BILL ANALYSIS Ó
AB 1080
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 1080 (Alejo) - As Amended: April 24, 2013
SUBJECT : Community Revitalization and Investment Authorities
SUMMARY : Allows local governments to establish a Community
Revitalization and Investment Authority (Authority) in a
disadvantaged community to fund specified activities, and allows
an Authority to collect tax increment. Specifically, this bill :
1)Includes legislative findings regarding the intent of the
Legislature to create a planning and financing tool to support
the revitalization of disadvantaged communities.
2)Establishes an Authority as a public body to carry out a
community revitalization plan (plan) within a community
revitalization investment area (area).
3)Provides that for the purposes of receiving tax increment
revenues, pursuant to Article XVI of Section 16 of the
California Constitution, an Authority is a redevelopment
agency.
4)Allows an Authority to be created in either of the following
ways:
a) A city, county, or city and county may adopt a
resolution creating the Authority. The governing board must
include three members of the governing board of the city,
county, or city and county that created the authority and
two public members who live or work in the area; or,
b) A city, county, city and county, and special district
may create an Authority by entering into a joint powers
agreement that shall establish the composition of the
governing board, which must include two public members who
live or work in the area.
5)Prohibits a school entity, as defined, from participating in
an Authority.
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6)Allows an Authority to establish an area if at least 80% of
the land, calculated by census tract, is characterized by both
of the following conditions:
a) An annual median income that is less than 80% of the
statewide annual median income; and,
b) Three of the following four conditions exist:
i) Unemployment that is at least 3% higher than the
statewide median unemployment rate;
ii)A crime rate that is 5% higher than the statewide median
crime rate;
iii)Deteriorated or inadequate infrastructure such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks; and,
iv)Deteriorated commercial or residential structures.
7)Provides that the conditions in (b) above constitute blight
within the meaning of Community Redevelopment Law.
8)Provides that the Authority is not required to make a finding
or conduct a survey of blight.
9)Allows an Authority to establish an Area in a former military
base that is principally characterized by deteriorated or
inadequate infrastructure and structures.
10)Requires a governing board of an Authority established in a
former military base to include, as one of its public members,
a member of the military base closure commission.
11)Subjects an Authority to the Ralph M. Brown Act.
12)Allows an Authority to do any of the following:
a) Provide funding to rehabilitate, repair, upgrade, or
construct infrastructure;
b) Provide funding for low- and moderate-income housing;
a) Remedy or remove hazardous substances pursuant to the
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Polanco Redevelopment Act;
b) Provide for seismic retrofits of existing buildings;
c) Acquire and transfer property subject to eminent domain;
d) Prepare and adopt a plan for an area subject to
Community Redevelopment Law;
e) Issue bonds;
f) Borrow money, receive grants, or accept financial or
other assistance or investment from the state and federal
government or any private lending institution for any
project within its area of operation;
g) Receive funding from the California Environmental
Protection Agency under the Water Security, Clean Drinking
Water, Coastal and Beach Protection Act of 2002.
h) Coordinate with a qualified community development entity
to maximize the benefit of New Markets Tax Credits;
i) Appropriate funding that the governing body deems
appropriate for administrative expenses;
j) Make loans or grants for owners or tenants to improve,
rehabilitate, or retrofit buildings or structures in the
area; and,
aa) Provide direct assistance to businesses within the plan
in connection with new or existing facilities for
industrial or manufacturing uses.
1)Allows money appropriated to the Authority from the
legislative body or bodies that created the Authority for
administrative expenses to be paid as a loan or grant.
2)Provides that if the Authority is loaned funding for
administrative expenses, the property owners within the plan
area will be made third party beneficiaries of the repayment
of the loan.
3)Provides that in addition to the common understanding and
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usual interpretation, the term "administrative expenses"
includes, but is not limited to, expenses for planning and
dissemination of information.
