BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING
          SB 133 (DeSaulnier)
          As Amended  August 6, 2013
          Majority vote 

           SENATE VOTE  :Vote not relevant  
           
           HOUSING             7-0         LOCAL GOVERNMENT    9-0         
           
           ----------------------------------------------------------------- 
          |Ayes:|Chau, Beth Gaines,        |Ayes:|Achadjian, Levine, Alejo, |
          |     |Atkins, Brown,            |     |Bradford, Gordon,         |
          |     |Maienschein, Quirk-Silva, |     |Melendez, Mullin, Rendon, |
          |     |Mullin                    |     |Waldron                   |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           APPROPRIATIONS      17-0                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|Gatto, Harkey, Bigelow,   |     |                          |
          |     |Bocanegra, Bradford, Ian  |     |                          |
          |     |Calderon, Campos,         |     |                          |
          |     |Donnelly, Eggman, Gomez,  |     |                          |
          |     |Hall, Holden, Linder,     |     |                          |
          |     |Pan, Quirk, Wagner, Weber |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Makes various reforms to the activities of  
          redevelopment agencies (RDA) in fulfilling the requirements to  
          increase, preserve and improve low- and moderate-income housing.  
             Specifically,  this bill  :   

          1)Requires RDAs to post a copy of their annual report on the  
            agency's or the community's Internet Web site.

          2)Requires RDAs to include the following information as part of  
            the annual report:

             a)   The percentage of funds from the Low and Moderate Income  
               Housing Fund (L&M fund) used for planning and general  








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               administration costs;

             b)   An itemized list of planning and general administration  
               expenditures from the L&M fund and an explicit description  
               of how the expenditures are necessary for the production,  
               improvement or preservation of low- and moderate-income  
               housing; 

             c)   Information describing the employees that are paid from  
               the L&M fund including the title, salary, wages, benefits,  
               and the nature of the employee's activities eligible to be  
               paid out of the L&M fund;

             d)   A list of the overhead costs that are paid directly or  
               indirectly from the L&M fund;

             e)   A statement of the amount and percentage of funds  
               deposited into the L&M fund exclusive of debt proceeds  
               expended for planning and administration in each of the  
               preceding five fiscal years that begin after December 31,  
               2011; 

             f)   A list of all the properties owned by a RDA purchased  
               with L&M funds, the date of acquisition for each property,  
               a RDA's intended purpose for the property, and the amount  
               if any of L&M funds used to acquire and maintain the  
               property; 

             g)   For each fiscal year since the agency's last adopted  
               implementation plan, a list of the replacement housing  
               obligations of the RDA including the number of units that  
               must be replaced, location, and status of the replacement  
               and production units; and,

             h)   For each housing project for which a RDA designates  
               encumbered funds, or amends an existing designation or  
               encumbrance during the fiscal year and where the RDA's  
               financing constitutes more than 50% of the total cost of  
               the housing project provide the project name, location,  
               number of affordable units, affordability level, amount of  
               agency financing and total cost of the low- and  
               moderate-income units.  

          3)Provides an agency that has deposited less than $100,000 in  








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            the L&M fund is exempt from providing the information required  
            by a) through h) above. 

          4)Requires the legislative body to adopt a separate written  
            resolution finding that based on the annual report the actual  
            planning and general administrative expenses do not exceed the  
            limits allowed. 

          5)Requires the Controller, on or before April 1 of each year, to  
            post on its Web site a list of RDAs with major audit  
            violations. 

          6)Allows the Controller to consult with locally affected  
            community groups as part of determining if an agency has  
            corrected a major audit violation. 

          7)Allows a RDA that is subject to a court order as a result of a  
            major audit violation to continue to issue, sell, or deliver  
            bonds or incur debt to increase, improve, preserve, or assist  
            in the construction, or rehabilitation of housing units for  
            extremely low, very low, low, or moderate income housing.  

          8)Allows, in the 60 day window between a court's initial finding  
            of a major audit violation and a final ruling, a RDA to pay  
            the budgeted operation and administration of the agency, as  
            opposed to only 75% of the budgeted amount. 

          9)Prohibits a RDA that is subject to a court order as result of  
            a major audit violation to exercise the power of eminent  
            domain. 

