BILL ANALYSIS Ó
SB 1404
Page 1
Date of Hearing: June 4, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 1404 (Leno) - As Amended: May 6, 2014
SENATE VOTE : 22-9
SUBJECT : San Francisco redevelopment: successor agencies:
housing.
SUMMARY : Allows San Francisco's successor agency to receive
former tax increment revenues and issue debt to pay for
specified replacement housing obligations. Specifically, this
bill :
1)Updates provisions of existing law to specify that the
successor agency to the Redevelopment Agency of the City and
County of San Francisco (successor agency), subject to the
approval of the oversight board of the City and County of San
Francisco, may replace all of the housing units demolished
prior to the enactment of provisions of existing law related
to replacement housing obligations (Chapter 970 of the
Statutes of 1975 and Chapter 661 of the Statutes of 2000), as
specified.
2)Prohibits, pursuant to 1), above, the successor agency from
using more than six redevelopment project areas under
redevelopment plans that were amended for this purpose prior
to enactment of the law dissolving redevelopment agencies, and
that may be merged, subject to approval by the oversight
board, pursuant to existing law, to fulfill these replacement
housing obligations.
3)Allows the successor agency to have the authority, rights, and
powers of the Redevelopment Agency of the City and County of
San Francisco to incur indebtedness, backed by property tax
revenues from the six project areas specified in 2), above,
exclusively for the purpose of fulfilling the replacement
housing obligations.
4)Provides that certain standards of bonds contained in existing
law that currently govern bonds issued by successor agencies
shall apply to the sale of those bonds pursuant to 3), above,
and requires review and approval by the oversight board and
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the Department of Finance (DOF), as specified.
5)Requires the successor agency, in seeking approval for
issuance of bonds by the oversight board and by DOF, to report
on the number of replacement units that it has funded and
completed since enactment of SB 2113 (Burton), Chapter 661,
Statutes of 2000.
6)Allows bonds to be sold pursuant to either a negotiated or
competitive sale.
7)Prohibits any time limit on incurring debt or receiving
property tax revenues to repay that debt from applying until
the successor agency replaces all of the units demolished
prior to the enactment of the replacement housing obligations
contained in existing law (Chapter 970 of the Statutes of
1975).
8)Allows the successor agency to 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, and allows the successor agency to pledge the
revenues pledged to those outstanding bonds or other
obligations to a new issuance of bonds or other obligations,
and requires that pledge, when made in connection with the
issuance of those bonds or other obligations to have the same
lien priority as the pledge of outstanding bonds or other
obligations and shall be valid, binding, and enforceable in
accordance with its terms.
9)Modifies provisions in existing law to specify that annual
revenues shall not exceed the amount necessary to fund the
activities of the successor agency in fulfilling these
replacement housing obligations.
10)Specifies that property tax revenues allocated to the
successor agency shall be distributed from the funds that are
available for distribution to non-school entities from the
Redevelopment Property Tax Trust Fund, as specified, after all
preexisting legal commitments and statutory obligations funded
from that revenue, excluding replacement housing obligations,
are made pursuant to existing law.
11)Provides that property tax revenues allocated to the
successor agency shall not include any moneys that,
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notwithstanding the replacement housing obligations, are
payable to a school district that maintains kindergarten and
grades 1 to 12, inclusive, community college districts, or to
the Educational Revenue Augmentation Fund (ERAF), as
specified.
12)Makes a number of other changes to existing law related to
the City and County of San Francisco's obligation to fulfill
replacement housing requirements.
13)Makes a number of findings and declarations related to the
City and County of San Francisco's former redevelopment agency
and replacement housing obligations.
EXISTING LAW :
1)Dissolves redevelopment agencies and institutes a process for
winding down their activities.
2)Allows a city or county that authorized the creation of a
redevelopment agency to elect to retain the housing assets and
functions previously performed by the redevelopment agency.
3)Requires the entity assuming the housing functions of the
former redevelopment agency to submit to DOF by August 1,
2012, a list of all housing assets, as specified.
4)Allows the entity that assumed the housing functions to
designate the use of and commit indebtedness obligation
proceeds that remain after the satisfaction of enforceable
obligations that have been approved in a Recognized Obligation
Payment Schedule and that are consistent with the indebtedness
obligation covenants.
5)Requires the proceeds to be derived from indebtedness
obligations that were issued for the purposes of affordable
housing prior to January 1, 2011, and were backed by the Low-
and Moderate-Income Housing Fund.
6)Allows the redevelopment agency of the City and County of San
Francisco to, subject to the approval of the Board of
Supervisors of the City and County of San Francisco, retain
its ability to incur indebtedness exclusively for Low- and
Moderate-Income Housing Fund activities, as specified, until
January 1, 2014, or until the agency replaces all of the
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housing units demolished prior to the enactment of the
replacement housing obligations in Chapter 970 of the Statutes
of 1975, whichever occurs earlier.
7)Allows the ability of the redevelopment agency of the City and
County of San Francisco to receive tax increment revenues to
repay indebtedness incurred for these Low- and Moderate-
Income Housing Fund activities to be extended until no later
than January 1, 2044.
