BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 662| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 662 Author: Atkins (D), et al. Amended: 9/3/13 in Senate Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/5/13 AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13 AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg ASSEMBLY FLOOR : 76-0, 4/25/13 (Consent) - See last page for vote SUBJECT : Local government: redevelopment: successor agencies to redevelopment SOURCE : Author DIGEST : This bill deletes the prohibition on infrastructure financing districts (IFDs) to include portions of former redevelopment project areas and modifies the statutes governing redevelopment agencies (RDAs) dissolution. 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 CONTINUED AB 662 Page 2 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 (GF) 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 26X1 (Blumenfield, Chapter 5, Statutes of 2011) dissolved all RDAs. The California Supreme Court's 2011 ruling in California Redevelopment Association v. Matosantos upheld AB 26X1, but invalidated AB 27X1 (Blumenfield, Chapter 6, Statutes of 2011), which would have allowed most RDAs to avoid dissolution. Existing law requires that specified actions of a successor agency be first approved by its oversight board, including, among others, the establishment of a Recognized Obligation Payment Schedule (ROPS). Existing law, AB 1484 (Assembly Budget Committee, Chapter 26, Statutes of 2012), requires the Department of Finance (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. This bill: 1. Allows an IFD to include portions of former RDA project areas, and makes several changes to the laws governing the dissolution of RDAs. 2. Authorizes 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. 3. Requires a successor agency to notify the oversight board 10 days prior to entering into a contract or agreement for the use or disposition of specified properties. Authorizes the board to notify the successor agency during that 10-day period that the board intends to conduct a hearing to CONTINUED AB 662 Page 3 determine whether the contract or agreement is consistent with the successor agency's long-range property management plan and requires the board to hold the hearing and issue findings within 30 days after it so notified the successor agency. 4. 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. 5. 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. 6. 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. 7. Specifies that the phrase "identified in an approved redevelopment plan" includes properties listed in a community plan, or a five-year implementation plan. 8. Provides that the loan repayment schedule excludes amounts paid to taxing entities from the Redevelopment Property Tax Trust Fund (Trust Fund) pursuant to the "due diligence review" process during the 2012-13 base year. 9. Allows a successor agency that has received a finding of completion to enter into, or amend existing, contracts and agreements, or otherwise administer projects in connection with long-term enforceable obligations, if the contract, agreement, or project will not commit new tax funds, or will not otherwise adversely affect the flow of specified tax revenues or payments to taxing agencies. 10.Repeals the state law that prohibits an IFD's territory from including any portion of a redevelopment project area, allowing IFDs to use tax increment revenues to finance public works in former RDA project areas. CONTINUED AB 662 Page 4 11.Requires the county auditor-controller, prior to distributing residual revenues to taxing entities, to allocate moneys from the Trust Fund from January 1, 2014 through June 1, 2018 to an entity that has assumed the housing duties of a former RDA. 12.Specifies that this "housing entity administrative cost allowance" would be 1%, but not less than $150,000 annually, of the property tax allocated to the Redevelopment Obligation Retirement Fund each fiscal year. 13.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. Comments 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 agreements related to millions of dollars of Proposition 1C infill infrastructure grants are not recognized as enforceable obligations, communities throughout the state may be unable to complete much-needed infill and transit-oriented development projects. Because state law does not provide successor agencies any flexibility to adjust contracts for enforceable obligations in ways that do not 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, this bill will support the completion of numerous development projects that have already received millions of dollars of public investments, support state policy goals, and benefit residents throughout California. Related Legislation SB 33 (Wolk) waives the voter-approval requirements to create an CONTINUED AB 662 Page 5 IFD, extends an IFD's life term, requires annual, independent audits, and authorizes an IFD's use for projects in disadvantaged communities, hazardous cleanup, environmental mitigation, and flood protection. SB 628 (Beall) removes the voter-approval requirements to create an IFD and issue bonds for a transit priority project. AB 229 (J. Pérez) creates infrastructure and revitalization financing districts (IRFDs) and authorizes a city, county, city and county, or Joint Power Authority acting as the military base reuse authority -- following a 2/3-vote to form the district, a 2/3-vote to issue the bonds, and a majority-vote for the appropriations limit -- to finance projects like flood management, environmental mitigation, and hazardous cleanup. AB 243 (Dickinson) creates IRFDs and reduces the 2/3-voter thresholds to 55% to form an IRFD and issue bonds. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee, unknown GF 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 Trust Fund through 2018, prior to distribution of residual revenues to local agencies and school entities. As such, this bill will 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 GF cost, pursuant to Proposition 98's minimum funding guarantees. SUPPORT : (Verified 8/30/13) AFSCME, AFL-CIO BRIDGE Housing California Infill Builders Association Cities of Sacramento, San Diego and West Sacramento Cynthia Morgan, Chair of the Board of Civic San Diego Mission Bay Development Group CONTINUED AB 662 Page 6 San Diego Housing Federation Smart Growth Investors II Strada Investment Group OPPOSITION : (Verified 8/30/13) Santa Clara County Board of Supervisors ASSEMBLY FLOOR : 76-0, 4/25/13 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Cooley, Lowenthal, Nazarian, Vacancy AB:k 9/3/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED