BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 133
Author: DeSaulnier (D)
Amended: 8/6/13
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 77-0, 9/4/13 - See last page for vote
SUBJECT : Redevelopment
SOURCE : Author
DIGEST : This bill makes various reforms to the activities of
redevelopment agencies (RDAs) in fulfilling the requirements to
increase, preserve and improve low- and moderate-income housing.
Assembly Amendments delete the Senate version, which dealt with
enterprise zones, and instead add the current language.
ANALYSIS : The Community Redevelopment Law (CRL) requires that
each RDA submit the final report of any audit undertaken by any
other local, state, or federal government entity to its
legislative body and to additionally present an annual report to
the legislative body containing specified information.
Existing law requires that funds used for purposes of
increasing, improving, and preserving a community's supply of
low- and moderate-income housing be held in a separate Low and
Moderate Income Housing Fund (L&M fund) until used. Existing
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law limits the planning and general administrative costs which
may be paid with moneys from the L&M fund.
Existing law requires, except as specified, each agency to
expend over each 10-year period of the implementation plan, the
moneys in the L&M fund to assist housing for persons of
moderate, low, and very low income according to specified
calculations.
Existing law authorizes a RDA to merge project areas under its
jurisdiction, and requires that at least 20% of specified taxes
allocated to the RDA be deposited into the L&M fund to assist in
the construction or rehabilitation of housing units for very
low, and low- and moderate-income households, as specified.
Existing law requires that if those funds have not been
committed for that purpose within six years, the agency shall
offer the funds to the housing authority that operates within
the jurisdiction of the agency, as specified.
Existing law provides that whenever low- or moderate-income
housing dwelling units are destroyed or removed from the low-
and moderate-income housing market as part of a redevelopment
that is subject to a written agreement with the agency, or where
financial assistance has been provided by the agency, the agency
is required to provide replacement housing within four years of
the destruction or removal.
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 L&M fund used for
planning and general 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;
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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.
1. Provides an agency that has deposited less than $100,000 in
the L&M fund is exempt from providing the information
required by (A) through (H) above.
2. 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.
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3. Requires the State Controller, on or before April 1 of each
year, to post on its Web site a list of RDAs with major audit
violations.
4. Allows the Controller to consult with locally affected
community groups as part of determining if an agency has
corrected a major audit violation.
5. 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.
6. 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.
7. Prohibits a RDA that is subject to a court order as result
of a major audit violation to exercise the power of eminent
domain.
8. 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.
9. Prohibits a RDA from paying a court sanction from the L&M
fund or any other special fund related to housing.
10.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.
11.Makes failure to comply with the restrictions regarding
eligible expenditures for planning and general administration
from the L&M fund a "major audit violation."
12.Requires the Department of Housing and Community Development
(HCD) to conduct audits of RDAs to ensure compliance with the
housing provisions of the CRL.
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13.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 HCD.
14.Requires RDAs to annually remit 0.05% of the L&M tax
increment to HCD to conduct redevelopment audits.
15.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's Internet Web site.
16.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.
17.Requires HCD to direct RDAs to take action to correct audit
violations.
18.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.
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19.Requires HCD to forward a copy of any audit or investigation
of a RDA to the AG and the Controller.
20.Requires HCD to notify a RDA and its legislative body when
it sends an audit violation to the AG.
21.Prohibits HCD from initiating or settling any litigation or
to resolve any audit or investigation in a manner contrary to
law.
22.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.
23.Requires that if the Controller finds that an audit was
conducted in an unprofessional manner, to refer the case to
the Board of Accountancy (Board).
24.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.
25.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.
26.Gives the auditor 30 days after receiving the Controller's
notice to file an appeal or the Controller's determination is
final.
27.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 hearing.
28.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.
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29.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.
30.Allows the Board to take any disciplinary action against an
auditor that it deems appropriate under the law.
31.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.
32.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.
33.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.
34.Establishes a double cap on the amount of L&M funds that an
RDA can spend on planning and general administrative costs.
35.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
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;
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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.
1. 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, RDA work on entitlements for
eligible affordable housing developments, loan processing,
and servicing, inspection for new rehabilitation units,
construction monitory and monitoring affordable housing
units.
2. 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.
3. 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."
4. 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
total number of employees supervised, managed and directly
supported by the employee.
5. Provides that the limitations planning and administrative
costs do not apply to a specific project area during the
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first five years.
6. 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.
7. 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.
1. 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;
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
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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.
1. 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.
2. Deletes the ability of an agency to adjust the
proportionality requirement for units constructed with
non-redevelopment funds.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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
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independent of the agency or the community for the
development for a specific eligible housing development.
8. 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.
9. 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.
10.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.
11.Deletes the authority of an agency to disburse excess
surplus funds to the local housing authority.
12.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, the Department of Toxic Substances Control, the
Regional Water Quality Control Board or the Office of
Human Health Risk Assessment for the cleanup of
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contamination.
1. 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.
2. 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.
3. 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.
4. Requires HCD to solicit comments from known or expected
parties interested in an extension petition.
5. 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.
6. 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
fund is developed such that less than 50% of the floor
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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.
1. 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.
2. Requires generally a RDA to replace destroyed units with new
construction.
3. 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:
(1) At risk of demolition or closure due to
substandard conditions and occupied by extremely low-
or very low-income households; and,
(2) Vacant due to substandard conditions.
A. 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.
1. 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.
2. Provides that if a court finds that a RDA has failed to
comply with replacement housing requirements, the court shall
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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.
3. 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.
1. 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.
2. 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.
3. Includes intent language regarding the need for greater
accountability and more auditing of RDAs.
4. 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.
5. 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 new construction, acquisition and substantial
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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.
1. 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
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developed;
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;
1. 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.
2. Permits the implementation plan to omit any property that is
used to confidentially house victims of domestic violence
3. 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;
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C. The obligation to expend or encumber excess surplus
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.
4. 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 CRL.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
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 this 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 for enforcement actions stemming from audits by
HCD and audit reviews by the Controller.
ASSEMBLY FLOOR : 77-0, 9/4/13
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
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Maienschein, Mansoor, Medina, Mitchell, Morrell, Mullin,
Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,
V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Melendez, Vacancy, Vacancy
JA:k 9/5/13 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****
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