BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:   April 22, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          AB 2  
          (Alejo and Eduardo Garcia) - As Amended March 26, 2015


          SUBJECT:  Community revitalization authority.


          SUMMARY:  Allows local governments to establish a Community  
          Revitalization and Investment Authority (Authority) in a  
          disadvantaged community to fund specified activities and allows  
          the Authority to collect tax increment.  Specifically, this  
          bill:  


          1)Includes legislative findings regarding the intent of the  
            Legislature to create a planning and financing tool to support  
            the revitalization of disadvantaged communities. 

          2)Establishes an Authority as a public body to carry out a  
            community revitalization plan (plan) within a community  
            revitalization investment area (area).

          3)Provides that a plan has the same meaning as a redevelopment  
            plan described in Article XVI of Section 16 of the California  
            Constitution.

          4)Provides that for the purposes of receiving tax increment  
            revenues, pursuant to subdivision (b) of Article XVI of  
            Section 16 of the California Constitution, an Authority is a  
            redevelopment agency.








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          5)Allows an Authority to be created in either of the following  
            ways:

             a)   A city, county, or city and county may adopt a  
               resolution creating the Authority.  The governing board  
               must include three members of the governing board of the  
               city, county, or city and county that created the Authority  
               and two public members who live or work in the area; or,

             b)   A city, county, city and county, and special district  
               may create an Authority by entering into a joint powers  
               agreement that establishes the composition of the governing  
               board, which must include two public members who live or  
               work in the area.

          1)Prohibits a school entity from participating in an Authority. 

          2)Prohibits a city or county from forming an Authority until the  
            successor agency or designated local authority of a former  
            redevelopment agency has received a finding of completion from  
            the Department of Finance that the former redevelopment agency  
            is fully dissolved. 

          3)Prohibits a successor agency to a former redevelopment agency  
            from participating in an Authority. 

          4)Allows an Authority to establish an area if at least 80% of  
            the land, calculated by census tract, is characterized by both  
            of the following conditions:



             a)   An annual median income that is less than 80% of the  
               statewide annual median income; and,

             b)   Three of the following four conditions exist:

               i)     Unemployment that is at least 3% higher than the  








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                 statewide median unemployment rate;

               ii)    A crime rate that is 5% higher than the statewide  
                 median crime rate;

               iii)   Deteriorated or inadequate infrastructure such as  
                 streets, sidewalks, water supply, sewer treatment or  
                 processing, and parks; and, 

               iv)    Deteriorated commercial or residential structures.  

          5)Allows an Authority to establish an area in a former military  
            base that is principally characterized by deteriorated or  
            inadequate infrastructure and structures. 

          6)Requires a governing board of an Authority established in a  
            former military base to include, as one of its public members,  
            a member of the military base closure commission. 

          7)Subjects an Authority to the Ralph M. Brown Act. 

          8)Allows an Authority to do any of the following:

             a)   Provide funding to rehabilitate, repair, upgrade, or  
               construct infrastructure;

             b)   Provide funding for low- and moderate-income housing;

             c)   Remedy or remove hazardous substances pursuant to the  
               Polanco Redevelopment Act;

             d)   Provide for seismic retrofits of existing buildings; 

             e)   Acquire and transfer property subject to eminent domain;

             f)   Prepare and adopt a plan for an area subject to  
               Community Redevelopment Law;  

             g)   Issue bonds; 








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             h)   Borrow money, receive grants, or accept financial or  
               other assistance or investment from the state and federal  
               government or any private lending institution for any  
               project within its area of operation;

             i)   Receive funding from the California Environmental  
               Protection Agency under the Water Security, Clean Drinking  
               Water, Coastal and Beach Protection Act of 2002;

             j)   Coordinate with a qualified community development entity  
               to maximize the benefit of New Markets Tax Credits;

             aa)  Appropriate funding that the governing body deems  
               appropriate for administrative expenses;

             bb)  Make loans or grants for owners or tenants to improve,  
               rehabilitate, or retrofit buildings or structures in the  
               area; 

             cc)  Construct foundations, platforms, and other like  
               structural forms necessary for the provision or utilization  
               of air rights sites for buildings to be used for  
               residential and commercial industrial; and,

             dd)  Provide direct assistance to businesses within the plan  
               in connection with new or existing facilities for  
               industrial or manufacturing uses.  

          1)Allows money appropriated to the Authority, from the  
            legislative body or bodies that created the Authority, for  
            administrative expenses to be paid as a loan or grant. 

