BILL ANALYSIS Ó
AB 2280
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Date of Hearing: March 26, 2014
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
AB 2280 (Alejo) - As Introduced: February 21, 2014
SUBJECT : Community Revitalization and Investment Authorities
SUMMARY : Allows local governments to establish a Community
Revitalization and Investment Authority (Authority) in a
disadvantaged community to fund specified activities and allows
the Authority to collect tax increment. Specifically, this
bill :
1)Includes legislative findings regarding the intent of the
Legislature to create a planning and financing tool to support
the revitalization of disadvantaged communities.
2)Establishes an Authority as a public body to carry out a
community revitalization plan (plan) within a community
revitalization investment area (area).
3)Provides that for the purposes of receiving tax increment
revenues, pursuant to Article XVI of Section 16 of the
California Constitution, an Authority is a redevelopment
agency.
4)Allows an Authority to be created in either of the following
ways:
a) A city, county, or city and county may adopt a
resolution creating the Authority. The governing board
must include three members of the governing board of the
city, county, or city and county that created the Authority
and two public members who live or work in the area; or
b) A city, county, city and county, and special district
may create an Authority by entering into a joint powers
agreement that shall establish the composition of the
governing board, which must include two public members who
live or work in the area.
1)Prohibits a school entity from participating in an Authority.
2)Prohibits a city or county from forming an Authority until the
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successor agency or designated local authority of a former
redevelopment agency has received a finding of completion from
the Department of Finance that the former redevelopment agency
is fully dissolved.
3)Prohibits a successor agency to a former redevelopment agency
from participating in an Authority.
4)Allows an Authority to establish an area if at least 80% of
the land, calculated by census tract, is characterized by both
of the following conditions:
a) An annual median income that is less than 80% of the
statewide annual median income; and
b) Three of the following four conditions exist:
i. Unemployment that is at least 3% higher than the
statewide median unemployment rate;
ii. A crime rate that is 5% higher than the statewide
median crime rate;
iii. Deteriorated or inadequate infrastructure such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks; and
iv. Deteriorated commercial or residential structures.
1)Provides that the conditions in b) above, constitute blight
for the meaning of Community Redevelopment Law.
2)Provides that the Authority is not required to make a finding
or conduct a survey of blight.
3)Allows an Authority to establish an area in a former military
base that is principally characterized by deteriorated or
inadequate infrastructure and structures.
4)Requires a governing board of an Authority established in a
former military base to include, as one of its public members,
a member of the military base closure commission.
5)Subjects an Authority to the Ralph M. Brown Act.
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6)Allows an Authority to do any of the following:
a) Provide funding to rehabilitate, repair, upgrade, or
construct infrastructure;
b) Provide funding for low- and moderate-income housing;
c) Remedy or remove hazardous substances pursuant to the
Polanco Redevelopment Act;
d) Provide for seismic retrofits of existing buildings;
e) Acquire and transfer property subject to eminent domain;
f) Prepare and adopt a plan for an area subject to
Community Redevelopment Law;
g) Issue bonds;
h) Borrow money, receive grants, or accept financial or
other assistance or investment from the state and federal
government or any private lending institution for any
project within its area of operation;
i) Receive funding from the California Environmental
Protection Agency under the Water Security, Clean Drinking
Water, Coastal and Beach Protection Act of 2002;
j) Coordinate with a qualified community development entity
to maximize the benefit of New Markets Tax Credits;
aa) Appropriate funding that the governing body deems
appropriate for administrative expenses;
bb) Make loans or grants for owners or tenants to improve,
rehabilitate, or retrofit buildings or structures in the
area; and
cc) Provide direct assistance to businesses within the plan
in connection with new or existing facilities for
industrial or manufacturing uses.
1)Allows money appropriated to the Authority from the
legislative body or bodies that created the Authority for
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administrative expenses to be paid as a loan or grant.
2)Provides that if the Authority is loaned funding for
administrative expenses, the property owners within the plan
area will be made third party beneficiaries of the repayment
of the loan.
