BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
SB 1 (Steinberg) - Sustainable Communities Investment Authority.
Amended: May 2, 2013 Policy Vote: G&F 4-2; T&H 8-3
Urgency: No Mandate: No
Hearing Date: May 23, 2013 Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: SB 1 would authorize local entities, either
individually or collaboratively and excluding schools, to form a
Sustainable Communities Investment Authority (SCIA).
Participating entities agree to direct property tax increment
revenues to the SCIA to invest in improvements that relieve
blight in transit priority project areas, small walkable
communities, and sites designated for clean energy
manufacturing, as specified.
Fiscal Impact:
Potentially major redirection of local property tax
revenues from participating local agencies, excluding
schools, to an SCIA over a period of decades. Since the
bill prohibits schools from participating, there is no state
fiscal impact related to the redirection of local property
tax revenues.
Estimated one-time costs to the State Controller's Office
(SCO) in the range of $100,000 to $200,000 (General Fund) to
establish guidelines for periodic financial and performance
audits that include provisions for determining compliance
with affordable housing requirements as well as secondary
review and compliance measures for failure to achieve
initial compliance on the regular audit schedule. (Staff
assumes 1.5 to 2 PY of regulatory staff to establish
guidelines)
Estimated ongoing SCO costs in the range of $150,000
(General Fund) on a periodic basis for accepting audits and
reviewing and approving secondary compliance plans submitted
by SCIAs who fail to comply with initial audit requirements.
(Staff assumes approximately 1PY of audit work on a periodic
basis)
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Estimated ongoing costs in the range of $150,000 to
$200,000 (General Fund) to the Department of Finance (DOF)
to review and approve completed audits on a periodic basis.
The bill requires audits to be submitted to the SCO, DOF,
and Joint Legislative Budget Committee (JLBC), and specifies
that the SCO is not required to review and approve completed
audits. (Staff assumes 1.5 to 2 PY of DOF staff would be
required to handle this workload to determine compliance
with guidelines)
Unknown costs to the Department of Industrial Relations
(State Public Works Enforcement Fund) to monitor and enforce
prevailing wage requirements for SCIA projects. These costs
would be reimbursed in arrears by charges on an awarding
body or developer for each project.
Background: Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property taxes that is
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades. RDAs
used tax increment financing to address issues of blight,
construct affordable housing, rehabilitate existing buildings,
and finance development and infrastructure projects.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and returning
billions of dollars of property tax revenues to schools, cities,
and counties to fund core services. Among the statutory changes
that the Legislature adopted to implement the 2011-12 budget, AB
X1 26 (Blumenfield) Chap 5/2011 dissolved all RDAs and
established procedures for winding down RDA activity. Existing
law requires successor agencies to dispose of former RDAs'
assets and properties, at an oversight board's direction, in an
expeditious manner aimed at maximizing value. Successor
agencies are required to make any payments related to
enforceable obligations, as specified in an adopted recognized
obligation payment schedule and remit unencumbered balances of
RDA funds and proceeds from asset sales to the county
auditor-controller for distribution to local taxing entities in
the county. Successor agencies cannot enter into new
enforceable obligations.
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SB 375 (Steinberg) Chap 728/2008, requires the Air Resources
Board (ARB) 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 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 implementation of a submitted SCS
submitted would achieve the greenhouse gas emission reduction
targets.
SB 375 also created and defines a "transit priority project" as
one that is: located within a half mile of an existing or
planned major transit stop or high-quality transit corridor; is
consistent with the general plan use designation, density,
building intensity, and applicable policies specified for the
project area in an ARB-accepted SCS; contains at least 50%
residential use on a square footage basis, as specified, and
nonresidential uses of 26-50% to a floor area ratio of not less
than .75; and provides a minimum net density of at least 20
dwelling units per acre. Existing law also defines a "small
walkable community project" as a project in an incorporated
city, but not within an MPO, that is: approximately one-quarter
mile diameter of contiguous land completely within the city's
incorporated boundaries; 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.
Proposed Law: SB 1 would authorize local agencies, excluding
schools, to establish an SCIA to finance specified activities
within an investment area according to a specified Sustainable
Communities Investment Plan. Among other things, this bill
would:
Require an SCIA to comply with the provisions of the Community
Redevelopment Law (CRL), but requires 25% of tax increment
proceeds to be spent on affordable housing, rather than the
20% required under redevelopment law.
Prohibit a city or county that created an RDA from forming an
SCIA unless the successor agency has received a finding of
completion from DOF.
Place the specified limits on project area designations: (1)
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for regions within an MPO with an adopted SCS that has been
accepted by ARB, possible project areas may include transit
priority areas identified in an SCS and for each jurisdiction,
one small walkable community, as specified; or (2) sites that
have land use approvals or other controls restricting the site
to clean energy manufacturing and sites consistent with the
SCS, if those sites are within the geographic boundaries of an
MPO.
Allow a plan for an SCIA to include a provision for the
receipt of tax increment funds, as specified, and provides
other specific requirements for the plan, in addition to what
is contained in CRL.
Authorize an SCIA to implement a local transaction and use
tax, as specified.
Require an SCIA to contract for an independent financial and
performance audit every five years, consistent with the
guidelines established by the SCO.
Require an SCIA to submit a plan for compliance to the SCO, if
the initial audit contains findings of failure to comply with
the audit guidelines.
Establish a prequalification process for construction
contracts or subcontracts for entities that receive over $1
million from an SCIA.
Require DIR to monitor and enforce prevailing wage
requirements, as specified, and require an SCIA to charge
awarding bodies or developers for DIR's monitoring and
enforcement costs.
Related Legislation: This bill is substantially similar to SB
1156 (Steinberg), which was vetoed by Governor Brown last year.
The veto message included the following:
I prefer to take a constructive look at implementing this
type of program once the winding down of redevelopment is
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.
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Staff Comments: SB 1 authorizes an SCIA to levy a transactions
and use tax, pursuant to the requirements in existing law. All
costs to the Board of Equalization (BOE) to administer the
collection and remittance of that tax would be paid for by the
authority. BOE notes that it would be difficult to establish
such a tax because the jurisdiction of an SCIA may not have
contiguous borders to existing local agencies, and the Board
would incur high administrative costs to identify specific
businesses in which the tax would be charged. In addition, the
tax would be confusing to both retailers and taxpayers, which
could lead to substantial noncompliance. There would be similar
confusion for election officials when presenting a transactions
and use tax to the voters within the boundaries of an SCIA for
approval
SB 1 requires periodic financial and performance audits to be
submitted to DOF, the SCO, and JLBC, but explicitly specifies
that the SCO would not be required to review and approve
completed audits. Staff assumes this duty would fall to DOF,
since the SCO is relieved of this obligation. However, if an
SCIA audit is deemed out of compliance, the SCO is required to
review and approve plans submitted by an SCIA to achieve
compliance. As part of this secondary review, the SCO must
ensure that the plan meets specified compliance measures. It is
unclear why the SCO is relieved from the first-level review and
certification of SCIA audits, but is required to ensure
compliance with the secondary review of compliance plans.