Amended in Senate August 21, 2013

Amended in Senate August 13, 2013

Amended in Assembly May 13, 2013

Amended in Assembly April 9, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 423

Introduced by Assembly Member Torres

February 15, 2013

An act to amend Section 34171 of, and to add Section 34176.6 to, the Health and Safety Code, relating to housing begin insert , and declaring the urgency thereof, to take effect immediately end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 423, as amended, Torres. Multiphase affordable housing projects: enforceable obligations.

The Community Redevelopment Law authorizes the establishment of redevelopment agencies in communities to address the effects of blight, as defined. Existing law dissolved redevelopment agencies and community development agencies as of February 1, 2012, and provides for the designation of successor agencies. Existing law imposes various requirements on successor agencies and subjects successor agency actions to the review of oversight boards. Existing law requires each oversight board to direct the successor agency to, among other things, cease performance in connection with and terminate all existing agreements that do not qualify as enforceable obligations, as defined.

This bill would authorize a successor agency of a former redevelopment agency that commenced and completed construction of portions of a multiphase affordable housing project in a county with a population over 1.7 million or in a city with a population over 160,000 to enter into a new enforceable obligation to complete the design and construction of a qualifying future phase, as specified, of a project. The bill would require that any moneys from the former redevelopment agency’s Low and Moderate Income Housing Fund that have not been remitted to the county auditor-controller, as specified, to first be allocated to the implementing entity of the new enforceable obligation to pay for the costs associated with specified agreements. The bill would require, if the remaining balance of the Low and Moderate Income Housing Fund is insufficient to pay for the costs associated with the specified agreements, any remaining costs to be included on Recognized Obligation Payment Schedules as enforceable obligations and be funded with Redevelopment Property Tax Trust Funds.

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This bill would declare that it is to take effect immediately as an urgency statute.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 34171 of the Health and Safety Code is
amended to read:

34171.  

The following terms shall have the following meanings:

(a) “Administrative budget” means the budget for administrative
costs of the successor agencies as provided in Section 34177.

(b) “Administrative cost allowance” means an amount that,
subject to the approval of the oversight board, is payable from
property tax revenues of up to 5 percent of the property tax
allocated to the successor agency on the Recognized Obligation
Payment Schedule covering the period January 1, 2012, through
June 30, 2012, and up to 3 percent of the property tax allocated to
the Redevelopment Obligation Retirement Fund money that is
allocated to the successor agency for each fiscal year thereafter;
provided, however, that the amount shall not be less than two
hundred fifty thousand dollars ($250,000), unless the oversight
board reduces this amount, for any fiscal year or such lesser amount
as agreed to by the successor agency. However, the allowance
amount shall exclude, and shall not apply to, any administrative
costs that can be paid from bond proceeds or from sources other
than property tax. Administrative cost allowances shall exclude
any litigation expenses related to assets or obligations, settlements
and judgments, and the costs of maintaining assets prior to
disposition. Employee costs associated with work on specific
project implementation activities, including, but not limited to,
construction inspection, project management, or actual
construction, shall be considered project-specific costs and shall
not constitute administrative costs.

(c) “Designated local authority” shall mean a public entity
formed pursuant to subdivision (d) of Section 34173.

(d) (1) “Enforceable obligation” means any of the following:

(A) Bonds, as defined by Section 33602 and bonds issued
pursuant to Chapter 10.5 (commencing with Section 5850) of
Division 6 of Title 1 of the Government Code, including the
required debt service, reserve set-asides, and any other payments
required under the indenture or similar documents governing the
issuance of the outstanding bonds of the former redevelopment
agency. A reserve may be held when required by the bond
indenture or when the next property tax allocation will be
insufficient to pay all obligations due under the provisions of the
bond for the next payment due in the following half of the calendar
year.

(B) Loans of moneys borrowed by the redevelopment agency
for a lawful purpose, to the extent they are legally required to be
repaid pursuant to a required repayment schedule or other
mandatory loan terms.

(C) Payments required by the federal government, preexisting
obligations to the state or obligations imposed by state law, other
than passthrough payments that are made by the county
auditor-controller pursuant to Section 34183, or legally enforceable
payments required in connection with the agencies’ employees,
including, but not limited to, pension payments, pension obligation
debt service, unemployment payments, or other obligations
conferred through a collective bargaining agreement. Costs incurred
to fulfill collective bargaining agreements for layoffs or
terminations of city employees who performed work directly on
behalf of the former redevelopment agency shall be considered
enforceable obligations payable from property tax funds. The
obligations to employees specified in this subparagraph shall
remain enforceable obligations payable from property tax funds
for any employee to whom those obligations apply if that employee
is transferred to the entity assuming the housing functions of the
former redevelopment agency pursuant to Section 34176. The
successor agency or designated local authority shall enter into an
agreement with the housing entity to reimburse it for any costs of
the employee obligations.

