BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 1 Author: Steinberg (D), et al. Amended: 9/3/13 Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 3/13/13 AYES: Wolk, Beall, DeSaulnier, Liu NOES: Knight, Emmerson NO VOTE RECORDED: Hernandez SENATE TRANSPORTATION & HOUSING COMMITTEE : 8-3, 4/23/13 AYES: DeSaulnier, Beall, Galgiani, Hueso, Lara, Liu, Pavley, Roth NOES: Gaines, Cannella, Wyland SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/13 AYES: De León, Hill, Lara, Padilla, Steinberg NOES: Walters, Gaines SENATE FLOOR : 27-11, 5/28/13 AYES: Beall, Block, Calderon, Corbett, De León, DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill, Hueso, Jackson, Lara, Leno, Lieu, Liu, Monning, Padilla, Pavley, Price, Roth, Steinberg, Torres, Wolk, Wright, Yee NOES: Anderson, Berryhill, Cannella, Emmerson, Fuller, Gaines, Huff, Knight, Nielsen, Walters, Wyland NO VOTE RECORDED: Correa, Vacancy ASSEMBLY FLOOR : 48-28, 9/9/13 - See last page for vote SUBJECT : Sustainable Communities Investment Authority CONTINUED SB 1 Page 2 SOURCE : Author DIGEST : This bill allows a local government to establish a Sustainable Communities Investment Authority (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. Assembly Amendments (1) provide 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; (2) prohibit 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 (USDA) land inventory and monitoring criteria as modified for California; (3) prohibit an Authority from being formed, as specified, by 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; and (4) make other clarifying changes. ANALYSIS : The Community Redevelopment Law (CRL) 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. In 2011, the Legislature enacted AB 26X1 (Blumenfield, Chapter 5) which eliminated redevelopment agencies and established procedures for winding down the agencies, paying off enforceable obligations, and disposing of agency assets. AB 26X1 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 CONTINUED SB 1 Page 3 auditor-controller for distribution to taxing agencies within each county. AB 26X1 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 Low and Moderate Income Housing Fund (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 Department of Housing and Community Development (HCD) takes on that responsibility. 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 (GHG) 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 GHG 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 GHG 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 GHG emission reduction targets; Contains 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; CONTINUED SB 1 Page 4 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: 1. Allows an Authority to be formed and specifies that it must comply with the provisions of the CRL, with certain exceptions, and this 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 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 State 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 this bill to establish blight. CONTINUED SB 1 Page 5 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 (DOF) that it has complied with the provisions of AB 26X1. 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 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. 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 CONTINUED SB 1 Page 6 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: (1) 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; (2) It is within the geographic boundaries of a MPO with an approved 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, 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 CONTINUED SB 1 Page 7 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: (1) Components, parts, or materials for the generation of renewable energy resources; (2) Equipment designed to make buildings more energy efficient or the component parts thereof; (3) Public transit vehicles or the component parts thereof; or, (4) 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 USDA 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 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 CONTINUED SB 1 Page 8 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 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 CONTINUED SB 1 Page 9 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. 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: CONTINUED SB 1 Page 10 (1) How it will implement the goals of a SCS if the sustainable communities investment area is within an MPO; (2) How it will contribute to a more efficient transportation; (3) How it will contribute to and reduce cost for the combined costs of housing and transportation; (4) How it will contribute to improved public health; (5) How it will promote more efficient water consumption; (6) How it will avoid loss of prime farmland; and, (7) How it will reduce air pollution, energy consumption and GHG emissions by reducing vehicle miles traveled; (8) How it will ensure compliance with the affordable housing maintenance and preservation requirements. A. A statement of how the plan will implement the sustainable parking standards; B. A statement of how the plan will implement the jobs plan; 1. 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. CONTINUED SB 1 Page 11 C. Health and safety related infrastructure investments in disadvantaged rural communities; and D. Infrastructure to support country wide services. 2. 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 DOF, and the Joint Legislative Budget Committee. 3. 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. 4. 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. 5. 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. 6. Requires the Authority to approve any bond financing. 7. Specifies that school district property taxes cannot be pledged for the repayment of bonds issued by an Authority. CONTINUED SB 1 Page 12 8. 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. 9. 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. 10.Allows an Authority to exercise the powers granted under the Mello-Roos Act. 11.Allows an Authority to implement local transaction and use tax, except that the resolution authorizing the tax may designate the use of the tax. 12.Establishes a process to prequalify developers for construction contracts in excess of $1 million. 13.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. 14.Defines, for the purpose of exempting small walkable communities from the California Environmental Quality Act, 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 CONTINUED SB 1 Page 13 publicly dedicated land, private streets that meet local standards, and other public use areas as determined by the local land use authority. 15.Makes legislative findings and declarations. Prior legislation . This bill is very similar to the final version of last year's SB 1156 (Steinberg, 2012), 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 complete and General Fund (GF) 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." FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Potentially major redirection of local property tax revenues from participating local agencies, excluding schools, to an Authority over a period of decades. Since this 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 Controller's Office 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. (Staff assumes 1.5 to 2 personnel year (PY) of regulatory staff to establish guidelines) Estimated ongoing Controller's Office costs in the range of $150,000 (GF) 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. (Staff assumes approximately one PY of audit work on a periodic basis) CONTINUED SB 1 Page 14 Estimated ongoing costs in the range of $150,000 to $200,000 (GF) to the DOF to review and approve completed audits on a periodic basis. This bill requires audits to be submitted to the Controller's Office, DOF, and Joint Legislative Budget Committee, and specifies that the Controller's Office 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 Authority projects. These costs would be reimbursed in arrears by charges on an awarding body or developer for each project. SUPPORT : (Verified 9/9/13) Alameda-Contra Costa Transit District Alliance for Community Transit-Los Angeles California Association of REALTORS California Labor Federation California Special Districts Association California State Association of Counties California State Council on Developmental Disabilities California Transit Association Capacity Builders, Inc. City of West Sacramento Counties of Alameda, Lassen East Los Angeles Community Corporation Emeryville Chamber of Commerce Green Technical Education and Employment Housing California 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 and Poverty CONTINUED SB 1 Page 15 OPPOSITION : (Verified 9/9/13) Air Conditioning Trade Association California Farm Bureau Federation California Right to Life Committee, Inc. California Taxpayers Association Contra Costa Taxpayers Association Plumbing-Heating-Cooling Contractors Association of California State Board of Equalization, Third District, Vice-Chair, Michelle Steel Western Electrical Contractors Association ARGUMENTS IN SUPPORT : 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. This bill offers local governments flexibility by allowing an authority to use a variety of tools, including tax increment financing, CRL powers, local sales taxes, infrastructure financing districts, and the ability to leverage public pension fund investments. ARGUMENTS IN OPPOSITION : 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 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. ASSEMBLY FLOOR : 48-28, 9/9/13 AYES: Alejo, Ammiano, Atkins, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, CONTINUED SB 1 Page 16 Chesbro, Daly, Dickinson, Eggman, Fong, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Mitchell, Mullin, Muratsuchi, Nazarian, Pan, Perea, V. Manuel Pérez, Quirk-Silva, Rendon, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, John A. Pérez NOES: Achadjian, Allen, Bigelow, Chávez, Conway, Cooley, Dahle, Donnelly, Fox, Beth Gaines, Gorell, Grove, Hagman, Harkey, Jones, Linder, Logue, Maienschein, Mansoor, Melendez, Morrell, Nestande, Olsen, Patterson, Salas, Wagner, Waldron, Wilk NO VOTE RECORDED: Medina, Quirk, Vacancy, Vacancy AB/RM:k 9/9/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED