BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1404|
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THIRD READING
Bill No: SB 1404
Author: Leno (D)
Amended: 5/6/14
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 4/30/14
AYES: Wolk, DeSaulnier, Hernandez, Liu
NOES: Knight, Walters
NO VOTE RECORDED: Beall
SUBJECT : San Francisco redevelopment: successor agencies:
housing
SOURCE : City and County of San Francisco
DIGEST : This bill allows San Francisco's successor agency to
receive former tax increment revenues and issue debt to pay for
specified affordable housing activities.
ANALYSIS : Until 2011, the Community Redevelopment Law allowed
local officials to set up redevelopment agencies (RDAs), prepare
and adopt redevelopment plans, and finance redevelopment
activities. As a redevelopment project area's assessed
valuation grew above its base-year value, the resulting property
tax revenues - the property tax increment - went to the RDA
instead of going to the underlying local governments. The RDA
kept the property tax increment revenues generated from
increases in property values within a redevelopment project
area. Existing law requires RDAs to set aside 20% of their
property tax increment revenues to increase, improve, and
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preserve the supply of affordable housing.
In 2000, six of San Francisco's oldest redevelopment project
areas were about to reach some of the statutory deadlines on RDA
activities. The Legislature extended the deadlines and allowed
San Francisco officials to use the resulting funds to replace
more than 6,700 affordable housing units that the RDA had
demolished and not replaced during the years before state law
imposed replacement housing requirements on RDAs (SB 2113,
Burton, Chapter 661, Statutes of 2000). Specifically, the
Legislature allowed San Francisco officials to:
Extend the deadline for establishing debt in the older project
areas until 2014, or until the RDA replaced all of the
demolished housing units, whichever date was earlier.
Extend the deadline for receiving property tax increment
revenues to pay for their housing debts until 2044.
The Burton bill required San Francisco to focus on low-income
housing, limit its administrative spending, and get state
approval before incurring more debt. The time extension
excluded schools' share of property tax revenues, avoiding a
continuing cost to the General Fund.
Citing a significant 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, Chapter 5, Statutes of 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, Chapter 6, Statutes of 2011),
which would have allowed most RDAs to avoid dissolution.
AB X1 26 established successor agencies to manage the process of
unwinding former RDAs' affairs
This bill confirms that replacing 5,842 housing units that the
former Redevelopment Agency of the City and County of San
Francisco destroyed and did not replace is a statutory
obligation that remains under statutes governing redevelopment
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agencies' dissolution. This bill allows the successor agency to
San Francisco's RDA, with approval from its oversight board, to
replace all of the demolished housing units. This bill grants
the successor agency, in addition to the powers that state law
grants to each successor agency, the authority, rights, and
powers of the RDA of the City and County of San Francisco,
exclusively for the purpose of fulfilling the replacement
housing obligations. This bill requires the successor agency to
use no more than six redevelopment project areas under
redevelopment plans that meet specified criteria to fulfill the
replacement housing obligations. This bill allows the successor
agency, with the oversight board's approval, to merge the
redevelopment project areas.
This bill allows the successor agency to issue bonds or other
indebtedness, backed by property tax revenues from six project
areas, exclusively for the purpose of fulfilling replacement
housing obligations. This bill requires that the bonds must be
sold subject to standards enumerated in specified state laws
that currently govern bonds issued by successor agencies. This
bill allows the successor agency to issue bonds through either a
negotiated or competitive sale. The successor agency, in
seeking approval for issuance of bonds by the oversight board
and the Department of Finance, shall report on the number of
replacement units that it has funded and completed since
enactment of SB 2113 (Burton of 2000). This bill directs that
any time limit on incurring debt or receiving property tax
revenues to repay that debt does not apply until the successor
agency replaces all of the demolished housing units. The
successor agency may issue new bonds or other obligations on a
parity basis with outstanding bonds or other obligations of the
successor agency relating to the six project areas. The
successor agency may pledge the revenues pledged to those
outstanding bonds or other obligations to a new issuance of
bonds or other obligation. That pledge, when made in connection
with the issuance of those bonds or other obligations must have
the same lien priority as the pledge of outstanding bonds or
other obligations, and must be valid, binding, and enforceable
in accordance with its terms.