4)Allows an Authority to adopt a plan to receive tax increment
generated in an area. The plan must include each of the
following elements:
a) A statement of the principal goals and objectives;
b) A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction, repair, or upgrade of existing
infrastructure;
c) A program that complies with all applicable provisions
of the Community Redevelopment Law, as specified.
d) A program to remedy and remove a release of hazardous
substances, if applicable;
e) A program to fund or facilitate economic revitalization
of the area; and,
f) A fiscal analysis of the projected receipt of revenue
and projected expenses over a five year planning period.
g) Requires an Authority that includes a provision for the
receipt of tax increment revenues in its plan to dedicate
at least 25% of allocated tax increment revenues for
affordable housing purposes. If the Authority makes a
finding that combining funding received under the program
with other funding for the same purpose shall reduce
administrative costs or expedite the construction of
affordable housing, than an authority may transfer funding
from the program to the housing authority within the
territorial jurisdiction of the local jurisdiction that
created the authority, or to the entity that received the
housing assets of the former redevelopment agency. Funding
shall be spent within the project area in which the funds
were generated.
1)Establishes a public process for adopting a plan to receive
tax increment generated in an Area that must include the
following:
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a) The Authority must hold two public hearings at least 30
days apart;
b) The plan must be made available to the public and to
each property owner within the area at a meeting held at
least 30 days prior to notice of the first public hearing;
2)Notice of the first public hearing must be given at least once
a week for four weeks prior to the hearing in a newspaper of
general circulation and mailed to each property owner in the
proposed area of the plan.
3)Notice of the second public hearing must be given not less
than ten days prior to the date of the second hearing in a
newspaper of general circulation and mailed to each property
owner in the area of the plan.
4)Requires a notice informing the public and property owners in
the area of a public hearing to discuss the plan to receive
tax increment to include:
a) The specific boundaries of the proposed area;
b) The purpose of the plan;
c) The time and place of the public hearing; and,
d) Requires that notice of the second hearing must include
a summary of the changes made to the plan from the first
hearing.
5)Allows the Authority to inform tenants of properties in the
area of the plan to receive tax increment in a manner of its
choosing.
6)Allows an Authority to adopt a plan by ordinance at the
conclusion of the second public hearing.
7)Allows an Authority to begin receiving tax increment funds
beginning on the first December 1 after the plan is adopted.
8)Allows any taxing entity other than a school entity that
receives property taxes in an area to adopt a resolution,
prior to the adoption of the plan, to direct the county
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auditor-controller to allocate its share of tax increment
funds to the Authority.
9)Allows the resolution adopted by a taxing entity directing its
share of tax increment to the Authority to allocate less than
the full amount of tax increment, establish a maximum amount
of time in years, or limit the use of funds to specific
purposes or programs.
10)Allows a taxing entity to repeal a resolution directing a
portion of its tax increment to the Authority by giving the
county auditor-controller 60 days' notice, except that the
auditor-controller will continue to allocate to the Authority
the portion of tax increment necessary to repay any debt
issued by the Authority that has not been fully repaid.
11)Requires that if an Area overlaps with a former redevelopment
agency the plan must specify that any tax increment collected
is subject to and subordinate to any preexisting enforceable
obligations of the former redevelopment agency.
12)Requires an Authority to complete an annual independent
audit.
13)Requires an Authority to post a draft of the audit on their
website and mail it to the each of the taxing entities that
are contributing tax increment to the area.
14)Requires the annual audit to include:
a) A description of the projects undertaken in the fiscal
year and a comparison of the progress expected on those
projects compared to the actual progress;
b) A chart comparing the actual revenues and expenses
including administrative costs of the Authority to the
budgeted revenues and expenses;
c) Amount of tax increment revenues received;
d) Amount of revenues received and expended for low-and
moderate-income housing;
e) Assessment of the level of completion of the projects in
the plan; and,
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f) Amount of revenues expended to assist private
businesses.
