BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 470 HEARING: 4/3/13
AUTHOR: Wright FISCAL: Yes
VERSION: 4/1/13 TAX LEVY: No
CONSULTANT: Weinberger
LOCAL ECONOMIC DEVELOPMENT
Allows cities and counties to use some of the Community
Redevelopment Law's financing, property sale, and
brownfield cleanup powers to promote economic development.
Background
Until 2011, the Community Redevelopment Law (CRL) allowed
local officials to set up redevelopment agencies (RDAs),
prepare and adopt redevelopment plans, and finance
redevelopment activities.
As part of the CRL, the Polanco Redevelopment Act allowed
redevelopment officials and property owners to clean up
contaminated properties - sometimes called "brownfields" -
within redevelopment project areas and to receive limited
immunity from future liability (AB 3193, Polanco, 1990).
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and
returning billions of dollars of property tax revenues to
schools, cities, and counties to fund core services. Among
the statutory changes that the Legislature adopted to
implement the 2011-12 budget, AB X1 26 (Blumenfield, 2011)
dissolved all RDAs. The California Supreme Court's 2011
ruling in California Redevelopment Association v.
Matosantos upheld AB X1 26, but invalidated AB X1 27
(Blumenfield, 2011), which would have allowed most RDAs to
avoid dissolution.
RDAs' dissolution deprived local government officials of
the Polanco Act's powers to abate toxic hazards and obtain
immunity from liability. It also eliminated other RDA
powers that local officials used to sell public property
and finance development projects. Local officials want the
Legislature to allow cities and counties to use these
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powers to promote local economic development projects.
Proposed Law
Senate Bill 470 lets cities and counties exercise powers
that are similar to statutory powers that former
redevelopment agencies used to:
I. Sell property.
II. Provide financial assistance to development
projects.
III. Clean up contaminated property.
I. Property sales. State law generally requires a county
to sell or lease real property using a competitive
sealed-bid process.
By contrast, state law generally provides cities with
broader discretion over the manner in which they dispose of
real property. The California Constitution lets charter
cities control their municipal affairs. Charter cities
must follow statewide laws only for issues of statewide
concern.
Before a former redevelopment agency could dispose of
property which it acquired with tax increment money, the
Community Redevelopment Law required the city council or
county board of supervisors which set up the agency to
approve the sale. The council or board had to hold a
noticed public hearing and the agency had to provide
detailed information about the sale or lease. If it
approved, the council or board had to adopt a resolution
finding that the price was at least fair market value or
that land use considerations justified a lower price (AB
1290, Isenberg, 1993). Senate Bill 470 replicates this
process to allow a city or county to sell real property for
economic development purposes.
Senate Bill 470 defines economic opportunity as any of the
following:
Development agreements or other agreements that
create, retain, or expand new jobs. A city or county
must make a finding that the agreement will create or
retain at least one full-time equivalent, permanent
job per $35,000 of city, county or city and county
investment in the project after full capacity and
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implementation of the agreement.
Development agreements that increase property tax
revenues to all property tax-collecting entities. A
city or county must make a finding that the agreement
will result in an increase of at least 15% of total
property tax resulting from the project at full
implementation when compared to the year prior to the
property being acquired by the government entity.
Creation of affordable housing, if a demonstrated
affordable housing need exists in the community, as
defined in the approved housing element or regional
housing needs assessment.
Projects that meet specified climate, air quality,
and energy conservation goals and have been included
in an adopted Sustainable Communities Strategy or
Alternative Planning Strategy, or a project that
specifically implements the goals of those adopted
plans.
Transit priority project areas, as defined in state
law.
Development of properties that are returned to the
city, county, or city and county pursuant to a long
range property management plan.
Senate Bill 470 requires a city council or board of
supervisors to approve the sale or lease of property for
economic opportunity purposes by resolution after a public
hearing. Notice of the time and place of the hearing must
be published in a newspaper of general circulation in the
community at least once per week for at least two
successive weeks before the hearing.
