BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1080 (Alejo) - Community Revitalization and Investment
Authorities.
Amended: August 20, 2013 Policy Vote: G&F 4-1; T&H 8-2
Urgency: No Mandate: No
Hearing Date: August 30, 2013
Consultant: Mark McKenzie
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: AB 1080 would authorize local entities, either
individually or collaboratively and excluding schools and
successor agencies, to form a Community Revitalization and
Investment Authority (CRIA). Participating entities agree to
direct property tax increment revenues to the CRIA to invest in
improvements in specified project areas that are characterized
by low household income, high unemployment and crime, and
deteriorated public infrastructure and structures.
Fiscal Impact:
Potentially major redirection of local property tax
revenues from participating local agencies, excluding
schools, to a CRIA over a period of decades. Since the bill
prohibits schools from participating, there is no state
fiscal impact related to the redirection of local property
tax revenues.
Estimated one-time costs to the State Controller's Office
(SCO) in the range of $50,000 to $100,000 (General Fund) in
2014-15 to establish guidelines for periodic audits that
include provisions for determining compliance with
affordable housing requirements as well as secondary review
and compliance measures for failure to achieve initial
compliance on the regular audit schedule. (Staff assumes 0.5
to 1.0 PY of regulatory staff to establish guidelines)
Estimated ongoing SCO costs of up to $100,000 (General
Fund) on a periodic basis, beginning in 2018-19, for
accepting audits and reviewing and approving secondary
compliance plans submitted by CRIAs who fail to comply with
initial audit requirements. (Staff assumes approximately 1PY
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of audit work on a periodic basis)
Background: Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property taxes that is
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades. RDAs
used tax increment financing to address issues of blight,
construct affordable housing, rehabilitate existing buildings,
and finance development and infrastructure projects.
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) Chap 5/2011 dissolved all RDAs and
established procedures for winding down RDA activity. Existing
law requires successor agencies to dispose of former RDAs'
assets and properties, at an oversight board's direction, in an
expeditious manner aimed at maximizing value. Successor
agencies are required to make any payments related to
enforceable obligations, as specified in an adopted recognized
obligation payment schedule and remit unencumbered balances of
RDA funds and proceeds from asset sales to the county
auditor-controller for distribution to local taxing entities in
the county. Successor agencies cannot enter into new
enforceable obligations.
Proposed Law: AB 1080 would authorize local agencies, excluding
schools and successor agencies, to establish a CRIA to finance
specified activities within a revitalization and investment area
according to a specified community revitalization and investment
plan. Among other things, this bill would:
Provide for the formation of a CRIA by local agencies,
excluding school entities and successor agencies, individually
by adopting a resolution, or collaboratively by forming a
joint powers authority.
Prohibit a city or county that created an RDA from forming a
CRIA unless the successor agency has received a finding of
completion from the Department of Finance (DOF). Any tax
increment derived from an area that includes RDA land would be
subordinate to any preexisting enforceable obligations.
Require at least 80 percent of the land in an investment area,
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as specified, to be characterized by an annual median
household income of less than 80 percent of the statewide
median household income and three of the following four
conditions:
o Nonseasonable unemployment at least 3 percent higher
than the statewide median unemployment rate, as
specified.
o Crime rates that are at least 5 percent higher than
the statewide rate.
o Deteriorated or inadequate infrastructure, such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks.
o Deteriorated commercial or residential structures.
Authorize a CRIA, as an alternative to the above criteria, to
establish an investment area within a former military base
principally characterized by deteriorated or inadequate
infrastructure and structures.
Authorize the administrative expenses of a CRIA to be paid
from tax increment.
Allow a plan for a CRIA to include a provision for the receipt
of tax increment funds, as specified, and require the plan to
include specified mandatory elements, including a program that
dedicates 25% of tax increment proceeds to be spent on
affordable housing, rather than the 20% required under
redevelopment law.
Authorize a CRIA to dedicate funding to specified
infrastructure, low and moderate income housing, brownfield
cleanup, seismic retrofits, property acquisition, and direct
assistance to businesses for industrial and manufacturing
uses.
Require a CRIA to annually review the plan, prepare an
independent financial audit, and adopt an annual report in a
public hearing.
Require a CRIA to conduct a protest proceeding every 10 years.
If there is a majority protest, the CRIA must not initiate
any new projects until an election of property owners and
residents is held. If a majority of the electorate votes
against the CRIA, it must not take any further action to
implement the plan.
Require the SCO to establish audit guidelines to determine
compliance with specified affordable housing maintenance and
replacement requirements.
Require a CRIA to contract for an independent performance
audit every five years, consistent with the guidelines
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established by the SCO.
