BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 662 (Atkins) - Redevelopment successor agencies
Amended: August 13, 2013 Policy Vote: G&F 7-0
Urgency: No Mandate: Yes
Hearing Date: August 30, 2013
Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: AB 662 would allow an infrastructure financing
district (IFD) to include portions of former redevelopment
project areas, and make several changes to the laws governing
the dissolution of redevelopment agencies (RDAs).
Fiscal Impact: 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
would 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, the bill would reduce the amount of
residual property tax revenues subject to general distribution
by at least $1.5 million annually through 2018, about half of
which would accrue 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.
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.
Prior to their dissolution pursuant to ABx1 26 (Blumenfield)
Chap 5/2011, RDAs used tax increment financing, oftentimes
issuing long-term debt in the form of tax allocation bonds, to
address issues of blight, construct affordable housing,
rehabilitate existing buildings, and finance development and
infrastructure projects.
Existing law establishes procedures for winding down RDA
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activity, including a requirement that successor agencies
dispose of former RDAs' assets under direction of an oversight
board. Successor agencies are required to make any payments
related to enforceable obligations, as specified in an adopted
biannual recognized obligation payment schedule (ROPS), and
remit unencumbered balances of RDA funds to the county
auditor-controller for distribution to local taxing entities in
the county. The Department of Finance (DOF) reviews each ROPS
to determine if the listed payments meet the statutory criteria
for repayment, and has the authority to disallow any payments
that do not meet those criteria. Successor agencies cannot
enter into new enforceable obligations.
Existing law, AB 1484 (Budget Committee), Chap 26/2012, requires
DOF to provide a successor agency with a "finding of completion"
after the agency remits specified RDA property tax allocations
and unencumbered cash assets to the county auditor-controller
through a due diligence process. Once the successor agency
receives a finding of completion, the agency is authorized to:
Transfer former RDA properties to the city or county, or
otherwise dispose of the property in accordance with a
DOF-approved long-range property management plan.
Repay loans made by the city or county to the RDA, if the loan
is deemed to have been made for legitimate redevelopment
purposes, as specified.
Expend bond proceeds in excess of the amounts needed to
satisfy approved enforceable obligations in a manner
consistent with the original bond covenants.
Proposed Law: AB 662 would allow an IFD to include portions of
former RDA project areas, and make several changes to the laws
governing the dissolution of RDAs. Specifically, this bill
would:
Authorize an IFD to finance a project located at least
partially in a former RDA project area, as long as DOF has
issued a certificate of completion to the successor agency.
Any IFD debts would be subordinate to enforceable obligations.
Clarify that properties in an approved RDA plan include
properties listed in a community plan, five-year
implementation plan, or other similar document, with respect
to property transfers to a city or county pursuant to an
approved long-range management plan.
Authorize a successor agency to schedule ROPS payments beyond
the existing six-month ROPS cycle upon a showing that a lender
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requires cash on hand beyond the ROPS cycle.
Authorize 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 DOF.
Specify 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
bonds to pay for project expenditures.
Authorize a successor agency that has received a finding of
completion, upon specified notice to an oversight board, to
enter into contracts or administer projects in connection with
an enforceable obligation, if no new tax revenues are
committed and the activity will not adversely impact the flow
of property tax revenues or payments.
Require the county auditor-controller, prior to distributing
residual revenues to taxing entities, to allocate moneys from
the Redevelopment Property Tax Trust Fund from January 1, 2014
through June 1, 2018 to an entity that has assumed the housing
duties of a former RDA.
Specify that this "housing entity administrative cost
allowance" would be 1 percent, but not less than $150,000
annually, of the property tax allocated to the Redevelopment
Obligation Retirement Fund each fiscal year.
Specify that the loan repayment schedule excludes amounts paid
to taxing entities from the Redevelopment Property Tax Trust
Fund pursuant to the due diligence review process during the
2012-13 base year.
Staff Comments: Upon dissolution of an RDA, a local agency had
the option to retain the housing functions and housing assets of
the former RDA, or transfer those functions to a local housing
authority. A local agency that retains the RDA housing
functions is eligible for an additional allocation of former RDA
revenues for administrative costs associated with that function.
However, there is no allowance in the dissolution statutes that
provide for the transfer of administrative funding if the
housing functions are transferred to a local housing authority.
AB 662 requires a "housing entity administrative cost allowance"
from January 2, 2014 through June 1, 2018 of up to 1 percent,
but no less than $150,000, of the property tax to be allocated
to the Redevelopment Obligation Retirement Fund on behalf of the
successor agency each fiscal year. This allocation diverts
former RDA revenues to housing successors prior to the general
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distribution of residual revenues to local taxing entities by
the county auditor-controller. Since approximately 10 local
housing authorities are acting as housing successors, this bill
would divert at least $1.5 million annually from general
distribution. About half of this amount would represent a loss
of property tax revenues to schools, which must be backfilled by
the General Fund.
The fiscal impacts of the remaining provisions of this bill are
not expected to be significant.