BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1080 HEARING: 6/19/13
AUTHOR: Alejo FISCAL: Yes
VERSION: 5/20/13 TAX LEVY: No
CONSULTANT: Weinberger
COMMUNITY REVITALIZATION AND INVESTMENT AUTHORITIES
Allows local governments to form Community Revitalization
and Investment Authorities to administer economic
development and affordable housing programs.
Background and Existing Law
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (RDAs), prepare
and adopt redevelopment plans, and finance redevelopment
activities.
A redevelopment agency kept the property tax increment
revenues generated from increases in property values within
a redevelopment project area. As a re-development 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. When a redevelopment agency
diverted property tax revenues from a school district, the
State General Fund paid the difference.
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 X1 26 (Blumenfield, 2011)
dissolved all RDAs. The California Supreme Court's 2011
ruling in California Redevelopment Association v.
Matosantos upheld AB X1 26, but invalidated AB X1 27
(Blumenfield, 2011), which would have allowed most RDAs to
avoid dissolution.
RDAs' dissolution deprived many local governments of the
primary tool they used to eliminate physical and economic
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blight, finance new construction, improve public
infrastructure, rehabilitate existing buildings, and
increase the sup-ply of affordable housing. Legislators,
local government officials, affordable housing advocates,
and others want to develop alternative tools to promote
local economic development.
Proposed Law
Assembly Bill 1080 allows local government officials to
establish a Community Revitalization and Investment
Authority (Authority) and use property tax increment
revenues to finance the implementation of a community
revitalization plan within a community revitalization and
investment area. AB 1080 specifies:
I. The process for creating an Authority.
II. Criteria for establishing a community
revitalization and investment area.
III. Powers and duties that apply to an Authority.
IV. The process for adopting a community
revitalization and investment plan.
V. How tax increment revenues are allocated to, and
used by, an Authority.
VI. Reporting and accountability requirements.
I. Formation process . Assembly Bill 1080 allows local
governments to form an authority in two ways:
A city, county, or city and county can adopt a
resolution creating an authority. The city, county,
or city and county's legislative body must appoint the
Authority's governing board, which must include three
members of the legislative body and two public
members. The two public members must be appointed
subject to specified statutory requirements and must
live or work within the community revitalization and
investment area.
A city, county, city and county, and special
district, as special district is defined in state law,
in any combination, may create an authority by
entering into a joint powers agreement pursuant to the
Joint Exercise of Powers Act. The Authority's
governing body must be comprised of a majority of
members from the legislative bodies of the public
agencies that created the authority and a minimum of
two public members. The two public members must be
AB 1080 -- 5/20/13 -- Page 3
appointed by a majority of the Authority's board,
subject to specified statutory requirements, and must
live or work within the community revitalization and
investment area.
Assembly Bill 1080 prohibits school entities from
participating in a community revitalization and investment
authority.
II. Community revitalization and investment areas . Before
redevelopment officials could wield their extraordinary
powers of property tax increment funding and property
management (including eminent domain), the Community
Redevelopment Law required them to determine if an area was
blighted. Assembly Bill 1080 deems specified conditions
within a community revitalization and investment area to
constitute blight within the meaning of the Community
Redevelopment Law. The bill allows an Authority to rely on
a legislative determination of blight and frees an
Authority from having to make a separate finding of blight
or conduct a survey of blight within a community
revitalization and investment area.
Assembly Bill 1080 allows an Authority to carry out a
community revitalization plan within a community
revitalization and investment area. The bill requires that
at least 80% of the land calculated by census tracts within
the area must be characterized by both of the following
conditions:
An annual median household income that is less than
80% of the statewide annual median income.
Three of the following four conditions:
o Unemployment that is at least 3% higher
than statewide median unemployment rate.
o Crime rates that are 5% higher than the
statewide median crime rate.
o Deteriorated or inadequate infrastructure
such as streets, sidewalks, water supply, sewer
treatment or processing, and parks.
o Deteriorated commercial or residential
structures.
Assembly Bill 1080 also allows an Authority to carry out a
community revitalization plan within a community
revitalization and investment area established within a
former military base that is principally characterized by
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deteriorated or inadequate infrastructure and structures.
The governing board of an Authority established within a
former military base must include a member of the military
base closure commission as a public member.
III. Powers and duties . Assembly Bill 1080 directs that
an Authority has the following powers and duties:
Provide funding to rehabilitate, repair, upgrade,
or construct infrastructure.
Provide funding for low- and moderate-income
housing.
Remedy or remove a release of hazardous substances
pursuant to the Polanco Redevelopment Act.
Provide for seismic retrofits of existing buildings
pursuant to a specified section of the Community
Redevelopment Law.