FISCAL EFFECT : None
COMMENTS :
1)Background on redevelopment and replacement of affordable
housing units in San Francisco . Prior to the dissolution of
redevelopment, state law required redevelopment agencies to
set aside 20% of their property tax increment revenues to
increase, improve, and preserve the supply of affordable
housing. State law also required local officials to limit the
length of time during which redevelopment plans remained in
effect, and required that redevelopment agencies must meet
their housing obligations before they terminate a project
area. SB 211 (Torlakson), Chapter 741, Statutes of 2001,
suspended the time limits on a redevelopment plan's
effectiveness and on the diversion of property tax increment
revenues to repay its debts until the redevelopment agency
"fully complied with its obligations."
In 2000, six of San Francisco's oldest redevelopment project
areas were about to reach some of the statutory deadlines on
redevelopment agency activities. The Legislature, in SB 2113
(Burton), Chapter 661, Statutes of 2000, extended the
deadlines and allowed San Francisco officials to use the
resulting funds to replace more than 6,700 affordable housing
units that the redevelopment agency had demolished and not
replaced during the years before state law imposed replacement
housing requirements on redevelopment agencies. 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, and to extend the
deadline for receiving property tax increment revenues to pay
for their housing debts until 2044.
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SB 2113 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, therefore not
impacting the state's General Fund.
Before state law dissolved redevelopment agencies, San
Francisco's redevelopment agency 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.
Because DOF does not recognize the financing of the remaining
5,842 replacement affordable housing units as an enforceable
obligation of the former redevelopment agency, San Francisco
officials are unable to issue debt backed by former tax
increment revenues to finance the remaining replacement
housing units.
2)Purpose of this bill . This bill allows San Francisco's
successor agency to receive former tax increment revenues from
six redevelopment project areas to fulfill its replacement
housing obligations. The bill allows the successor agency to
bond against the property tax revenues from the six project
areas, and allows the successor agency to keep collecting tax
increment and incur debt until the successor agency has
replaced all of the previously demolished units. In 2003, the
Department of Housing and Community Development (HCD)
certified a net loss of 6,709 affordable units, of which 867
have since been replaced since 2003. Additionally, the bill
specifies that tax increment received by the successor agency
will not come from property tax revenues dedicated to school
entities.
This bill is co-sponsored by the City and County of San
Francisco and the Mayor of San Francisco, Edwin M. Lee.
3)Author's statement . According to the author, "Beginning in
the 1950s, the former San Francisco Redevelopment Agency
received a significant amount of federal urban renewal funds
to implement locally adopted redevelopment plans. Though the
goal was to create vibrant, mixed-income communities and to
eliminate blight, the result, in some instances, was that
these redevelopment projects authorized the widespread
clearance and relocation of communities, particularly lower
income and minority populations. In San Francisco, the urban
renewal process resulted in a net loss of 6,709 affordable
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housing units - housing for which there is still tremendous
need.
"As a remedy, the state amended the Community Redevelopment
Law (CRL) in 1976 to require the replacement of affordable
housing lost through early urban renewal activities. The CRL
mandates a one-for-one replacement of the total number of
units, as well as an equal or greater number of bedrooms.
"Despite the 1976 mandate, in 2000, the California Legislature
enacted special legislation acknowledging that the former
Redevelopment Agency had an unfulfilled replacement housing
obligation resulting from its pre-1976 destruction of
affordable housing. In adopting SB 2113 (Burton, Chapter 661,
Statutes of 2000), the Legislature made several significant
findings, including that San Francisco's housing situation is
unique, as median rents and sales prices are among the highest
in the state.
"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 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?by authorizing
the city to continue to use tax increment as it is generated
in six specific former redevelopment areas."
4)Arguments in support . Supporters argue that the bill will
help San Francisco fulfill a historic commitment to building
5,947 replacement units which was previously undertaken by San
Francisco's redevelopment agency prior to dissolution, and
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will provide the City and County of San Francisco with the
tools necessary to meet the replacement housing commitment
while protecting state revenue for schools.
5)Arguments in opposition . None on file.
6)Double-referral . This bill is double-referred to the Assembly
Housing and Community Development Committee.
7)Conflict . This bill conflicts with SB 1129 (Steinberg), which
is currently pending in the Assembly. Chaptering out
amendments will be needed, should both bills continue to move
through the legislative process.
REGISTERED SUPPORT / OPPOSITION :
Support
City and County of San Francisco [CO-SPONSOR]
Edwin M. Lee, Mayor, City and County of San Francisco
[CO-SPONSOR]
California Rural Legal Assistance Foundation
Chinatown Community Development Center
Council of Community Housing Organizations
Malia Cohen, Member, Board of Supervisors, City and County of
San Francisco
Mercy Housing California
Non-Profit Housing Association of Northern California
Public Interest Law Project
San Francisco Labor Council
Tenderloin Neighborhood Development Corporation
Western Center on Law & Poverty
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958