BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 1080
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: alejo
VERSION: 7/2/13
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: July 9, 2013
SUBJECT:
Community Investment and Revitalization Authorities
DESCRIPTION:
This bill allows a local government or local governments jointly
to establish a Community Investment and Revitalization Authority
to use tax increment revenues to invest in disadvantaged
communities.
ANALYSIS:
Historically, the Community Redevelopment Law allowed a local
government to establish a redevelopment area and capture all of
the increase in property taxes generated within the area
(referred to as "tax increment") over a period of decades. The
law requires redevelopment agencies to deposit 20 percent of tax
increment into a Low and Moderate Income Housing Fund (L&M fund)
to be used to increase, improve, and preserve the community's
supply of low- and moderate-income housing available at an
affordable housing cost.
In 2011, the Legislature enacted two bills, AB 26X (Blumenfield)
and AB 27X (Blumenfield), Chapters 5 and 6, respectively, of the
First Extraordinary Session. AB 26X eliminated redevelopment
agencies and established procedures for winding down the
agencies, paying off enforceable obligations, and disposing of
agency assets. AB 26X established successor agencies, typically
the city that established the agency, to take control of all
redevelopment agency assets, properties, and other items of
value. Successor agencies are to dispose of an agency's assets
as directed by an oversight board, made up of representatives of
local taxing entities, with the proceeds transferred to the
county auditor-controller for distribution to taxing agencies
within each county.
AB 26X also included provisions allowing the host city or county
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of a dissolving redevelopment agency to retain the housing
assets and functions previously performed by the agency, except
for funds on deposit in the agency's L&M fund, and thus become a
housing successor agency. If the host city or county chooses
not to become the housing successor agency, a local housing
authority or the state's Department of Housing and Community
Development (HCD) takes on that responsibility.
AB 27X allowed redevelopment agencies to avoid elimination if
they made payments to schools in the current budget year and in
future years. In December 2011, the California Supreme Court in
California Redevelopment Association v. Matosantos upheld AB 26X
and overturned
AB 27X. As a result, all of the state's roughly 400
redevelopment agencies dissolved on February 1, 2012, and local
jurisdictions are in the process of implementing AB 26X's
provisions to distribute former redevelopment assets and pay its
remaining obligations.
This bill authorizes local governments to create Community
Investment and Revitalization Authorities to use tax increment
revenue to improve the infrastructure, assist businesses, and
support affordable housing in disadvantaged communities.
Specifically, this bill:
1.Permits a city, county, or city and county to create a
Community Investment and Revitalization Authority (authority).
The authority board shall have five members, three of whom
shall be members of the legislative body of the city or county
and two of whom shall be public members who live or work
within the community revitalization and investment area.
2.Permits, as an alternative, any combination of a city, county,
city and county, and a special district, but not a school
district, to enter a joint powers agreement to form an
authority. The board of the authority in this case shall
consist of a majority of members from the legislative bodies
and a minimum of two public members who live or work within
the community revitalization and investment area.
3.Prohibits a city or county that created a redevelopment agency
dissolved pursuant to AB 26X of 2011 from forming an authority
unless the Department of Finance has issued its successor
agency a finding of completion indicating that the local
government has complied with AB 26X's requirements to
distribute the former agency's assets to the taxing entities.
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4.Allows an authority to carry out a community revitalization
plan within a community revitalization and investment area
(plan 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:
Non-seasonal unemployment that is at least 3% higher
than statewide median unemployment rate.
Crime rates that are 5% higher than the statewide
median crime rate.
Deteriorated or inadequate infrastructure such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks.
Deteriorated commercial or residential structures.
Alternatively, an authority may carry out a community
revitalization and investment plan within a community plan
area established within a former military base that is
principally characterized by deteriorated or inadequate
infrastructure and structures. The board of an authority
established within a former military base must include a
member of the military base closure commission as a public
member.
1.Allows any city, county, or special district, other than a
school entity, that receives ad valorem property taxes from
property located in a plan area to adopt a resolution
allocating some or all of its share of tax increment within
the plan area for a number of years it specifies. The city,
county, or special district may also dedicate its tax
increment to specific purposes or programs. In addition, the
city, county, or special district may cease providing tax
increment to an authority, unless its increment is pledged to
repay debt.