Acquire and transfer real property in accordance
with specified provisions of the Community
Redevelopment Law. The bill requires an Authority to
retain controls and establish restrictions or
covenants running with the land sold or leased for
private use for such periods of time and under such
conditions as are provided in the community
revitalization and investment plan. The bill declares
the establishment of such controls to be a public
purpose.
Issue bonds pursuant to specified provisions of the
Community Redevelopment Law.
Borrow money, receive grants, or accept financial
or other assistance or investment from the state or
the federal government or any other public agency or
private lending institution for any project within its
area of operation, and comply with any conditions of
the loan or grant. The bill specifies that an
Authority may qualify for funding as a disadvantaged
community as determined by the California
Environmental Protection Agency pursuant to state law.
An Authority may also enter into an agreement with a
qualified community development entity to coordinate
investments of funds derived from the New Markets Tax
Credit with those of the authority, under specified
conditions.
Adopt a community revitalization plan.
Make loans or grants for owners or tenants to
improve, rehabilitate, or retrofit buildings or
structures within the plan area.
AB 1080 -- 5/20/13 -- Page 5
With specified exceptions, provide direct
assistance to businesses within the plan area in
connection with new or existing facilities for
industrial or manufacturing uses.
Assembly Bill 1080 allows the legislative body or bodies
that created the Authority to appropriate the amounts the
legislative body or bodies deem necessary for the
Authority's administrative expenses and overhead. The
money appropriated can be paid as a grant to defray the
expenses and overhead, or as a loan to be repaid upon terms
and conditions determined by the legislative body. If
appropriated as a loan, the property owners within the plan
area must be made third-party beneficiaries of the
repayment of the loan. The bill specifies that, in
addition to the common understanding and usual
interpretation of the term, "administrative expense"
includes expenses of planning and dissemination of
information.
Assembly Bill 1080 deems an Authority to be a local public
agency subject to the Ralph M. Brown Act, the Public
Records Act, and the Political Reform Act.
IV. Community revitalization and investment plans .
Assembly Bill 1080 requires an Authority to adopt a
community revitalization and investment plan that may
include a provision for the receipt of tax increment funds
generated within the area according to the Community
Redevelopment Law, provided the plan includes:
A statement of the plan's principal goals and
objectives.
A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction of adequate infrastructure or repair or
upgrading of existing infrastructure.
A program to remedy or remove a release of
hazardous substances, if applicable.
A program to provide funding for or otherwise
facilitate the economic revitalization of the area.
A fiscal analysis setting forth the projected
receipt of revenue and projected expenses over a
five-year planning horizon.
The time limits, specified in the Community
Redevelopment Law, designating the maximum length of
time an Authority can establish debt, act pursuant to
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a plan, repay debt, and commence eminent domain
proceedings.
A program that complies with the Community
Redevelopment Law's requirement that a specified
percentage of tax increment revenues must be used to
increase, improve, and preserve the community's supply
of low- and moderate-income housing. The bill
requires an Authority that includes a provision for
the receipt of tax increment revenues in its plan to
dedicate at least 25 percent of allocated tax
increment revenues for affordable housing purposes and
specifies other requirements that apply to an
Authority's use of funds for affordable housing.
Assembly Bill 1080 requires an Authority to consider
adoption of the plan at two public hearings that must take
place at least 30 days apart. At the first public hearing,
the Authority must hear all written and oral comments but
take no action. At the second public hearing, the
Authority must consider all written and oral comments and
take action to modify, adopt, or reject the plan. The
draft 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 the notice given for the first public
hearing. The purposes of the meeting must be to allow the
staff of the authority to present the draft plan, answer
questions about the plan, and consider comments about the
plan.
Assembly Bill 1080 specifies the manner in which the
Authority must provide public notice of the two public
hearings. The bill allows the Authority to adopt the plan
at the conclusion of the second public hearing by
ordinance, which must be subject to referendum as
prescribed by law for the ordinances of the local
jurisdiction that created the Authority.
V. Tax increment financing . The California Constitution
and the Community Redevelopment Law allow local officials
to use property tax increment revenues to repay bonds,
debts, and loans needed to finance a redevelopment project.
Assembly Bill 1080 deems a community revitalization and
investment authority to be an "agency" as defined in the
Community Redevelopment Law for purposes of receiving tax
increment revenues pursuant to Article XVI of Section 16 of
the California Constitution.
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Assembly Bill 1080 specifies that a "redevelopment plan"
referred to in the Community Redevelopment law is
equivalent to the community revitalization and investment
plan adopted pursuant to the bill's provisions. The bill
allows a community revitalization and investment plan to
include a provision for the receipt of tax increment funds.
