BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 2 Hearing Date: 7/14/2015
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|Author: |Alejo |
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|Version: |7/7/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Alison Dinmore |
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SUBJECT: Community revitalization and investment authority
DIGEST: This bill authorizes local governments to create
Community Revitalization and Investment Authorities (Authority)
to use tax increment revenue to improve the infrastructure,
assist businesses, and support affordable housing in
disadvantaged communities.
ANALYSIS:
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.
This bill allows local government officials to establish an
Authority and use property tax increment revenues to finance the
implementation of a community revitalization and investment plan
within a Community Revitalization and Investment Area (CRIA).
This bill specifies: the process for creating an Authority, what
can be designated a CRIA, the powers of an Authority, the
process for adopting a community revitalization and investment
plan, how tax increment revenues are allocated to and used by an
Authority, reporting and auditing requirements, an Authority's
obligations related to affordable housing, and an Authority's
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use of eminent domain.
1)Creation of an Authority.
The Authority may be created in one of the following ways:
a) A city, county, or city and county may adopt a
resolution creating an Authority. Three of the board
members must be members of the legislative body of that
jurisdiction that created the authority and two must be
public members that work or live within the CRIA.
b) A city, county, city and county, and special district or
any combination thereof may enter into a joint powers
agreement. A majority of the members of the board must be
members of the legislative body of the public agencies that
created the Authority and a at least two members must be
public members who work and live within the CRIA.
This bill prohibits a school entity or a successor agency from
participating in an Authority. It also prohibits a city or
county that created a former redevelopment agency from forming
an Authority, unless the former redevelopment agency's
successor agency has received a finding of completion from the
Department of Finance and complies with other requirements.
1)What is a CRIA?
This bill permits an Authority to carry out a community
revitalization plan within a CRIA. At least 80% of the land
calculated by census tracts or census block groups within the
area must be characterized by both of the following
conditions:
a) Annual median household income is less than 80% of the
statewide annual median income, and
b) Three of the following conditions:
Non-seasonal unemployment is at least 3% higher
than statewide median unemployment.
Crime rates are 5% higher than statewide median
crime rates.
Deteriorated or inadequate infrastructure such
as streets, sidewalks, water supply, sewer treatment or
processing, and parks.
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Deteriorated commercial or residential
structures.
This bill also permits an Authority to carry out a community
revitalization plan within a CRIA established within a former
military base that is principally characterized by
deteriorated or inadequate infrastructure and structures. The
governing body of an Authority established within a military
base shall include a member of the military base closure
commission.
A CRIA is subject to the Ralph M. Brown Act, the California
Public Records Act, and the Political Reform Act of 1974.
1)CRIA powers. An Authority may do all of the following:
a) Provide funding to rehabilitate, repair, upgrade, or
construct infrastructure.
b) Remedy or remove a release of hazardous substances
pursuant to the Polanco Redevelopment Act.
c) Provide for seismic retrofits of existing buildings in
accordance with all applicable laws and regulations.
d) Acquire and transfer real property including through the
use of eminent domain. An Authority must retain controls
and establish restrictions or covenants (such as
affordability requirements) running with the land sold or
leased for private use for such periods of time and under
such conditions as are provided in the community
revitalization and investment plan.
e) Issue bonds.
f) Borrow money, receive grants or accept financial or
other assistance or investment from the state or the
federal government or any other public agency or private
lending institution for any project within its area of
operation, and may comply with any conditions of the loan
or grant. An Authority may qualify for funding as a
disadvantaged community.
g) Adopt a community revitalization and investment plan.
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h) Make loans or grants to owners or tenants to improve,
rehabilitate, or retrofit buildings or structures within
the plan area.
i) Construct foundations, platforms, and other structural
forms necessary for the provision or utilization of air
rights sites or buildings to be used for residential,
commercial industrial, or other uses contemplated by the
revitalization plan.
j) Provide direct assistance to businesses within the plan
area in connection with new or existing facilities for
industrial or manufacturing uses, except under specific
restrictions.
1)Community revitalization and investment plan.
