BILL ANALYSIS Ó
SB 1
Page 1
Date of Hearing: August 14, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 1 (Steinberg) - As Amended: August 5, 2013
SENATE VOTE : 27-11
SUBJECT : Sustainable Communities Investment Authority.
SUMMARY : Allows local governments to establish a Sustainable
Communities Investment Authority to finance specified activities
within a Sustainable Communities Investment Area. Specifically,
this bill :
1)Allows a Sustainable Communities Investment Authority
(Authority) to be formed and specifies that it must comply
with the provisions of the Community Redevelopment Law (CRL),
with certain exceptions, and the provisions contained in the
bill.
2)Requires an Authority to adopt a plan for a sustainable
communities investment area.
3)Requires a sustainable communities investment plan to
terminate on a specified date not to exceed 30 years from the
date of the first issuance of bond indebtedness by the
Authority.
4)Provides that the Authority shall be deemed to be an "agency"
as defined in the CRL and shall have all the rights,
responsibilities, and obligations of an agency.
5)Provides that an Authority is not required to make a finding
of blight or conduct a survey of blight in a project area, but
can rely upon the legislative findings in the bill to
establish blight.
6)Prohibits an Authority from being formed under the bill's
provisions by either of the following:
a) A city or county that created a redevelopment agency
(RDA) that was dissolved, as specified, unless the
successor agency or designated local authority for the
former RDA has received a finding of completion from the
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Department of Finance; or,
b) A city, county, city and county, or special district
that has declared a fiscal emergency, unless the city,
county, city and county, or special district subsequently
declares that the fiscal emergency has been resolved.
7)Allows an Authority to be created in the following ways:
a) A city, county, city and county, or special district may
create an Authority by entering into a joint powers
agreement, as specified. A joint powers agreement shall
establish a governing board and designate the Sustainable
Communities Investment Area;
b) A city may create an Authority, appoint the Authority
governing board, designate a Sustainable Communities
Investment Area within the city's incorporated area, and
establish the parameters of the proposed economic
development within a proposed Sustainable Communities
Investment Area with county approval of the economic
development parameters and the Sustainable Communities
Investment Plan, including any amendments to the plan;
c) A city and county may create an Authority and appoint
the authority governing board, which shall be comprised of
two members appointed by the city and two members by the
county. A fifth member shall be appointed by the two city
and the two county members. The governing board shall
designate the Sustainable Communities Investment Area. A
Sustainable Communities Investment Plan, including any
amendments to it, shall be approved by both the city and
the county. The Sustainable Communities Investment Area
may include an incorporated area or both an incorporated
area and an unincorporated area;
d) If the Sustainable Communities Investment Area is within
an unincorporated area, the board of supervisors of a
county may create an Authority and appoint the authority
governing board; and,
e) A city may create an Authority, which shall constitute a
legally distinct entity from that city, and appoint the
authority governing board, which may designate a
Sustainable Communities Investment Area only within the
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incorporated limits of that city.
8)Provides that the governing board of the Authority shall
consist of five members, and that members shall be appointed
for four-year terms and shall only be removed by the
appointing authority for cause, and provides that the initial
appointees to the governing board shall serve either two-year
or four-year terms and shall draw their terms by lot.
9)Deems an Authority a public body subject to the Ralph A. Brown
Act, California Public Records Act, Meyers-Milias-Brown Act,
and the Political Reform Act.
10)Requires a city or county approving participation in an
Authority, the governing board, or a sustainable communities
investment area to do so through a resolution.
11)Excludes a school district from participating in an
Authority.
12)States that a sustainable communities investment area shall
include only the following:
a) Transit priority areas that meet the following
parameters:
i) A transit priority project including a high-speed
rail station. The transit stop or corridor must be
completed within the planning horizon established by
specified federal regulations. The transit priority area
may include a military base reuse plan that meets the
definition of a transit priority area and it may include
a contaminated site within a transit priority area;
ii) It is within the geographic boundaries of a
metropolitan planning organization (MPO) with an approved
sustainable communities strategy (SCS).
a) Areas that are small walkable communities, as defined,
except that small walkable communities may also be
designated in a city that is within the area of an MPO.