Assembly Bill 1080 allows any city, county, or special
district that receives ad valorem property taxes from
property located within an area to adopt a resolution
directing the county auditor-controller to allocate its
share of tax increment funds within the area covered by the
plan to the authority. The resolution may direct the
county auditor-controller to allocate less than the full
amount of the tax increment, establish a maximum amount of
time in years that the allocation takes place, or limit the
use of the funds by the authority for specific purposes or
programs. A resolution may be repealed by giving the county
auditor-controller 60 days' notice; provided, however, that
the county auditor-controller must continue to allocate to
the Authority the taxing entity's share of ad valorem
property taxes that have been pledged to the repayment of
debt issued by the Authority until the debt has been fully
repaid.
Assembly Bill 1080 requires that a provision for the
receipt of tax increment funds must become effective in the
tax year that begins after the December 1 first following
the adoption of the plan.
Assembly Bill 1080 specifies the manner in which a county
auditor-controller must allocate tax revenue to an
Authority upon adoption of a plan that includes a provision
for the receipt of tax increment funds.
Assembly Bill 1080 requires that an Authority's plan for an
area that includes land formerly or currently designated as
part of a redevelopment area must subordinate tax increment
amounts received by the Authority to any preexisting
enforceable obligation, as defined in statute.
VI. Reporting and Accountability . Assembly Bill 1080
requires an Authority to review a community revitalization
and investment plan at least annually and make any
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modifications that are necessary and appropriate in
accordance with specified statutory provisions. An
Authority must require the preparation of an annual
independent financial audit paid for from its revenues.
Assembly Bill 1080 requires an Authority, after holding a
public hearing, to adopt an annual report on or before June
30 of each year. Written copies of the draft report must be
made available to the public 30 days prior to the public
hearing. The clerk of the legislative body must post the
draft report in an easily identifiable and accessible
location on the Authority's Internet Web site and must mail
a written notice of the availability of the draft report on
the Web site to each owner of land within the area covered
by the plan and to each taxing entity that has adopted a
resolution allocating tax increment funds to the Authority.
Assembly Bill 1080 requires the annual report to contain
specified information and prohibits an Authority from
spending specified tax increment revenues if it fails to
provide the annual report.
Assembly Bill 1080 requires that an Authority must, every
10 years, conduct a protest proceeding at a public hearing
to consider whether the property owners within the plan
area wish to present oral or written protests against the
Authority. Notice of the protest proceeding must be
included in the written notice of the hearing on the annual
report and must inform the property owner of his or her
right to submit an oral or written protest before the close
of the public hearing. The authority must consider all
written and oral protests received prior to the close of
the public hearing. The bill specifies that a majority
protest exists if protests have been filed representing
over 50 percent of the assessed value in the area.
If there is a majority protest, Assembly Bill 1080 requires
the Authority to call an election of the property owners in
the area covered by the plan, and prohibits the Authority
from initiating or authorizing any new projects until the
election is held. The election must be held within 90 days
of the public hearing and may be held by mail-in ballot.
If a majority of the property owners, weighted proportional
to the assessed value of their property, vote against the
Authority, then the Authority must not take any further
action to implement the plan on and after the effective
date of the election. This prohibition does not prevent
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the Authority from taking any and all actions and
appropriating and expending funds, including any and all
payments on bonded or contractual indebtedness, to carry
out and complete projects for which expenditures of any
kind had been made prior to the effective date of the
election.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Eliminating redevelopment
agencies did not eliminate the need for California
communities to build more affordable housing, eliminate
blight, foster business activity, clean up contaminated
brownfields, and create jobs. AB 1080 establishes a new
approach to local economic development and housing policy
that is focused on the state's disadvantaged communities.
AB 1080 fosters collaboration between cities and counties
on local economic development efforts and mitigates the
zero-sum competition for scarce property tax revenues among
cities, counties, and school districts. To ensure public
accountability, the bill requires a community
revitalization and investment authority to conduct an
annual review and reporting process and periodically allows
local residents to prohibit an Authority from taking
further actions. While it is unrealistic to expect that a
single economic development tool will work in all
California cities, AB 1080 is a viable option for bringing
vital investments to communities that most need employment
opportunities, crime reduction, upgraded infrastructure,
brownfields remediation, and affordable housing.
2. First things first . Last year, Governor Brown vetoed
several bills creating new financing tools for local
economic development. The Governor's veto messages
expressed his desire to wait until after the winding down
of redevelopment is complete and State General Fund savings
are achieved before implementing new financing programs.
In response, AB 1080 should ensure that local officials
complete significant elements of the redevelopment
dissolution process before embarking on new projects
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through a community revitalization and investment
authority. Specifically:
If a former redevelopment agency's successor agency
complies with state laws that require it to remit
specified RDA property tax allocations and cash assets
for distribution to taxing entities, it receives a
"finding of completion" from the Department of Finance
(AB 1484, Assembly Budget Committee, 2012). More than
200 successor agencies have received a finding of
completion. The Committee may wish to consider
amending AB 1080 to require any city or county that is
a successor agency to obtain a finding of completion
before forming a community revitalization and
investment authority.
