BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 341 (DeSaulnier) - Redevelopment: assumption of housing  
          functions.
          
          Amended: April 1, 2013          Policy Vote: T&H 10-0
          Urgency: No                     Mandate: No
          Hearing Date: April 29, 2013                            
          Consultant: Mark McKenzie       
          
          This bill does not meet the criteria for referral to the  
          Suspense File. 

          
          Bill Summary: SB 341 would make numerous changes to the powers  
          and duties of entities assuming the housing functions of former  
          redevelopment agencies (housing successors).

          Fiscal Impact: 
           Minor and absorbable costs to the Department of Housing and  
            Community Development (HCD) to make annual adjustments to the  
            cap on monitoring and administrative costs based on  
            inflationary factors (General Fund).

           Potential shift of housing successor revenues among local  
            agencies, and shifts in local expenditures from activities  
            authorized under current law to the priorities identified in  
            the bill (Local- Low and Moderate Income Housing Asset Funds).

           Unknown, likely minor state revenue gains, to the extent that  
            housing successors fail to encumber excess surplus or  
            specified transferred funds within the allotted timeframes.   
            Any funds that accrue to HCD as a result of these transfers  
            must be programmed for expenditure in the Multifamily Housing  
            Program or the Joe Serna, Jr. Farmworker Housing Program.

           Minor costs to HCD to administer the expenditure of any  
            transferred funds, as specified above.

          Background: Prior to 2011, the Community Redevelopment Law (CRL)  
          authorized cities and counties to establish redevelopment  
          agencies (RDAs) and capture any increase in property taxes  
          generated within a project area (referred to as "tax increment")  
          over a period of decades for expenditures to eliminate blight.   








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          State law required redevelopment agencies to deposit 20 percent  
          of tax increment into a Low and Moderate Income Housing Fund to  
          be used to increase, improve, and preserve the community's  
          supply of low and moderate income housing available at an  
          affordable housing cost.  

          In 2011, the Legislature enacted ABx1 26 (Blumenfield), Chapter  
          5 of the First Extraordinary Session.  ABx1 26 eliminated  
          redevelopment agencies and established procedures for winding  
          down RDA affairs, paying off enforceable obligations, and  
          disposing of agency assets.  ABx1 26 provided for "housing  
          successors" to assume the housing rights, powers, duties,  
          obligations, and physical assets of the former redevelopment  
          agencies, as specified in the CRL.  In most cases, the city or  
          county that authorized the creation of the RDA became the  
          housing successor.  If the host jurisdiction opted not to take  
          on the responsibility, the local housing authority became the  
          housing successor.  If there is no local housing authority in  
          the jurisdiction of the former RDA, the Department of Housing  
          Community Development became the housing successor.  To date,  
          HCD has not assumed the duties as housing successor for any  
          former RDAs. 

          Proposed Law: SB 341 would specify that funds in a housing  
          successor's Low and Moderate Income Housing Asset Fund are  
          generally subject to expenditure requirements of the housing  
          provisions of the CRL, with revisions to the general  
          requirements in the following ways:

           Deletes current CRL provisions relating to planning and  
            administrative costs and specified income targeting  
            requirements.
           Authorize a housing successor to spend up to 2% of its annual  
            portfolio value, or $200,000, whichever is greater, for the  
            purpose of monitoring and preserving the long-term  
            affordability of units in its portfolio and for administering  
            its activities.
           Authorize housing successors to spend up to $250,000 annually  
            for homeless prevention and rapid rehousing services to  
            individuals and families who are homeless or at risk of  
            homelessness, as long as outstanding housing replacement and  
            production requirements of the RDA have been fulfilled.
           Apply income targeting requirements only to funds left after  
            expenditures for authorized monitoring and administration and  








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            provision of homeless prevention services.
           Require new reporting every five years on expenditures related  
            to targeted populations, and restricts future expenditures if  
            specified goals are not met.
           Provide that program income a housing successor receives shall  
            not be associated with a project area and may be expended  
            outside of a project area without a finding of benefit to a  
            project area. 
           Allow housing successors to transfer funds among themselves  
            for the purpose of developing affordable units in transit  
            priority projects, permanent supportive housing, farmworker  
            housing, or special needs housing, subject to specified  
            conditions.
           Require any funds that are transferred among housing  
            successors to be transferred to HCD for expenditure in the  
            Multifamily Housing Program or the Joe Serna, Jr. Farmworker  
            Housing Grant Program.
           Require that a housing successor that has not expended excess  
            surplus within three years to transfer the surplus to HCD for  
            expenditure in those existing programs for multifamily housing  
            or farmworker housing.
           Eliminate the requirement for a housing successor to report  
            annually to the State Controller, and instead allow a  
            successor to combine its annual independent financial audit  
            with that of its host jurisdiction.  Also replaces the current  
            provisions requiring reporting to HCD and the agency's  
            governing body with a requirement for the housing successor to  
            include specified information in its annual housing element  
            progress report to HCD.

          Staff Comments: This bill would revise the general requirements  
          for a housing successor's expenditure of funds available in a  
          local Low and Moderate Income Housing Asset Fund, which includes  
          real property and other physical assets, funds related to  
          housing enforceable obligations, loan and grant receivables,  
          rents and other payments from housing tenants or operators, and  
          repayments of loans or deferrals, as specified in existing law.   
          The changes in the bill are intended to provide increased  
          flexibility, streamline administrative requirements, and target  
          resources to expenditures that have been deemed the greatest  
          needs by interested parties.

          The California Constitution prohibits the state from redirecting  
          redevelopment property tax revenues, and generally prohibits the  








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          state from shifting property taxes revenues from cities,  
          counties, and special districts (Section 25.5 of Article XIII).   
          It is unclear whether the transfers of unencumbered "excess"  
          housing asset funds, or those transferred among housing  
          successors, to HCD, as specified in the bill, would violate the  
          constitutional protections related to local property tax  
          revenues.  It seems unlikely, however, that there would be a  
          legal challenge to any such transfer.  Since there are be  
          significant demands on available housing asset revenues, it  
          seems unlikely that there would be any transfers to HCD, and if  
          there ever were in the future, such transfers would likely be  
          rare and the amounts involved would be fairly small.  In  
          addition, housing asset funds are not narrowly defined as  
          property tax revenues.  Rather, the funds are either the rents  
          derived from, or proceeds from the sale of, property that was  
          purchased, partially at least, with property tax increment  
          revenues, or repayment of loans of former housing asset funds,  
          which are repaid from property tax revenue reallocated to a  
          successor agency.  At this time, staff is uncertain whether  
          there is a legal case to be made that housing asset funds are  
          property tax revenues that are subject to constitutional  
          restrictions.