(D) Judgments or settlements entered by a competent court of
law or binding arbitration decisions against the former
redevelopment agency, other than passthrough payments that are
made by the county auditor-controller pursuant to Section 34183.
Along with the successor agency, the oversight board shall have
the authority and standing to appeal any judgment or to set aside
any settlement or arbitration decision.

(E) Any legally binding and enforceable agreement or contract
that is not otherwise void as violating the debt limit or public
policy. However, nothing in this act shall prohibit either the
successor agency, with the approval or at the direction of the
oversight board, or the oversight board itself from terminating any
existing agreements or contracts and providing any necessary and
required compensation or remediation for such termination. Titles
of or headings used on or in a document shall not be relevant in
determining the existence of an enforceable obligation.

(F) Contracts or agreements necessary for the administration or
operation of the successor agency, in accordance with this part,
including, but not limited to, agreements concerning litigation
expenses related to assets or obligations, settlements and
judgements, and the costs of maintaining assets prior to disposition,
and agreements to purchase or rent office space, equipment and
supplies, and pay-related expenses pursuant to Section 33127 and
for carrying insurance pursuant to Section 33134.

(G) Amounts borrowed from, or payments owing to, the Low
and Moderate Income Housing Fund of a redevelopment agency,
which had been deferred as of the effective date of the act adding
this part; provided, however, that the repayment schedule is
approved by the oversight board. Repayments shall be transferred
to the Low and Moderate Income Housing Asset Fund established
pursuant to subdivision (d) of Section 34176 as a housing asset
and shall be used in a manner consistent with the affordable
housing requirements of the Community Redevelopment Law (Part
1 (commencing with Section 33000)).

(H) Any agreement necessary to complete the design and
construction of a qualifying future phase of a project pursuant to
subdivision begin delete (b) end delete begin insert (a) end insert of Section 34176.6.

(2) For purposes of this part, “enforceable obligation” does not
include any agreements, contracts, or arrangements between the
city, county, or city and county that created the redevelopment
agency and the former redevelopment agency. However, written
agreements entered into (A) at the time of issuance, but in no event
later than December 31, 2010, of indebtedness obligations, and
(B) solely for the purpose of securing or repaying those
indebtedness obligations may be deemed enforceable obligations
for purposes of this part. Notwithstanding this paragraph, loan
agreements entered into between the redevelopment agency and
the city, county, or city and county that created it, within two years
of the date of creation of the redevelopment agency, may be
deemed to be enforceable obligations.

(3) Contracts or agreements between the former redevelopment
agency and other public agencies, to perform services or provide
funding for governmental or private services or capital projects
outside of redevelopment project areas that do not provide benefit
to the redevelopment project and thus were not properly authorized
under Part 1 (commencing with Section 33000) shall be deemed
void on the effective date of this part; provided, however, that such
contracts or agreements for the provision of housing properly
authorized under Part 1 (commencing with Section 33000) shall
not be deemed void.

(e) “Indebtedness obligations” means bonds, notes, certificates
of participation, or other evidence of indebtedness, issued or
delivered by the redevelopment agency, or by a joint exercise of
powers authority created by the redevelopment agency, to
third-party investors or bondholders to finance or refinance
redevelopment projects undertaken by the redevelopment agency
in compliance with the Community Redevelopment Law (Part 1
(commencing with Section 33000)).

(f) “Oversight board” shall mean each entity established pursuant
to Section 34179.

(g) “Recognized obligation” means an obligation listed in the
Recognized Obligation Payment Schedule.

(h) “Recognized Obligation Payment Schedule” means the
document setting forth the minimum payment amounts and due
dates of payments required by enforceable obligations for each
six-month fiscal period as provided in subdivision (m) of Section
34177.

(i) “School entity” means any entity defined as such in
subdivision (f) of Section 95 of the Revenue and Taxation Code.

(j) “Successor agency” means the successor entity to the former
redevelopment agency as described in Section 34173.

(k) “Taxing entities” means cities, counties, a city and county,
special districts, and school entities, as defined in subdivision (f)
of Section 95 of the Revenue and Taxation Code, that receive
passthrough payments and distributions of property taxes pursuant
to the provisions of this part.

(l) “Property taxes” include all property tax revenues, including
those from unitary and supplemental and roll corrections applicable
to tax increment.

(m) “Department” means the Department of Finance unless the
context clearly refers to another state agency.

(n) “Sponsoring entity” means the city, county, or city and
county, or other entity that authorized the creation of each
redevelopment agency.

(o) “Final judicial determination” means a final judicial
determination made by any state court that is not appealed, or by
a court of appellate jurisdiction that is not further appealed, in an
action by any party.

