BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 1
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: steinberg
VERSION: 4/15/13
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 23, 2013
SUBJECT:
Sustainable Communities Investment Authority
DESCRIPTION:
This bill allows a local government to establish a Sustainable
Communities Investment Authority and direct tax increment
revenues to that authority in order to address blight by
supporting development in transit priority project areas, small
walkable communities, and clean energy manufacturing sites.
ANALYSIS:
Historically, the Community Redevelopment Law allowed a local
government to establish a redevelopment area and capture all of
the increase in property taxes generated within the area
(referred to as "tax increment") over a period of decades. The
law requires redevelopment agencies to deposit 20 percent of tax
increment into a Low and Moderate Income Housing Fund (L&M fund)
to be used to increase, improve, and preserve the community's
supply of low- and moderate-income housing available at an
affordable housing cost.
In 2011, the Legislature enacted two bills, AB 26X (Blumenfield)
and AB 27X (Blumenfield), Chapters 5 and 6, respectively, of the
First Extraordinary Session. AB 26X eliminated redevelopment
agencies and established procedures for winding down the
agencies, paying off enforceable obligations, and disposing of
agency assets. AB 26X established successor agencies, typically
the city that established the agency, to take control of all
redevelopment agency assets, properties, and other items of
value. Successor agencies are to dispose of an agency's assets
as directed by an oversight board, made up of representatives of
local taxing entities, with the proceeds transferred to the
county auditor-controller for distribution to taxing agencies
within each county.
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AB 26X also included provisions allowing the host city or county
of a dissolving redevelopment agency to retain the housing
assets and functions previously performed by the agency, except
for funds on deposit in the agency's L&M fund, and thus become a
successor housing agency. If the host city or county chooses
not to become the housing successor agency, a local housing
authority or the state's Department of Housing and Community
Development (HCD) takes on that responsibility.
AB 27X allowed redevelopment agencies to avoid elimination if
they made payments to schools in the current budget year and in
future years. In December 2011, the California Supreme Court in
California Redevelopment Association v. Matosantos upheld AB 26X
and overturned
AB 27X. As a result, all of the state's roughly 400
redevelopment agencies dissolved on February 1, 2012, and local
jurisdictions are in the process of implementing AB 26X's
provisions to distribute former redevelopment assets and pay its
remaining obligations.
SB 375 (Steinberg), Chapter 728, Statutes of 2008, required the
Air Resources Board (ARB), by September 30, 2010, to provide
each region that has a metropolitan planning organization (MPO)
with a greenhouse gas emission reduction target for the
automobile and light truck sector for 2020 and 2035,
respectively. Each MPO, in turn, is required to include within
its regional transportation plan (RTP) a sustainable communities
strategy (SCS) designed to achieve the ARB targets for
greenhouse gas emission reduction. Each MPO must submit its SCS
to ARB for review. ARB must accept or reject the MPO's
determination that the SCS submitted would, if implemented,
achieve the greenhouse gas emission reduction targets.
SB 375 also created and defines a "transit priority project" as
one that:
Is located within one-half mile of an existing or planned
major transit stop or high-quality transit corridor included
in the RTP.
Is consistent with the general plan use designation, density,
building intensity, and applicable policies specified for the
project area in its SCS, for which ARB has accepted an MPO's
determination that the SCS would, if implemented, achieve the
greenhouse gas emission reduction targets;
Contains at least 50% residential use, based on total building
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square footage and, if the project contains between 26% and
50% nonresidential uses, a floor area ratio of not less than
0.75;
Provides a minimum net density of at least 20 dwelling units
per acre; and
Existing law also defines a "small walkable community project"
as a project in an incorporated city, which is not within the
boundary of an MPO, and that:
Is approximately one-quarter mile diameter of contiguous land
completely within the existing incorporated boundaries of the
city;
Is a project area that includes a residential area adjacent to
a retail downtown area; and
Has a density of at least eight dwelling units per acre or a
floor area ratio for retail or commercial use of not less than
0.50.
This bill authorizes local governments to create Sustainable
Communities Investment Authorities to function in a manner
similar to former redevelopment agencies and under the Community
Redevelopment Law with certain modifications. Specifically,
this bill:
1. Permits any combination of a city, county, city and
county, or special district, but not a school district, to
create a Sustainable Communities Investment Authority
(authority) in one of several ways as follows:
A city, county, or special district may create an
authority through a joint powers agreement that
establishes a governing board and designates a Sustainable
Communities Investment Area (area).
