BILL ANALYSIS Ó
SB 1
Page 1
SENATE THIRD READING
SB 1 (Steinberg)
As Amended September 3, 2013
Majority vote
SENATE VOTE :27-11
HOUSING 5-2 LOCAL GOVERNMENT 6-3
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|Ayes:|Chau, Atkins, Brown, |Ayes:|Levine, Alejo, Bradford, |
| |Quirk-Silva, Mullin | |Gordon, Mullin, Rendon |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Beth Gaines, Maienschein |Nays:|Achadjian, Melendez, |
| | | |Waldron |
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APPROPRIATIONS 12-5
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|Ayes:|Gatto, Bocanegra, | | |
| |Bradford, | | |
| |Ian Calderon, Campos, | | |
| |Eggman, Gomez, Hall, | | |
| |Holden, Pan, Quirk, Weber | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Bigelow, | | |
| |Donnelly, Linder, Wagner | | |
| | | | |
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SUMMARY : Allows local governments to establish a Sustainable
Communities Investment Authority (Authority) to finance
specified activities within a sustainable communities investment
area. Specifically, this bill :
1)Allows an Authority to be formed and specifies that it must
comply with the provisions of the Community Redevelopment Law
(CRL), with certain exceptions, and the bill's provisions.
2)Requires an Authority to adopt a plan for a sustainable
communities investment area.
3)Requires a sustainable communities investment plan to
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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)Exempts an Authority from the requirement under the CRL from
reporting on its financial information to the Controller.
6)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.
7)Prohibits a city or county that created a redevelopment agency
from forming an Authority unless the designated local
authority or the successor agency has receive a finding of
completion from Department of Finance that it has complied
with the provisions of
AB 26 X1 (Blumenfield), Chapter 5, Statutes of 2011-12 First
Extraordinary Session.
8)Allows an Authority to be formed as follows:
a) A city and county representing the geographic territory
of an sustainable communities investment area may form an
Authority by entering into a joint powers agreement (JPA)
that establishes the governing board and the sustainable
communities investment area;
b) A city may form the governing board and establish the
parameters of the proposed economic development within the
sustainable communities investment area in an incorporated
area of the city provided the economic development
parameters and the sustainable communities investment plan
are approved by the county;
c) A city and county may appoint a governing board for a
sustainable communities investment area comprised of two
members appointed by the city with geographic jurisdiction
and two appointed by the county with geographic
jurisdiction and a fifth member appointed by those members.
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The governing board will designate the sustainable
communities' investment area in an incorporated area, an
unincorporated area or both. The city and the county must
approve the sustainable communities investment plan and any
amendments to it.
d) If the sustainable communities' investment area is
within an unincorporated area, the county may form an
Authority and appoint the governing body.
e) A city may form an Authority and appoint a governing
board that designates the sustainable communities
investment area without county approval if the area is
within the incorporated limits of the city.
9)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.
10)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.
11)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.
12)Excludes a school district from participating in an
Authority.
13)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
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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).
b) 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,
c) Sites that have land use approvals, covenants,
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.
1)Prohibits an Authority from including land that is subject to
a contract pursuant to the Williamson Act or more than two
acres of prime farmland, farmland of statewide importance,
unique farmland, or farmland of local importance as defined by
the United States Department of Agriculture land inventory and
monitoring criteria as modified for California. .
2)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
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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
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.
3)Requires the county auditor controller to allocate to an
Authority the tax increment as specified in a an sustainable
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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).
4)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.
5)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.
6)Provides that if a city, county, or city and county that is
part of an Authority declares a fiscal emergency that city,
county or city and county must 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.
7)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.
8)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.
9)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.
10)Provides that an Authority that collects tax increment
revenues must dedicate no less than 25% of the allocated tax
increment for affordable housing purposes.
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11)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 with relieve blight as follows:
i) How it will implement the goals of a SCS if the
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; and,
vii) How it will reduce air pollution, energy consumption
and greenhouse gas emissions by reducing vehicle miles
traveled;
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;
e) A statement of how the plan will implement the jobs
plan;
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12)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.
1)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.
2)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.
3)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.
4)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
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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)Requires the Authority to approve any bond financing.
2)Specifies that school district property taxes cannot be
pledged for the repayment of bonds issued by an Authority.
3)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.
4)Permits a state or local pension fund system to invest capital
in the public infrastructure projects and private commercial
residential developments undertaken by an Authority.