          10)Removes the statutory caps on the amount of a monetary  
            sanction that a court can order a RDA to pay for a major audit  
            violation and permits the court to determine a sanction that  
            is commensurate with the violation. 

          11)Prohibits a RDA from paying a court sanction from the L&M  
            fund or any other special fund related to housing.

          12)Provides that an action filed by a court to compel a RDA to  
            correct a major audit violation does not preclude an action by  
            any other interested party or a resident of the jurisdiction.

          13)Makes failure to comply with the restrictions regarding  








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            eligible expenditures for planning and general administration  
            from the L&M fund a "major audit violation."

          14)Requires the Department of Housing and Community Development  
            (HCD) to conduct audits of RDAs to ensure compliance with the  
            housing provisions of the Community Redevelopment Law (CRL).

          15)Requires HCD to review all of the following in audits of  
            RDAs:

             a)   Agency compliance with production and replacement of  
               housing obligations;

             b)   Recording and monitoring of affordability covenants;

             c)   Provision of relocation assistance;

             d)   Propriety of deposits to and expenditures from the L&M  
               fund;

             e)   Compliance with the debt limit of the agency;

             f)   Adoption of a legally sufficient implementation plan;

             g)   Major audit violations as defined in the Health and  
               Safety Code Section 33080.8; and, 

             h)   Accounting practice or provision of the CRL in the  
               discretion of the department.

          16)Requires RDAs to annually remit .05% of the L&M tax increment  
            to HCD to conduct redevelopment audits. 

          17)Requires HCD to determine, on or before April 1 of each year,  
            whether an audit or investigation from the previous year,  
            contains a major audit violation and post those on the HCD  
            Internet Web site.   

          18)Requires on or before June 1 of each year, HCD to determine  
            if a major audit violation has been corrected by consulting  
            with each affected agency and locally affected community  
            groups.

          19)Requires HCD to direct RDAs to take action to correct audit  








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            violations.

          20)Provides that if HCD determines that an RDA has not taken  
            action within 180 days to correct an audit violation, it must  
            forward all relevant documents to the Attorney General (AG)  
            for action.   

          21)Requires HCD to forward a copy of any audit or investigation  
            of a RDA to the AG and the Controller. 

          22)Requires HCD to notify a RDA and its legislative body when it  
            sends an audit violation to the AG. 

          23)Prohibits HCD from initiating or settling any litigation or  
            to resolve any audit or investigation in a manner contrary to  
            law. 

          24)Allows the Controller to conduct quality control reviews of  
            RDA audits to the extent feasible within existing resources  
            and to communicate the results of the review to the RDA and  
            the independent auditor. 

          25)Requires that if the Controller finds that an audit was  
            conducted in an unprofessional manner, to refer the case to  
            the California Board of Accountancy (Board).

          26)Provides that if the Board determines that the independent  
            auditor conducted the audit in an unprofessional manner then  
            the auditor is prohibited from performing any RDA audits for  
            three years and the Board may impose additional penalties. 

          27)Provides that whenever the Controller determines through two  
            consecutive quality control reviews that an audit was not  
            performed in substantial conformity with guidelines in state  
            law, the Controller will notify the auditor and the Board in  
            writing.

          28)Gives the auditor 30 days after receiving the Controller's  
            notice to file an appeal or the Controller's determination is  
            final. 

          29)Provides that if the auditor files an appeal, the Board will  
            investigate and may find that the Controller's determination  
            will not be upheld and has no effect or schedule an appeal for  








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            hearing. 

          30)Provides that if the Controller's determination becomes  
            final, the auditor is prohibited from conducting audits for  
            three years and is subject to any additional conditions  
            ordered by the Board.   

          31)Provides that no later than March 1, following the date at  
            which the Controller's determination becomes final, the  
            Controller will notify each RDA of the auditors that are  
            ineligible as a result of misconduct. 

          32)Allows the Board to take any disciplinary action against an  
            auditor that it deems appropriate under the law. 

          33)Requires a RDA that is found to have deposited less into the  
            L&M fund than required by law or to have spent money from the  
            L&M fund for purposes other than increasing, improving, and  
            preserving the community's supply of affordable housing, to  
            repay the funds with interest, plus an additional 50% of that  
            amount and interest. 

