BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 341
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          Date of Hearing:   June 19, 2013

               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
                                   Ed Chau, Chair
                   SB 341 (DeSaulnier) - As Amended:  May 30, 2013

           SENATE VOTE  :   34-0
           
          SUBJECT  :   Redevelopment 

           SUMMARY  :   Revises the activities required for entities that  
          assumed the housing functions of a former redevelopment agency.   
           Specifically,  this bill  :   

          1)Defines "housing successor" to mean the entity that assumed  
            the housing functions of a former redevelopment agency. 

          2)Defines "statutory value of real property" as the value of the  
            properties formerly held by the redevelopment agency listed on  
            the housing asset transfer form, the value of properties  
            transferred to the housing successor, and the purchase price  
            of properties purchased by the housing successor. 

          3)Defines "development" as new construction, acquisition, and  
            substantial rehabilitation of housing; acquisition of  
            long-term affordability covenants on multifamily units; or the  
            preservation of assisted housing developments that are  
            eligible for prepayment or for which the rental restrictions  
            are set to expire within five years.   

          4)Defines "excess surplus" as either an unencumbered amount in  
            the Low- and Moderate- Income Housing Asset Fund (the Fund)  
            that exceeds the greater of either $1 million or the aggregate  
            amount deposited into the account during the preceding four  
            fiscal years, whichever is greater.  

          5)Requires the housing successor to comply with the Community  
            Redevelopment Law (CRL) when administering the funds in the  
            Fund except as specified.

          6)Allows the housing successor each fiscal year, to spend up to  
            2% of the statutory value of real property owned by the  
            housing successor and of loans and grants receivable,  
            including real property, on administrative costs of monitoring  
            and preserving the long-term affordability of units and other  








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            activities as specified. If this amount is less than $200,000,  
            allows the housing successor to spend up to $200,000 for that  
            fiscal year on monitoring and preserving the affordability of  
            housing units. 

          7)Allows the housing successor, once it has fulfilled its  
            monitoring obligations and its obligations to replace low- and  
            moderate-income housing that has been removed or destroyed, to  
            spend up to $250,000 on homeless prevention and rapid  
            rehousing activities for families and individuals. 

          8)Requires the housing successor to spend any funds remaining,  
            after 5) and 6) are accomplished, on the development of  
            housing affordable to and occupied by households earning 80%  
            or less of area median income (AMI) of which at least 30% must  
            be spent for rental housing affordable to households earning  
            30% or less of AMI and no more than 20% may be spent on  
            housing affordable to and occupied households earning between  
            60% and 80% of AMI.    

          9)Requires a housing successor to complete a report in 2019, and  
            every five years after, which demonstrates that it has spent  
            funds on the specified income categories from January 1, 2014  
            through the end of the latest fiscal year.   

          10)Requires a housing successor that fails to spend the required  
            amount of funds on extremely low-income housing to set aside  
            50% of remaining funds, expended in each fiscal year following  
            the latest fiscal year, on extremely low-income housing until  
            the housing successor is in compliance. 

          11)Requires a housing successor that exceeds the expenditure  
            limit allowed for housing for households earning between 60%  
            and 80% of AMI, as evidenced by the five year report, to cease  
            expending funds on those households until the housing  
            successor demonstrates compliance with the limit in an annual  
            report. 

          12)Provides that if the aggregate number of deed-restricted  
            rental housing provided to seniors in the last ten years by  
            the housing successor, former redevelopment agency, or host  
            jurisdiction exceeds 50% of the aggregate number of units of  
            deed restricted housing within the same time period, then the  
            housing successor must not expend any funds to assist  
            additional senior housing until construction begins on units  








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            available to all persons regardless of age that is equal to  
            50% of the aggregate number of total deed restricted rental  
            units within the previous ten years. 

          13)Provides that program income does not have to be spent in a  
            project area but can be spent anywhere in the jurisdiction it  
            was collected or can be transferred to another jurisdiction  
            without a finding of benefit. 

