BILL ANALYSIS Ó
SB 1156
Page 1
Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1156 (Steinberg) - As Amended: June 27, 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 a Sustainable Communities Investment Authority
(Authority) to be formed and specifies that it must comply
with the provisions of the Community Redevelopment Law (CRL),
and the bill's provisions.
2)Requires an Authority to adopt a plan for a sustainable
communities investment area (SCIA).
3)Requires a sustainable communities investment plan to
terminate on a specified date not to exceed 30 years from the
date of the first issuance of bond indebtedness by the
Authority.
4)Provides that the Authority shall be deemed to be an "agency"
as defined in the CRL and shall have all the rights,
responsibilities, and obligations of any agency, except that a
determination shall not be required to be made regarding
blight within the sustainable communities investment area, and
an action shall not be required to be taken for the
elimination of blight in connection with the creation of a
plan for a sustainable communities investment area.
5)Allows an Authority to be formed as follows:
a) An SCIA within an incorporated area may be formed in any
of the following ways:
i) The legislative bodies of the city and county
representing the geographic territory
of an SCIA may form an Authority by entering into a joint
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powers authority (JPA),
as specified, to establish the parameters of the proposed
economic development within a proposed SCIA;
ii) A legislative body of a city may form the governing
board and establish the parameters of the proposed
economic development within a proposed SCIA provided the
economic development parameters are approved by the
county;
iii) A city and county may appoint a governing board for
an SCIA comprised of three members appointed by the city
with geographic jurisdiction and two appointed by the
county with geographic jurisdiction; or,
iv) If an SCIA consists of a single project and 100% of
tax increment revenue is invested in the project, then a
legislative body of a city may appoint a governing board,
subject to county approval of the designation of the
SCIA.
b) If the SCIA is within an unincorporated area, the
Authority may be formed by the board of supervisors of a
county, or city and county.
6)Provides that the governing board of the Authority shall
consist of five members, and that members shall be appointed
for four-year terms and shall only be removed by the
appointing authority for cause, and provides that the initial
appointees to the governing board shall serve either two-year
or four-year terms and shall draw their terms by lot.
7)States that an SCIA shall include only the following:
a) For areas within the geographic boundaries of a
metropolitan planning organization (MPO) where a
sustainable communities strategy (SCS) has been adopted by
the MPO, and the State Air Resources Board has accepted the
MPO's determination that the SCS would, if implemented,
achieve the greenhouse gas emission reduction targets:
i) Transit priority areas are areas where a transit
priority project, as defined, may be constructed,
provided that if the SCIA is based on proximity to a
planned major transit stop or a high-quality transit
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corridor, the stop or the corridor must be scheduled to
be completed within the planning horizon, as specified.
Specifies that
a transit priority area may include a military base reuse
plan that meets the definition
of a transit priority area and it may include a
contaminated site within a transit priority area;
ii) Areas that are small walkable communities, as
defined, except that small walkable communities may also
be designated in a city that is within the area of an
MPO. Specifies that no more than one small walkable
community project area shall be designated within a city;
and,
iii) Sites that have land use approvals, covenants,
conditions and restrictions, or other effective controls
restricting the sites to clean energy manufacturing, and
that are consistent with the use, designation, density,
building intensity, and applicable policies specified for
the SCIA in the SCS, if those sites are within the
geographic boundaries of an MPO. Specifies that clean
energy manufacturing shall consist of the manufacturing
of any of the following:
(1) Components, parts, or materials for the
generation of renewable energy resources;
(2) Equipment designed to make buildings more
energy efficient or the component parts thereof;
(3) Public transit vehicles or the component parts
thereof; or,
(4) Alternative fuel vehicles or the component
parts thereof.
8)Allows a plan for an SCIA to include a provision for the
receipt of tax increment funds,
as specified, providing that the local government with land use
jurisdiction has adopted all
of the following:
a) A sustainable parking standards ordinance that restricts
parking in transit priority project areas to encourage
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transit use to the greatest extent feasible;
b) An ordinance creating a jobs plan. Specifies that all
entities receiving financial support from the Authority
shall, at a minimum, require that any and all agreements
approved by the Authority include a jobs plan, which shall
describe how the project will further create construction
careers that pay prevailing wages, living wage permanent
jobs, and create a program for community outreach, local
hire, and job training. Specifies that the plan shall also
describe the project developer's commitment to offer jobs
to disadvantaged California residents, including veterans
of the Iraq and Afghanistan wars, people with a history in
the criminal justice system, and single-parent families;
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 specified for the SCIA 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) Within small walkable communities outside of 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.
9)Requires, for small walkable communities outside of an MPO,
the Authority to obtain the MPO's concurrence that the plan is
consistent with the use designation, density, building
intensity, and applicable policies for the project area in the
SCS.
10)Specifies, in the event a tax increment financing provision
is included as part of an SCIA, and for the purposes of
collecting tax increment under Section 16 of Article XVI of
the California Constitution, that the terms "district" and
"affected taxing entity" shall exclude a school district and
special districts.
11)Permits a state or local pension fund system to invest
capital in the public infrastructure projects and private
commercial residential developments undertaken by an
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Authority.
12)Grants an Authority the ability to exercise the powers of the
Marks-Roos Local Bond Pooling Act of 1985.
13)Allows an Authority to implement local transaction and use
tax, except that the resolution authorizing the tax may
designate the use of the tax.
14)Establishes a process to prequalify developers for
construction contracts in excess of $1,000,000.
15)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.
16)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
of development, exclusive of structured parking areas,
proposed for the project divided by the total net lot area;
b) "Gross building area" as the sum of all finished areas
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 and declarations.
EXISTING LAW :
1)Dissolves redevelopment agencies as of February 1, 2012.