          34)Applies the 10-year statute of limitations for failure to  
            deposit or expend L&M funds correctly to merged redevelopment  
            project areas and to any other moneys that any agency must  
            deposit in the L&M fund in addition to tax increment. 

          35)Prohibits repayment of any L&M funds required to meet the  
            set-a-side requirements to come from any other funds  
            designated for affordable housing. 

          36)Establishes a double cap on the amount of L&M funds that an  
            RDA can spend on planning and general administrative costs.

          37)Places a 10% cap on the amount of L&M funds that a RDA can  
            spend on general administrative costs including:

             a)   Employee compensation costs and related non-personnel  
               costs, such as travel and training, paid to or on behalf of  
               any agency, city, or county employee whose duties include  
               permissible L&M housing activities other than direct  
               program and project administration (i.e., line staff);

             b)   Employee compensation costs and related non-personnel  








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               costs paid to or on behalf of any agency, city, or county  
               employee who supervises or manages line staff or who  
               provides general administrative services, such as finance,  
               legal, and human resources that indirectly support  
               permissible L&M housing activities; 

             c)   Overhead costs, such as rent, equipment, and supplies;  
               and,

             d)   The total value of any contracts for agency planning or  
               administrative services that are related to permissible  
               housing activities and that are not associated with a  
               specific development project.

          38)Places a 10% cap on the amount of L&M funds that a RDA can  
            spend on program and project staff costs, including employee  
            compensation costs and related non-personnel costs that are  
            directly and necessarily associated with development of a  
            specific housing development project including, negotiation  
            and project management of disposition and development  
            agreements, land leases, loan agreements and similar  
            affordable housing agreements, redevelopment agency work on  
            entitlements for eligible affordable housing developments,  
            loan processing, and servicing, inspection for new  
            rehabilitation units, construction monitory and monitoring  
            affordable housing units.   

          39)Allows a RDA to spend up to 2% of their L&M fund on code  
            enforcement provided that the RDA complies with relocation and  
            replacement rules if tenants are displaced or homes are  
            destroyed as a result of code enforcement activities. 

          40)Allows a RDA to spend any difference between the cap on  
            "general administrative and planning" (employee compensation  
            for executive management cost and overhead costs) and actual  
            administrative expenditures on "program and project staff  
            costs." 

          41)Requires employee compensation for executive and management  
            staff, to be justified by an independent cost allocation study  
            that is no more than six years old and not represent a greater  
            proportion of the employees total compensation than the  
            proportion of employees working directly and exclusively on  
            activities required for the L&M fund in comparison to the  








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            total number of employees supervised, managed and directly  
            supported by the employee.   

          42)Provides that the limitations planning and administrative  
            costs do not apply to a specific project area during the first  
            five years.

          43)Provides that the planning and administrative costs apply to  
            project areas where the project area is amended or if the tax  
            increment of a new or amended project area is deposited into  
            an L&M fund covering more than one project area. 

          44)Prohibits a RDA from spending L&M funds on any of the  
            following:

             a)   Code enforcement;

             b)   Land use planning or development of or revision of the  
               housing element except for the payment of normal  
               project-related planning fees that is applicable to similar  
               development projects, except that a RDA may spend L&M funds  
               on the cost of staff participation in the development of  
               the housing element provided that those costs are counted  
               toward the 10% cap on planning and administration costs;

             c)   Lobbying; and, 

             d)   Administration of non-redevelopment activities that are  
               not related to the activities required under the L&M fund.   


          45)Provides that the completion of the current 10-year  
            implementation plan for a RDA (provided the 10-year period  
            began before January 1, 2010), the proportionality  
            requirements dictated by regional housing needs assessment  
            (RHNA) no longer apply, and funds must be expended from the  
            L&M fund as follows:

             a)   Requires at least 75% of each RDA's expenditures from  
               the L&M fund shall directly assist the new construction,  
               acquisition, and substantial rehabilitation or preservation  
               of housing for persons of extremely low, very low, or low  
               income;









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             b)   Requires at least 50% of each RDA's expenditures from  
               the L&M fund shall directly assist the new construction,  
               acquisition, and substantial rehabilitation or preservation  
               of housing for persons of extremely low or very low income;  
               and,

             c)   Requires that at least 25% of each RDA's expenditures  
               from the L&M fund shall directly assist the new  
               construction, acquisition, and substantial rehabilitation  
               or preservation of housing for persons of extremely low  
               income.

