revenues." In order to make a new tool 
          for community and economic development work it needs to set 
          reasonable and achievable standards for compliance. In order to 
          use tax increment to finance projects in a sustainable 
          communities investment area, this bill would require a city and 
          or county to adopt a sustainable parking ordinance that 
          encourages public transit and a jobs plan that would create 
          careers that pay prevailing wage.  The committee may wish to 
          consider whether defining benchmarks for a sustainable parking 
          plan would be useful in helping cities and counties comply with 
          the requirements of the bill.  

          An Authority would be formed by a JPA between a city and county 
          in an incorporated area, the city would for a governing body and 
          establish the parameters of a sustainable communities investment 
          area with the approval of the county. A separate board is then 
          set up made up of three members representing the city and two 
          representing the county.  Although the board for the area made 
          up of city and county representatives is formed, it is never 
          mentioned again in the bill. It's unclear what role the 
          governing body of the sustainable communities investment area 
          would play in the new financing tool, although it is defined and 
          membership is detailed it does not have a role in implementing 
          the authority or plan.  The committee may wish to clarify the 
          governing structure for the Authority detailed in the bill. 

          The bill requires counties to sign off on sustainable 
          communities investment areas and projects, the bill does not 
          provide cities with an option to create their own sustainable 
          communities investment area to use only their portion of tax 
          increment.  It is unclear if counties and cities could agree to 








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          collaborate on a sustainable communities investment area and 
          therefor if the new tool provided could be used by local 
          governments.   

           Housing issues:   As introduced this bill provided a financing 
          tool for housing and economic development but has been amended 
          to finance selected developments that would accomplish the 
          planning goals of the SCS, including transit priority areas, 
          small walkable communities, and clean energy manufacturing.   
          Although housing is no longer specifically mentioned, the 
          Authority would be required to comply with the housing 
          provisions of the CRL. This raises some concerns.  
           
                 Last year, SB 450 (Lowenthal) proposed significant 
               reforms to the CRL, including reforms to the housing 
               provisions. SB 450 was vetoed by the Governor because he 
               felt it was premature in light of the pending Supreme Court 
               decision on ABX1 26 and ABX1 27 in California Redevelopment 
               Association v. Matosantos.   There is a reference in the 
               intent language of SB 1156 to incorporate the changes the 
               CRL made by SB 450, but  SB 1156 does not do so.  The 
               committee may wish to consider that the SB 450 reforms were 
               made to address abuses of the CRL and that in setting up a 
               new community economic development entity that is subject 
               to the CRL, it would be prudent to ensure that those 
               reforms are made to the CRL so that the same abuses don't 
               occur in the new sustainable communities investment 
               authority. 

                 Redevelopment agencies were required to set aside 20% of 
               tax increment generated in redevelopment project areas for 
               the creation, improvement, and preservation of affordable 
               housing. The committee may wish to consider whether a 20% 
                                                                     set-aside is the appropriate amount in transit priority 
               areas where there would need to be a higher concentration 
               of residential units.  Additionally, less money will be 
               generated because the schools portion of tax increment will 
               be excluded.  

                 Under the CRL, redevelopment agencies could fulfill 
               their inclusionary housing requirements by causing to be 
               available by regulation or agreement two affordable housing 
               units outside the project area, for every one that would 
               have been available in the project area. The committee may 
               wish to consider that in the case of a transit priority 








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               area, the need for more residential units would argue 
               against allowing the Authority to meet the inclusionary 
               housing requirements of the CRL outside the transit 
               priority area. 

            Committee amendments:  

          The committee has suggested the following amendments to clarify 
          the bill and to require an Authority to set a-side 30% of tax 
          increment generated in a sustainable communities investment area 
          for housing affordable to low and moderate-income families:

                 Clarify how the governing body of an Authority may be 
               created.  

                 Make clear an Authority is required to comply with 
               Community Redevelopment Law and the provisions of this 
               bill.  

                 Require Authority to set aside 30% of tax increment for 
               affordable housing for low and moderate income families and 
               individuals. 

           Double referred  :  If SB 1156 passes this committee, the bill 
          will be referred to the Committee on Local Government.
           
          REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          American Federation of State, County and Municipal Employees
          BRIDGE Housing
          California Labor Federation
          California Special Districts Association
          California State Association of Counties
          California Teamsters Public Affairs Council
          City of Burbank
          DMB Pacific Ventures
          Los Angeles Alliance for a New Economy
          Mission Bay Development Group
          Natural Resources Defense Council
          State Building and Construction Trades Council of California
           
            Opposition 
           








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          Associated Builders and Contractors of California
          California Taxpayers Association
          Plumbing-Heating-Cooling Contractors Association of California
          Western Electrical Contractors Association

           Analysis Prepared by  :    Lisa Engel / H. & C.D. / (916) 319-2085