          2)Provides that, if the Authority is loaned funding for  
            administrative expenses, the property owners within the plan  
            area will be made third party beneficiaries of the repayment  
            of the loan. 

          3)Provides that in addition to the common understanding and  








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            usual interpretation, the term "administrative expenses"  
            includes, but is not limited to, expenses for planning and  
            dissemination of information.  

          4)Allows an Authority to adopt a plan to receive tax increment  
            generated in an area. The plan must include the following:

             a)   A statement of the principal goals and objectives;

             b)   A description of the deteriorated or inadequate  
               infrastructure within the area and a program for  
               construction, repair, or upgrade of existing  
               infrastructure;

             c)   A program to spend 25% of the tax increment collected to  
               increase, improve, and preserve the community's supply of  
               low- and moderate-income housing;

             d)   A program to remedy and remove a release of hazardous  
               substances;

             e)   A program to fund or facilitate economic revitalization  
               of the area; and,

             f)   A fiscal analysis of the projected receipt of revenue  
               and projected expenses over a five year planning period. 

          1)Requires the Authority to adopt a program that prohibits the  
            number of housing units for extremely low-, very low- and  
            low-income households in the sustainable communities  
            investment area from being reduced during the effective period  
            of the sustainable communities investment plan, and requires  
            the replacement of these housing units within two years of  
            their displacement. 

          2)Allows an Authority to transfer funding for affordable housing  
            to a housing authority or the entity that received the housing  
            assets of the former redevelopment agency within the project  
            area, if it makes a finding that the transfer will reduce  








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            administrative costs or expedite the construction of  
            affordable housing. 

          3)Incorporates into the Act the provisions of Community  
            Redevelopment Law (CRL) that required a redevelopment agency  
            to set set-aside funds for affordable housing and the  
            provisions for administering those funds. 

          4)Requires an Authority to contract for an independent and  
            financial audit every five years, conducted by guidelines  
            established by the Controller, and submit it to the  
            Controller, the Director of Department of Finance, and the  
            Joint Legislative Budget Committee. 

          5)Requires the audit to determine compliance with the affordable  
            housing maintenance and replacement requirement, including  
            provisions to ensure that the replacement requirements are met  
            within the five-year period covered by the audit. 

          6)Provides that, if the Authority fails to meet the maintenance  
            and replacement requirement for affordable housing, it must  
            adopt and submit to a plan with its yearly financial audit to  
            show how it will comply with those provisions within two  
            years. 

          7)Requires the controller to review and approve an Authority's  
            plan to meet the replacement housing requirements and ensure  
            that the plan includes one or more of the following means of  
            achieving compliance:

             a)   Expenditure of an additional 10% of gross tax increment  
               revenue on increasing, preserving, or improving the supply  
               of low-income housing;

             b)   An increase in the production by an additional 10% of  
               housing for very low-income households as required under  
               the CRL housing production requirements; and/or,

             c)   The targeting of expenditures from the Low- and Moderate  








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               -Income Housing Fund toward rental housing affordable to  
               and occupied by person of very low and extremely low  
               income. 

          1)Establishes a public process for adopting a plan or amending a  
            plan to receive tax increment generated in an area that must  
            include the following:

             a)   The Authority must hold two public hearings at least 30  
               days apart;

             b)   The plan must be made available to the public and to  
               each property owner within the area at a meeting held at  
               least 30 days prior to notice of the first public hearing;

             c)   Notice of the first public hearing must be given at  
               least once a week for four weeks prior to the hearing in a  
               newspaper of general circulation and mailed to each  
               property owner in the proposed area of the plan; and,

             d)   Notice of the second public hearing must be given not  
               less than 10 days prior to the date of the second hearing  
               in a newspaper of general circulation and mailed to each  
               property owner in the area of the plan.

          1)Requires a notice informing the public and property owners in  
            the area of a public hearing to discuss the plan to receive  
            tax increment to include:

             a)   The specific boundaries of the proposed area;



             b)   The purpose of the plan; and,



             c)   The time and place of the public hearing.
          27) Requires that notice of the second hearing must include a  








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            summary of the changes made to the plan from the first  
            hearing.


          28) Allows the Authority to inform tenants of properties in the  
            area of the plan to receive tax increment in a manner of its  
            choosing.

          29)Allows an Authority to adopt a plan by ordinance at the  
            conclusion of the second public    hearing. 

