BILL ANALYSIS Ó
AB 2
Page 1
ASSEMBLY THIRD READING
AB
2 (Alejo and Eduardo Garcia)
As Amended March 26, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+---------------------|
|Housing |6-1 |Chau, Steinorth, |Beth Gaines |
| | |Burke, Chiu, Lopez, | |
| | |Mullin | |
| | | | |
|----------------+------+---------------------+---------------------|
|Local |7-2 |Maienschein, |Linder, Waldron |
|Government | |Gonzalez, Alejo, | |
| | |Chiu, Cooley, | |
| | |Gordon, Holden | |
| | | | |
|----------------+------+---------------------+---------------------|
|Appropriations |13-3 |Gomez, Bloom, Bonta, |Bigelow, Jones, |
| | |Calderon, Chang, |Wagner |
| | |Daly, Eggman, | |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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AB 2
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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 California Constitution Article XVI, Section
16.
4)Provides that for the purposes of receiving tax increment
revenues, pursuant to California Constitution Article XVI,
Section 16(b), an Authority is a redevelopment agency.
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.
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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
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.
1)Allows an Authority to establish an area in a former military
base that is principally characterized by deteriorated or
inadequate infrastructure and structures.
2)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.
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3)Subjects an Authority to the Ralph M. Brown Act.
4)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;
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;
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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 usual
interpretation, the term "administrative expenses" includes, but
is not limited to, expenses for planning and dissemination of
information.
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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
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area, if it makes a finding that the transfer will reduce
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;
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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-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
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c) The time and place of the public hearing.
27) Requires that notice of the second hearing must include a
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.
29)Allows an Authority to begin receiving tax increment funds
beginning on the December 1 after the plan is adopted.
30)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.
31)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.
32)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.
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33)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.
34)Requires an Authority to complete an annual independent audit.
35)Requires an Authority to post a draft of the audit on their Web
site and mail it to the each of the taxing entities that are
contributing tax increment to the area.
36)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.
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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) Two thousand five hundred dollars where the Authority has
total revenue of less than $100,000;
b) Five thousand dollars where the Authority has total
revenue of at least $100,000 but less than $200,000; and
c) Ten thousand dollars 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
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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.
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.
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FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Negligible state General Fund impact from property tax revenue
redirection because schools are prohibited from participating.
2)Estimated one-time costs to the State Controller's Office (SCO)
in the range of $50,000 to $100,000 (General Fund) in 2016-17 to
establish guidelines for periodic audits. (Staff assumes 0.5 to
1.0 PY [personal year] of regulatory staff to establish
guidelines)
3)Estimated ongoing SCO costs of up to $100,000 (General Fund) on
a periodic basis, beginning in 2020-21 for accepting audits and
reviewing and approving secondary compliance plans submitted by
Authorities who fail to comply with initial audit requirements.
(Staff assumes approximately 1 PY [personal year] of audit work
on a periodic basis.)
4)Potentially substantial fiscal impacts to participating local
governments, but all affected local governments volunteer to
participate.
COMMENTS:
Background: In 2011, the Legislature approved and the Governor
signed two measures, AB 26 X1 (Blumenfield), Chapter 5, Statutes
of 2011 and AB 27 X1 (Blumenfield), Chapter 6, Statutes of 2011
that together dissolved redevelopment agencies as they existed at
the time and created a voluntary redevelopment program on a
smaller scale. In response, the California Redevelopment
Association (CRA), League of California Cities, along with other
parties, filed suit challenging the two measures. The Supreme
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Court denied the petition for peremptory writ of mandate with
respect to AB 26 X1 . However, the Court did grant CRA's petition
with respect to ABX1 27. As a result, all redevelopment agencies
were required to dissolve as of February 1, 2012.
Over the last 60 years, redevelopment agencies used tax increment
to finance affordable housing, community development, and economic
development projects. The dissolution of redevelopment agencies
has created a void and an effort to create new tools that would
support community and economic development activities. This bill
would allow local government entities, excluding schools, to form
an Authority to collect tax increment and issue debt. The
Authority could use its powers to invest in disadvantaged
communities with a high crime rate, high unemployment, and
deteriorated and inadequate infrastructure, commercial, and
residential buildings. Three of these four conditions would
constitute blight. The area where the Authority could invest
would also be required to have an annual median household income
that is less than 80% of the statewide annual median income. This
is different from redevelopment agencies that were required to
conduct a study and make a finding that blight existed in a
project area before they could use their extraordinary powers,
like eminent domain, to eradicate blight.
Like redevelopment agencies, this bill would allow Authorities to
freeze the property taxes at the time the plan for revitalizing
the area is approved. The Authority will collect all the tax
increment or the increase in property taxes that is generated
after that point and use it on specified activities. Unlike
redevelopment agencies, this bill would require the taxing
entities in the area including the county, city, special
districts, or a military base to agree to divert tax increment to
the Authority. Local government entities that initially
participate can opt out by giving the auditor-controller sixty
days' notice; however, the auditor controller will continue to
collect the local government entities' portions of tax increment
until any debts issued up until then have been repaid. No portion
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of the local schools' share of tax increment may go to the
Authority.
Addressing Governor's Veto of Previous Bill: This bill is largely
similar to AB 2280 (Alejo) of 2014 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
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, this bill takes portions of
the Community Redevelopment Law (CRL) and incorporates it into
this bill rather than cross referencing the CRL.
Purpose of this bill: 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
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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."
Affordable housing provisions: Prior to their dissolution,
redevelopment generated up to $1 billion a year for affordable
housing in the state. Redevelopment agencies were required to
set- a-side 20% of tax increment generated in a project area to
increase, improve, or rehabilitate affordable housing for low,
very-low, and moderate income families and individuals. AB 2
changes the requirements of RDAs in three ways. It increases the
amount an Authority must set aside for affordable housing from 20%
to 25%. Second, the bill requires a community revitalization and
investment plan to ensure that housing affordable to and occupied
by extremely low-, very low-, and low-income households within an
area does not decrease during the life of the area plan. Third,
the bill requires the authority to provide replacement housing in
two rather than four years.
The Authority would be allowed to transfer the funds collected for
affordable housing to a housing authority within the project area
or to the successor agency to a former redevelopment agency. An
Authority would have to make a finding that transferring the funds
and combining them with other funding for housing would reduce
administrative costs or expedite the construction of affordable
housing.
Related legislation:
AB 2280 would have established an Authority and gave it the same
rights, responsibilities and powers as redevelopment agencies.
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This bill was vetoed by the Governor.
AB 1080 (Alejo) of 2013 would have established an Authority and
given it the same rights, responsibilities and powers as
redevelopment agencies. This bill 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.
Analysis Prepared by:
Lisa Engel / H. & C.D. / (916) 319-2085 FN:
0000334
AB 2
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