3)Provides that in addition to the common understanding and
usual interpretation, the term "administrative expenses"
includes, but is not limited to, expenses for planning and
dissemination of information.
4)Allows an Authority to adopt a plan to receive tax increment
generated in an area. The plan must include the following:
a) A statement of the principal goals and objectives;
b) A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction, repair, or upgrade of existing
infrastructure;
c) A program to spend 25% of the tax increment collected to
increase, improve, and preserve the community's supply of
low- and moderate-income housing;
d) A program to remedy and remove a release of hazardous
substances;
e) A program to fund or facilitate economic revitalization
of the area; and
f) A fiscal analysis of the projected receipt of revenue
and projected expenses over a five year planning period.
1)Requires the Authority to adopt a program that prohibits the
number of housing units for extremely low-, very low- and
low-income households in the sustainable communities
investment area from being reduced during the effective period
of the sustainable communities investment plan, and requires
the replacement of these housing units within two years of
their displacement.
2)Allows an Authority to transfer funding for affordable housing
to a housing authority or the entity that received the housing
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assets of the former redevelopment agency within the project
area, if it makes a finding that the transfer will reduce
administrative costs or expedite the construction of
affordable housing.
3)Requires an Authority to comply with all provisions of the
Community Redevelopment Law in administering tax increment
funding set-aside for affordable housing.
4)Requires an Authority to contract for an independent and
financial audit every five years, conducted by guidelines
established by the Controller, and submit it to the
Controller, Director of Department of Finance, and the Joint
Legislative Budget Committee.
5)Requires the audit to determine compliance with the affordable
housing maintenance and replacement requirement including
provisions to ensure that the replacement requirements are met
within the five year period covered by the audit.
6)Provides that if the Authority fails to meet the maintenance
and replacement requirement for affordable housing it must
adopt and submit to a plan with its yearly financial audit to
show how it will comply with those provisions within two
years.
7)Requires the controller to review and approve an Authority's
plan to meet the replacement housing requirements and ensure
that the plan includes one or more of the following means of
achieving compliance:
a) Expenditure of an additional 10% of gross tax increment
revenue on increasing, preserving, or improving the supply
of low-income housing;
b) An increase in the production by an additional 10% of
housing for very low-income households as required under
the CRL housing production requirements; and/or
c) The targeting of expenditures from the Low- and Moderate
-Income Housing Fund toward rental housing affordable to
and occupied by person of very low and extremely low
income.
1)Establishes a public process for adopting a plan or amending a
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plan to receive tax increment generated in an area that must
include the following:
a) The Authority must hold two public hearings at least 30
days apart;
b) The plan must be made available to the public and to
each property owner within the area at a meeting held at
least 30 days prior to notice of the first public hearing;
c) Notice of the first public hearing must be given at
least once a week for four weeks prior to the hearing in a
newspaper of general circulation and mailed to each
property owner in the proposed area of the plan; and
d) Notice of the second public hearing must be given not
less than 10 days prior to the date of the second hearing
in a newspaper of general circulation and mailed to each
property owner in the area of the plan.
1)Requires a notice informing the public and property owners in
the area of a public hearing to discuss the plan to receive
tax increment to include:
a. The specific boundaries of the proposed area;
b. The purpose of the plan; and
c. The time and place of the public hearing.
20)Requires that notice of the second hearing must include a
summary of the changes made to the plan from the first
hearing.
21)Allows the Authority to inform tenants of properties in the
area of the plan to receive tax increment in a manner of its
choosing.
22)Allows an Authority to adopt a plan by ordinance at the
conclusion of the second public hearing.
23)Allows an Authority to begin receiving tax increment funds
beginning on the first December 1 after the plan is adopted.
24)Allows any taxing entity other than a school entity that
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receives property taxes in an area to adopt a resolution,
prior to the adoption of the plan, to direct the county
auditor-controller to allocate its share of tax increment
funds to the Authority.
