BILL ANALYSIS Ó AB 1175 Page 1 ASSEMBLY THIRD READING AB 1175 (Bocanegra) As Amended March 21, 2013 Majority vote HOUSING 5-2 LOCAL GOVERNMENT 7-2 ----------------------------------------------------------------- |Ayes:|Torres, Atkins, Brown, |Ayes:|Achadjian, Levine, Alejo, | | |Chau, Mullin, | |Bradford, Gordon, Mullin, | | | | |Frazier | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Beth Gaines, Maienschein |Nays:|Melendez, Waldron | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 12-5 ----------------------------------------------------------------- |Ayes:|Gatto, Bocanegra, | | | | |Bradford, | | | | |Ian Calderon, Campos, | | | | |Eggman, Gomez, Hall, | | | | |Rendon, Pan, Quirk, Weber | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Harkey, Bigelow, | | | | |Donnelly, Linder, Wagner | | | | | | | | ----------------------------------------------------------------- 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 AB 1175 Page 2 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 AB 1175 Page 3 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 FN: 0000585 AB 1175 Page 4