Specifies that no more than one small walkable community
project area shall be designated within a city; and,
b) Sites that have land use approvals, covenants,
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conditions and restrictions, or other effective controls
restricting the sites to clean energy manufacturing, and
that are consistent with the use, designation, density,
building intensity, and applicable policies specified for
the sustainable communities investment area in the SCS, if
those sites are within the geographic boundaries of an MPO.
Specifies that clean energy manufacturing shall consist of
the manufacturing of any of the following:
i) Components, parts, or materials for the generation
of renewable energy resources;
ii) Equipment designed to make buildings more energy
efficient or the component parts thereof;
iii) Public transit vehicles or the component parts
thereof; or,
iv) Alternative fuel vehicles or the component parts
thereof.
12)Allows a sustainable communities investment plan for an
sustainable communities investment area to include a provision
for the receipt of tax increment funds providing that the
local government with land use jurisdiction has adopted all of
the following:
a) A sustainable parking standards ordinance that restricts
parking in transit priority project areas to encourage
transit use to the greatest extent feasible;
b) An ordinance creating a jobs plan. Specifies that all
entities receiving financial support from the Authority
shall, at a minimum, require that any and all agreements
approved by the Authority include a jobs plan, which shall
describe how the project will further create construction
careers that pay prevailing wages, living wage permanent
jobs, and create a program for community outreach, local
hire, and job training. Specifies that the plan shall also
describe the project developer's commitment to offer jobs
to disadvantaged California residents, including veterans
of the Iraq and Afghanistan wars, people with a history in
the criminal justice system, and single-parent families;
c) For transit priority areas and small walkable
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communities within an MPO, a plan consistent with the use
designation, density, building intensity, and applicable
policies specified for the sustainable communities
investment area density of at least 20 dwelling units per
net acre and for nonresidential uses, provides a minimum
floor area ratio of 0.75;
d) Within small walkable communities outside of an MPO, a
plan for new residential construction that provides a
density of at least 20 dwelling units per net acre and, for
nonresidential uses, provides a minimum floor area ratio of
0.75; and
e) An ordinance 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.
13)Requires the county auditor controller to allocate to an
Authority the tax increment as specified in a an sustainable
communities investment plan in proportion to the levied taxes
for the city and or county in excess of the amount specified
in Health and Safety Code Section 33670 (a).
14)Provides that the auditor-controller may only allocate tax
increment revenues to an Authority if the taxing agency whose
tax increment would be allocated adopts a resolution
authorizing the allocation.
15)Provides that the adoption of a resolution to allow tax
increment to go to the Authority does not prohibit an
auditor-controller's authority to revoke the allocation if it
conflicts with requirements to pay existing obligations
secured by tax increment revenues.
16)Provides that if an sustainable communities investment area
includes in whole or in part a former redevelopment area and
the sustainable communities investment plan includes a
provision for receipt of tax increment revenues then it shall
include a provision that tax increment amounts collected and
received by the Authority are subordinate to existing
enforceable obligations.
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17)Defines "net available revenue" as periodic distributions to
the city or county from the Redevelopment Property Tax Trust
Fund once all enforceable obligations are paid.
18)Allows a city or county forming the Authority to dedicate any
portion of its net available revenue to the Authority through
the sustainable communities investment plan which shall
include the date upon which the Authority will cease to
receive the net available revenue.
19)Provides that an Authority that collects tax increment
revenues must dedicate no less than 25% of the allocated tax
increment for affordable housing purposes.