No later than the date on which the city or county provides
the first notice of a hearing, it must make a report
available for public inspection and copying at a cost not
to exceed the cost of duplication. The report must contain
a copy of the proposed sale or lease and a summary that
describes and specifies:
The cost of the agreement including land
acquisition costs, clearance costs, relocation costs,
the costs of any improvements to be provided by the
city, county, or city and county, plus the expected
interest on any loans or bonds to finance the
agreements.
The estimated value of the interest to be conveyed
or leased, determined at the highest and best uses
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permitted under the general plan or zoning.
The estimated value of the interest to be conveyed
or leased, determined at the use and with the
conditions, covenants, and development costs required
by the sale or lease. The purchase price or present
value of the lease payments which the lessor will be
required to make during the term of the lease. If the
sale price or total rental amount is less than the
fair market value of the interest to be conveyed or
leased, determined at the highest and best use, then
the report's summary must provide an explanation of
the reasons for the difference.
An explanation of why the sale or lease of the
property will assist in the creation of economic
opportunity, with reference to all supporting facts
and materials relied upon in making this explanation.
Senate Bill 470 requires that the resolution approving the
lease or sale must be adopted by a majority vote unless the
legislative body has provided by ordinance for a two-thirds
vote for that purpose. The resolution must contain a
finding that the sale or lease of the property will assist
in the creation of economic opportunity and must contain
one of the following findings:
The consideration is not less than the fair market
value at its highest and best use.
The consideration is not less than the fair reuse
value at the use and with the covenants and conditions
and development costs authorized by the sale or lease.
II. Financial Assistance. The Community Redevelopment Law
allowed an RDA to establish a program under which it
loaned funds to owners or tenants for the purpose of
rehabilitating commercial buildings or structures within a
project area (AB 1290, Isenberg, 1993). Senate Bill 470
allows a city or county to establish a program under which
it loans funds to owners or tenants for the purpose of
rehabilitating commercial buildings or structures.
The Community Redevelopment Law allowed an RDA to assist
with the financing of facilities or capital equipment,
including pollution control devices, as part of an
agreement for developing or rehabilitating property that
will be used for industrial or manufacturing purposes.
Before entering into such an agreement, the RDA has to
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find, after a public hearing, that the assistance was
necessary for the economic feasibility of the development
and that the assistance could not be obtained on
economically feasible terms in the private market. Senate
Bill 470 allows a city or county to assist with the
financing for facilities or capital equipment on the same
terms.
Senate Bill 470 allows a city or county to enter into a
voluntary agreement with another city, county, local taxing
entity, or joint powers authority to jointly finance a
project for creating economic opportunity. The bill states
that it does not authorize a city, county, or city and
county to collect and spend tax dollars from another
jurisdiction without written consent.
Senate Bill 470 states that its provisions must not be
interpreted to authorize the use of eminent domain for
economic development purposes.
III. Contaminated property. The Polanco Redevelopment Act
gave RDAs the authority to clean up brownfields and
provided immunity from liability to public agencies and
property purchasers under an approved cleanup plan. Senate
Bill 470 allows cities and counties to use nearly identical
statutory authority.
Specifically, Senate Bill 470 allows a city, county, or
city and county to take any actions that it determines are
necessary and that are consistent with other state and
federal laws to remedy or remove a release of hazardous
substances on, under, or from property within its
jurisdiction, whether it owns that property or not, subject
to specified conditions.
Unless an administering agency has been designated under
state law, Senate Bill 470 requires the city, county, or
city and county to request cleanup guidelines from the
Department of Toxic Substance Control (DTSC) or the
California regional water quality control board (RWQCB)
before taking action to remedy or remove a release. The
city, county, or city and county must submit for approval a
cleanup or remedial action plan to the DTSC or RWQCB
before taking action to remedy or remove a release. The
DTSC or RWQCB must respond to the requests for guidelines
and approvals within a reasonable period of time.
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Senate Bill 470 identifies the conditions under which a
city, county, or city and county can designate a local
agency, in lieu of the DTSC or RWQCB, to review and approve
a cleanup or remedial action plan and to oversee the
remediation or removal of hazardous substances from a
specific hazardous substance release site. The bill allows
a local agency to withdraw from its designation and allows
the DTSC or RWQCB to require, under specified conditions, a
local agency to withdraw from the designation.