An Authority shall adopt a community revitalization and
investment plan that may include a provision for the receipt
of tax increment funds generated within the area, provided the
plan includes:
a) A statement of the principal goals and objectives of the
plan, including the territory covered.
b) A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction of adequate infrastructure or repair or
upgrading existing infrastructure.
c) A housing program that describes how the Authority will
comply with the housing provisions in the Act. The program
shall include all of the following:
The amount available in the Low and Moderate Income
Housing Fund (Housing Fund) and the estimated amounts
that will be deposited into the Housing Fund during each
of the next five years.
Estimates of the new, rehabilitated, or
price-restricted residential units to be assisted during
each of the five years, and estimates of Housing Fund
expenditures during each of the five years.
A description of how the program will implement the
requirements for Housing Fund expenditures over a 10-year
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period for various groups, as required.
Estimates of the number of units, if any, developed
by the Authority for very low-, low-, and moderate-income
households during the next five years.
a) A program to remedy or remove a release of hazardous
materials, if applicable.
b) A program to provide funding for or otherwise facilitate
the economic revitalization of the area.
c) A fiscal analysis setting forth the projected receipt of
revenue and projected expenses over a five-year planning
period. An Authority may not spend revenue for any purpose
that is not identified as part of a program.
d) Time limits designating the maximum length of time an
Authority can establish debt, act pursuant to a plan, repay
debt, and commence eminent domain proceedings.
This bill specifies the manner in which an Authority must
consider the adoption of the plan, including requiring notice
and public hearings, a protest process, and, in some cases,
voter approval through a specified election process.
An Authority must consider and adopt a plan amendment in
accordance with the procedures that applied to the
consideration of the original plan.
1)Tax increment financing.
a) Article XVI, Section 16 of the California Constitution
permits local officials to use property tax increment
revenues to repay bonds, debts, and loans needed to finance
a redevelopment project. This bill designates an Authority
to be the agency under Article XVI, Section 16 for purposes
of receiving tax increment revenues. This bill also allows
a community revitalization and investment plan to include a
provision for the receipt of tax increment funds.
b) Any city, county, city and county, or special district
that receives ad valorem property taxes from property
located within an area may adopt a resolution directing the
county auditor-controller to allocate its share of tax
increment funds within the area covered by the plan to the
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Authority. The resolution may direct the
auditor-controller to allocate less than the full amount of
tax increment, establish a maximum amount of time in years
that the allocation takes place, or limit the use of the
funds by the Authority for specific purposes or programs,
provided that 25% of the increment designated is allocated
for affordable housing. A city, county, city and county,
or special district may repeal a resolution by giving the
auditor-controller 60 days' notice. The county
auditor-controller must continue to allocate the taxing
entity's taxes that have been pledged to repay debt issued
by the Authority until the debt has been fully repaid.
2)Reporting and audits.
The Authority shall review the plan at least annually and make
amendments that are necessary and appropriate in accordance
with statutory requirements and shall prepare an annual
independent financial audit paid for from revenues from the
Authority.
The Authority shall adopt an annual report on or before June
30 each year after holding a public hearing. This bill
specifies how the report shall be made available to the
public. The report must contain specific financial
information regarding the projects undertaken and prohibits an
authority from spending specified tax increment revenues if it
fails to provide the annual report.
This bill requires the Authority to contract every five years
for an independent audit to determine compliance with
affordable housing maintenance and replacement requirements,
including provisions to ensure that the requirements are met
within each five-year period covered by the audit. The audit
must be conducted in accordance with guidelines established by
the Controller, and the Authority must provide the audit to
the Controller for review and approval. The bill sets forth
sets steps an Authority must take if the audit demonstrates a
failure to comply with statutory requirements, as well as
penalties. The Attorney General may, at the Controller's
request, take action to collect the fines.
3)Housing provisions.
a) Requires that not less than 25% of all taxes that are
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allocated to the Authority shall be deposited into a
separate Housing Fund and used for the purposes of
increasing, improving, and preserving the community's
supply of low- and moderate-income housing available at an
affordable cost. This bill also provides a cause of action
to compel compliance with the requirements to set aside 25%
in the Housing Fund, as well as penalties.
b) 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 or
any private developer within or outside the plan area if it
makes the finding that the transfer will reduce
administrative costs or expedite the construction of
affordable housing.
c) Permits the Authority to exercise any or all of its
powers for the construction, rehabilitation, or
preservation of affordable housing for extremely low-, very
low-, low-, and moderate-income persons or families,
including the following:
i. Acquire real property or building sites.
