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