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.