BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 1175
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          ASSEMBLY THIRD READING
          AB 1175 (Bocanegra)
          As Amended  March 21, 2013
          Majority vote 

           HOUSING             5-2         LOCAL GOVERNMENT    7-2         
           
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          |Ayes:|Torres, Atkins, Brown,    |Ayes:|Achadjian, Levine, Alejo, |
          |     |Chau, Mullin,             |     |Bradford, Gordon, Mullin, |
          |     |                          |     |Frazier                   |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Beth Gaines, Maienschein  |Nays:|Melendez, Waldron         |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           APPROPRIATIONS      12-5                                        
           
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          |Ayes:|Gatto, Bocanegra,         |     |                          |
          |     |Bradford,                 |     |                          |
          |     |Ian Calderon, Campos,     |     |                          |
          |     |Eggman, Gomez, Hall,      |     |                          |
          |     |Rendon, Pan, Quirk, Weber |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Harkey, Bigelow,          |     |                          |
          |     |Donnelly, Linder, Wagner  |     |                          |
          |     |                          |     |                          |
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           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  








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            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.  
           
          FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, negligible fiscal impact.

           COMMENTS  :   

          Background:  In 2011, the Legislature approved and the Governor  
          signed two measures, AB 26 X1 and AB 27 X1 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 AB 26  
          X1.  However, the Court did grant CRA's petition with respect to  
          AB 27 X1.   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  
          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 the  
          agency's 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  








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          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, California Public Employees' Retirement  
          System (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 Memorandum 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  
          health care.  This bill changes existing law to allow retirees,  
          specifically those of the former redevelopment agency in the  
          City of Los Angeles to receive health benefits.  
           

          Analysis Prepared by  :    Lisa Engel / H. & C.D. / (916) 319-2085
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