BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                        AB 471|
          |Office of Senate Floor Analyses   |                              |
          |1020 N Street, Suite 524          |                              |
          |(916) 651-1520         Fax: (916) |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 
           
                                           
                                    THIRD READING


          Bill No:  AB 471
          Author:   Atkins (D), et al.
          Amended:  1/29/14 in Senate
          Vote:     27 - Urgency

           
          PRIOR VOTES NOT RELEVANT

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-0, 1/15/14
          AYES:  Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu
          NO VOTE RECORDED:  Vacancy

           SENATE APPROPRIATIONS COMMITTEE  :  6-0, 1/23/14
          AYES:  De León, Gaines, Hill, Lara, Padilla, Steinberg
          NO VOTE RECORDED:  Walters


           SUBJECT  :    Local government:  redevelopment:  successor  
          agencies to 
                      redevelopment

           SOURCE  :     Author


           DIGEST  :    This bill allows infrastructure financing districts  
          to include portions of former redevelopment project areas and  
          amends several statutes governing redevelopment agencies (RDAs)  
          dissolution.

           Senate Floor Amendments  of 1/29/14 delete the provisions of the  
          bill relating to long-range property management plan and  
          long-term enforceable obligations and change the effective date  
          for the definition of the term "housing entity cost allowance"  
                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          2

          from January 2, 2014 to July 1, 2014; and make additional  
          technical and conforming changes.

           ANALYSIS  :    Until 2011, the Community Redevelopment Law allowed  
          local officials to set up RDAs, prepare and adopt redevelopment  
          plans, and finance redevelopment activities.  As a redevelopment  
          project area's assessed valuation grew above its base-year  
          value, the resulting property tax revenues - the property tax  
          increment - went to the RDA instead of going to the underlying  
          local governments.  The RDA kept the property tax increment  
          revenues generated from increases in property values within a  
          redevelopment project area.

          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  
          26 X1 (Blumenfield, Chapter 5, Statutes of 2011, First  
          Extraordinary Session) dissolved all RDAs.  The California  
          Supreme Court's 2011 ruling in California Redevelopment  
          Association v. Matosantos upheld AB 26 X1, but invalidated AB 27  
          X1 (Blumenfield, Chapter 6, Statutes of 2011, First  
          Extraordinary Session), which would have allowed most RDAs to  
          avoid dissolution.

          RDAs' elimination created substantial policy challenges for  
          local officials who must manage the complex process of  
          dissolving former RDA and identify new tools for financing local  
          economic development.  Some local officials want the Legislature  
          to clarify statutes that govern the redevelopment dissolution  
          process and amend state law to make it easier for local agencies  
          to support economic development using Infrastructure Financing  
          Districts (IFDs).

           Unwinding former RDAs' affairs  .  AB 26 X1 established successor  
          agencies to manage the process of unwinding former RDAs'  
          affairs.  With the exception of seven cities that chose not to  
          serve as successor agencies, the city or county that created  
          each former RDA now serves as that RDA's successor agency.  Each  
          successor agency has an oversight board that is responsible for  
          supervising it and approving its actions.  The Department of  
          Finance (DOF) can review and request reconsideration of an  
          oversight board's decisions.

                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          3


          One of the successor agencies' primary responsibilities is to  
          make payments for enforceable obligations entered into by former  
          RDA.  The statutory definition of an enforceable obligation  
          includes bonds, specified bond-related payments, some loans,  
          payments required by the federal government, obligations to the  
          state, obligations imposed by state law, legally required  
          payments related to RDA employees, judgments or settlements, and  
          other legally binding and enforceable agreements or contracts  
          that are not otherwise void.
           
          Each successor agency must, every six months, draft a list of  
          enforceable obligations that are payable during a subsequent six  
          month period.  This recognized obligation payment schedule  
          (ROPS) must be adopted by the oversight board and is subject to  
          review by the DOF.  Obligations listed on a ROPS are payable  
          from a Redevelopment Property Tax Trust Fund (RPTTF), which  
          contains the revenues that would have been allocated as tax  
          increment to a former RDA.  

          This bill:

          1.Allows a successor agency to schedule ROPS payments beyond the  
            existing six-month ROPS cycle upon a showing that a lender  
            requires cash on hand beyond the ROPS cycle.  

          2.Allows a successor agency to utilize reasonable estimates and  
            projections to support payment amounts for enforceable  
            obligations if it submits appropriate supporting documentation  
            of the basis for the estimate or projection to the DOF and the  
            county auditor-controller.

          3.Specifies that a ROPS can include appropriation of moneys from  
            bonds subject to passage during the ROPS cycle when an  
            enforceable obligation requires the successor agency to issue  
            the bonds and use the proceeds to pay for project  
            expenditures.

          State law requires a county auditor-controller to make  
          allocations from the RPTTF to successor agencies to pay for  
          specified administrative costs.  In some communities, an entity  
          other than the former RDA's successor agency has assumed a  
          former RDA's housing responsibilities.


                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          4

          This bill:

          1. Requires that a successor agency must remit, to an entity  
             that has assumed a former RDA's housing duties, the amount of  
             a housing entity administrative cost allowance that is listed  
             on the successor agency's ROPS.