25)Allows the resolution adopted by a taxing entity directing
its share of tax increment to the Authority to allocate less
than the full amount of tax increment, establish a maximum
amount of time in years, or limit the use of funds to specific
purposes or programs.
26)Allows a taxing entity to repeal a resolution directing a
portion of its tax increment to the Authority by giving the
county auditor-controller 60 days' notice, except that the
auditor-controller will continue to allocate to the Authority
the portion of tax increment necessary to repay any debt
issued by the Authority that has not been fully repaid.
27)Requires that if an area overlaps with a former redevelopment
agency the plan must specify that any tax increment collected
is subject to and subordinate to any preexisting enforceable
obligations of the former redevelopment agency.
28)Requires an Authority to complete an annual independent
audit.
29)Requires an Authority to post a draft of the audit on their
Web site and mail it to the each of the taxing entities that
are contributing tax increment to the area.
30)Requires the annual audit to include:
a) A description of the projects undertaken in the fiscal
year and a comparison of the progress expected on those
projects compared to the actual progress;
b) A chart comparing the actual revenues and expenses
including administrative costs of the Authority to the
budgeted revenues and expenses;
c) Amount of tax increment revenues received;
d) Amount of revenues received and expended for low-and
moderate-income housing;
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e) Assessment of the level of completion of the projects in
the plan; and
f) Amount of revenues expended to assist private
businesses.
1)Provides that if an Authority fails to provide a copy of a
completed financial audit to the Controller within 20 days of
receiving a written notice of failure to comply, the Authority
shall forfeit the following to the state:
a) $2,500 where the Authority has total revenue of less
than $100,000;
b) $5,000 where the Authority has total revenue of at least
$100,000 but less than $200,000; and
c) $10,000 where the Authority has total revenue of at
least $250,000.
1)Provides that if an Authority fails to provide an audit for
two years in a row, after receiving a notice of failure to
comply, it must forfeit double the amount required above based
on its revenue size.
2)Provides that if an Authority fails to provide an audit for
three or more years in a row, after receiving a notice of
failure to comply, it must forfeit triple the amount required
above based on its revenue size.
3)Provides that if an Authority fails to provide an audit for
three or more years in a row the Controller shall conduct or
contract to conduct an independent financial audit report paid
for by the Authority.
4)Provides that the Controller may request the Attorney General
(AG) bring an action for the forfeiture of penalties in the
name of the people of the state of California.
5)Provides that the Controller may waive the forfeiture request
upon a satisfactory showing of good cause of why the Authority
did not provide the audit.
6)Provides that if an Authority does not complete an annual
report then it cannot expend any tax increment funds it
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receives.
7)Requires an Authority, every 10 years, to hold a protest
proceeding at the public hearing to review an annual report,
to give property owners an opportunity to provide oral or
written protests against an Authority.
8)Requires an Authority to hold an election of the property
owners in the areas covered by the plan if a majority of the
owners protest, and not initiate any new projects until the
election is held.
9)Provides that a majority protest exists if protests have been
filed representing 50% of the assessed value of the area.
10)Requires the election to be held 90 days after the public
hearing and permits it to be held by mail-in ballot.
11)Prevents an Authority from taking any further action to
implement a plan if a majority of the property owners,
weighted proportional to the assessed value of their property,
vote against the Authority.
12)Allows the Authority to continue to appropriate and expend
funds for contractual indebtedness and complete projects for
which expenditures of any kind have been made prior to the
effective date of the election.
EXISTING LAW
1)Dissolves redevelopment agencies as of February 1, 2012
(Health and Safety Code Section 34170).
2)Establishes the Community Redevelopment Law (CRL), which
governs the authority to establish a redevelopment agency and
the authority for a redevelopment agency to function as an
agency and to adopt and implement a redevelopment plan (Health
and Safety Code Section 33000 et seq.).