          14)Allows two or more housing successors in a county or in a  
            single metropolitan statistical area, within 15 miles of each  
            other, or that are contiguous jurisdictions, to enter into an  
            agreement to transfer funds, without making a finding of  
            benefit to the project area, with following conditions:

             a)   The funds are used for the following purposes:  
               transit-oriented development, permanent supportive housing,  
               farmworker housing, or special-needs housing;

             b)   The participating housing successors make a finding that  
               the transfer will not exacerbate racial, ethnic, and  
               economic segregation.

             c)   The development is not in a census tract where more than  
               50% of the population is very low income unless it is  
               within one-half mile of a major transit stop or high  
               quality transit corridor;

             d)   Neither housing successor has any outstanding  
               obligations to replace removed or destroyed low-income  
               housing;

             e)   The completed development will not result in a reduction  
               in the number of housing units or a reduction in the  
               affordability of housing units;

             f)   No housing successor is allowed to transfer more than $1  
               million;

             g)   The jurisdictions of the housing successor agencies that  
               are transferring funds have an adopted and substantially  
               compliant housing element and have submitted an annual  
               progress report within the preceding 12 months.

             h)   Transferred funds can only be used for housing that is  








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               affordable to households earning 60% of AMI; and 

             i)   If transferred funds are not encumbered within two years  
               then they must be transferred to the Department of Housing  
               & Community Development (HCD) and deposited in the  
               Multifamily Housing Program (MHP) or Joe Serna Jr.  
               Farmworker Housing Program. 

          1)Requires a housing successor with an excess surplus to either  
            encumber the funds for the development of affordable housing  
            or transfer the funds to another qualifying successor agency  
            within three fiscal years. If a successor agency fails to do  
            either of these it must transfer the excess surplus to HCD to  
            be spent under the MHP or Joe Serna Jr. Farmworker Housing  
            Program.

          2)Eliminates the requirement for a housing successor to report  
            annually to the State Controller or to HCD. 

          3)Requires a housing successor, to conduct an independent  
            financial audit of the Low- and Moderate-Income Housing Asset  
            Fund within six months of the end of each fiscal year. 

          4)Requires a housing successor that is a city or county to  
            include the following in its housing element annual report and  
            post it on its website or if the housing successor is not a  
            city or county to provide the following to the governing body  
            and post it on its Internet Web site:

             a)   The amount deposited into the Fund, distinguishing the  
               amounts for enforceable obligations on the ROPS and other  
               amounts;

             b)   A statement of the balance of the funds at the close of  
               the fiscal year, which distinguishes any amounts held for  
               items on the ROPS from other amounts;

             c)   A description of expenditures from the Fund by category;

             d)   The statutory value of real property owned by the  
               housing successor, the value of loans and grants  
               receivable, and the sum of the two amounts;

             e)   A description of any amounts transferred to another  
               housing successor in the previous fiscal year, any amounts  








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               that are still unencumbered from an earlier fiscal years,  
               and an update on the status of the project for which funds  
               were transferred;

             f)   A description and status of any project that the housing  
               successor receives tax revenue as part of the ROPs;

             g)   A description of any outstanding obligations to replace  
               destroyed or removed housing that remained and were  
               transferred to the housing successor on February 1, 2012,  
               the plan for accomplishing that obligation, and a copy of  
               the implementation plan of the former redevelopment agency;

             h)   Compliance with expenditures required for housing for  
               extremely low-income households;

             i)   The percentage of deed restricted rental units for  
               seniors assisted within the previous 10 years as compared  
               to the aggregate number of units assisted in  
               deed-restricted rental housing; and

             j)   The amount of excess surplus, the amount of time that  
               the successor agency has had the excess surplus, and the  
               housing successor's plan for eliminating the excess  
               surplus. 

           EXISTING LAW  

          1)Limits planning and general administrative expenditures from  
            the Low- and Moderate-Income Housing Fund to the following  
            costs which are directly related to permissible housing  
            activities:  

             a.   Salaries, wages and related costs of the agency's staff  
               or the costs for services provided through interagency or  
               outside agreements; and 

             b.   Costs incurred by a nonprofit corporation that are  
               directly attributable to a specific project. 

          1)States that legal, architectural and engineering costs and  
            other salaries wages and costs directly related to the  
            planning and execution of a specific project are not planning  
            and administrate cost for that purpose of this section but  
            instead project costs.