2.Deems an authority an "agency" pursuant to Community
Redevelopment Law (CRL) for purposes of receiving tax
increment revenue, but limits an agency's powers and duties to
those prescribed in this bill. These powers include:
Provide funding to rehabilitate, repair, upgrade, or
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construct infrastructure;
Provide funding for low- and moderate-income housing;
Remedy or remove a release of hazardous substances,
pursuant to provisions of the CRL known as the Polanco Act;
Provide for seismic retrofits of existing buildings
pursuant to the CRL;
Acquire and transfer real property in accordance with
specified provisions of the CRL;
Issue bonds;
Borrow money, receive grants, or accept financial or
other assistance from the state or federal government;
Adopt a community revitalization and investment plan;
Make loans and grants for owners or tenants to improve,
rehabilitate, or retrofit buildings or structures within
the plan area; and
Provide direct assistance to businesses within the plan
area in connection with new or existing facilities for
industrial or manufacturing uses.
1.Requires an authority following a specified public notice and
hearing process to adopt a community revitalization and
investment plan. The plan may include a provision for the
receipt of tax increment funds generated within the area,
provided the plan includes these elements:
A statement of its principal goals and objectives;
A description of deteriorated or inadequate
infrastructure within the plan area and a program to
upgrade that infrastructure;
A program to remedy or remove a release of hazardous
substances;
A program to provide funding or otherwise facilitate the
economic revitalization of the plan area;
Time limits as provided in the CRL, which prescribe the
maximum time an authority may establish debt, act pursuant
to an area plan, and repay debt;
A fiscal analysis setting forth the receipt of revenue
and projected expenses over a five-year planning horizon;
A program to use 25 percent of the tax increment revenue
to increase, improve, and preserve the supply of low- and
moderate-income housing available at an affordable housing
cost in compliance with the CRL's housing provisions; and
A program that does both of the following:
Prohibits the number of housing units occupied by
extremely low-, very low-, and low-income households,
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including the number of bedrooms in those units, from
being reduced within the area during the effective period
of the plan; and
Requires the replacement of dwelling units that house
extremely low-, very low-, or low-income households when
removed from an area within two years, rather than the
four years under existing provisions of the CRL.
An authority shall follow the same process when making plan
amendments. In addition, each year the authority must review
its plan and make modifications as appropriate.
1.Allows an authority to transfer funding for affordable housing
to a housing authority or the entity that received the housing
assets of the former redevelopment agency within the
territorial jurisdiction of the local jurisdiction of the
authority, if it makes a finding that the transfer will reduce
administrative costs or expedite the construction of
affordable housing.
2.Requires that an authority adopt an annual report each year
after holding a public hearing on the draft report and
pursuant to specified notification requirements. The annual
report must detail projects undertaken, revenues and expenses,
housing activities, and assistance provided to private
businesses. If an authority fails to provide its annual
report, then it cannot spend any tax increment funds received.
3.Requires that every ten years an authority shall conduct at
its annual report adoption hearing a protest hearing at which
property owners within the plan area may present protests
against the authority pursuant to a process specified in the
bill. Under this process, if property owners representing
over 50 percent of the assessed valuation of property in the
plan area protest, then the authority must call an election
within 90 days and, in the meantime, take no actions on any
new projects. If a majority of property owners, weighted
proportionally to the assessed value of their property, vote
against the authority at the protest election, then the
authority shall take no further action to implement its plan,
except that it may finish those projects for which it had
begun making expenditures of any kind.
4.Requires an authority to contract every five years for an
independent financial and performance audit to determine
compliance with the affordable housing requirements of the
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bill. The State Controller shall establish guidelines for
ensuring that an authority is meeting the housing requirements
of the bill (described in the final bullet under #7 above)
over each five-year period covered by the audit. If an
authority is failing to comply with these housing
requirements, then it shall submit to the controller with its
audit a plan to achieve compliance in not less than two years.
The plan must include one of the following means of achieving
compliance:
Expenditure of an additional 10 percent of the authority's
tax increment revenues on providing low-income housing;
A 10 percent increase in the production of housing for
very low-income households, as required under the CRL's
housing production requirements; or
The targeting of expenditures from its L&M fund
exclusively to rental housing affordable to, and occupied
by, persons of very low and extremely low income.
COMMENTS:
1.Purpose . The author introduced this bill to allow certain
"disadvantaged" areas of California to create a new entity
called a Community Revitalization Investment Authority through
which the local community would invest the property tax
increments of consenting local agencies, except schools, and
other available funding, to improve conditions leading to
increased employment opportunities, to reduce high crime
rates, to repair deteriorating and inadequate infrastructure,
to clean up brownfields, and to promote affordable housing.