          2. From July 1, 2014 to July 1, 2018, specifies that the housing  
             entity administrative cost allowance shall be 1%, but not  
             less than $150,000 annually, of the property tax allocated to  
             the Redevelopment Obligation Retirement Fund each fiscal  
             year.

          3. If a local housing authority assumed the housing functions of  
             the former redevelopment agency, as specified, then the  
             housing entity administrative cost allowance shall be listed  
             by the successor agency on the ROPS.  Requires the successor  
             agency to make the housing entity administrative cost  
             allocations on each January 2 and July 1. 

          If a successor agency complies with state laws that require it  
          to remit specified RDA property tax allocations and cash assets  
          identified through a "due diligence review" process, it receives  
          a "finding of completion" from the DOF (AB 1484, Assembly Budget  
          Committee, Chapter 26, Statutes of 2012).  Close to 300  
          successor agencies have received a finding of completion.

          A successor agency that receives a finding of completion can  
          repay specified loans made to a former redevelopment agency by  
          the city or county that created it.  State law requires that a  
          successor agency must repay the loans according to a schedule  
          that meets specified conditions.  One condition requires that  
          the maximum annual loan repayment amount cannot exceed 50% of  
          the increase in the amount of money distributed to taxing  
          entities from the RPTTF in the current fiscal year over the  
          amount distributed in the 2012-13 base year.

          This bill requires that calculation of the maximum loan  
          repayment amount must exclude amounts paid to taxing entities  
          during the 2012-13 base year from the RPTTF pursuant to the "due  
          diligence review" process.

          This bill specifies that the phrase "identified in an approved  
          redevelopment plan" includes properties listed in a community  

                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          5

          plan or a five-year implementation plan.

           IFDs  .  Cities and counties can create IFDs and issue bonds to  
          pay for community scale public works: highways, transit, water  
          systems, sewer projects, flood control, child care facilities,  
          libraries, parks, and solid waste facilities.  To repay the  
          bonds, IFDs divert property tax increment revenues from  
          consenting local governments -- but not schools -- for 30 years.

          State law prohibits an IFD's territory from including any  
          portion of a redevelopment project area. 

          This bill:

          1. Repeals this prohibition, allowing IFDs to use tax increment  
             revenues to finance public works in former RDA project areas.

          2. Prohibits an IFD from financing any project or portion of a  
             project in a former redevelopment project area unless the  
             former redevelopment agency's successor agency has received a  
             finding of completion.  

          3. Declares that any IFD debt or obligation is subordinate to an  
             enforceable obligation of a former redevelopment agency and  
             prohibits tax increment revenues allocated to an IFD from  
             including any revenues that state law requires a county  
             auditor-controller to deposit in a RPTTF. 

          4. Allows a city or county forming an IFD to dedicate any  
             portion of its "net available revenue" to the IFD.  Defines  
             "net available revenue" as periodic distributions to the city  
             or county from the RPTTF that are available to the city or  
             county after all preexisting legal commitments and statutory  
             obligations funded from that revenue are made pursuant to  
             state law.  Excludes funds payable to school entities  
             pursuant to a specified statute from the definition of "net  
             available revenue."

          5. Makes additional technical and conforming changes to current  
             law.

           Comments
           
          According to the Senate Governance and Finance Committee  

                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          6

          analysis, local officials and developers have identified  
          ambiguities and obstacles in current law which prevent them from  
          completing vital economic development projects that began before  
          RDAs were dissolved.  Because state law doesn't provide  
          successor agencies any flexibility to adjust contracts for  
          enforceable obligations in ways that don't affect tax increment  
          or to schedule ROPS payments beyond a single six-month ROPS  
          period, many successor agencies may be unable to finance or  
          complete long-term phased development projects that are already  
          underway.  By eliminating these ambiguities and obstacles, and  
          eliminating an unnecessary prohibition against an IFD including  
          any portion of a redevelopment project area for the purposes of  
          collecting tax increment, AB 471 will support the completion of  
          numerous development projects that already have received  
          millions of dollars of public investments, support state policy  
          goals, and benefit residents throughout California.

           Previous Legislation 
           
          AB 471 is similar to AB 662 (Atkins, 2013), which Governor Brown  
          vetoed citing his concern that the bill's "language to authorize  
          new or amended contracts for existing enforceable obligations  
          could result in unintended costs to the General Fund."  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee, unknown  
          General Fund impact, likely in the range of $750,000 annually  
          for five years.  This figure is based on the assumption that  
          approximately 10 successor housing agencies will be eligible for  
          at least $150,000 annually in allocations from the Redevelopment  
          Property Tax Trust Fund through 2018, prior to distribution of  
          residual revenues to local agencies and school entities.  As  
          such, this bill reduces the amount of residual property tax  
          revenues subject to general distribution by at least $1.5  
          million annually through 2018, about half of which accrues to  
          K-14 schools.  In general, any property tax proceeds diverted  
          from schools results in an equivalent General Fund cost,  
          pursuant to Proposition 98's minimum funding guarantees.  

           SUPPORT  :   (Verified  1/30/14)

          BRIDGE Housing

                                                                CONTINUED





                                                                     AB 471
                                                                     Page  
          7

          California Infill Builders Federation
          City of West Sacramento
          Mission Bay Development Group
          Strada Investment Group

          AB:d  1/31/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

                                   ****  END  ****
          


































                                                                CONTINUED