ii. Improve real property or building sites but only if
both: 1) the improvements are part of the new
construction or rehabilitation of affordable-housing
units for low- or moderate-income persons that are
directly benefited from the improvements and are a
reasonable and fundamental component of the housing; and
2) the authority requires that the units remain available
at affordable-housing costs to, and occupied by, persons
and families of extremely low, very low, low, and
moderate income for specified time periods.
iii. Donate real property to private or public persons or
entities.
iv. Finance insurance premiums necessary for the
provision of insurance during the construction or
rehabilitation of properties that are administered by
governmental entities or nonprofit organizations
providing housing for lower income households, including
rental properties, emergency shelters, transitional
housing, or special residential care facilities.
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v. Construct, acquire, or rehabilitate buildings or
structures.
vi. Provide subsidies to, or for the benefit of,
extremely low-, very low-, low-, and moderate-income
persons and families, to the extent those households
cannot obtain housing at affordable costs on the open
market.
vii. Develop plans; pay principle and interest on bonds,
loans, advances, or other indebtedness; or pay financing
or carrying charges.
viii. Maintain the community's supply of mobilehomes.
ix. Preserve the availability to lower income households
of affordable housing units in housing developments that
are assisted or subsidized by public entities and that
are threatened with imminent conversion to market rates.
d) Requires the Authority within two years, whenever
housing units for persons and families of low or moderate
income are destroyed or removed as a result of a
revitalization project, to rehabilitate, develop, or
construct an equal number of replacement units that have an
equal or greater number of bedrooms as those destroyed or
removed, to rent or sell to persons and families of low or
moderate income.
i. Requires all replacement units to remain affordable.
ii. Notwithstanding (d)(i), the Authority may replace,
destroy, or remove units with a fewer number of
replacement units if the replacement dwelling meets both
of the following criteria:
The total number of bedrooms in the
replacement dwelling equals or exceeds the number of
bedrooms in the destroyed or removed units.
The replacement units are affordable to, and
occupied by, the same income level of households as
the destroyed or removed units.
i. Requires the Authority, within 30 days prior to the
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execution of an agreement of acquisition of real
property, agreement for the disposition and development
of property, or agreement that leads to the destruction
of housing units for low- and moderate-income housing, to
adopt a replacement housing plan by resolution.
a) Requires the Authority to monitor any housing affordable
to persons and families of low or moderate income developed
or otherwise made available under the CRIA and submit the
information annually to the Department of Housing and
Community Development (HCD) and the State Controller.
b) Requires all new or substantially rehabilitated housing
units developed or otherwise assisted with money from the
Housing Fund to remain available at affordable costs for
specified periods of time.
c) Requires money from the Housing Fund not to be used to
the extent that other reasonable means of private or
commercial financing for new or substantially rehabilitated
units at the same level of affordability and quantity are
reasonably available to the agency or to the owner of the
units. Prior to the expenditure of funds from the Housing
Fund, where funds exceed 50% of the costs of producing the
units, the Authority shall find, based on substantial
evidence, that the use of funds is necessary because the
Authority or owner has made a good-faith attempt but has
been unable to obtain commercial or private means of
financing the units at the same level of affordability and
quantity.
d) Requires the Authority to expend over each 10-year
period of the community revitalization plan the money in
the Housing Fund to assist housing for persons of very low
income and low income in at least the same proportion as
the total number of housing units needed that each of those
income groups bears to the total number of units needed for
persons of moderate, low, and very low income within the
community.
e) Requires the community revitalization plan to contain
both of the following:
i. A provision that requires whenever dwelling units
for persons and families of low or moderate income are
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destroyed or removed from the low- and moderate-income
housing market, the Authority shall within two years of
destruction or removal, rehabilitate, develop, or
construct for rental or sale to persons and families of
low or moderate income an equal number of replacement
dwelling units at affordable housing costs within the
jurisdiction of the Authority.
ii. A provision that prohibits the number of housing
units occupied by extremely low-, very low-, and
low-income households, including the number of bedrooms
in those units, at the time the plan is adopted, from
being reduced in the plan area during the effective
period of the plan.