2)Establishes the Community Redevelopment Law, which governs the
authority to establish a redevelopment agency and the
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authority for a redevelopment agency to function as an agency
and to adopt and implement a redevelopment plan.
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.
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.
5)Specifies that a "transit priority project" shall a) contain
at least 50% residential use,
based on total building square footage and, if the project
contains between 26% and 50% nonresidential uses, a floor area
ratio of not less than 0.75; b) provide a minimum net density
of at least 20 dwelling units per acre; and, c) be within
one-half mile of a major transit stop or high-quality transit
corridor included in a regional transportation plan. A major
transit stop is as defined in Section 21064.3, except that,
for purposes of this section, it also includes major transit
stops that are included in the applicable regional
transportation plan. For purposes of this section, a
high-quality transit corridor means a corridor with
fixed-route bus service with
service intervals no longer than 15 minutes during peak commute
hours. A project shall be considered to be within one-half
mile of a major transit stop or high-quality transit corridor
if all parcels within the project have no more than 25% of
their area farther than one-half mile from the stop or
corridor and if not more than 10% of the residential units or
100 units, whichever is less, in the project are farther than
one-half mile from the stop or corridor.
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6)Requires, under the provisions of SB 375 (Steinberg), Chapter
728, Statutes of 2008, a regional transportation plan to
include a sustainable communities strategy designed to achieve
the targets for greenhouse gas emission reductions.
FISCAL EFFECT : Unknown. The bill is keyed fiscal.
COMMENTS :
1)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, 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 a city or county
to establish a Sustainable Communities Investment Authority to
use tax increment financing, on a limited scale, along with
other financing tools to support the goals of SB 375.
2)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, required the alignment of planning for
transportation and housing, and created specified incentives
for the implementation of those strategies.
This bill would authorize the use of tax increment as well as
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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.
3)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
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."
4)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. This bill excludes school
districts and special districts from "district" and "affected
taxing entity" for purposes of tax increment financing.
According to the author, this exclusion is intended to protect
the general fund by excluding schools, but it may be
unconstitutional to statutorily exclude schools and special
districts since the Constitution includes them in the
authorizing language for tax increment financing.
The Committee may wish to ask the author to discuss the
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constitutionality of these provisions that exempt school
districts and special districts, and whether these legal
issues can be resolved.
5)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. 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.
6)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
an Authority to establish an SCIA without making a finding of
blight. In order to eradicate blight, redevelopment agencies
had authority to use eminent domain. SB 1156 would permit an
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.
7)According to the author, "SB 1156 would bring together cities
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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.
8)The California State Association of Counties (CSAC) has a
"support in concept" position on the bill, but has raised
concerns about the governance structure contained in the bill.
CSAC writes that "the bill as currently drafted is not clear
about whether a county's permission is required before the
creation of a Sustainable Communities Investment Authority.
Likewise, for governance options where the county is not a
full equal partner with a city, the required permission should
include specific minimum information about how the tax
increment funds will be used and for how long the funds will
be diverted. Any changes to that basic information should
also require the permission of any entities whose money is
being diverted for those purposes."
Additionally, CSAC notes that they "envision a new structure
for community development and affordable housing that gives
counties and cities working together the power to not only
spur economic development, but at the same time provide the
public infrastructure that would help ensure truly sustainable
communities. This infrastructure should include transitional
housing for people entering or reentering the workforce after
incarceration or a childhood spent in the foster system, as
well as others who need transitional and supportive housing.
It should include the child care facilities that allow parents
to work, or the clinics that keep those housed locally
healthy, working, and out of emergency rooms."
9)The League of California Cities (League), in their "notice of
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concerns" letter, raises several issues with respect to the
creation of a tool that cities can use. The League notes that
there are several issues remaining in the bill that would
benefit from further clarity:
a) How the existing governance options in the bill will
affect its usefulness;
b) A review of the practical effects of incorporating
redevelopment law into this Authority;
c) How this tool would interact in former redevelopment
project areas which are likely to remain embroiled in
controversy; and,
d) An evaluation of the impact on the usefulness of this
tool given the other programs, policies and conditions
added to the bill that would apply to the activities of the
Authority and public and private entities that receive
financial support from the Authority.
10)Given the issues pointed out by both CSAC and the League and
their request to create a workable economic development tool
for the future, and also given the current unwinding
of redevelopment that gave the authority, rights, powers, duties
and obligations previously vested with former redevelopment
agencies (except for those that were repealed, restrict or
revised in AB 26X) to the successor agencies, the Committee
may wish to consider the following:
a) Is this economic development tool the right mechanism
for local agencies? Are the uses specified in the bill for
funding (transit priority areas, small walkable
communities, and clean energy manufacturing) those that the
Legislature, cities, and counties want to encourage, or are
there other priorities that should be included?
b) How would this bill interplay with the current work of
the successor agencies?
c) Are there other funding mechanisms or alternatives that
should be discussed as part of a larger conversation about
economic development tools for cities and counties?
11)Support arguments : Supporters argue that this bill sets
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forth a new vision of local economic development 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.
Opposition arguments : Concerns have been raised about the
constitutionality of the funding mechanism that the bill
creates and whether the priorities proposed to be funded by
the Authority are those that the Legislature and local
governments believe should be part of a new structure for
economic and community development.
12)This bill was heard in the Assembly Housing and Community
Development Committee on June 27, 2012, where it passed with a
5-2 vote.
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 Ýin concept]
California Teamsters Public Affairs Council
City of Burbank
DMB Pacific Ventures
Los Angeles Alliance for a New Economy
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Mission Bay Development Group
Natural Resources Defense Council
State Building and Construction Trades Council of California
Concerns
League of California Cities
Opposition
Associated Builders and Contractors of California
California Taxpayers Association
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958