15)Provides that if an Authority does not complete an annual
report then it cannot expend any tax increment funds it
receives.
16)Requires an Authority to hold a protest proceeding at the
public hearing to review an annual report, every 10 years to
give property owners an opportunity to provide oral or written
protests against an Authority.
17)Requires an Authority to hold an election of the property
owners in the areas covered by the plan if a majority of the
owners protest, and not initiate any new projects until the
election is held.
18)Provides that a majority protest exists if protests have been
filed representing 50% of the assessed value of the area.
19)Requires the election to be held 90 days after the public
hearing and permits it to be held by mail-in ballot.
20)Prevents an Authority from taking any further action to
implement a plan if a majority of the property owners,
weighted proportional to the assessed value of their property
vote against the Authority.
21)Allows the Authority to continue to appropriate and expend
funds for contractual indebtedness and complete projects for
which expenditures of any kind have been made prior to the
effective date of the election.
EXISTING LAW :
1)Dissolves redevelopment agencies as of February 1, 2012.
2)Establishes the Community Redevelopment Law (CRL), which
governs the authority to establish a redevelopment agency and
the authority for a redevelopment agency to function as an
agency and to adopt and implement a redevelopment plan.
3)Authorizes cities and counties to create IFDs and issue bonds
to pay for community scale public works: highways, transit,
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water systems, sewer projects, flood control, child care
facilities, libraries, parks, and solid waste facilities.
4)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.
5)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.
6)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.
7)Requires that every local agency, who will contribute its
property tax increment revenue to the IFD, approve the plan.
8)Requires a two-thirds voter approval of the formation of the
IFD and the issuance of bonds.
9)Requires majority voter approval for setting the IFD's
appropriations limits.
10)Specifies that public agencies that own land in a proposed
IFD may not vote on issues regarding the district.
11)Authorizes IFDs to issue a variety of debt instruments,
including bonds, certificates of participation, leases, and
loans.
12)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.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill would allow local government entities, excluding
schools, to form a Community Revitalization and Investment
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(Authority) to collect tax increment and issue debt. The
Authority could use its powers to invest in disadvantaged
communities with a high crime rate, high unemployment, and
deteriorated and inadequate infrastructure, commercial, and
residential buildings. Three of these four conditions would
constitute blight allowing Authorities to use the powers of
former redevelopment agencies. The area where the Authority
could invest would also have to have an annual median
household income that is less than 80% of the statewide annual
median income. This is different from redevelopment agencies
that were required to conduct a study and make a finding that
blight existed in a project area before they could use their
extraordinary powers to eradicate blight. Like redevelopment,
this bill would allow Authorities to freeze the property taxes
at the time the plan for revitalizing the area is approved.
The Authority will collect all the tax increment or the
increase in property taxes that are generated after that point
and use it on specified activities. Unlike redevelopment
agencies, this bill would require the taxing entities in the
area including the county, city, special districts, or a
military base to agree to divert tax increment to the
Authority. Local government entities that initially
participate can opt out by giving the auditor-controller sixty
days' notice; however, the auditor controller will continue to
collect the local government entities portions of tax
increment until any debts issued up until then have been
repaid.
Former Redevelopment Law required 20% of funds to be set aside
for the development of affordable housing. This bill goes
further and requires 25% of funds be set aside for affordable
housing.
This bill also requires the Authority to hold an annual public
hearing to assess progress in Plan implementation and to
consider necessary modifications. Property owners within the
Plan Area are provided the opportunity to vote via a protest
process at 10-year intervals to terminate further activity of
the Authority.
2)According to the author, "Redevelopment was a multi-purpose
tool that focused over $6 billion per year toward repairing
and redeveloping urban cores, and building affordable housing,
especially those areas most economically and physically
disadvantaged. Since the dissolution of redevelopment
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agencies, communities across California are seeking an
economic development tool to use.