20)Requires a sustainable communities investment plan to include
the following, in addition to what is required for a
redevelopment plan in the CRL:
a) A fiscal analysis of the projected receipt of tax
increment and other revenue and the projected expenses over
five-year planning horizons for the life of the Authority;
b) A statement of the principal goals and objectives of the
plan with findings of the public purposes and uses that
will be achieved;
c) A statement of how the sustainable communities
investment plan will relieve blight as follows:
i) How it will implement the goals of a SCS if the re
sustainable communities investment area is within an MPO;
ii) How it will contribute to a more efficient
transportation;
iii) How it will contribute to and reduce cost for the
combined costs of housing and transportation;
iv) How it will contribute to improved public health;
v) How it will promote more efficient water
consumption;
vi) How it will avoid loss of prime farmland;
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vii) How it will reduce air pollution, energy consumption
and greenhouse gas emissions by reducing vehicle miles
traveled; and,
viii) How it will ensure compliance with the affordable
housing maintenance and preservation requirements.
d) A statement of how the plan will implement the
sustainable parking standards; and,
e) A statement of how the plan will implement the jobs
plan.
21)Provides a sustainable communities investment plan, in
addition to meeting the housing provisions of the CRL, may
include, to the extent applicable to the sustainable
communities investment area, the following:
a) Affordable and farmworker housing;
b) Transitional and supportive housing for, including but
not limited to, former foster youth, persons with mental
health treatment needs, persons with substance use disorder
treatment needs, offender populations.
c) Health and safety related infrastructure investments in
disadvantaged rural communities; and,
d) Infrastructure to support country wide services.
22)Requires, if a city, county, city and county, or special
district that has entered into an agreement to allocate a
portion of its tax increment to an Authority and subsequently
declares a fiscal emergency, that city, county, or city and
county, or special district to develop a plan for how the
county auditor-controller shall reduce the amount of the tax
increment revenue allocated to the authority during the period
of time of the fiscal emergency.
23)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.
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24)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.
25)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 the audit to show how it will
comply with those provisions within two years.
26)Require 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.
27)Requires the Authority to approve any bond financing.
28)Specifies that school district property taxes cannot be
pledged for the repayment of bonds issued by an Authority.
29)Specifies, in the event a tax increment financing provision
is included as part of an sustainable communities investment
area, and for the purposes of collecting tax increment under
Section 16 of Article XVI of the California Constitution, that
the terms "district" and "affected taxing entity" shall
exclude a school district and special districts.
30)Permits a state or local pension fund system to invest
capital in the public infrastructure projects and private
commercial residential developments undertaken by an
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Authority.
31)Allows an Authority to exercise the powers granted under the
Mello-Roos Act.
32)Allows an Authority to implement local transaction and use
tax, except that the resolution authorizing the tax may
designate the use of the tax.
33)Establishes a process to prequalify developers for
construction contracts in excess of $1,000,000.
34)Requires the Department of Industrial Relations to monitor
and enforce compliance with prevailing wage requirements for
projects that include funds from an Authority and shall charge
each awarding body or developer for the reasonable and
directly related costs of monitoring and enforcing compliance
with the prevailing wage requirements of each project.
35)Defines, for the purpose of exempting small walkable
communities from the California Environmental Quality Act
(CEQA), the following terms:
a) "Floor area ratio" as the ratio of gross building area
of development, exclusive of structured parking areas,
proposed for the project divided by the total net lot area;
b) "Gross building area" as the sum of all finished areas
of all floors of a building included within the outside
faces of its exterior walls; and,
c) "Net lot area" means the area of a lot excluding
publicly dedicated land, private streets that meet local
standards, and other public use areas as determined by the
local land use authority.
36)Makes legislative findings and declarations.
EXISTING LAW :
1)Dissolves redevelopment agencies as of February 1, 2012.
2)Establishes the Community Redevelopment Law, which governs the
authority to establish a redevelopment agency and the
authority for a redevelopment agency to function as an agency
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and to adopt and implement a redevelopment plan.