f) Permits an Authority, not later than six months
following the close of any fiscal year of an Authority in
which excess surplus accumulates in the Housing Fund, to
adopt a plan for the expenditure of all money in the
Housing Fund within five years from the end of that fiscal
year. Excess surplus means any unexpended and
unencumbered amount in an Authority's Housing Fund that
exceeds $1 million or the aggregate amount deposited in
the Housing Fund during the Authority's preceding four
years. The Authority shall separately account for any
excess surplus accumulated each year as part of the
Housing Fund. This bill sets forth procedures for the
expenditure of excess surplus and sanctions for failure to
expend or encumber excess surplus.
g) The Authority shall prepare a feasible method or plan
for relocation for all the following:
i. Families and persons to be temporarily or
permanently displaced from housing facilities in the plan
area.
ii. Nonprofit local community organizations to be
temporarily or permanently displaced from facilities
actually used for institutional purposes in the plan
area.
h) The relocation plan shall provide that no persons or
families of low or moderate income shall be displaced
unless and until there is a suitable housing unit
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available and ready for occupancy by the displaced person
or family at rents comparable to those at the time of
displacement.
i) The Authority shall require that housing be made
available for rent or purchase to the persons and families
of low or moderate income displaced by the project. If
insufficient housing units are available to persons and
families displaced in a CRIA, the legislative body that
created the Authority shall assure that sufficient land is
available for suitable housing for rental or purchase by
those persons and families. Permanent housing shall be
made available within two years from the time occupants
are displaced.
1)Eminent domain.
Within the planning area or for the purposes of
revitalization, an Authority may acquire real property by
eminent domain, provided that authority is exercised within 12
years from the adoption of the plan.
If an Authority has adopted a plan but has not commenced an
eminent domain proceeding to acquire any particular parcel of
property subject to eminent domain within three years after
the date of adoption of the plan, the owner of the property
may offer in writing to sell the property to the Authority for
fair market value. If the Authority does not acquire or
institute eminent domain proceedings 18 months from the date
of the offer, the property owners may file an action against
the Authority in inverse condemnation to recover damages from
the Authority for interference with the possession and use of
real property.
COMMENTS:
1)Purpose of the bill. According to the author, communities are
searching for options to replace the loss of redevelopment
agencies, which were used to revitalize urban cores and build
affordable housing, especially in those areas most
economically and physically disadvantaged. In downtowns and
older neighborhoods there are old infrastructure, odd-shaped
lots, and environmental conditions that must be remediated.
Private developers will avoid the additional risks and costs
associated with such parcels, and without new tools and
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resources, these areas will continue to deteriorate. While
infrastructure finance districts will be helpful in some
areas, they are a new tool and less focused on the challenges
of urban renewal.
This proposal provides another option for California cities to
target and improve the state's disadvantaged poorer areas and
neighborhoods. Re-establishing an urban renewal tool also
complements the state's recent efforts to invest in
disadvantaged communities, and advances greenhouse gas
reduction, transit usage, protection of farmland and open
space, and affordable housing.
2)Background of Community Redevelopment Law. Historically, the
CRL allowed a local government to establish a redevelopment
area and capture all of the increase in property taxes
generated within the area (referred to as "tax increment")
over a period of decades. The law required redevelopment
agencies to deposit 20% of tax increment into a Low and
Moderate Income Housing Fund (L&M fund) to be used to
increase, improve, and preserve the community's supply of low-
and moderate-income housing available at an affordable-housing
cost.
In 2011, the Legislature enacted two bills, AB 26X
(Blumenfield) and AB 27X (Blumenfield), Chapters 5 and 6,
respectively, of the First Extraordinary Session. AB 26X
eliminated redevelopment agencies and established procedures
for winding down the agencies, paying off enforceable
obligations, and disposing of agency assets. AB 26X
established successor agencies, typically the city that
established the agency, to take control of all redevelopment
agency assets, properties, and other items of value.
Successor agencies are to dispose of an agency's assets as
directed by an oversight board, made up of representatives of
local taxing entities, with the proceeds transferred to the
county auditor-controller for distribution to taxing agencies
within each county.
AB 26X also included provisions allowing the host city or
county of a dissolving redevelopment agency to retain the
housing assets and functions previously performed by the
agency, except for funds on deposit in the agency's L&M fund,
and thus become a housing successor. If the host city or
county chooses not to become the housing successor, a local
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housing authority or the state's HCD takes on that
responsibility.