Senate Bill 470 requires a city, county, or city and county
to notify the DTSC, RWQCB, and local health and building
departments of cleanup activity at least 30 days before the
activity begins. With specified exceptions, the bill
allows the DTSC or RWQCB to require a city, county, or city
and county to remedy or remove a release of a hazardous
substance pursuant to state law if the city, county, city
and county, or a responsible party's action to remedy or
remove a release of a hazardous substance is inconsistent
with an approved plan.
Senate Bill 470 imposes specified conditions on a city,
county, or city and county's authority to remedy or remove
a release of hazardous substances
Senate Bill 470 allows a city, county, or city and county
to require the owner or operator of any site within a
project area to provide the city, county, or city and
county with all existing environmental information
pertaining to the site, except for information which is
determined to be privileged. A person can only be
requested to furnish information that is within their
possession or control, including actual knowledge of
information within the possession or control of any other
party. If environmental assessment information is not
available, the city, county, or city and county can require
the owner of the property to conduct an assessment in
accordance with standard real estate practices for
conducting phase I or phase II environmental assessments.
Senate Bill 470 provides that a city, county, or city and
county is not liable under specified state and local
liability laws if it undertakes and completes an action, or
causes another person to undertake and complete an action,
to remedy or remove a hazardous substance release in
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accordance with a cleanup or remedial action plan that
meets specified criteria.
Senate Bill 470 requires that a city, county, or city and
county must receive written acknowledgement from the DTSC,
RWQCB, or local agency that it will receive specified
immunity from liability upon proper completion of a
remedial or removal action in accordance with an approved
plan.
Senate Bill 470 specifies the manner in which the DTSC,
RWQCB, or local agency must make a determination that a
remedial or removal action has been properly completed and
notify the city, county, or city and county in writing that
the immunity provided by the bill is in effect. A city,
county, or city and county must reimburse the DTSC, RWQCB,
and local agency for costs incurred in reviewing or
approving cleanup or remedial action plans.
Senate Bill 470 requires that a local agency's approval of
a cleanup or remedial action also must be subject to the
concurrent approval of the DTSC or RWQCB, under specified
conditions.
Senate Bill 470 identifies the people and entities to which
it extends immunity from specified liability upon proper
completion of a remedial or removal action. The bill also
identifies people and entities to which it does not extend
immunity.
Senate Bill 470 states that it:
Provides immunity that is in addition to any other
immunity of a city, county, or city and county
provided by law.
Does not impair specified causes of action against
the person, firm, or entity responsible for the
hazardous substance release that is the subject of a
removal or remedial action.
Does not apply to, or limit, alter, or restrict,
any action for personal injury, property damage, or
wrongful death.
Does not limit liability under a specified
provision of federal law.
Does not establish, limit, or affect the liability
of a city, county, or city and county for any release
of a hazardous substance that is not investigated or
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remediated pursuant to state laws.
Senate Bill 470 requires any responsible parties to be
liable to a city, county, or city and county that remedies
or removes, or requires others to remedy or remove, a
release of a hazardous substance. The bill prohibits a
city, county, or city and county from recovering the costs
of goods and services that were not procured in accordance
with applicable procurement procedures. The amount of the
costs must include the interest, calculated according to a
specific formula, on the costs accrued from the date of
expenditure and reasonable attorney's fees. The costs are
recoverable in a civil action.
Senate Bill 470 identifies the defenses that are available
to a responsible party under state law.
Senate Bill 470 allows a city, county, or city and county
to recover costs for developing and implementing an
approved cleanup or remedial action plan to the same extent
the DTSC is authorized to recover those costs. The bill
defines the scope and standard of liability for recovering
a city, county, or city and county's costs.
Senate Bill 470 requires a city, county, or city and county
to begin an action to recover costs of a remedy or removal
within three years after completion of the remedy or
removal. The bill states that the cost recovery authority
it grants is in addition to, and is not to be construed as
restricting, any other cause of action available to a city,
county, or city and county.