FISCAL EFFECT : Unknown
COMMENTS :
This bill is a reintroduction of AB 1080 (Alejo) which was held
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on suspense in Senate Appropriations Committee last year. The
only difference between AB 2280 and AB 1080 is that AB 2280
establishes penalties that an Authority is subject to, if it
fails to provide the State Controller with a financial audit
each year. An Authority is subject to a financial penalty if it
fails to submit a financial audit within 20 days of the
Controller's request. The penalty is based on the total
revenues of the Authority. If an Authority fails to provide an
audit for three or more years in a row, than the Controller can
conduct an audit and require the Authority to pay for it. The
Controller also has discretion at any time after an Authority
fails to provide the audit to request that the AG bring an
action against the Authority for the forfeiture of the penalty.
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), 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.
Over the last sixty years, redevelopment agencies used tax
increment to finance affordable housing, community development,
and economic development projects. The dissolution of
redevelopment agencies has created a void and an effort to
create new tools that would support community and economic
development activities. This bill would allow local government
entities, excluding schools, to form a Community Revitalization
and Investment (Authority) to collect tax increment and issue
debt. The Authority could use its powers to invest in
disadvantaged communities with a high crime rate, high
unemployment, and deteriorated and inadequate infrastructure,
commercial, and residential buildings. Three of these four
conditions would constitute blight allowing Authorities to use
the powers of former redevelopment agencies. The area where the
Authority could invest would also have to have an annual median
household income that is less than 80% of the statewide annual
median income. This is different from redevelopment agencies
that were required to conduct a study and make a finding that
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blight existed in a project area before they could use their
extraordinary powers to eradicate blight.
Like redevelopment, this bill would allow Authorities to freeze
the property taxes at the time the plan for revitalizing the
area is approved. The Authority will collect all the tax
increment or the increase in property taxes that is generated
after that point and use it on specified activities. Unlike
redevelopment agencies, this bill would require the taxing
entities in the area including the county, city, special
districts, or a military base to agree to divert tax increment
to the Authority. Local government entities that initially
participate can opt out by giving the auditor-controller sixty
days' notice; however, the auditor controller will continue to
collect the local government entities' portions of tax increment
until any debts issued up until then have been repaid.
Purpose of this bill : According to the author, "redevelopment
was a multi-purpose tool that focused over $6 billion per year
toward repairing and redeveloping urban cores, and building
affordable housing, especially in those areas most economically
and physically disadvantaged. Since the dissolution of
redevelopment agencies, communities across California are
seeking an economic development tool to use. Multiple
legislative measures were introduced in 2012 after the
dissolution of redevelopment agencies in an effort to provide
local governments options for sustainable community economic
development. Four measures were approved by the Legislature.
However, all four were vetoed by Governor Brown at the end of
legislative session.
While the dissolution of former redevelopment agencies
continues, the pervasive question is, what economic development
tool can local governments use? This proposal provides a viable
option targeting the state's disadvantaged poorer areas and
neighborhoods."
Affordable housing provisions : Redevelopment agencies were
required to set aside 25% of tax increment generated in a
project area to increase, improve, or rehabilitate affordable
housing for low, very-low, and moderate income families and
individuals. In previous years, redevelopment generated up to
$1 billion for affordable housing in the state. AB 2280 would
require an Authority to reserve 25% of the tax increment
generated from a project area for affordable housing.
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Related legislation :
AB 1080 (Alejo) is almost identical to this bill and was held on
suspense in Senate Appropriations Committee last year.
SB 1 (Steinberg) would have allowed local governments to
establish a Sustainable Communities Investment Authority after
July 1, 2012, to finance specified activities within a
sustainable communities investment area using tax increment
financing. This bill is on the Senate Floor on inactive.
Committee amendment:
On page 14, line 5 delete "agency" and replace it with
"Authority"
Double referred : If AB 2280 passes out of this committee, the
bill will be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
California Building Industry Association
California Coalition for Rural Housing
California Rural Legal Assistance Foundation
League of California Cities
Western Center on Law and Poverty
Opposition
None on file.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085