3)Defines a "small walkable community project" as a project that
is in an incorporated city that is not within the boundaries
of an MPO and that satisfies the following requirements:
a) Has a project area of approximately one-quarter mile
diameter of contiguous land completely within the existing
incorporated boundaries of the city;
b) Has a project area that includes a residential area
adjacent to a downtown retail area; and,
c) The project has a density of at least eight dwelling
units per acre or a floor area ratio for retail or
commercial uses of not less than 0.50.
4)Specifies that a "transit priority project" shall a) contain
at least 50% residential use,
based on total building square footage and, if the project
contains between 26% and 50% nonresidential uses, a floor area
ratio of not less than 0.75; b) provide a minimum net density
of at least 20 dwelling units per acre; and, c) be within
one-half mile of a major transit stop or high-quality transit
corridor included in a regional transportation plan. A major
transit stop is as defined in Section 21064.3, except that,
for purposes of this section, it also includes major transit
stops that are included in the applicable regional
transportation plan. For purposes of this section, a
high-quality transit corridor means a corridor with
fixed-route bus service with
service intervals no longer than 15 minutes during peak commute
hours. A project shall be considered to be within one-half
mile of a major transit stop or high-quality transit corridor
if all parcels within the project have no more than 25% of
their area farther than one-half mile from the stop or
corridor and if not more than 10% of the residential units or
100 units, whichever is less, in the project are farther than
one-half mile from the stop or corridor.
5)Requires, under the provisions of SB 375 (Steinberg), Chapter
728, Statutes of 2008, a regional transportation plan to
include a sustainable communities strategy designed to achieve
the targets for greenhouse gas emission reductions.
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FISCAL EFFECT : This bill is keyed fiscal.
COMMENTS :
1)This bill authorizes cities and counties to establish
Sustainable Communities Investment Authorities to help develop
transit priority areas, clean manufacturing districts and
small walkable communities. This bill is author-sponsored.
According to the author, this bill has been developed "to give
local governments economic development tools following the
elimination of redevelopment. The key policy advanced by SB 1
is that it would replace the historical standard of blight
remediation with the new objective of encouraging
transit-oriented, infill development, and compliance with SB
375."
2)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, 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. SB 1 would allow a city or county to
establish a Sustainable Communities Investment Authority to
use tax increment financing, on a limited scale, along with
other financing tools to support the goals of SB 375.
3)SB 375 created a new procedure for land use planning that
would require local governments to plan in a way that would
accomplish the greenhouse gas reduction goals of AB 32 (the
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California Global Greenhouse Gas Reduction Act of 2006). SB
375 required MPOs to adopt an SCS in their regional
transportation plans for the purpose of reducing greenhouse
gas emissions, required the alignment of planning for
transportation and housing, and created specified incentives
for the implementation of those strategies.
This bill would authorize the use of tax increment as well as
other funding sources to finance some of the projects - small
walkable communities, transit priority areas and clean energy
manufacturing - that would be part of the SCS.
4)This bill relies upon tax increment financing, in addition to
several other potential funding sources, including Mello Roos,
capital investment from public pensions, and local transaction
and use taxes, to support the development of transit priority
areas, small walkable communities, and clean energy
manufacturing. One of the challenges of using tax increment
as a financing tool for community and economic development in
the post-redevelopment world is carving out the schools
portion of the tax increment. Section 16 of Article XVI of
the California Constitution gives authority to reapportion
property taxes among a city, city and county, and district or
other public corporation (otherwise known as taxing agencies)
for the purpose of redevelopment. SB 1 excludes school
district and special district from "district" and "affected
taxing entity" for purposes of tax increment financing.
5)Post-World War II, redevelopment was created as a tool to
combat urban decay and eradicate blight. Redevelopment
agencies were given fundamental tools including the ability to
acquire property through the power of eminent domain, the
authority to finance their activities by issuing bonds and
taking on debt, and the authority and obligation to relocate
people who have interests in the property acquired by an
agency. To establish redevelopment project areas, a
redevelopment agency was required to identify both physical
and economic blight in the project area that could not be
mitigated without the use tax increment. SB 1 would allow
sustainable communities investment authority to establish a
sustainable communities investment area without making a
finding of blight. In order to eradicate blight,
redevelopment agencies had authority to use eminent domain. SB
1 would permit a sustainable communities investment authority
to use eminent domain without a finding of blight.