He notes that redevelopment 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 agencies, communities across California are
seeking an economic development tool to use.
While legislators introduced multiple measures in 2012 to
provide local governments options for sustainable community
economic development, and the Legislature approved four of
them, none became law as Governor Brown vetoed those four.
Still the author believes that as the dissolution of former
redevelopment agencies continues, the pervasive question is
"what economic development tool can local governments use?"
It is unrealistic to expect that a single solution could work
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successfully in all California cities. The author states that
this bill provides a viable option targeting the state's
disadvantaged poorer areas and neighborhoods.
2.Housing provisions . The bill adds to the affordable housing
provisions of existing Community Redevelopment Law in three
ways. First, it increases from 20 to 25 percent the amount of
tax increment revenue that an authority must deposit into its
L&M fund. Because tax increment accruing to an authority
under this bill would be less (e.g., it would not include the
schools' share), this would be 25 percent of a smaller number.
Second, the bill requires a community revitalization and
investment plan to ensure that housing affordable to and
occupied by extremely low-, very low-, and low-income
households within an area does not decrease during the life of
the area plan. Third, the bill requires the authority to
provide replacement housing in two rather than four years.
These provisions, added in the most recent set of amendments,
represent an agreement between the author and the advocates of
affordable housing.
3.Opposition . Opponents object to the bill's authorization of
the use of tax increment and to its authorization to issue
debt absent a vote of the people. They argue that
sidestepping the voters in this way means that local voters
won't have a say in what their communities look like, how
bonds are issued, and how property tax revenue is spent. In
addition, they note that tax increment funding leaves cities,
counties, and special districts underfunded to provide
essential government services.
4.Protest and vote of the property owners . This bill sets up a
process whereby at least once every ten years property owners
within a plan area can protest and ultimately vote to shut
down the work of the authority in their community. The
protest process is restricted so that only property owners can
participate and a person's vote is weighted according to the
assessed value of his property within the plan area. Given
that the Community Revitalization and Investment Authorities
the bill authorizes are to work specifically in disadvantaged
communities and have as a major part of their mission to
provide affordable housing, which more often than not will be
rental housing, it seems inappropriate to restrict this
protest process and associated votes to property owners, when
many who do not own property will be affected by an
authority's work. In addition, votes weighted by the assessed
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value of a person's property are used only with assessments
based on property value. This bill has nothing to do with
such assessments. The committee may wish to amend this bill
to open the protest process and associated votes to residents
of the plan area as well as property owners and to provide
each person with one vote.
5.Technical amendments .
On page 5, line 34, delete "funding"
On page 7, line 24, delete "applicable" and insert
"other housing-related"
On page 7, line 37, after "34176" insert ", but Section
34176.1 shall not apply to funds funding transferred"
1.Committee of second referral . The Rules Committee referred
this bill to the Governance and Finance Committee and to the
Transportation and Housing Committee. This bill passed that
committee on June 19 by a 4 to 1 vote. The Governance and
Finance Committee's analysis and hearing of the bill dealt
primarily with the provisions of the bill related to the local
government finance provisions, leaving the housing provisions
for review in this committee.
RELATED LEGISLATION:
SB 1 (Steinberg) allows a local government to establish a
Sustainable Communities Investment Authority and direct tax
increment revenues to that authority in order to address blight
by supporting development in transit priority project areas,
small walkable communities, and clean energy manufacturing
sites. SB 1 passed the Transportation and Housing Committee on
April 23, 2013, by an 8 to 3 vote. Set for hearing in the
Assembly Housing and Community Development Committee on July
3rd.
Assembly Votes:
Floor: 54-16
Appr: 12-5
L Gov: 8-0
H&CD: 5-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, July 3,
2013.)
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SUPPORT: California Building Industry Association
California Rural Legal Assistance Foundation
California Special Districts Association
California Rural Legal Assistance Foundation
City of Antioch
City of Blue Lake
City of Burbank
City of Ceres
City of El Centro
City of Fairfield
City of Lakewood
City of Madera
City of Mendota
City of Salinas
City of Watsonville
Los Angeles County Division of the League of
California Cities
League of California Cities
League of California Cities - Latino Caucus
Western Center on Law and Poverty
OPPOSED: California Alliance to Protect Private Property
Rights
California Taxpayers Association