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          2)Requires redevelopment agencies to expend funds to increase,  
            preserve, and improve the community's supply of low- and  
            moderate-income housing. 

          3)Defines "excess surplus" as any unexpended and unencumbered  
            amount in an agency's Low- and Moderate-Income Housing Fund  
            that is greater than $1 million or the sum of the last four  
            years' worth of tax increment. 

          4)Requires a redevelopment agency to disburse excess surplus  
            funds to the housing authority or a local housing development  
            agency within one year or expend the funds itself in three  
            years. 

          5)Requires a redevelopment agency within five years of acquiring  
            a property to initiate activities consistent with the  
            development of the property including but not limited to  
            zoning changes, disposition and development agreements. 

          6)Provides that a redevelopment agency may, by resolution,  
            extend the deadline by up to five years to initiate activities  
            consisted with development of a property.

          7)Requires that each redevelopment agency, over each 10-year  
            period of the agency's redevelopment implementation plan,  
            expend the moneys in the Low- and Moderate-Income Housing Fund  
            to assist housing for persons of very low and low income in at  
            least the same proportion as those income categories represent  
            within the total number of very low-, low-, and  
            moderate-income housing units assigned to the jurisdiction as  
            part of the regional housing needs assessment under housing  
            element law.

          8)Requires a redevelopment agency, within four years of  
            destroying or removing dwelling units that house low-or  
            moderate-income households to replace the units by  
            rehabilitating, developing, constructing an equal number of  
            replacement units at the same affordability level within the  
            territory of the redevelopment agency. 

          9)Requires a redevelopment agency to ensure that 30% of all new  
            substantially rehabilitated housing units developed by the  
            redevelopment agency and 15% of all new and substantially  
            rehabilitated housing units developed with in the project area  








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            are affordable to low and moderate income households. 

          10)Requires a redevelopment agency to hire impendent auditors  
            each year to review their financial statements.

          11)Requires a redevelopment agency to submit their audits to the  
            Controller by April 1 of each year who must compile a list of  
            agencies for which an independent auditor identified major  
            audit violations.  

          12)Requires the Controller by June 1 of each year to determine  
            if the listed agencies have corrected the major audit  
            violation and if not refer the violations to the Attorney  
            General for action.

           FISCAL EFFECT  :  Unknown. 

           COMMENTS  :   

          In 2011, facing a severe budget shortfall, the Governor proposed  
          eliminating redevelopment agencies in order to deliver more  
          property taxes to other local agencies.  Redevelopment  
          redirected 12% of property taxes statewide away from schools and  
          other local taxing entities and into community development and  
          affordable housing.  Ultimately, the Legislature approved and  
          the Governor signed two measures, ABX1 26 and ABX1 27 that  
          together dissolved redevelopment agencies as they existed at the  
          time and created a voluntary redevelopment program on a smaller  
          scale.  In response, the California Redevelopment Association  
          (CRA), the League of California Cities, along with other  
          parties, filed suit challenging the two measures. The Supreme  
          Court denied the petition for peremptory writ of mandate with  
          respect to ABX1 26. However, the Court did grant CRA's petition  
          with respect to ABX1 27.   As a result, all redevelopment  
          agencies were required to dissolve as of February 1, 2012.    

          As part of the dissolution process, local jurisdictions were  
          required to set up a housing successor to assume the housing  
          functions of the former redevelopment agency.   The city or  
          county that created the redevelopment agency could opt to become  
          the housing successor but if they chose not to the  
          responsibility was transferred to a housing authority in the  
          jurisdiction of the former redevelopment agency. If there was no  
          housing authority in the jurisdiction then the housing functions  
          were be transferred to HCD.  Housing successors are required to  








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          maintain any funds generated from housing assets in the Low- and  
          Moderate-Income Housing Asset Fund and use them in accordance  
          with the housing related provisions of the Community  
          Redevelopment Law (CRL).  The Low and Moderate Income Housing  
          Asset Fund includes real property and other physical assets,  
          funds encumbered for enforceable obligations, any loan or grant  
          receivable, any funds revised from rents or operation of  
          properties, rents or other payments from housing tenants or  
          operators, and repayment of loans or deferrals owed to the Low-  
          and Moderate-Income Housing Fund.  Funding available to a  
          housing successor in the post-redevelopment world are limited to  
          program dollars repaid from loans or investments made by the  
          former redevelopment agency. This is a much smaller amount than  
          was generated by redevelopment agency which produced more than  
          $1 billion in tax increment for housing activities statewide  
          each year.