          30)Allows an Authority to begin receiving tax increment funds  
            beginning on the December 1 after the plan is adopted.

          29)Allows any taxing entity other than a school entity that  
            receives property taxes in an area to adopt a resolution,  
            prior to the adoption of the plan, to direct the county  
            auditor-controller to allocate its share of tax increment  
            funds to the Authority. 

          30)Allows the resolution adopted by a taxing entity directing  
            its share of tax increment to the Authority to allocate less  
            than the full amount of tax increment, establish a maximum  
            amount of time in years, or limit the use of funds to specific  
            purposes or programs.  

          31)Allows a taxing entity to repeal a resolution directing a  
            portion of its tax increment to the Authority by giving the  
            county auditor-controller 60 days' notice, except that the  
            auditor-controller will continue to allocate to the Authority  
            the portion of tax increment necessary to repay any debt  
            issued by the Authority that has not been fully repaid. 

          32)Requires that, if an area overlaps with a former  
            redevelopment agency, the plan must specify that any tax  
            increment collected is subject to and subordinate to any  
            preexisting enforceable obligations of the former  
            redevelopment agency.









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          33)Requires an Authority to complete an annual independent  
            audit.

          34)Requires an Authority to post a draft of the audit on their  
            Web site and mail it to each of the taxing entities that are  
            contributing tax increment to the area. 

          35)Requires the annual audit to include:

             a)   A description of the projects undertaken in the fiscal  
               year and a comparison of the progress expected on those  
               projects compared to the actual progress;

             b)   A chart comparing the actual revenues and expenses,  
               including administrative costs 
             of the Authority to the budgeted revenues and expenses;

             c)   Amount of tax increment revenues received;

             d)   Amount of revenues received and expended for low-and  
               moderate-income housing;

             e)   Assessment of the level of completion of the projects in  
               the plan; and,

             f)   Amount of revenues expended to assist private  
               businesses. 

          1)Provides that, if an Authority fails to provide a copy of a  
            completed financial audit to the Controller within 20 days of  
            receiving a written notice of failure to comply, the Authority  
            shall forfeit the following to the state: 

             a)   $2,500 where the Authority has total revenue of less  
               than $100,000;

             b)   $5,000 where the Authority has total revenue of at least  
               $100,000 but less than $200,000; and 









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             c)   $10,000 where the Authority has total revenue of at  
               least $250,000. 

          1)Provides that, if an Authority fails to provide an audit for  
            two years in a row, after receiving a notice of failure to  
            comply, it must forfeit double the amount required above based  
            on its revenue size. 

          2)Provides that, if an Authority fails to provide an audit for  
            three or more years in a row, after receiving a notice of  
            failure to comply, it must forfeit triple the amount required  
            above based on its revenue size. 

          3)Provides that, if an Authority fails to provide an audit for  
            three or more years in a row, the Controller shall conduct or  
            contract to conduct an independent financial audit report paid  
            for by the Authority.

          4)Provides that the Controller may request the Attorney General  
            (AG) bring an action for the forfeiture of penalties in the  
            name of the people of the state of California. 

          5)Provides that the Controller may waive the forfeiture request  
            upon a satisfactory showing of good cause of why the Authority  
            did not provide the audit. 

          6)Provides that, if an Authority does not complete an annual  
            report, then it cannot expend any tax increment funds it  
            receives. 

          7)Requires an Authority, every 10 years, to hold a protest  
            proceeding at the public hearing to review an annual report,  
            to give property owners an opportunity to provide oral or  
            written protests against an Authority.
          8)Requires an Authority to hold an election of the property  
            owners in the areas covered by the plan if between 25% and 50%  
            of the owners protest, and not initiate any new projects until  
            the election is held. 









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          9)Provides that a majority protest exists if protests have been  
            filed representing 50% of the assessed value of the area. 

          10)Requires the election to be held 90 days after the public  
            hearing and permits it to be held by mail-in ballot.

          11)Prevents an Authority from taking any further action to  
            implement a plan if a majority of the property owners,  
            weighted proportional to the assessed value of their property,  
            vote against the Authority. 

          12)Allows the Authority to continue to appropriate and expend  
            funds for contractual indebtedness and complete projects for  
            which expenditures of any kind have been made prior to the  
            effective date of the election. 

          EXISTING LAW:  


          1)Dissolves redevelopment agencies as of February 1, 2012.