SEC. 2.  

Section 34176.6 is added to the Health and Safety
Code, to read:

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34176.6.  

(a) The Legislature finds and declares all of the
following:

(1) Former redevelopment agencies provided a crucial supply
of affordable housing to the residents of California since the
inception of redevelopment and tax increment financing. Many of
these affordable housing projects were multiphase developments
spanning over decades of land assembly, planning, implementation,
and construction, and provide vital housing for thousands of
persons and families of low or moderate income. Failure to
complete the multiphase affordable housing projects because of
the dissolution of redevelopment agencies would result in a
deterioration of properties and land use, and undue disruption to
the health, safety, and well-being of the residents of completed
phases of these projects. Failure to complete these affordable
housing projects would exacerbate the shortage of affordable
housing for persons and families of low or moderate income
residing and working throughout California.

(2) Many of these multiphase projects were underway at the
time the dissolution of redevelopment agencies was under
consideration by the Governor, Legislature, and the courts.
Multiphase affordable housing projects that were substantially
completed but awaiting approval of the final phase have been
stymied by the dissolution of redevelopment agencies. This is
particularly true in larger communities where land assembly and
construction had been severely impacted by the recent economic
down turn and delayed the final implementation of these projects.

(3) To avoid serious blight to the multiphase projects and to
ensure an adequate supply of housing for persons and families of
low or moderate income, it is necessary to enact this section. This
section shall apply only to counties with a population over 1.7
million and cities with a population over 160,000. In enacting this
section, it is the policy of the Legislature to assist these larger
communities who were negatively impacted by the recent economic
crisis and were unable to complete the final phase of large scale,
multiphase, planned, and partially implemented affordable housing
projects as a result of the dissolution of redevelopment agencies.

(b)

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begin insert 34176.6. end insert   

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begin insert (a) end insert  Notwithstanding Section 34177.3, or any other
law, a successor agency of a former redevelopment agency that
commenced and completed construction of portions of a multiphase
affordable housing project in a county with a population over 1.7
million or in a city with a population over 160,000 may enter into
a new enforceable obligation, as defined in paragraph (1) of
subdivision (d) of Section 34171, to complete the design and
construction of a qualifying future phase of a project.

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(c)

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begin insert (b) end insert  Notwithstanding any other law, any moneys from the former
redevelopment agency’s Low and Moderate Income Housing Fund
that have not been remitted to the county auditor-controller
pursuant to the due diligence review process in Sections 34179.5
and 34179.6 shall first be allocated to the implementing entity of
the new enforceable obligation to pay for the costs associated with
any agreement permitted by subdivision begin delete (b) end delete begin insert (a) end insert . The implementing
entity may be either the successor agency or the housing successor
entity, as designated pursuant to Section 34176. In the event that
the remaining balance of the Low and Moderate Income Housing
Fund is insufficient to pay for the costs associated with any
agreements permitted by subdivision begin delete (b) end delete begin insert (a) end insert , any remaining costs
shall be included on Recognized Obligation Payment Schedules
as enforceable obligations and shall be funded with the
Redevelopment Property Tax Trust Fund.

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(d)

end delete

begin insert (c) end insert  Any agreement permitted by subdivision begin delete (b) end delete begin insert (a) end insert shall first
be approved by the oversight board pursuant to Section 34180.

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(e)

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begin insert (d) end insert  (1) “Qualifying future phase” shall mean a phase of a
planned and partially implemented project where the previously
planned phases have received a certificate of occupancy before
February 1, 2012, but construction contracts had not been entered
into for the final phase of the project before February 1, 2012.

(2) “Qualifying future phase” shall meet all of the following
criteria:

(A) The project is for the creation of affordable housing for
“persons and families of low or moderate income,” as defined in
Section 50093. The project may include first floor commercial or
retail space.

(B) Upon completion of the residential units, the residential
units shall be subject to a declaration of covenants and restrictions
restricting the residential units to housing for a period in
compliance with the Community Redevelopment Law (Part 1
(commencing with Section 33000)) and the maximum income and
purchase price or rent that may be charged. The declaration of
covenants and restrictions shall be recorded against the property.

(C) All public infrastructure including sewers, water lines, curb
cuts, streets, and other customary infrastructure is currently in
place for the future phase.

(D) At least one phase of the project had been identified as a
Catalyst Project for California Sustainable Strategies Pilot Program
and embodies the goals of the Sustainable Communities and
Climate Protection Act of 2008 (Chapter 728 of the Statutes of
2008).

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begin insert SEC. 3. end insert   

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This act is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety within
the meaning of Article IV of the Constitution and shall go into
immediate effect. The facts constituting the necessity are:

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In order to timely provide critical funding to increase the supply
of affordable housing, it is necessary that this act take effect
immediately.

end insert