BILL ANALYSIS Ó AB 1793 Page 1 Date of Hearing: April 30, 2014 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT K.H. "Katcho" Achadjian, Chair AB 1793 (Chau) - As Introduced: February 18, 2014 SUBJECT : Community development: affordable housing. SUMMARY : Authorizes housing successors to transfer the responsibility of enforcing the affordability deed restrictions of below market-rate (BMR) homeownership units of former redevelopment agencies (RDAs) to qualified nonprofit organizations. Specifically, this bill : 1)Provides housing successors with the authority, by ordinance or resolution adopted at a noticed public meeting, to transfer the responsibility of enforcing the affordability deed restrictions of BMR homeownership units to qualified nonprofit organizations. 2)Directs the California Housing Finance Agency (CalHFA) to issue a request for proposal (RFP) on or before July 1, 2015, to identify up to six qualified nonprofit organizations that would serve this role. 3)Requires all selected nonprofit organizations to conduct a yearly audit of the BMR units, and to provide this information to the donating housing successor, and requires the audit to include the number of units that have been sold to new owners, and any return on equity sharing. 4) Requires the donating housing successor to publish the audit on its Web Site. EXISTING LAW : 1)Requires RDAs to dissolve effective February 1, 2012. 2)Requires a successor agency to be established, and allows the successor agency to be the city, county, or city and county, in the territorial jurisdiction of the former RDA, and requires that if no local agency elects to be the successor agency, a designated local authority shall be formed with three members appointed by the Governor. AB 1793 Page 2 3)Requires successor agencies to transfer a former RDA's housing assets and functions to "housing successors." Housing successors retain the housing assets, functions, and powers previously performed by an RDA, excluding any enforceable obligations retained by the successor agency. 4)Provides that the city, county, or city and county within the territorial jurisdiction of the former RDA may elect to act as the housing successor. If they do not elect to act as the housing successor, then the local housing authority is required to act as the housing successor. If there is no local housing authority, then the Department of Housing and Community Development (HCD) acts as the housing successor. 5)Provides that housing successors may, amongst other things, enforce affordability covenants and perform related activities pursuant to applicable provisions of Community Redevelopment Law (CRL). 6)Requires successor agencies to make payments on legally enforceable obligations using property tax revenues when no other funding source is available, or when payment from property tax revenues is required by an enforceable obligation. 7)Defines enforceable obligations for successor agencies to include, but not be limited to: a) Bonds, including debt service, reserves, or other required payments; b) Loans borrowed by the RDA for a lawful purpose, including loans from the Low- and Moderate- Income (L&M) Housing Fund; c) Payments required by the federal government; d) Pre-existing obligations to the state or obligations imposed by state law; e) Legally enforceable payments required in connection with the RDAs' employees, including pension obligations; f) Judgments and settlements entered into by a court or binding arbitration decisions, retaining appeal rights; AB 1793 Page 3 g) Legally binding contracts that do not violate the debt limit or public policy; and, h) Contracts necessary for administration of the RDA, such as for office space, equipment, and supplies, to the extent permitted. FISCAL EFFECT : This bill is keyed fiscal. COMMENTS : 1)Purpose of this bill . AB 1793 gives housing successors the authority, by ordinance or resolution adopted at a noticed public meeting, to transfer the responsibility associated with enforcing the affordable deed restrictions of BMR homeownership units to qualified nonprofit organizations. The bill requires, on or before July 1, 2015, CalHFA to issue an RFP to identify up to six qualified nonprofit organizations that would serve this role. Nonprofit organizations selected to enforce BMR units' affordable deed restrictions would be required to conduct a yearly audit of the BMR units, and to provide the audit to the donating housing successor. The bill requires the donating housing successor to publish the audit on its Web Site. This bill is sponsored by Housing California. 