          46)Allows a RDA to count expenditures for extremely low-income  
            housing toward the percentages required for very low income  
            and to count expenditures for extremely low- and very  
            low-income toward the percentages required for low income. 

          47)Deletes the ability of an agency to adjust the  
            proportionality requirement for units constructed with  
            non-redevelopment funds. 

          48)Requires a RDA to demonstrate in each implementation plan at  
            the end of five years that the agency's aggregate expenditures  
            from the L&M fund exclusive of debt service payments from the  
            onset of the new proportionality requirements satisfy the  
            requirements.

          49)Defines "preservation" as preserving affordability of an  
            assisted housing development that is eligible for prepayment  
            or termination or the rental restrictions may expire within  
            five years. 

          50)Defines "housing for persons of extremely low income" as  
            housing that is available at a rent or housing cost that is  
            affordable to households earning 30% of the area median income  
            or 30% of the statewide median income, whichever is greater.  

           51)Provides that if a RDA has deposited less than $2 million in  
             the L&M fund in the first five years after the onset of the  
             new proportionality requirements, the RDA has 10 years to  
             fulfill the requirements to spend the L&M funds in the  
             percentages described above for extremely low-, very low- and  
             low-income housing for the first time. 









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          52)Allows, for purposes of the proportionality requirements, an  
            agency to count contractually obligated funds as expended  
            funds, provided that the contract is with an entity that is  
            independent of the agency or the community for the development  
            for a specific eligible housing development.

          53)Provides that if a contract to expend funds from the L&M fund  
            for a specific eligible housing development is terminated, the  
            funds may no longer be counted towards meeting the  
            proportionality requirements. 

          54)Provides that if a RDA fails to meet the proportionality  
            requirements, they may not expend any money from the L&M fund  
            for households whose incomes exceed 50% of median income until  
            they have expended funds for extremely low-, very low- and  
            low-income housing that should have been spent in previous  
            implementation plan periods.

          55)Provides that if a RDA fails to spend L&M funds in same  
            proportion as the number of persons in all age groups, they  
            may not expend any money from the L&M fund for senior  
            households until they have expended funds for all-age housing  
            that should have been spent in previous implementation plan  
            periods.

          56)Deletes the authority of an agency to disburse excess surplus  
            funds to the local housing authority.  

          57)Requires for each interest in real property acquired using  
            money from the L&M fund, a RDA within five years of acquiring  
            the property, must do one of the following:

             a)   Enter into a disposition and development agreement or a  
               land lease with a third party for the development of  
               housing affordable to persons and families of low and  
               moderate income;

             b)   Obtain final land use entitlements and secure full  
               financing for agency development for housing that is  
               affordable to persons and families of low and moderate  
               income; and,

             c)   Submit a remedial action plan for the property to the  
               appropriate oversight agency including, but not limited to,  








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               the Department of Toxic Substances Control, the Regional  
               Water Quality Control Board or the Office of Human Health  
               Risk Assessment for the cleanup of contamination.     

          58)Provides that if a RDA has not completed one of the above  
            within five years, or if less than 10% of the dwelling units  
            or floor area of a project is developed within 10 years from  
            the date the agency originally acquired the property, the  
            agency must reimburse the L&M fund 150% of the amount expended  
            to acquire and maintain the property or 150% the current fair  
            market value of the property whichever is more.  

          59)Provides that if a RDA owns two or more adjacent properties  
            that make up a single redevelopment project the date of  
            acquisition will be the date of acquisition for the last  
            acquired property provided that the date is not later than  
            five years after the acquisition of the first property.  

          60)Provides that a RDA may adopt a resolution to petition HCD  
            for an extension of the five-year deadline and the department  
            may grant a single extension of up to five years if the  
            department makes a finding that the failure to complete the  
            required activities is beyond the agency's control and that  
            the agency has a feasible plan for development. 

          61)Requires HCD to solicit comments from known or expected  
            parties interested in an extension petition.

          62)Requires HCD to establish a schedule of fees to cover the  
            cost of reviewing the petition and to charge the RDA from  
            funds other than those designated for affordable housing. 