A city alone may create an authority, appoint the
authority's governing board, designate an area within the
city, and establish the parameters of the proposed
economic development within a proposed area with county
approval of the economic development parameters and the
Sustainable Communities Investment Plan (plan).
Alternatively, a city alone may create an
authority, which constitutes a legally distinct entity
from that city, and appoint the authority's governing
board, which may designate an area only within the
incorporated limits of that city.
A city and a county together may create an
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authority and appoint the governing board with the city
council appointing two members and the county appointing
two members, and those four members appointing the fifth.
The governing board then designates the area in an
incorporated area or in both an incorporated area and an
unincorporated area. The city and county must both
approve the plan.
A county board of supervisors alone can create an
authority for an area within an unincorporated area.
1. Prescribes that an authority shall have five members of
four-year terms and shall be subject to the Brown Act for
open meetings, the Public Records Act, the
Meyers-Milias-Brown Act governing employer-employee
relations, and the Political Reform Act.
2. Prohibits a city or county that created a redevelopment
agency dissolved pursuant to
AB 26X of 2011 from forming an authority unless Department
of Finance has issued its successor agency a finding of
completion indicating that the local government has complied
with AB 26X's requirements to distribute the former agency's
assets to the taxing entities.
3. Deems an authority to be an "agency," as defined in the
Community Redevelopment Law; assigns an authority all of the
rights, responsibilities, and obligations of a redevelopment
agency; and requires an authority to comply with most
provisions of the Community Redevelopment Law, excluding
specified statutes that suspend redevelopment agencies'
activities, prohibit redevelopment agencies' issuance of
debt, and govern redevelopment agencies' dissolution.
4. Limits the areas that local governments can include in a
plan area to:
Transit priority project areas, including high-speed
rail stations. The transit stop or corridor must be
scheduled to be completed within the planning horizon
established by specified federal regulations governing the
metropolitan transportation planning process. The bill
specifies that if the transit priority project area
includes a high-speed rail station, then the radius of the
area may be up to one mile from the station. If such a
project area consists of a radius greater than half a
mile, then at least 50 percent of the tax increment
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revenue from that area shall be used to support
construction of the high-speed rail station and related
infrastructure.
Small walkable communities, as defined, which the bill
also permits to be in a city that is within the
jurisdiction of an MPO. An authority may designate only
one small walkable community area per city.
Clean energy manufacturing sites. The bill defines
clean energy manufacturing sites to be those that have
land use approvals or other effective controls restricting
the sites to clean energy manufacturing and that are
consistent with the SCS, if within the jurisdiction of an
MPO. The bill defines clean energy manufacturing as:
o Components, parts, or materials for the
generation of renewable energy;
o Equipment designed to make buildings more energy
efficient;
o Public transit vehicles or their components; or
o Alternative fuel vehicles or their component
parts.
1. Authorizes only local agencies participating in, approving
the formation of, or appointing board members to an
authority to allocate all or part of their tax increment
revenues, plus specified additional revenues, to the
authority. Before any assignment of tax increment revenues,
the local government with land use jurisdiction over the
area must have adopted a sustainable parking standards
ordinance to encourage transit use to the greatest extent
feasible and a jobs plan ordinance to ensure projects
further construction careers that pay prevailing wage.
2. Adds to the numerous elements that must be included in a
redevelopment plan for a project area so that a Sustainable
Communities Investment plan will also include:
A fiscal analysis of projected tax increment revenue
and other revenue and projected expenses over five-year
planning horizons for the life of the authority.
A statement of the principal goals and objectives of
the plan together with findings of the public purposes and
uses that it will achieve.
A statement of how the plan will relieve blight,
including how it will implement the goals of the SCS,
reduce energy consumption, ensure compliance with the
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bill's affordable housing provisions, and contribute to
more efficient transportation infrastructure, to reducing
the combined costs of housing and transportation for
residents, to improving public heath, to promoting
efficient water consumption, to preserving prime farm
land, and to reducing vehicle miles traveled.
Statements of how the plan will implement the local
government's sustainable parking standards and its jobs
plan.
1. Permits a plan additionally to include:
Farmworker housing.
Transitional and supportive housing, including former
foster youth, persons with mental health treatment needs,
persons with substance use disorder treatment needs, and
various offender populations.