With specified exceptions, Senate Bill 470 requires that a
city, county, or city and county that undertakes and
completes a remedial action, or otherwise causes a remedial
action to be undertaken and completed, shall not be liable,
based on its ownership of property after a release
occurred, for any costs that any responsible party incurs
to investigate or remediate the release or to compensate
others for the effects of that release.
With specified exceptions, Senate Bill 470 states that its
provisions do not limit the powers of the State Water
Resources Control Board or a California regional water
quality control board to enforce specified provision of
state law.
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Senate Bill 470 replicates the Polanco Act's definitions
for numerous terms.
Comments
1. Purpose of the bill . In recent years, local
governments have lost nearly all the tools they commonly
used to promote economic development. SB 470 restores some
significant powers that cities and counties previously
exercised under provisions of the Community Redevelopment
Law. The bill gives local officials vitally needed
flexibility to sell land at "fair reuse value" rather than
"fair market value" and reestablishes the powers and
protections that allowed them to clean up brownfields.
After the recent turmoil surrounding RDAs' dissolution, SB
470 will benefit communities throughout California by
helping local officials get their economic development
efforts back on track.
2. Which properties ? SB 470 copies the procedures under
which RDAs sold land they had acquired with tax increment
revenues and applies those procedures to all city or county
real property owned that is to be sold for "economic
opportunity" purposes. Within the context of the Community
Redevelopment Law, the procedures for selling land at less
than fair market value were inherently limited to
properties that were owned by RDAs and were subject to the
many limitations that applied to RDA's activities. By
removing that land sale process from the CRL and applying
it more broadly, SB 470 gives local officials greater
authority to sell land at less than fair market value than
they had before RDAs' dissolution. The rules that made
sense in the context of RDA law may not be appropriate for
all city or county property sales. The Committee may wish
to consider amending SB 470 to apply its land sale
provisions only to those properties that were acquired with
tax increment funds from a former RDA.
3. New financing authority for school districts ? SB 470
authorizes voluntary agreements between a city or county
and a local taxing entity to jointly finance a project for
creating economic opportunity, but does not define the term
"local taxing entity." Other provisions of state law define
the term "local taxing entity" to include school districts.
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SB 470 could be interpreted as granting new authority to
school districts to participate in financing local economic
development projects. Giving schools new authority to
provide financing for economic development could have
fiscal implications for the state if the General Fund
backfills school districts' investments. The Joint
Exercise of Powers Act already allows government officials
to enter into voluntary agreements to jointly exercise any
financing powers that they hold in common. To avoid
unintended consequences, the Committee may wish to consider
amending SB 470 to delete the provision authorizing
voluntary joint financing agreements.
4. Unintended consequences . Some cities already have
broader legal authority than SB 470 provides to sell public
property for economic development purposes. Charter cities
can control their municipal affairs under the State
Constitution's home rule provisions. State law broadly
authorizes all cities to "purchase, lease, receive, hold,
and enjoy real and personal property, and control and
dispose of it for the common benefit" (SB 750, Cunningham,
1949). The Committee may wish to consider amending SB 470
to clarify that its provisions do not limit, but are an
alternative to, existing state laws governing the sale of
city property.
5. Related legislation . AB 440 (Gatto) allows local
agencies to clean up hazardous substance releases and
receive liability immunity under provision that are similar
to those in the Polanco Redevelopment Act. The bill is
awaiting a hearing in the Assembly Committee on
Environmental Safety and Toxic Materials.
6. Double-referral . The Senate Rules Committee has ordered
a double-referral of SB 470. It referred the bill first to
the Senate Governance & Finance Committee, which has policy
jurisdiction over the statutes governing local governments'
land sales and economic development assistance, and then to
Senate Environmental Quality Committee, which has
jurisdiction over the bill's brownfield cleanup provisions.
Support and Opposition (3/28/13)
Support : City of Long Beach; Long Beach Mayor Bob Foster;
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Los Angeles Mayor Antonio Villaraigosa; San Francisco Mayor
Ed Lee; San Jose Mayor Chuck Reed; Santa Ana Mayor Miguel
Pulido; California Contract Cities Association; Gateway
Cities Council of Governments; League of California Cities.
Opposition : Unknown.