          63)Provides that a RDA must deposit 150% of the fair market  
            value of the property at the time it is sold or transferred or  
            if the property is not sold or transferred for the fair market  
            value of the land at the time a building permit is issued for  
                                        the property if either of the following conditions exist:  

             a)   A property acquired using moneys from the L&M fund is  
               sold or transferred for purpose other than housing that is  
               affordable to persons and families of low and moderate  
               income; or,

             b)   A property that is acquired using money from the L&M  








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               fund is developed such that less than 50% of the floor area  
               or a percentage of the floor area equal to the amount of  
               L&M moneys that were used to acquire the property whichever  
               is less, is housing for persons and families of low and  
               moderate income.

          64)Requires that for units destroyed within the project area on  
            or after January 1, 2012, a RDA is required to replace vacant  
            units such that the replacement units are available at  
            affordable housing costs and occupied by persons and families  
            in the same or lower income category in the same proportion as  
            the units occupied or last occupied by low and moderate income  
            households in the property.

          65) Requires generally a RDA to replace destroyed units with new  
            construction.

          66)Provides that up to 25% of the replacement obligation  
            incurred during a five-year implementation plan may be  
            fulfilled by either of the following:

             a)   With units that have been rehabilitated such that the  
               after-rehabilitation values increased by 50% or more of the  
               pre-rehabilitation value and the units being replaced were  
               either:

               i)     At risk of demolition or closure due to substandard  
                 conditions and occupied by extremely low- or very  
                 low-income households; and,

               ii)    Vacant due to substandard conditions.

             b)   With substantially rehabilitated multi-family units that  
               the agency has substantially rehabilitated within the  
               project area, two units for each unit the agency is  
               obligated to replace, or outside the project area three  
               units for each unit the agency is obligated to replace. 

          67)Requires a RDA to adopt a separate written resolution after a  
            public hearing that based on substantial evidence that the  
            rehabilitation of the replacement dwelling units complies with  
            the replacement unit requirements.  

          68)Provides that if a court finds that a RDA has failed to  








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            comply with replacement housing requirements, the court shall  
            prohibit the agency from issuing any debt for any project  
            areas except debt from which all proceeds will be deposited in  
            the L&M fund until the court determines that the RDA has  
            complied with this section. 

          69)Adds the following to the information a RDA is required to  
            include in a replacement housing plan:

             a)   A description of the occupancy and affordability  
               restrictions to be imposed on replacement dwelling units;

             b)   Substantial evidence supporting a finding that the  
               replacement dwelling units will meet the needs of  
               households in the income categories of the households  
               displaced from the dwelling units that the replacement  
               units are intended to replace; and,

             c)   A declaration of whether the RDA intends to rehabilitate  
               existing dwelling units.

          70)Provides that if a RDA ceases its activities prior to the end  
            of an affordability covenant, then it will designate a  
            successor agency that will monitor and enforce the covenants  
            for the remaining period of the covenant.  

          71)Provides that if no successor agency is designated at the  
            time a RDA ceases its activities then the community must  
            monitor and enforce the covenants for the remaining period of  
            the covenant. 

          72)Includes intent language regarding the need for greater  
            accountability and more auditing of RDAs. 

          73)Deletes the authority given to RDAs to offer money in the L&M  
            fund of a merged project area to the housing authority for the  
            purpose of constructing or rehabilitating affordable housing  
            if the funds have been deposited in the L&M fund for six years  
            but have not been spent.

          74)Adds the following to the list of required information the  
            implementation plan for an RDA must include: 

             a)   The proposed amount of expenditure for the L&M fund for  








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               new construction, acquisition and substantial  
               rehabilitation or preservation for housing for persons of  
               extremely low, very low or low income during each year of  
               the implementation plan; 

             b)   The replacement units that satisfy each replacement  
               housing obligation;

             c)   In the case when replacement units have been destroyed  
               or removed, but units are not yet complete, the proposed  
               location of the replacement units that are not yet  
               complete; and,

             d)   A complete accounting for compliance with the RDA's  
               affordable housing obligation over the life of the plan  
               including the total number of units the RDA is obligated to  
               replace and the total number of units required to be  
               constructed before the end for the project area life.