Health and safety related infrastructure investments
for disadvantaged and rural communities.
Infrastructure investments to support countywide
services, including health clinics, hospitals, medical
provider offices, child care facilities, day reporting
centers, and grocery stores in food desert areas.
1. Increases from 20 percent to 25 percent the amount of
money an authority must dedicate from tax increment revenues
it receives to the provision of low- and moderate-income
housing (i.e., the authority's L&M fund).
2. Provides that a local government with land use authority
that participates in or approves an authority must enact an
ordinance that:
Prohibits the number of housing units occupied by
extremely low-, very low-, and low-income households,
including the number of bedrooms in those units, from
being reduced within the area during the effective period
of the plan; and
Requires the replacement of dwelling units that house
extremely low-, very low-, or low-income households when
removed from an area within two years, rather than the
four years under existing provisions of the Community
Redevelopment Law.
1. Requires an authority to contract every five years for an
independent financial and performance audit pursuant to
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guidelines that the State Controller shall establish. These
must include guidelines for ensuring that an authority is
meeting the housing requirements of the bill (#10
immediately above). If an authority is failing to comply
with these housing requirements, then it shall submit to the
controller with its audit a plan to achieve compliance in
not less than two years. The plan must include one of the
following means of achieving compliance:
Expenditure of an additional 10 percent of the
authority's tax increment revenues on providing low-income
housing;
A 10 percent increase in the production of housing for
very low-income households, as required under the
Community Redevelopment Law's housing production
requirements; or
The targeting of expenditures from its L&M fund
exclusively to rental housing affordable to, and occupied
by, persons of very low and extremely low income.
1. Permits a state or local public pension fund to invest in
public infrastructure projects and private commercial and
residential development that an authority undertakes.
2. Authorizes an authority to implement a local transactions
and use tax, above the state's base 7.25 percent sales and
use tax, and the resolution authorizing the tax may
designate the use of the proceeds of the tax.
3. Authorizes an authority to issue bonds paid for with
authority proceeds in order to carry out the provisions of
this bill.
4. Authorizes an authority to exercise the powers of an
infrastructure financing district to divert property tax
increment revenues and issue bonds to pay for public works.
5. Allows an authority to finance infrastructure by issuing
bonds and lending the proceeds for public works, working
capital, and insurance programs as provided in the
Marks-Roos Local Bond Pooling Act.
6. Requires that all entities that will receive more than
$1,000,000 from an authority, including private developers,
must comply with specified prequalification requirements for
all construction contracts or subcontracts and allows an
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authority to establish additional prequalification
requirements.
COMMENTS:
1. Purpose . Eliminating redevelopment agencies did not
eliminate the need for California communities to build more
affordable housing, eliminate blight, foster business
activity, clean up contaminated brownfields, and create
jobs. This bill establishes a new approach to local
economic development and housing policy that is focused on
building sustainable communities and creating high skill,
high wage jobs. This bill fosters collaboration between
cities and counties on local economic development efforts
and mitigates the zero-sum competition for scarce property
tax revenues among cities, counties, and school districts.
The bill offers local governments flexibility by allowing an
authority to use a variety of tools, including tax increment
financing, Community Redevelopment Law powers, local sales
taxes, infrastructure financing districts, and the ability
to leverage public pension fund investments.
2. How much area does the bill cover ? This bill provides for
the creation of new Sustainable Communities Investment
Authorities to set up a new system of tax increment
financing that excludes the schools and relies on consensus
among the local agencies, to confer new revenue authority,
and to retain all the other powers that redevelopment
agencies possessed under state law, except it limits the
areas that would qualify as project areas. This bill
permits project areas only on clean energy manufacturing
sites, to a single small walkable community in each
jurisdiction, and to transit priority areas. It is unclear
how much area within the state would actually meet these
qualifications, because:
The bill defines a clean energy manufacturing site
as one with existing land use controls to restrict the
site to clean energy manufacturing, as defined, but does
not limit the area of these sites.
SB 375 provided for the creation of transit
priority areas, which would occur most likely only in
heavily urbanized areas with substantial transit service.
Still, the incentives in this bill could lead over time to
a proliferation of such half-mile areas around transit
stops in some cities in order to access the many powers
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conferred to an authority created under this bill.
