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.









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          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;








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             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.








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            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  








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            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
           








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          Concerns

          League of California Cities
           
          Analysis Prepared by  :    Debbie Michel / L. GOV. / (916)  
          319-3958