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The California Farm Bureau Federation, in their opposition
letter, write that SB 1 "would replace this specific statutory
definition [of blight] and many years of well-defined case law
created by hundreds of court challenges over many decades,
with a definition of blight that is so vague that it is
essentially meaningless. 'Inefficient land use patterns' and
'inefficient transportation infrastructure' are the essential
triggers for a determination of blight that could result in
the taking of someone's home, business, or family farm for the
lease or sale to another private party for a private use."
6)Redevelopment agencies were required to set aside 20% of tax
increment generated in redevelopment project areas for the
creation, improvement, and preservation of affordable housing.
This bill increases the set aside to 25%. In addition, 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 do
not decrease during the life of the plan. The bill also
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.
7)Last year this Committee heard SB 1156 (Steinberg) which is
substantially similar to this bill. Governor Brown vetoed SB
1156 with the following message:
This bill would allow local governments to establish a
Sustainable Communities
Investment Authority to finance activities within a specified
area. The planning and
investment that is envisioned by this bill would help to
develop and redevelop a
California that is sustainable and thriving.
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.
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The author notes that SB 1 contains provisions that require a
city or county to receive a finding of completion from the
Department of Finance certifying that they have met the legal
requirement of the RDA dissolution process before they can
participate in the creation of an Authority using the
provisions of SB 1, thereby addressing concerns raised in the
veto message.
8)The California State Association of Counties (CSAC), in
support, writes that "the foundation of our support is
allowing counties a clear option whether or not to financially
participate in tax increment financing for economic
development purposes. We believe an approach that encourages
collaboration between counties and cities will best serve
Californians. This approach would not only allow counties
appropriate control over their own general funds, but
necessitates discussions about what kinds of development
benefits the community as a whole."
Also in support, the California Special Districts Association
writes that "SB 1 protects core services, such as those
provided by special districts?any division of property taxes
away from local agencies would require the governing board of
each participating agency to adopt a resolution, or 'opt-in'.
This provision ensures accountability and local control over
local revenue; it also prevents the exchanging of one problem
for a new, worse local infrastructure problem. Secondly, SB 1
promotes collaboration by empowering local agencies, including
special districts, with the ability to create an investment
authority by entering into a JPA?such a JPA would enable an
authority to best utilize the community's assets and meet its
needs."
9)Support arguments : Supporters argue that 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, and that
the 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.
Opposition arguments : Opponents object to the taxation,
bonding, and eminent domain powers that this bill confers to
the Authorities. They are concerned about how high sales tax
rates could go up in the project areas and about how
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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.
10)This bill was heard by the Assembly Housing and Community
Development Committee on July 3, 2013 and passed on a 5 - 2
vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Alameda-Contra Costa Transit District
Alliance for Community Transit-Los Angeles
California Association of REALTORS
California Labor Federation
California Transit Association
California Special Districts Association
California State Association of Counties
California State Council on Developmental Disabilities
Capacity Builders, Inc
City of West Sacramento
Counties of Alameda, Lassen
East LA Community Corporation
Emeryville Chamber of Commerce
Green Technical Education and Employment
Housing California
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Los Angeles County Federation of Labor
Los Angeles / Orange Counties Building and Construction Trades
Council
Metropolitan Transportation Commission
Mission Bay Development Group
Natural Resources Defense Council
Sacramento Area Council of Governments
Sacramento Housing Alliance
Southeast Asian Community Alliance
State Building and Construction Trades Council
Western Center on Law & Poverty
Opposition
Air Conditioning Trade Association
California Farm Bureau Federation
California Right to Life Committee, Inc.
CalTax
Contra Costa Taxpayers Association
Michelle Steel, Vice-Chair, Third District, State Board of
Equalization
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
6 individuals
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958