Require a CRIA to submit a plan for compliance to the SCO, if
the initial audit contains findings of failure to comply with
the specified housing requirements identified in the audit
guidelines.
Require the SCO to review and approve the compliance plan to
ensure that it includes specified means of achieving
compliance, including expenditure of an additional 10 percent
of tax increment on low-income housing, increasing production
of units for very low income households by 10 percent, or
targeting expenditures to rental housing affordable to very
low and extremely low income persons.
Related Legislation: SB 1 (Steinberg), which is currently on the
Assembly Appropriations Committee Suspense File, would authorize
local entities, excluding schools, to form a Sustainable
Communities Investment Authority, and direct tax increment to
investments in improvements that relieve blight in transit
priority project areas, small walkable communities, and sites
designated for clean energy manufacturing, as specified.
Staff Comments: The Governor vetoed a number of bills last year
that were intended to provide economic development options for
local governments in the wake of the dissolution of RDAs,
including SB 1156 (Steinberg), which was similar in approach to
AB 1080. In his veto message of SB 1156, Governor Brown
indicated that he was supportive of taking a constructive look
at implementing this type of program once the winding down of
redevelopment is complete. That process is ongoing.
Prior to 2011, local communities used redevelopment as a tool to
alleviate blight by diverting over $6 billion annually in
property tax increment to pay for development projects,
repairing infrastructure, and building affordable housing.
Since approximately half of property tax revenues statewide are
a dedicated source of funding for K-14 schools, redevelopment
diverted significant revenues away from schools. Generally, the
loss in school funding related to the tax increment dedicated
for redevelopment purposes has been backfilled by the General
Fund pursuant to the minimum funding guarantees specified in
Proposition 98. Although AB 1080 uses tax increment financing
for CRIA activities, the bill avoids the impact to the state
General Fund by explicitly prohibiting school entity
participation.
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This bill requires that a disadvantaged community have at least
80 percent of the land (calculated by census tracts) within an
investment area be characterized by an annual household income
that is less than 80 percent of the statewide median household
income, and three out of the following four characteristics:
unemployment that is at least 3 percent above the statewide
average, crime rates that are at least 5 percent above the
statewide average, deteriorated or inadequate infrastructure,
and deteriorated commercial or residential structures.
According to the most recent DOF economic data, the statewide
median household income was $55,100 in 2010-11. The most recent
labor market information on the Employment Development
Department's website indicates a statewide unemployment rate of
8.7 percent in July of 2013. Earning $45,000 or less annually
per household is the U.S. Census Bureau's current threshold for
"low-income," and the poverty line is approximately half of that
amount at a household income of $22,350. This bill requires
that an investment area be characterized by an average household
income of about $44,080 in 80 percent of the census tracts, in
addition to meeting three of the four characteristics enumerated
above. Staff notes that the income requirements are roughly
what the Census Bureau classifies as low-income, but is nearly
twice the amount considered to be the poverty line. The extent
to which the criteria specified in the bill would constrain the
use of this new economic development tool is unclear.
AB 1080 requires periodic audits to determine compliance with
affordable housing maintenance and replacement requirements of
the bill. These audits are to be submitted to the SCO, but the
bill explicitly states that the SCO is not required to review
and approve completed audits. However, if a CRIA audit is
deemed out of compliance, the SCO is required to review and
approve plans submitted by a CRIA to achieve compliance. As
part of this secondary review, the SCO must ensure that the plan
meets specified compliance measures. It is unclear why the SCO
is relieved from the first-level review and certification of
CRIA audits, but is required to ensure compliance with the
secondary review of compliance plans. The Community
Redevelopment Law required RDAs to submit financial information
to the SCO annually. Although AB 1080 requires CRIA's to
annually conduct financial audits, there is no requirement that
the SCO receive, review, or approve those audits.
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The SCO would have new workload to establish, update, and
monitor. Staff estimates the SCO would incur staffing costs in
the range of $50,000 to $100,000 (0.5 to 1.0 PY of staff time)
related to this new workload. The workload associated with
receiving independent audits, and reviewing and approving plans
of compliance is dependent upon the number of CRIAs formed.
Staff estimates up to 1.0 PY of SCO staff time could be
dedicated to these efforts, but since the audits only have to be
submitted every five years, any workload would not occur until
2018-19.
AS PROPOSED TO BE AMENDED, the bill would:
Allow a CRIA to be calculated by census blocks, rather
than census tracts, when data is available.
Specify that residents of a CRIA must be at least 18
years of age in order to participate in a protest election.
Establish a schedule of penalties is a CRIA fails to
provide a copy of completed audits to the SCO.