2)Background . In 2011, as a result of serious budget shortfalls, the Governor proposed eliminating RDAs and creating a Voluntary Alternative Redevelopment Program (VARP) to replace them. Two pieces of budget trailer legislation, AB1X 26 (Chapter 5, Statutes of 2011-12 First Extraordinary Session) and AB1X 27 (Chapter 6, Statutes of 2011-12 First Extraordinary Session), were enacted to achieve this goal. AB1X 26 provided for the dissolution of RDAs and for the winding up of their obligations by successor agencies. AB1X 27 established VARP, which would have allowed RDAs to continue operations if their local city or county made voluntary annual payments benefitting schools, for the purpose of offsetting state education costs. In CRA v. Matosantos (2011), the California Supreme Court upheld the constitutionality of AB1X 26, but invalidated AB1X 27. This had the effect of dissolving RDAs without giving them the option of continuing operations by offsetting state education costs. AB 1793 Page 4 When RDAs were dissolved, successor agencies were established to wind up the RDAs' obligations. Successor agencies were required to effectuate the transfer of an RDA's housing functions and assets to a "housing successor." Cities and counties were given the option of acting as housing successors and taking over the housing assets of their jurisdiction's RDA. If they did not wish to take on this role, the local housing authority was required to act as housing successor. If there was no local housing authority, HCD was required to act as housing successor. RDAs produced, amongst other things, tens of thousands of BMR homeownership units. BMR units are affordable due to deed restrictions or equity-sharing agreements that must be monitored and enforced to recapture or retain affordability. Housing successors to RDAs are currently tasked with enforcing the affordability deed restrictions on BMR homeownership units. According to a recent survey of housing successors, a majority of responding agencies lost a significant amount of their designated funding for managing these units, and have laid off over half of their staff responsible for managing or monitoring affordable housing programs. One-third of responding agencies have seen affordable housing lost to foreclosure since the elimination of RDAs, and two-thirds expect it to happen. 3)Author's statement . According to the author, "When redevelopment agencies were dissolved, cities and counties were given the option of taking over the housing assets of their jurisdiction's redevelopment agency. If they did not wish to take these assets, the local Housing Authority was required to accept them. Redevelopment agencies produced, amongst other things, tens of thousands of below market rate (BMR) homeownership units. BMR units are affordable due to deed restrictions or equity-sharing agreements that must be monitored and enforced by housing successor agencies to recapture or retain affordability. "Housing successor agencies (cities, counties, cities and counties, or housing authorities) to former redevelopment agencies are currently tasked with enforcing the affordability deed restrictions on BMR homeownership units. According to a recent survey of housing successor agencies, a majority of responding agencies lost a significant amount of their AB 1793 Page 5 designated funding for managing these units, and have laid off over half of their staff responsible for managing or monitoring affordable housing programs. Without sufficient staffing or funding, the affordability of these units could be lost. One-third of responding agencies have seen affordable housing lost to foreclosure since the elimination of redevelopment agencies, and two-thirds expect it to happen." 4)League of Cities concerns . According to the League of Cities, "AB 1793 does nothing to address the financial difficulties [of finding a monetary solution to administer housing successor responsibilities]. We appreciate that the bill does not require cities and counties to turn over the housing successor responsibilities, but there is nothing under existing law that would prevent jurisdictions from contracting out their responsibilities to nonprofits. Finally, the current draft of AB 1793 complicates the picture of who does what with regard to liabilities and reporting requirements. We look forward to working with the author and his staff to address these concerns." 5)Arguments in support . Housing California argues that "stewardship of scattered site affordable homeownership units is particularly challenging. Surveys have shown that the affordability restrictions of affordable homeownership units created by RDAs are currently being lost" and that "a number of California nonprofits are in an excellent position to provide stewardship for the homes created by RDAs." 6)Arguments in opposition . None on file. 7)Double-referral . This bill was heard by the Housing and Community Development Committee on April 9, 2014, and passed with a 7-0 vote. REGISTERED SUPPORT / OPPOSITION : Support Housing California [SPONSOR] Opposition None on file AB 1793 Page 6 Concerns League of California Cities Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958