AB 27X allowed redevelopment agencies to avoid elimination if
they made payments to schools in the current budget year and
in future years. In December 2011, the California Supreme
Court in California Redevelopment Association v. Matosantos
upheld AB 26X and overturned AB 27X. As a result, all of the
state's roughly 400 redevelopment agencies dissolved on
February 1, 2012, and local jurisdictions began implementing
AB 26X's provisions to distribute former redevelopment assets
and pay the remaining obligations.
3)If at first you don't succeed. This bill is similar to AB
1080 (Alejo, 2013), which failed in the Senate Appropriations
Committee. This bill is also similar to AB 2280 (Alejo,
2014), which was vetoed by Governor Brown. The veto message
stated:
"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 CRL and incorporates them into the bill rather than
cross-referencing CRL.
4)Housing provisions. Prior to their dissolution, redevelopment
agencies generated up to $1 billion per year for affordable
housing in the state. The bill adds to the affordable housing
provisions of existing CRL in three ways. First, it increases
from 20 to 25% the amount of tax increment revenue that an
Authority must deposit into its L&M fund. Because tax
increment accruing to an authority under this bill would be
less (e.g., it would not include the schools' share), this
would be 25% of a smaller number. 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
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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.
5)Opposition. This bill would grant local governments the power
to take private property through eminent domain and pay for it
using tax increment revenues. The eminent domain provisions
in the bill largely replicate the powers granted to former
redevelopment agencies under CRL. Opponents argue, however,
that this tool was abused by some and took property from
private owners, forcing them to close down their businesses,
depressing property tax revenues, and hurting minority
communities the most. Opponents further question the ability
for Authorities under this bill to allow tax increment
financing to enable these unelected bodies to obligate
taxpayers of a district with no vote of the people to make
payments for the bonds for 45 years. The bill allows an
Authority, after holding three hearings, to adopt a plan by
ordinance if more than 25% but less than 50% of property
owners and residents file protests. EIFDs, on the other hand,
do not give districts the power of eminent domain. Opponents
question why a city would use EIFDs with a voting requirement
and no eminent domain, when they could create a CRIA without a
vote and use eminent domain.
6)Double-referred. This bill was heard in the Senate Governance
and Finance Committee on June 10, 2015, and approved 5-1.
Assembly Votes:
Floor: 63-13
Appr: 13-3
LGov: 7-2
H&CD: 6-1
Related Legislation:
AB 2280 (Alejo, 2014) - would have allowed a local government or
local governments jointly to establish a Community
Revitalization and Investment Authority to use tax increment
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revenues to invest in disadvantaged communities. AB 2280 was
vetoed by the Governor.
AB 1080 (Alejo, 2013) - would have allowed a local government or
local governments jointly to establish a Community
Revitalization and Investment Authority to use tax increment
revenues to invest in disadvantaged communities. AB 1080 was
held on suspense in the Senate Appropriations Committee.
SB 1 (Steinberg, 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. SB 1 died on the
Inactive File on the Senate Floor.
SB 1156 (Steinberg, 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. SB 1156 was vetoed by the Governor.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Wednesday,
July 8, 2015.)
SUPPORT:
The Arc and United Cerebral Palsy California Collaboration
American Planning Association, California Chapter
Building Owners & Managers Association of California
California Apartment Association
California Association for Local Economic Development
California Asian Pacific Chamber of Commerce
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Coalition for Rural Housing
California Special Districts Association
City of Camarillo
City of Glendale
City of Hesperia
City of Indian Wells
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City of Lakewood
City of Mendota
City of Rosemead
City of Sacramento
City of Salinas
City of Thousand Oaks
City Council of Sacramento
Commercial Real Estate Development Association
Glendale City Employees' Association
Housing California
International Council of Shopping Centers
LeadingAge California
League of California Cities
League of California Cities African-American Caucus
League of California Cities Asian & Pacific Islander Caucus
League of California Cities Latino Caucus
Mayor of Sacramento, Kevin Johnson
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Transportation Agency for Monterey County
OPPOSITION:
California Alliance to Protect Private Property Rights
Fieldstead and Company
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