This bill prohibits annual property tax revenues authorized by
the bill from exceeding the amount needed to pay for the
successor agency's activities in fulfilling replacement housing
obligations. This bill prohibits the successor agency from
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collecting or spending more than 10% of the revenues on planning
and administrative costs. This bill requires that property tax
revenues allocated to the successor agency pursuant to this
bill's provisions must be distributed from funds that are
available for distribution to non-school entities from the
Redevelopment Property Tax Trust Fund after specified
preexisting legal commitments and statutory obligations are
funded from that revenue pursuant to state law. Property tax
allocations made pursuant to this bill's provisions cannot
include specified moneys that are payable to school entities
from the Redevelopment Property Tax Trust Fund.
This bill requires that the successor agency's activities must:
Be consistent with statutory affordable housing requirements
and the policies and objectives of the community's housing
element.
Address the unmet housing needs of very low, low- and
moderate-income households.
Be consistent with the community's most recently approved
consolidated and annual action plans submitted to the United
States Department of Housing and Urban Development.
This bill requires the successor agency to devote no less than
50% of the revenues to assist in developing housing that is
affordable to very low income house-holds.
This bill contains legislative findings and declarations
relating to San Francisco's affordable housing replacement
obligations, and the necessity of a special statute.
Background
Before state law dissolved RDAs, San Francisco's RDA had been
able to finance the construction of 867 of the 6,709 replacement
affordable housing units that the Burton bill allowed it to
finance. The Department of Finance does not recognize the
financing of the remaining 5,842 replacement affordable housing
units as an enforceable obligation of the former redevelopment
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agency. As a result, San Francisco officials are unable to
issue debt backed by former tax increment revenues to finance
the remaining replacement housing units.
Comment
The unique history of the former San Francisco RDA's demolition
of low- and moderate-income housing as part of its so-called
"urban renewal" more than four decades ago directly contributed
to the housing affordability crisis that confronts the city
today. Allowing San Francisco's successor agency to issue debt
backed by former tax increment revenues to finance the
construction of 5,842 affordable housing units provides San
Francisco officials with a vital tool they can use to address
the city's critical shortage of affordable housing. This bill
only grants San Francisco narrow authority to finance the
construction of a limited number of specific affordable housing
units in a manner that is consistent with the terms established
by SB 2113 (Burton, 2000). Specifically, this bill does not
allow the successor agency to divert any money that would
otherwise be payable to school entities, thereby avoiding
General Fund costs. This bill preserves the requirement for
State approval of indebtedness issued by the successor agency
and specifically requires oversight board approval of the
successor agency's activities. Because of San Francisco's
unique structure as a city and county, with only two non-school
taxing entities within its boundaries, the dedication of
property tax revenues pursuant to this bill will have limited
fiscal implications for other local governments. By enabling
San Francisco to finance thousands of urgently-needed affordable
housing units and mitigate the effects of its former RDAs
housing demolition, this bill will benefit residents of San
Francisco and the wider Bay Area.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 5/6/14)
City and County of San Francisco (source)
California Rural Legal Assistance Foundation
Chinatown Community Development Center
Council of Community Housing Organizations
Mercy Housing
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Non-Profit Housing Association of Northern California
Public Interest Law Project
San Francisco Supervisor Malia Cohen
Tenderloin Neighborhood Development Corporation
Western Center on Law and Poverty
ARGUMENTS IN SUPPORT : According to the author, "The high cost
of housing acknowledged in 2000 has dramatically increased; San
Francisco's early redevelopment activities, including the
removal of previously existing affordable units, have compounded
the effects of the city's current housing crisis. Construction
funding for the remaining 5,842 replacement units certified by
the HCD is a key component of San Francisco's solution to our
current housing shortage. State authorized funding for these
units will leverage approximately $1 billion in public and
private sources for affordable housing.
"San Francisco's Successor Agency to the Former Redevelopment
Agency has taken seriously its charge to replace the remaining
5,842 affordable units, and has documented both the scope of the
obligation and the need to allocate property tax revenues over
time in order to fund the necessary construction.
"The replacement housing obligation is an important remedy to
redress the destruction of affordable housing. This bill will
allow San Francisco to fulfill its obligation to replace 5,842
affordable units by authorizing the city to continue to use tax
increment as it is generated in six specific former
redevelopment areas."
AB:d 5/7/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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