           Purpose of this bill  :    According to the author, "this bill  
          revises the rules governing the activities and expenditures of  
          housing successors to streamline administrative requirements  
          while ensuring accountability, provide additional flexibility,  
          and target scarce available resources to the greatest needs."    
          SB 341 retains the housing provisions of the CRL as the basic  
          law governing housing successors but alters the law for housing  
          successor in the following ways:

                 Allows housing successors to expend available funds  
               first for the purpose of monitoring and preserving the  
               long-term affordability of units in its portfolio and for  
               administering its activities up to an annual cap of 2% of  
               its portfolio value or $200,000 whichever is greater. 

                 Allows housing successors to expend up to $250,000 per  
               year for homeless prevention and rapid rehousing services  
               to individuals and families who are homeless or at risk of  
               homelessness.

                 Alters the income targeting requirements and applies  
               them only to funds left after allowed monitoring and  
               administration expenditures and homeless prevention  
               services. 

                 Relaxes the limitations on senior housing allowing no  
               more than 50% of housing financed by the jurisdiction over  
               a ten-year period to be limited to seniors. 








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                 Allows housing successors to transfer funds among  
               themselves under certain conditions for the purpose of  
               developing affordable units in transit priority projects,  
               permanent supportive housing, farmworker housing, or  
               special needs housing. 
           
          Changes from CRL:   SB 341 attempts to target the more limited  
          financial resources of housing successor toward core functions.   
          Redevelopment agencies were required to expend funds to improve,  
          increase, or preserve housing affordable to low- and  
          moderate-income families.  Housing successor's will have far  
          less money than redevelopment agencies so this bill would  
          prioritize that  limited funding toward monitoring and  
          maintaining the housing assets that were created of financed by  
          the former redevelopment agency.  This bill would also allow  
          housing successors to use funds in the Low- and Moderate-Income  
          Housing Asset Fund toward services to prevent homelessness and  
          rapidly rehousing people.   Under existing law, the CRL did not  
          permit redevelopment agencies to spend funds on services. This  
          bill also targets limited funds that are available after  
          monitoring and preserving the existing housing assets toward  
          housing for low- and extremely- low income housing .  This is  
          different the CRL which required money to be expended for low-  
          and very-low income housing in proportion to the communities  
          housing element need for those populations. 
           
          Excess Surplus  :  If a housing successor allows an excess surplus  
          of funds to accumulate, any amounts over $1 million over a three  
          year period without spending it on developing housing or  
          transferring it to another housing successor then it must  
          transfer those funds to HCD.  HCD is required to expend those  
          funds through the MHP or Joe Serna Jr. Farmworker Housing Grant  
          Program.  HCD is not required to award these funds to projects  
          in the jurisdictions where were generated.  It is probable that  
          the amount of money transferred, if any will be small, but the  
          committee may wish to consider amending the bill to encourage  
          HCD to award this funding to projects in the jurisdiction that  
          generated it.     

           Committee amendment:
           
          Page 13, line 3, after "Program." insert "The Department of  
          Housing and Community Development is encouraged whenever  
          possible to expend funds collected under this section in the  








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          jurisdiction where they were generated." 

           Related Legislation  :  The author has a companion measure to this  
          bill, SB 133 (DeSaulnier) that is contingent upon the enactment  
          of this bill. SB 133 makes reforms to the CRL that would apply  
          to any future entities that are created and vested with the same  
          statutory powers and duties of redevelopment agencies. 

           Double referred  :  If SB 341 passes this committee, the bill will  
          be referred to the Committee on Local Government.
           
          REGISTERED SUPPORT / OPPOSITION :

           Support 
           
          California Housing Consortium 
          City of San Jose
          City of Sonoma 
          Housing California
          Nonprofit Housing Association of Northern California 
           
            Opposition 
           
          None on file. 

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