1. Housing provisions . The bill adds to the affordable
housing provisions of existing Community Redevelopment Law
in three ways. First, it increases from 20 to 25 percent
the amount of tax increment revenue that an authority must
deposit into its L&M fund. Because tax increment accruing
to an authority under this bill would be less (e.g., it
would not include the schools' share), this would be 25
percent of a smaller number. Second, the bill requires that
a host city or county pass an ordinance ensuring that
housing affordable to and occupied by extremely low-, very
low-, and low-income households within an area does not
decrease during the life of the plan. Third, the bill
requires that ordinance to ensure an authority provide
replacement housing in two rather than four years. These
provisions represent an agreement between the author and the
advocates of affordable housing.
2. Where are the SB 450 fixes ? In response to thousands of
reported abuses of L& M funds, the Legislature in 2011
passed SB 450 (Lowenthal), which substantively reformed how
redevelopment agencies spend their L&M funds. That bill
passed this committee on April 5, 2011 by a 9-0 vote, but
the governor vetoed SB 450, deeming it premature in light of
the then pending Supreme Court decision on AB 26X and AB 27X
in California Redevelopment Association v. Matosantos. This
bill, however, proposes restoring the use of the
redevelopment law, including its housing provisions, but
without the changes that SB 450 would have made. Last year
when the Legislature passed SB 1156 (see Comment #5 below),
it also passed AB 345 (Atkins), which contained all of SB
450's reforms delayed to coincide with the likely
establishment of the new Sustainable Communities Investment
Authorities. Governor Brown vetoed AB 345, as he did SB
1156. The committee or the author may therefore wish to
amend this bill to include the reforms SB 450 proposed to
how redevelopment agencies spend their housing dollars.
3. Previous legislation . This bill is very similar to the
final version of last year's SB 1156 (Steinberg), which
Governor Brown vetoed. The governor's veto message read in
part:
I prefer to take a constructive look at implementing this
type of program once the winding down of redevelopment is
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complete and General Fund savings are achieved. At that
time, we will be in a much better position to consider new
investment authority. I am committed to working with the
Legislature and interested parties on the important task
of revitalizing our communities.
The author notes that many of the uncertainties pertaining
to the winding down of redevelopment are in the process of
being resolved and should be completed while this bill is
moving through the Legislature.
4. Opposition . Opponents object to the taxation, bonding,
and eminent domain powers that the bill confers to the
Sustainable Communities Investment Authorities. They are
concerned about how high sales tax rates could go up in the
project areas and about how authorities would structure the
public votes for such sales tax increases as well as for
bonds. The opponents are also concerned that the imposition
of sales taxes of varying levels in many small areas
throughout the state could result in significant
administrative challenges and compliance problems for small
businesses. Finally, they are opposed to assigning eminent
domain power to the authorities.
Three contractor organizations oppose the bill unless it is
amended to delete an exemption from monitoring of prevailing
wage compliance by the Department of Industrial Relations
for projects where the developer has entered into a
collective bargaining agreement that binds all the
contractors.
5. Technical amendments .
On page 9, line 6, delete "(b)" and insert "(3)"
On page 9, line 27, delete "both" and insert "all"
On page 13, lines 14-15, delete "a more efficient
transportation infrastructure" and insert "more efficient
transportation"
On page 13, line 22, delete "correction"
On page 15, line 24, delete "3334.2" and insert
"33334.2"
1. Committee of second referral . The Rules Committee
referred this bill to the Governance and Finance Committee
and to the Transportation and Housing Committee. This bill
passed that committee on March 13 by a 4 to 2 vote. The
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Governance and Finance Committee's analysis and hearing of
the bill dealt primarily with the provisions of the bill
related to the local government finance provisions, leaving
the housing provisions for review in this committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 17,
2013.)
SUPPORT: Alameda-Contra Costa Transit District
California Association of Realtors
California Federation of Labor
California State Association of Counties
California Special Districts Association
California Transit Association
DMB Pacific Ventures
Emeryville Chamber of Commerce
Housing California
Los Angeles County Federation of Labor
Los Angeles/Orange Counties Building and
Construction Trades Council
Metropolitan Transportation Commission
Sacramento Area Council of Governments
Western Center on Law and Poverty
OPPOSED: Air Conditioning Trade Association
California Federation of Republican Women
California Taxpayers Association
Howard Jarvis Taxpayers Association
Plumbing-Heating-Cooling Contractors Association
of California
Western Electrical Contractors Association