BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1175
                                                                  Page  1

          Date of Hearing:   April 17, 2013

               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
                                 Norma Torres, Chair
                  AB 1175 (Bocanegra) - As Amended:  March 21, 2013
           
          SUBJECT  :   Public employee benefits: postemployment health care 

           SUMMARY  :   Provides a process for administering the retirement  
          benefits of employees of the redevelopment agency of the City of  
          Los Angeles.  Specifically,  this bill  :  

          1)Requires that if the governing board of the designated local  
            authority (authority) for the former redevelopment agency of  
            the City of Los Angeles dissolves, the governing board must  
            identify an entity responsible for assuming the obligation  
            necessary to fully compensate for the postretirement benefit  
            costs of the former personnel of the authority and the former  
            redevelopment agency.   

          2)Provides that the entity that assumes the responsibility shall  
            be considered the employer of the former personnel of the  
            authority and former redevelopment agency for the purpose of  
            making ongoing contributions for the premium payments.

          3)Declares the need for a special law to address this issue  
            because of the circumstances that established an authority for  
            the former redevelopment agency of the City of Los Angeles.  

           EXISTING LAW  

          1)Provides that if no local agency elects to become the  
            successor agency for a dissolved redevelopment agency then an  
            authority will be immediately formed in the county of the  
            former redevelopment agency and vested with all of the powers  
            and duties of a successor agency (Health and Safety Code  
            Section 34173). 

          2)Requires the Governor to appoint three residents of the county  
            to serve as the governing board of the authority (Health and  
            Safety Code Section 34173).

          3)Requires the authority to serve as successor agency until a  
            local agency elects to become the successor agency (Health and  
            Safety Code Section 34173).








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          4)Gives the members of the authority the immunities applicable  
            to public entities and public employees (Health and Safety  
            Code Section 34173).

          5)Requires the successor agency or authority to identify the  
            enforceable obligations of the former redevelopment agency  
            (Health and Safety Code Section 34171). 

          6)Includes as enforceable obligations of the former  
            redevelopment agency: legally enforceable payments required in  
            connection with the agencies' employees, including, but not  
            limited to, pension payments, pension obligation debt service,  
            unemployment payments, or other obligations conferred through  
            a collective bargaining agreement (Health and Safety Code  
            Section 34171). 
           
          FISCAL EFFECT  :   Unknown. 

           COMMENTS  :   

           Background  :  In 2011, the Legislature approved and the Governor  
          signed two measures, ABX1 26 and ABX1 27 that together dissolved  
          redevelopment agencies as they existed at the time and created a  
          voluntary redevelopment program on a smaller scale.  In  
          response, the California Redevelopment Association (CRA), and  
          the League of California Cities, along with other parties, filed  
          suit challenging the two measures. The Supreme Court denied the  
          petition for peremptory writ of mandate with respect to ABX1 26.  
          However, the Court did grant CRA's petition with respect to ABX1  
          27.   As a result, all redevelopment agencies were required to  
          dissolve as of February 1, 2012.    

          As part of the dissolution process, local communities with  
          redevelopment agencies were required to establish a successor  
          agency that is responsible for identifying the enforceable  
          obligations or those debts of the former redevelopment agency  
          that need to be retired.  In four jurisdictions, Los Angles,  
          Merced, Stanislaus, and Ventura no local agency agreed to become  
          the successor agency to the former redevelopment agency and the  
          Governor appointed an authority.

          Successor agencies and authorities are required to submit a list  
          of recognized enforceable obligations to the Department of  
          Finance for approval.  Over time, these obligations will be  








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          repaid by property taxes collected and deposited by the county  
          auditor-controller into the Redevelopment Property Tax Trust  
          Fund. Included in the list of enforceable obligations are  
          legally enforceable payments required in connection with  
          agencies employees, including but not limited to pension  
          payments, pension obligations debt service, unemployment  
          payments or other obligations conferred through a collective  
          bargaining agreement.   Health care benefits are not  
          specifically listed but if they were part of the collective  
          bargaining agreement they would be considered enforceable  
          obligations.

          Once all of the debts of a former redevelopment agency have been  
          paid off then the successor agency and authority terminate its  
          existence.  Health benefits negotiated under a collective  
          bargaining agreement would be enforceable obligations and  
          therefore the successor agency could not be dissolved if health  
          benefits are still owed.  However, the sponsor believes that  
          once the designated authority no longer has active employees and  
          only retired employees, CalPERS will be prevented from providing  
          health care benefits to the retirees of the former redevelopment  
          agency.  

          In most cases the employees of the former redevelopment agency  
          were considered employees of the city or county and when the  
          redevelopment agency was dissolved the city or county continued  
          to provide health care benefits to those employees or retirees.   
          In Los Angeles the redevelopment agency and the City of Los  
          Angeles had a Memo of Understanding (MOU) that the city would  
          provide health care benefits to the former redevelopment agency.  
          The city did not become the successor agency and did not renew  
          the MOU to provide health care benefits to the former employees  
          of the redevelopment agency.  The authority contracted with  
          CalPERS to provide benefits to the current employees of the  
          authority and the retirees of the redevelopment agency.     

           Purpose of this bill  :  According to the sponsor of this bill,  
          current law requires agencies that contract with CalPERS for  
          health benefits to have at least one employee in order to  
          qualify as a public agency, which then allows CalPERS to provide  
          healthcare to an agency's retiree population.  California's  
          elimination of redevelopment agencies will eventually result in  
          the dismissal of all active employees of the redevelopment  
          agencies. As a result retirees of each agency will no longer be  
          able to contract with CalPERS for the provision of retiree  








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          health care. This bill changes existing law to allow retirees,  
          specifically those of the former redevelopment agency in Los  
          Angeles City to receive health benefits.  

           Staff comments  :  This bill does not specify who would take over  
          responsibility for the health care benefits of former employees  
          of the Los Angeles redevelopment agency if the authority no  
          longer exists.  The city did not want to become the successor  
          agency, so it's unclear if they would not take over the  
          postretirement benefits of the agency employees, who will.   

          Three other communities have authorities appointed by the  
          governor. It's unclear if they also would need to be included in  
          this bill to ensure the former employees of those redevelopment  
          agencies receive postretirement health benefits. 

           Double referred  :  If AB 1175 pass out of this committee, the  
          bill will be referred to the Committee on Local Government.
           
          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          American Federation of State, County and Municipal Employees,  
          AFL-CIO (sponsor)
          Three individual letters

           Opposition 
           
          None on file. 
           
          Analysis Prepared by  :    Lisa Engel / H. & C.D. / (916) 319-2085