          75)Includes the following information for all affordable housing  
            units that are replaced, constructed, rehabilitated or have  
            covenants attached to them and are included in the database  
            required by existing law:

             a)   The street address and assessor's parcel number of the  
               property and for properties that are listed as a group, the  
               number of units;

             b)   The size of each unit based on the number of bedrooms;

             c)   The affordability level of each unit;

             d)   The year in which the construction or substantial  
               rehabilitation of the unit was complete;

             e)   The date of recordation and document number of the  
               affordability covenants or restrictions;

             f)   The date on which the covenants or restrictions expire;

             g)   For projects developed prior to January 1, 2002, a  
               statement of the effective period of the land use controls  
               established in the plan at the time the unit was developed;









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             h)   For owner-occupied units that have changed ownership  
               during the previous implementation plan period the date and  
               document number of the new affordability covenants or other  
               document recorded to ensure that the affordability  
               restrictions run with the land; and,

             i)   Whether units count toward replacement units and the  
               units they are replacing;

          76)Requires the following information as part of the  
            implementation plan for owner-occupied and rental units that  
            are required to replace units, are counted toward the RDA's  
            housing obligation and are not included in the database  
            required by existing law:

             a)   The street address and if available assessor's parcel  
               number of the property;

             b)   For properties where units are listed as a group, the  
               number of units;

             c)   The affordability level of each unit;

             d)   The date of recordation and document number or  
               restrictions; and, 

             e)   Whether the units count toward the replacement  
               obligation and reference the destroyed units they are  
               replacing.

          77)Permits the implementation plan to omit any property that is  
            used to confidentially house victims of domestic violence  

          78)Provides that failure to meet any of the following  
            obligations will be an ongoing violation until the RDA has  
            fulfilled the obligation: 

             a)   The deposit and expenditure requirements for the L&M  
               fund;

             b)   The obligation to eliminate project deficits to the L&M  
               fund;

             c)   The obligation to expend or encumber excess surplus  








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               funds;

             d)   The obligation to provide relocation assistance;

             e)   Replacement and production housing obligations;

             f)   The obligation to monitor and enforce affordability  
               covenants; and, 

             g)   The obligation to continue the project past the  
               effectiveness date of the redevelopment plan in order to  
               meet unfulfilled housing requirements.

          79)Applies to an agency or authority created after January 1,  
            2014 that must comply with or that is defined as an agency  
            pursuant to the Community Redevelopment Law (CRL). 
           
          FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, 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  
          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  :  The CRL required RDAs to set-a-side 20% of tax  
          increment generated in a project area to increase, improve, and  
          preserve affordable housing.  The intent of the L&M Fund was to  
          avoid gentrification in blighted communities and to avoid  
          displacement of the existing residents.  RDAs captured  
          approximately 12% of the state's property taxes for their  
          activities and generated about $1 billion each year for  
          affordable housing.  In 2011, the Legislature passed SB 450  
          (Lowenthal) which reformed the process by which RDAs were  
          required to spend the L&M fund.  The reforms include, limiting  
          the amount that can be spent on planning and administration  
          costs, targeting L&M funds to extremely low-income units, and  
          creating penalties for RDAs that did not spend their housing  








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          funds in a timely manner.  SB 450 was vetoed by the Governor  
          because the California Supreme was about to rule in California  
          Redevelopment Agency v. Matosantos and it would have been  
          premature to enact such substantive reforms before that time.   
          The court's ruling ultimately resulted in the complete  
          dissolution of RDAs eliminating the need for reforms.  However,  
          there are now several bills moving through the legislative  
          process that would create new entities with the authority to  
          collect tax increment and the same rights, responsibilities, and  
          obligations of former RDAs. 

          SB 1 (Steinberg) of the current legislative session, creates a  
          new entity, the Sustainable Communities Investment Authority,  
          which could capture tax increment and spend it on SB 375  
          (Steinberg), Chapter 728, Statutes of 2008, type developments.    
          SB 1 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 sustainable communities  
          strategy (SCS).   SB 1080 (Alejo) of 2013 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.  These new entities are required to comply with most  
          of the provisions of the CRL.  In addition to these two bills,  
          some infrastructure financing district (IFD) bills, such as SB  
          628 (Beall) also of the current legislative session, reference  
          redevelopment law when describing IFD housing obligations.  

