BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 133
                                                                  Page  1

          Date of Hearing:   august 21, 2013

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                  Mike Gatto, Chair

                  SB 133 (DeSaulnier) - As Amended:  August 6, 2013 

          Policy Committee:                             Local  
          GovernmentVote:9-0
                       Housing and Community Development      7-0

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:              

           SUMMARY  

          This bill requires a new agency or authority that must comply  
          with provisions of the Community Redevelopment Law (CRL), to  
          comply with new programs and procedures to increase, preserve  
          and improve low- and moderate-income L & M housing.   
          Specifically, this bill:   

          1)States the bill's provisions only apply to an agency or  
            authority created on or after January 1, 2014 and that is  
            required to comply with CRL or is defined as an agency  
            pursuant to CRL.  It does not apply to an agency that has  
            assumed the housing assets and functions of a former  
            redevelopment agency (RDA).

          2)Establishes a process for HCD to address major audit  
            violations, including referrals to the Attorney General.

          3)Grants the Controller an enhanced role in reviewing RDA audits  
            and working to improve and correct audits, including the  
            authority to report to the Board of Accountancy independent  
            auditors whose actions are unprofessional or in violation of  
            law.

           FISCAL EFFECT  

          This bill will result in no direct new costs because there are  
          no existing entities yet that meet the requirements in the bill.  
           However, there have been numerous legislative efforts to  
          establish new entities that can use the powers of the former  
          redevelopment entities.  If these efforts are successful and new  








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          entities are established there will be costs as a result of this  
          bill.  Absent knowing the number of these yet to be created  
          entities, the costs cannot be estimated.  However, they could  
          reach into the hundreds of thousands of dollars for HCD and the  
          Controller.  In addition, there could be costs to the Department  
          of Justice and the Board of Accountancy for enforcement actions  
          stemming from audits by HCD and audit reviews by the Controller.

           COMMENTS 

           1)Purpose  .  According to the author, the evidence for the need  
            to reform the CRL, can be found in a 2010 report by the Senate  
            Office of Oversight and Outcomes that looked at the housing  
            expenditures from 12 redevelopment agencies, seven of which  
            had showed consistently high planning and administration  
            expenditures and five chosen at random.   The report made the  
            following findings:

              a)   No assurance  .  Current laws and oversight give the  
               Legislature and public no assurance that redevelopment  
               agencies are using at least 20% of revenues to efficiently  
               create affordable housing.

              b)   Lax records  .  Many redevelopment agencies use their low-  
               and moderate-income housing fund to cover costs in other  
               city departments - such as public works, finance, and  
               personnel - without documenting that the resources are  
               directly related to an affordable housing project.  

              c)   Loose law  .  Each year redevelopment agencies were  
               required to determine the need to spend any housing  
               set-aside money on planning and administration.  Many  
               redevelopment agency officials did not know about the law,  
               ignored it or complied by passing a pro forma resolution.   
               The lack of compliance made little difference.  An  
               appellate court found that the law limiting planning and  
               administrative costs gives so much discretion to  
               redevelopment agencies that they are largely shielded from  
               lawsuits, even those agencies that ignore the law and make  
               assertions unsupported by facts.
           
              d)   Questionable spending  .  Some redevelopment agencies used  
               their housing set-aside funds in what appear to be  
               impermissible ways, such as hiring a lobbyist, funding a  
               public relations campaign and paying a non-profit housing  








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               rights center to offer residents legal advice.

              e)   Unreliable audits  .  Each redevelopment agency has to get  
               an annual independent financial audit, yet these audits are  
               of inconsistent quality.  Many Certified Public Accountants  
               fail to test or make note of compliance with housing  
               set-aside fund laws.

              f)   Code enforcement  .  Some redevelopment agencies used  
               their housing set-aside funds to pay for code enforcement,  
               which is permitted only when the code enforcement work is  
               directly linked to efforts to develop, improve or preserve  
               affordable housing.

            The author also notes that in October 2010, the Los Angeles  
            Times reported a number of irregularities in the spending of  
            L&M funds.  The article cited examples of agencies that spent  
            most of their affordable housing money over the decade on  
            planning and administration, but never built a single unit.   
            The author states the article also cited examples of agencies  
            that used L&M funds to buy properties that were never used for  
            affordable housing.

            According to the author, given the abuses of the past, it is  
            critical to put reforms into place before redevelopment is  
            reborn so that they do not recur.

           2)Relevant legislation  .  Several 2013 bills establish new  
            entities that would be subject to the provisions of SB 133.  

             a)   SB 1 (Steinberg) creates a new entity, the Sustainable  
               Communities Investment Authority, to authorize the use of  
               tax increment as well as other funding sources to finance  
               specified projects.  SB 1 is before the Assembly  
               Appropriations Committee, today.

             b)   AB 1080 (Alejo) allows local governments to establish a  
               Community Revitalization and Investment Authority in a  
               disadvantaged community to fund specified activities and  
               allows the authority to collect tax increment.  AB 1080 is  
               in the Senate Appropriations Committee.

             c)   SB 628 (Beall) authorizes a city or a county to create  
               an infrastructure financing district (IFD) to implement  
               transit priority projects without having to hold an  








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               election and requires the city or county to use 25% of the  
               resulting revenues for affordable housing.  SB 628 has been  
               concurred in by the Senate.

           3)Previous legislation  .  This bill is substantially similar to  
            SB 450 (Lowenthal) of 2011, which applied to existing  
            agencies.  SB 450 was vetoed by Governor Brown, who opined it  
            was premature given the Supreme Court was about to act on the  
            legislation that eliminated redevelopment agencies.


           Analysis Prepared by  :    Roger Dunstan / APPR. / (916) 319-2081