A successor agency that receives a finding of
completion can retain a former RDA's real property
assets in a trust and use those assets subject to
provisions of a long-range property management plan
approved by the Department of Finance. The Committee
may wish to consider amending AB 1080 to clarify that
the property management powers that the bill grants to
a community revitalization and investment authority do
not exempt a successor agency from complying with
statutes governing the use and disposition of former
RDA real property assets.
3. Change is inevitable . When R&B legend Sam Cooke wrote
"A Change is Gonna Come," he wasn't thinking about local
economic development priorities. Nevertheless, changes in
local economic and land use conditions will inevitably
require local officials to modify community revitalization
and investment plans. AB 1080 does not specify the manner
in which local officials must adopt plan amendments. The
Committee may wish to consider amending AB 1080 to specify
that a community revitalization and investment plan can be
amended through the same public notice and hearing process
that the bill requires for the formation of an Authority.
4. Pick a number . Above-average unemployment and crime
rates are two criteria that AB 1080 establishes for the
formation of a community revitalization and investment
area. However, the bill doesn't specify the data sources
that local officials must use to measure unemployment or
crime and doesn't require that the data reflect
measurements taken over a specific period of time. The
Committee may wish to consider amending AB 1080 to specify
AB 1080 -- 5/20/13 -- Page 11
what data sources must be used and what time period must be
measured to determine whether a potential community
revitalization and investment area meets the bill's
unemployment and crime rate criteria.
5. Alternative, not additive . AB 1080 allows a city or
county to establish a community revitalization and
investment area within a former military base that is
principally characterized by deteriorated or inadequate
infrastructure and structures. Some local officials have
questioned whether an area within a former base must also
meet the bill's general criteria for forming a community
revitalization and investment area, like low household
income, high unemployment and crime, and deteriorated
infrastructure or buildings. The Committee may wish to
consider amending AB 1080 to clarify that the criteria for
forming a community revitalization and investment area
within a former military base are an alternative, not an
addition, to the general criteria for forming an area.
6. Let's get technical . The Committee may wish to
consider amending AB 1080 to make these additional
corrections, clarifications, and non-substantive changes:
Correct an erroneous cross-reference on page 3,
line 36, by striking out "(2)" and inserting "(1)".
Eliminate an unnecessary requirement that a clerk
must post an annual report by striking out, on page 9,
lines 36 and 37, "The clerk of the legislative body
shall post the draft report" and inserting "The
authority shall cause the draft report to be posted"
Correct an erroneous cross-reference on page 10,
line 20, by striking out "(a)" and inserting "(b)".
Clarify the bill's references to election dates, by
striking out the word "effective" on page 10, line 32,
and page 11, lines 7 and 12.
Add coauthors.
7. Legislative history . AB 1080 is similar to SB 1156
(Steinberg, 2012), which the Governor vetoed, and SB 1
(Steinberg, 2013), which the Senate Governance & Finance
Committee passed on a 4-2 vote and is now awaiting a
hearing in the Assembly.
8. Double referral . The Senate Rules Committee has
ordered a double-referral of AB 1080, first to the Senate
Governance & Finance Committee which has policy
AB 1080 -- 5/20/13 -- Page 12
jurisdiction over the statutes governing local governments'
finances, and then to the Senate Transportation & Housing
Committee, which has jurisdiction over the bill's
housing-related provisions.
9. Related bills . The Senate Governance & Finance
Committee has heard several other bills that seek to
provide local governments with alternative financing
mechanisms to replace redevelopment:
SB 33 (Wolk) expands local officials' authority to
create Infrastructure Financing Districts (IFDs).
SB 628 (Beall) removes the voter-approval
requirements to create IFDs and issue bonds for
transit priority projects.
AB 229 (J. P�rez) allows local government to create
Infrastructure and Revitalization Financing Districts.
AB 243 (Dickinson) allows local governments to
create Infrastructure and Revitalization Financing
Districts.
AB 294 (Holden) authorizes IFDs to use the county's
Educational Revenue Augmentation Fund portion of tax
increment revenues.
AB 662 (Atkins) repeals the prohibition against
forming an IFD within a former redevelopment area.
Assembly Actions
Assembly Housing and Community Development Committee: 5-2
Assembly Local Government Committee: 8-0
Assembly Appropriations Committee: 12-5
Assembly Floor: 54-16
Support and Opposition (6/13/13)
Support : Cities of Blue Lake, Burbank, El Centro,
Fairfield, Lakewood, Madera, Mendota, Pomona, Salinas, and
Watsonville; Building Industry Association; California
Special Districts Association; League of California Cities;
League of California Cities, Latino Caucus; League of
California Cities, Los Angeles Division; Western Center on
Law and Poverty.
Opposition : California Alliance to Protect Private
Property Rights; California Taxpayer Association.
AB 1080 -- 5/20/13 -- Page 13