          2)Establishes the Community Redevelopment Law (CRL), which  
            governs the authority to establish a redevelopment agency and  
            the authority for a redevelopment agency to function as an  
            agency and to adopt and implement a redevelopment plan.

          FISCAL EFFECT:  This bill is keyed fiscal.


          COMMENTS:  


          1)Bill Summary.  This bill allows local governments to establish  
            a Community Revitalization and Investment Authority in a  
            disadvantaged community to fund specified activities and  
            allows the Authority to collect tax increment.  


            This bill is an author-sponsored measure.








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          2)Author's Statement.  According to the author, "Redevelopment  
            was a multi-purpose tool that focused over $6 billion per year  
            toward repairing and redeveloping urban cores, and building  
            affordable housing, especially in those areas most  
            economically and physically disadvantaged.  Since the  
            dissolution of redevelopment agencies, communities across  
            California are seeking an economic development tool to use.   
            Multiple legislative measures were introduced after the  
            dissolution of redevelopment agencies in an effort to provide  
            local governments options for sustainable community economic  
            development.  Several measures were approved by the  
            Legislature, however, all were vetoed by Governor Brown. While  
            the dissolution of former redevelopment agencies continues,  
            the pervasive question is, what economic development tool can  
            local governments use?  This proposal provides a viable option  
            targeting the state's disadvantaged poorer areas and  
            neighborhoods."





          3)Previous Legislation. AB 2280 (Alejo) of 2014 would have  
            established an Authority and given it the same rights,  
            responsibilities and powers as redevelopment agencies. It was  
            vetoed by the Governor.  This bill is largely similar to AB  
            2280 which was vetoed by the Governor.  The Governor's veto  
            message stated the following:

            I am returning Assembly Bill 2280 without my signature.

            This bill allows local governments to establish a Community  
            Revitalization and Investment Authority to use tax increment  
            revenues to invest in disadvantaged communities. 

            I applaud the author's efforts to create an economic  
            development program, with voter approval, that focuses on  








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            disadvantaged communities and communities with high  
            unemployment.  The bill, however, unnecessarily vests this new  
            program in redevelopment law. I look forward to working with  
            the author to craft an appropriate legislative solution.
             
             To address the Governor's concerns, AB 2 takes portions of the  
            CRL and incorporates it into the bill rather than cross  
            referencing the CRL.  
             
            AB 1080 (Alejo) of 2013 would have established an Authority  
            and given it the same rights, responsibilities and powers as  
            redevelopment agencies. It was held on suspense in the Senate  
            Appropriations Committee.  

            SB 1 (Steinberg) of 2013 would have allowed local governments  
            to establish a Sustainable Communities Investment Authority to  
            finance specified activities within a sustainable communities  
            investment area using tax increment financing. This bill died  
            on the Inactive File on the Senate Floor. 

            SB 1156 (Steinberg) of 2012 would have allowed local  
            governments to establish a Sustainable Communities Investment  
            Authority after July 1, 2012, to finance specified activities  
            within a sustainable communities investment area using tax  
            increment financing.  This bill was vetoed by the Governor.

          4)Arguments in Support.  Supporters argue that this bill will  
            create a tool that can assist with addressing the challenges  
            faced by California's most disadvantaged and poorest areas.  

           5)Arguments in Opposition.  Opponents argue that this bill will  
            create Authorities with all the powers associated with  
            traditional Redevelopment Agencies, including the unchecked  
            power of eminent domain.


          6)Double-Referral.  This bill was heard by the Housing and  
            Community Development Committee on April 15, 2015, where it  
            passed with a 6-1 vote.








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          REGISTERED SUPPORT / OPPOSITION:





          Support


          


          African American Caucus, League of California Cities


          American Planning Association, California Chapter








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          Building Owners and Managers Association of California


          California Association for Local Economic Development


          California Building Industry Association


          California Business Properties Association
                                                                     

          California Chamber of Commerce


          California Coalition for Rural Housing


          City of Lakewood and Mendota


          Glendale City Employees Association


          Housing California


          International Council of Shopping Centers


          Latino Caucus, League of California Cities


          Leading Age California


          League of California Cities








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          NAIOP of California, the Commercial Real Estate Development  
          Association


          Organization of SMUD Employees


          San Bernardino Public Employees Association


          San Luis Obispo County Employees Association




          Opposition


          California Alliance to Protect Private Property Rights


          Fieldstead and Company




          Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958


















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