"Multiple legislative measures were introduced in 2012 after
the dissolution of redevelopment agencies in an effort to
provide local governments options for sustainable community
economic development. Four measures were approved by the
Legislature. However, all four were vetoed by Governor Brown
at the end of legislative session.
"While the dissolution of former redevelopment agencies
continues, the pervasive question is "what economic
development tool can local governments use?" It is
unrealistic to expect a single solution could work
successfully in all California cities. This proposal provides
a viable option targeting the state's disadvantaged poorer
areas and neighborhoods."
3)Last year the Legislature saw several proposals to create some
sort of funding mechanism for local agencies after the loss of
redevelopment. Most bills focused on Infrastructure Financing
Districts (IFDs) and broadening the scope and powers of IFDs
as well as bills to reduce the voter threshold needed to
establish IFDs, in order to create a more workable tool for
local agencies in light of the dissolution of redevelopment
agencies. Most of these measures were vetoed by the Governor,
who noted that "expanding the scope of IFDs is premature?[and]
would likely cause cities to focus their efforts on using the
new tools provided?instead of winding down redevelopment."
This bill, similar in several aspects to other IFD bills with
respect to the broader goal of creating a financing mechanism
for local agencies post-redevelopment with the use of tax
increment, however, allows for the creation of an Authority
rather than an IFD. The Committee heard a similar bill last
year - SB 1156 (Steinberg, 2012), which would have allowed
local governments to establish a Sustainable Communities
Investment Authority to finance specified activities within a
sustainable communities investment area. SB 1156 was vetoed
by Governor Brown who stated that "[he prefers] to take a
constructive look at implementing this type of program once
the winding down of redevelopment is complete and General Fund
savings are achieved. At that time, we will be in a much
better position to consider new investment authority. I am
committed to working with the Legislature and interested
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parties on the important task of revitalizing our
communities."
This legislative session is no different - there are multiple
proposals pending in both the Senate and the Assembly,
including SB 1 (Steinberg), which is substantially similar to
SB 1156 from last year. The Committee may wish to discuss
each of these measures and their individual merits, but also
contemplate whether a more comprehensive approach is
necessary. As well, the Committee may wish to ask the authors
of such bills to discuss their efforts with the Governor's
Office in order to reach a different fate this year.
4)The California Special Districts Association, in support,
writes that "property tax revenue cannot be diverted away from
local services to fund an [Authority] unless the local agency
providing those services adopts a resolution consenting to the
diversion. This section is particularly well-crafted and
should be considered a model for other similar local financing
tools, such as with infrastructure financing districts,
because it offers each local agency the flexibility to adjust
the purpose and amount of revenue that could be diverted. It
also allows a local agency to terminate the revenue diversion,
with notice, to the extent that it has not been pledged to
debt repayment. This flexibility will maximize the
opportunities for local agency participation."
5)Committee amendments : In order to correct a technical
mistake, the following amendments should be taken:
34191.51 (c)(1) - The governing board of an authority created
pursuant to subparagraph (A) of paragraph (1) of subdivision
(b)
34191.51 (c)(2) - The governing board of the authority created
pursuant to subparagraph (B) of paragraph (2) of subdivision
(b)
6)Support arguments : Supporters argue that this bill offers
options for communities to use and that the bill fills a void
in the current package of legislation pending that can be used
to address deteriorated conditions in the poorer neighborhoods
across California.
Opposition arguments : While the bill contains provisions that
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require a protest process after the Authority has existed for
10 years, it could be argued that residents should get to vote
on the initial formation of an Authority.
7)This bill was heard by the Assembly Housing and Community
Development Committee on April 17, 2013 and passed on a 5-2
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
California Building Industry Association
California Rural Legal Assistance Foundation
California Special Districts Association
Cities of Blue Lake, Madera, Mendota, Sacramento, Salinas,
Watsonville
League of California Cities
League of California Cities - Latino Caucus
Western Center on Law and Poverty
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958