BILL ANALYSIS Ó AB 662 Page 1 GOVERNOR'S VETO AB 662 (Atkins, et al.) As Amended September 6, 2013 2/3 vote ----------------------------------------------------------------- |ASSEMBLY: |76-0 |(April 25, |SENATE: |36-0 |(September 11, | | | |2013) | | |2013) | ----------------------------------------------------------------- ------------------------------------------------------------------------ |COMMITTEE VOTE: |9-0 |(September 11, |RECOMMENDATION: |concur | |(L. GOV.) | |2013) | | | ------------------------------------------------------------------------ ----------------------------------------------------------------- |ASSEMBLY: |78-0 |(September 12, | | | | | | |2013) | | | | ----------------------------------------------------------------- Original Committee Reference: L. GOV. SUMMARY : Allows 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). The Senate amendments : 1)Make clarifying amendments to the provision of the bill that authorizes an IFD to finance a project or portion of a project that is located in, or overlaps with, a redevelopment project area or former redevelopment project area. 2)Require a successor agency to the former redevelopment agency to receive a certificate of completion, as defined, prior to the district financing any project or portion of a project in a former redevelopment project area. 3)Provide that any debt or obligation of a district shall be AB 662 Page 2 subordinate to an enforceable obligation of a former redevelopment agency, and provide that the division of taxes allocated to the IFD shall not include any taxes required to be deposited by the county auditor-controller into the Redevelopment Property Tax Trust fund, as specified. 4)Allow the legislative body of the city forming the IFD to choose to dedicate any portion of its net available revenue to the IFD through the financing plan, as specified. 5)Define "net available revenue" to mean periodic distributions to the city from the Redevelopment Property Tax Trust Fund that are available to the city after all preexisting legal commitments and statutory obligations funded from that revenue are made, as specified, and prohibit "net available revenue" from including any funds deposited by the county auditor-controller in the Redevelopment Property Tax Trust Fund or funds remaining in the Redevelopment Property Tax Trust Fund prior to distribution and from including any moneys payable to a school district that maintains kindergarten and grades 1 to 12, inclusive, community college districts, or to the Educational Revenue Augmentation Fund. 6)Allow, if a successor agency has received a finding of completion, the agency 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, and will not otherwise adversely affect the flow of property tax revenues or payments made to the taxing agencies, as specified. 7)Define "housing entity administrative cost allowance" to mean an amount of up to 1% of the property tax allocated to the Redevelopment Obligation Retirement Fund on behalf of the successor agency for each applicable fiscal year, but not less than $150,000 per fiscal year. 8)Require the housing entity administrative cost allowance to be listed by the successor agency on the Recognized Obligation Payment Schedule (ROPS), and provide, upon approval of the AB 662 Page 3 ROPS by the oversight board and the Department of Finance, that the housing entity administrative cost allowance shall be remitted by the county auditor-controller on each January 2 and June 1 to the public housing authority that assumed the housing functions of the former redevelopment agency. 9)Provide, if there are insufficient moneys in the Redevelopment Obligations Retirements Fund in any given fiscal year to make the authorized payment, that the unfunded amount may be listed on each subsequent ROPS until it has been paid in full. 10)Allow a successor agency to utilize reasonable estimates and projects to support payment amounts for enforceable obligations if the successor agency submits appropriate supporting documentation of the basis for the estimate or projection to the Department of Finance. 11)Allow specified ROPS payments to be scheduled beyond the existing ROPS cycle upon a showing that a lender requires cash on hand beyond the ROPS cycle. 12)Allow a successor agency to utilize reasonable estimates and projections to support payment amounts for enforceable obligations, when a payment is shown to be due during the ROPS period, but an invoice or other billing document has not yet been received, if the successor agency submits appropriate supporting documentation of the basis for the estimate or projection to the Department of Finance. 13)Allow a ROPS to also include appropriation of moneys from bonds subject to passage during the ROPS cycle when an enforceable obligation requires the agency to issue the bonds and use the proceeds to pay for project expenditures. 14)Require a successor agency to provide notice to the oversight board at least 10 days prior to entering into a contract or agreement for the use or disposition of properties, as specified, and specify that during the 10-day period the oversight board may notify the successor agency that the board intends to conduct a hearing to determine whether the contract or agreement is consistent with the successor agency's AB 662 Page 4 long-range property management plan. Requires the board to hold the hearing and issue findings within 30 days after it so notified the successor agency. 15)Establish a "housing administrative cost allowance" for public housing authorities who take over housing responsibilities from a former redevelopment agency, as specified. 16)Provide that the term "identified in an approved redevelopment plan" includes properties listed in a community plan or a five-year implementation plan. 17)Specify that no reimbursement is required by this act because this act provides for offsetting savings to local agencies or school districts that result in no net costs. 