BILL ANALYSIS Ó
SB 1404
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Date of Hearing: June 18, 2014
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
SB 1404 (Leno) - As Amended: June 12, 2014
SENATE VOTE : 22-9
SUBJECT : San Francisco redevelopment: successor agencies:
housing
SUMMARY : Allows San Francisco's successor agency to receive
property tax increment from six specified redevelopment project
areas, and issue debt to pay for specified replacement housing
obligations. Specifically, this bill :
1)Makes a finding and declaration confirming that there is a
statutory obligation to replace 5,842 affordable units that
the city and county of San Francisco's former redevelopment
agency (RDA) destroyed and did not replace.
2)Finds and declares that, because of the unique circumstances
relating to the replacement of affordable housing demolished
by the former RDA of the city and county of San Francisco, a
special law is necessary and a general law cannot be made
applicable within the meaning of the California Constitution.
3)Updates provisions of existing law to specify that the
successor agency to the RDA 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 replacement housing obligations, as specified.
4)Prohibits the successor agency from using more than six RDA
project areas under redevelopment plans that were amended for
this purpose prior to the dissolution of RDAs.
5) Provides that the six RDA project areas may be merged,
subject to approval by the oversight board, pursuant to
existing law, to fulfill these replacement housing
obligations.
6)Allows the successor agency to have the authority, rights, and
powers of the RDA of the city and county of San Francisco to
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incur indebtedness, backed by property tax revenues from the
six RDA project areas, exclusively for the purpose of
fulfilling the replacement housing obligations.
7)Requires bonds issued by successor agencies to be sold using
the standard of former RDA bonds.
8)Requires review and approval of bond sales by the oversight
board and the Department of Finance (DOF), as specified.
9)Requires the successor agency, in seeking approval for
issuance of bonds by the oversight board and 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, which extended the RDA project areas'
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 prior to
state law replacement housing requirements.
10)Allows bonds to be sold pursuant to either a negotiated or
competitive sale.
11)Prohibits any time limit imposed by the relevant subdivision
of Community Redevelopment Law (CRL) 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).
12)Applies the following to the new bonds issued for the six RDA
project areas and existing bond obligations of the successor
agency:
a) Allows a successor agency to issue new bonds or debt
on the six RDA project areas on an equal basis with
outstanding bonds or other debt that have been issued by
the successor agency.
b) Allows a successor agency to pledge the revenues
that have been pledged to outstanding bonds and debt to
repay the new bonds or debt issued for the six RDA
project areas.
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c) Gives new bonds issued for the six RDA project areas
the same lien priority as the pledge of outstanding bonds
or debt.
1)Specifies that annual revenues must not exceed the amount
necessary to fund the activities of the successor agency in
fulfilling these replacement housing obligations.
2)Specifies that property tax revenues allocated to the
successor agency must be distributed to the city and county of
San Francisco 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.
3)Provides that property tax revenues allocated to the successor
agency must not include any moneys that, notwithstanding the
replacement housing obligations, are payable to local agencies
other than the city and county of San Francisco, 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.
4)Provides that the activities conducted with these property tax
revenues must be consistent with the affordable housing
requirements of the CRL, as well as the policies and
objectives of the community's housing element.
EXISTING LAW :
1)Requires RDAs to dissolve effective February 1, 2012, pursuant
to the California Supreme Court's decision in CRA v.
Matosantos (2011).
2)Establishes successor agencies to RDAs that would, except in
certain situations, be the city, county, or city and county in
the territorial jurisdiction of the former RDA.
3)Allows a city or county that authorized the creation of an RDA
to elect to retain the housing assets and functions previously
performed by the RDA.
4)Requires the entity assuming the housing functions of the
former RDA to submit a list of all housing assets to DOF by
August 1, 2012, as specified.
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5)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.
6)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.
7)Allows the RDA 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 housing units demolished prior
to the enactment of the replacement housing obligations in
Chapter 970 of the Statutes of 1975, whichever occurs earlier.
8)Allows the ability of the RDA 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 :
Redevelopment agency dissolution : In 2011, as a result of
serious budget shortfalls, the Governor proposed eliminating
RDAs and creating a Voluntary Alternative Redevelopment Program
(VARP) to replace them. Two pieces of budget trailer
legislation, AB1X 26 (Chapter 5, Statutes of 2011-12 First
Extraordinary Session) and AB1X 27 (Chapter 6, Statutes of
2011-12 First Extraordinary Session), were enacted to achieve
this goal. AB1X 26 provided for the dissolution of RDAs and for
the winding up of their obligations by successor agencies. AB1X
27 established VARP, which would have allowed RDAs to continue
operations if their local city or county made voluntary annual
payments benefitting schools, for the purpose of offsetting
state education costs. In CRA v. Matosantos (2011), the
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California Supreme Court upheld the constitutionality of AB1X
26, but invalidated AB1X 27. This had the effect of dissolving
RDAs without giving them the option of continuing operations by
offsetting state education costs.
When RDAs were dissolved, successor agencies were established to
wind up the RDAs' obligations. Except in certain situations,
the successor agency is the city, county, or city and county in
the territorial jurisdiction of the former RDA. Cities and
counties were also given the option of taking over the housing
assets of their jurisdiction's RDA.
Redevelopment and replacement of affordable housing units in San
Francisco : Prior to the dissolution of redevelopment, state law
required RDAs 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 RDA plans remained in
effect, and required that RDAs must meet their housing
obligations before they terminate a project area.
In 2000, six of San Francisco's oldest RDA project areas were
about to reach some of the statutory deadlines on RDA
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 RDA had demolished
and not replaced during the years before state law imposed
replacement housing requirements on RDAs. 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.
SB 2113 (Burton) also 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 RDAs, San Francisco's RDA had been
able to finance the construction of 867 of the 6,709 replacement
affordable housing units. Because DOF does not recognize the
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financing of the remaining 5,842 replacement affordable housing
units as an enforceable obligation of the former RDA, San
Francisco officials are unable to issue debt backed by former
tax increment revenues to finance the remaining replacement
housing units.
Purpose of this bill : This bill allows San Francisco's
successor agency to receive former tax increment revenues from
six RDA project areas to fulfill its replacement housing
obligations. The bill allows the successor agency to bond
against the property tax revenues from the six RDA 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. Additionally, the bill
specifies that tax increment received by the successor agency
will not come from property tax revenues dedicated to school
entities or local agencies other than the city and county of San
Francisco. This bill is co-sponsored by the city and county of
San Francisco and the Mayor of San Francisco, Edwin M. Lee.
Author's statement : According to the author, "[b]eginning in
the 1950s, the former San Francisco RDA 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 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
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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."
Double-referral : This bill is double-referred to the Assembly
Local Government Committee, where it passed out of Committee 7-0
on June 4, 2014.
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
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Western Center on Law & Poverty
Opposition
None on file
Analysis Prepared by : Rebecca Rabovsky / H. & C.D. / (916)
319-2085