5)Allows an Authority to exercise the powers granted under the
Mello-Roos Act.
6)Allows an Authority to implement local transaction and use
tax, except that the resolution authorizing the tax may
designate the use of the tax.
7)Establishes a process to prequalify developers for
construction contracts in excess of
$1 million.
8)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.
9)Defines, for the purpose of exempting small walkable
communities from the California Environmental Quality Act
(CEQA), the following terms:
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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.
1)Makes legislative findings and declarations.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Estimated one-time General Fund (GF) costs to the State
Controller's Office (SCO) in the range of $100,000 to $200,000
GF 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.
2)Estimated ongoing SCO GF costs in the range of $150,000 on a
periodic basis for accepting audits and reviewing and
approving secondary compliance plans submitted by authorities
who fail to comply with initial audit requirements.
3)Estimated ongoing GF costs in the range of $150,000 to
$200,000 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, and specifies the SCO is not
required to review and approve completed audits.
4)If an authority was to adopt a local transactions and use tax,
the Board of Equalization (BOE) would administer the tax and
incur one-time costs of approximately $275,000. For each
taxing area there would be additional administrative costs
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varying with the size of the district, but could reach several
hundred thousand dollars for a very large district. The costs
the BOE incurred would be fully reimbursed by the authority.
COMMENTS:
In 2011, the Legislature approved and the Governor signed two
measures, AB 26 X1 and
AB 27 X1 (Blumenfield), Chapter 6, Statutes of 2011-12 First
Extraordinary Session 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 AB 26 X1. However, the Court did
grant CRA's petition with respect to AB 27 X1. 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 eradicate blight, 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 cities
and counties to establish Sustainable Communities Investment
Authorities (Authorities) to use tax increment financing, on a
limited scale, along with other financing tools to support the
goals
SB 375 (Steinberg), Chapter 728, Statutes of 2008.
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 (Núñez), Chapter
488, Statutes of 2006: The 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, aligning planning for transportation
and housing, and creating 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
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of the SCS.
Responding to pervious veto: This bill is a modified version of
SB 1156 (Steinberg) which was vetoed last year. The Governor's
veto message indicated he was unwilling to sign a bill creating
a new financing tool for community redevelopment until the
winding down of redevelopment is complete and General Fund
savings are achieved. According to the author, "the concerns
that led to the veto are being resolved and we expect most of
the successor agencies to be deemed compliant with the asset
dissolution requirements of AB 26 X1 and AB 1484." The author
notes that this bill requires that cities and counties receive a
finding of completion from Department of Finance certifying that
they have met the legal requirements of redevelopment
dissolution before they can establish an Authority.
Purpose of the bill: According to the author, "on December 29,
2011, the California Supreme Court required the dissolution of
California redevelopment agencies. However, in the wake of
stubborn unemployment and recession, resources are needed to
stimulate economic development in a strategic manner. SB 1
would authorize the creation of Sustainable Communities
Investment Areas. This legislation will give cities and counties
a modest tool to support sustainable economic development that
creates good jobs, affordable housing, and a healthy
environment."
Financing tool: 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. This bill excludes school
district and special district from "district" and "affected
taxing entity" for purposes of tax increment financing.
No finding of blight: Post-World War II, redevelopment was
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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. This bill 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.
Housing Provisions: 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.
In 2011, SB 450 (Lowenthal) proposed significant reforms to the
CRL, including reforms to the housing provisions. SB 450 was
vetoed by the Governor because he felt it was premature in light
of the pending Supreme Court decision on AB 26 X1 and AB 27 X1
in California Redevelopment Association v. Matosantos. The
committee may wish to consider that the SB 450 reforms were made
to address abuses of the CRL and that in setting up a new
community economic development entity that is subject to the
CRL, it would be prudent to ensure that those reforms are made
to the CRL so that the same abuses don't occur in the new
sustainable communities investment authority. SB 133
(DeSaulnier) which was heard by the Assembly Housing and
Community Development Committee makes the changes that were
previously passed in SB 450.
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Related legislation: The Assembly Housing and Community
Development Committee approved AB 1080 (Alejo) of 2013, which
allows local governments to establish a Community Revitalization
and Investment Authority in a disadvantaged community and divert
tax increment for many of the activities that were allowed under
redevelopment. That bill also requires 25% of tax increment
collected be set aside for affordable housing.
SB 1156 (Steinberg) of 2011 which was substantially similar to
this bill was vetoed last year. Below is the veto statement:
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.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0002188