18)Add in chaptering out language to address conflicts with AB 564 (Mullin) of the current legislative session. EXISTING LAW : 1)Authorizes cities and counties to 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. 2)Allows an IFD to divert property tax increment revenues from other local governments, excluding school districts, for up to 30 years, in order to pay back bonds issued by the IFD. 3)Requires that in order to form an IFD a city or county must develop an infrastructure plan, send copies to every landowner, consult with other local governments, and hold a public hearing. 4)Requires that when forming an IFD, local officials must find that its public facilities are of communitywide significance and provide significant benefits to an area larger than the IFD. 5)Requires that every local agency who will contribute its AB 662 Page 5 property tax increment revenue to the IFD approve the plan. 6)Requires a two-thirds voter approval of the formation of the IFD and the issuance of bonds. 7)Requires majority voter approval for setting the IFD's appropriations limits. 8)Specifies that public agencies that own land in a proposed IFD may not vote on issues regarding the district. 9)Authorizes IFDs to issue a variety of debt instruments, including bonds, certificates of participation, leases, and loans. 10)Requires any IFD that constructs dwelling units to set aside not less than 20% of those units to increase and improve the community's supply of low- and moderate-income housing available at an affordable housing cost to persons and families of low- and moderate-income. AS PASSED BY THE ASSEMBLY , this bill deleted the prohibition on infrastructure financing districts including any portion of a redevelopment project area. FISCAL EFFECT : According to the Senate Appropriations Committee, this bill contains 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. COMMENTS : This bill deletes the prohibition on an AB 662 Page 6 infrastructure financing district (IFD) from including any portion of a redevelopment project area, and makes a number of other various changes to the redevelopment dissolution process in order to allow dissolution to occur in a more orderly fashion while still allowing needed economic development. This bill is author-sponsored. Existing law prohibits an IFD from including any portion of a redevelopment project area for the purposes of collecting tax increment. The author argues that given that redevelopment agencies were dissolved on February 1, 2012, and are no longer collecting additional tax increment to create new activities to promote economic development and infrastructure, the restriction on the overlap with IFDs is unnecessary. The bill also makes a number of changes to the statutes governing the wind-up of redevelopment agencies and provides clarity to the law on how projects that were already in the pipeline prior to dissolution can still be completed. This bill adds a number of provisions into the redevelopment dissolution process. First, the bill clarifies a successor agency's flexibility to enter into, make contracts and agreements, make land use decisions or otherwise administer projects in connection with long-term enforceable obligations so long as such amendments will not commit new tax funds or will not adversely affect the flow of tax increment to the taxing agencies. In order to take advantage of this authorization, the successor agency must have received a finding of completion from the Department of Finance. Second, the bill allows items on a recognized obligation payment schedule (ROPS) to be scheduled beyond an existing ROPS cycle, when certain conditions are met. The bill also allows reasonable estimates and projections to be used to support payment amounts for enforceable obligations, when appropriate supporting documentation of the basis for the estimate is submitted to the Department of Finance. This bill clarifies that the loan repayment schedule, authorized once a successor agency receives a finding of completion, shall not include amounts paid back pursuant to the due diligence review process during the base year, thus lowering the base year amount and permitting faster loan repayment. The bill also allows an AB 662 Page 7 oversight board to object to purchase and sales contracts entered into a part of the long range property management plan, but not require oversight board approval in all cases. Support arguments: This bill makes a number of changes to the redevelopment dissolution process in order to ensure a more orderly dissolution and deletes an unnecessary prohibition on IFDs including any portion of a redevelopment project area. Opposition arguments: The Santa Clara County Board of Supervisors argues that by allowing new enforceable obligations, this bill runs directly counter to the purpose of winding-down RDAs. GOVERNOR'S VETO MESSAGE : This measure would provide flexibility to cities and successor agencies around the state currently winding down their redevelopment affairs. More importantly, this bill would authorize cities to create Infrastructure Financing Districts within the boundaries of former redevelopment project areas, as well as provide additional property taxes for administrative costs to the local housing authorities currently managing stranded housing assets. Unfortunately, as currently written, the language to authorize new or amended contracts for existing enforceable obligations could result in unintended costs to the General Fund. I applaud the author for her efforts to improve the dissolution process. Therefore, I am directing my administration to work with the author's office to make changes to the bill's language in a manner that avoids those costs. When the changes are made, I look forward to seeing the measure return to my desk for signature. AB 662 Page 8 Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958 FN: 0002910