          This bill would implement reforms to the CRL and as a result any  
          entity that is vested with the rights, powers, and duties of  
          RDAs would be required to comply with these reforms. 
           
           Auditing:  Existing law required RDAs to contract with an  
          independent auditor each year to review the financial statements  
          of the agency.  Independent auditors were required to review the  
          RDAs financial statements and identify "major audit" violations  
          which are defined by law.  RDAs had to inform the local  
          legislative body of any major audit violations and correct them.  
           The Controller received the audits and reviewed them and had  
          the authority to forward a major audit violation to the AG if it  
          is not corrected and the AG could take action against the RDA  
          including prohibiting it from expending funds or incurring new  
          debt.  In past years, HCD also had authority to audit the L&M  








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          fund to ensure compliance; this function had been drastically  
          reduced over the years as a result of budget constraints.  
           
          This bill would make several reforms to oversight and auditing  
          in the CRL.  The Controller would have the authority to report  
          independent auditors whose actions are unprofessional or violate  
          law to the Board of Accountancy.  Auditors who are found by the  
          Board to be in violation of the law may be banned from auditing  
          for three years. 

          HCD would have the funding and authority to audit the L&M funds  
          to determine compliance.  If the department determined that a  
          RDA did not fulfilling its obligations to spend L&M funds in a  
          timely and appropriate matter, it can refer the violations to  
          the AG for action.  RDAs will pay .05% of their tax increment to  
          fund HCD's auditing.

          General administration and planning:  Existing law gives RDAs  
          relatively broad authority to spend L&M funds on planning,  
          administration, and project costs.  This bill creates a double  
          cap system that would restrict spending for general and  
          administrative costs to 10% of the L&M Fund and program and  
          project costs to 10% of the L&M fund.  The general  
          administrative and planning cost are described above and  
          generally relate to employee compensation, travel expenses,  
          executive and management salaries and consulting contracts  
          necessary to meet the requirements of creating, preserving, and  
          improving low- and moderate-income housing.  The program and  
          project costs are for specific project related costs like  
          monitoring of a specific housing development project including  
          project management of disposition and development agreements,  
          land leases, loan agreements and similar affordable housing  
          agreements, redevelopment agency work on entitlements for  
          eligible affordable housing developments, loan processing, and  
          servicing, inspection for new rehabilitation units, construction  
          monitory and monitoring affordable housing units.  

          If an RDA does not expend all of the funds allowed for general  
          planning and administration, it can apply the remaining amount  
          to program and project costs.  However, program and project  
          costs cannot be spent on general administration and planning. 
           
           New requirements for land purchased through the L&M fund:   
          Existing law requires a RDA to take certain steps to develop  








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          properties purchased using L&M funds within the first five years  
          of acquisition.  If the RDA did not take steps to develop the  
          property (including zoning changes, disposition and development  
          agreements) within five years, the RDA could adopt a resolution  
          to extend the deadline by five years but if nothing is done  
          after five years they must sell the property and deposit the  
          proceeds back in the L&M fund.  

          This bill would require that RDAs enter into a disposition  
          agreement with a third party to develop the property, obtain  
          final land use entitlement and secure full financing for the  
          affordable housing development within five years.  If the RDA  
          fails to take these steps, they can petition HCD for a five year  
          extension. If an RDA does not take steps to develop a property  
          within the timeframe and certain benchmarks are not met, it must  
          reimburse the L&M fund 150% of the amount that was used to  
          acquire and maintain the property or 150% of the current market  
          value, whichever is greater. 

          Proportionality requirements:  Existing law requires that the  
          L&M fund be spent to assist households that are very low and low  
          income at the same income levels that are required as part of  
          the RHNA under housing element law.  This bill would delete the  
          proportionally requirement and rather require that at least 75%  
          of the agency's expenditures from the L&M fund assist extremely  
          low-, very low- or low-income households or persons.  It further  
          requires that 25% of each of the agency's expenditures directly  
          assist extremely-low income households and that an additional  
          50% assist extremely low- and very low-income households.  These  
          sub requirements count against the 75% requirements.  


           Analysis Prepared by  :    Lisa Engel / H. & C.D. / (916) 319-2085  



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