BILL ANALYSIS Ó
AB 2
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
2 (Alejo and Eduardo Garcia)
As Amended September 4, 2015
Majority vote
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|ASSEMBLY: | | (May 11,2015) |SENATE: |29-10 | (September 9, |
| |63-13 | | | |2015) |
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Original Committee Reference: H. & C.D.
SUMMARY: Authorizes local governments to create Community
Revitalization and Investment Authorities (authorities) to use
tax increment revenue to improve the infrastructure, assist
businesses, and support affordable housing in disadvantaged
communities. 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)Allows local governments to form an authority in two ways:
a) A city, county, or city and county can adopt a
resolution creating an authority governed by a five-member
board that is appointed by the city, county, or city and
county's legislative body. Three-board members must be
members of the city, county, or city and county's
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legislative body and two must be public members who live
or work within the community revitalization and investment
area.
b) A city, county, city and county, and special district,
in any combination, may create an authority by entering
into a joint powers agreement. The authority's governing
body must be comprised of a majority of members from the
legislative bodies of the public agencies that created the
authority. The governing body must include at least two
public members who are appointed by a majority of the
authority's board and must live or work within the
community revitalization and investment area.
3) Prohibits:
a) School entities from participating in an authority.
b) Redevelopment successor agencies from participating in
an authority.
c) 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 specified conditions.
4) Allows an authority to carry out a community revitalization
and investment plan (plan) within a community revitalization
and investment area. This bill requires that 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) An annual median household income that is less than
80% of the statewide annual median income.
b) Three of the following four conditions:
i) Nonseasonal unemployment that is at least 3% higher
than the statewide median, as defined by a specified
labor market report.
ii) Crime rates that are 5% higher than the statewide
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median crime rate, as defined by a specified Department
of Justice report.
iii) Deteriorated or inadequate infrastructure such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks.
iv) Deteriorated commercial or residential structures.
5) Allows an authority to carry out a plan within a community
revitalization and investment area established within a
former military base that is principally characterized by
deteriorated or inadequate infrastructure and structures.
6) Allows the legislative body or bodies of the local
government or governments that created the authority to
appropriate any amount the legislative body or bodies deem
necessary for the administrative expenses and overhead of the
authority. The money appropriated may be paid to the
authority as a grant to defray the expenses and overhead, or
as a loan to be repaid upon the terms and conditions as the
legislative body may provide. If appropriated as a loan, the
property owners and residents within the plan area must be
made third-party beneficiaries of the repayment of the loan.
This bill specifies that the term "administrative expense"
includes expenses of planning and dissemination of
information.
7) Enumerates an authority's powers and allows an authority to
dedicate funding to specified infrastructure, low and
moderate income housing, brownfield cleanup, seismic
retrofits, property acquisition, construction of specified
structures for provision of air rights, and direct assistance
to businesses for industrial and manufacturing uses.
8) Deems an authority to be a local public agency subject to
the Ralph M. Brown Act, the Public Records Act, and the
Political Reform Act.
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9) Requires an authority to adopt a plan that may include a
provision for the receipt of tax increment funds generated
within the area, provided the plan includes eight specified
elements.
10)Specifies the manner in which an authority must consider
adoption of the plan, including requiring public hearing, a
protest process and, in some cases, voter approval of the
plan through a specified election process.
11)Directs an authority to consider and adopt a plan amendment
in accordance with the procedures that applied to the
consideration and adoption of the original plan.
12)Deems an authority to be the "agency" described in
California Constitution Article XVI, Section 16, for purposes
of receiving tax increment revenues.
13)Allows a plan to include a provision for the receipt of tax
increment funds.
14)Allows any city, county, or special district that receives
ad valorem property taxes from property located within an
area to adopt a resolution directing the county
auditor-controller to allocate some or all of its share of
tax increment funds within the area covered by the plan to
the authority. A resolution may be repealed by giving the
county auditor-controller 60 days' notice. However, 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.
15)Requires that, before adopting a resolution allocating a
share of its tax increment funds to an authority, a city,
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county, or special district must approve a memorandum of
understanding with the authority governing the authority's
use of tax increment funds for administrative and overhead
expenses.
16)Requires that a provision for the receipt of tax increment
funds must become effective in the tax year that begins after
the December 1 following the adoption of the plan.
17)Specifies the manner in which a county auditor-controller
must allocate tax revenue to an authority upon adoption of a
plan that includes a provision for the receipt of tax
increment funds.
18)Requires that an authority's plan for an area that includes
land formerly or currently designated as part of a
redevelopment area must subordinate tax increment amounts
received by the authority to any preexisting enforceable
obligation, as defined in statute.
19)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.
20)Requires that at least 25% of all tax increment revenues
that are allocated to the authority from any participating
entity must be deposited into a separate Low- and
Moderate-Income Housing Fund and used by the authority for
the purposes of increasing, improving, and preserving the
community's supply of low- and moderate-income housing
available at affordable housing cost, as defined in state
law.
21)Allows an 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.
22)Enumerates detailed requirements governing the manner in
which an authority may manage and expend tax increment
revenues deposited into a Low- and Moderate-Income Housing
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Fund.
23)Requires every plan to contain a provision that whenever
dwelling units housing persons and families of low- or
moderate-income are destroyed or removed from the low- and
moderate-income housing market as part of a revitalization
project the authority must, within two years of such
destruction or removal, rehabilitate, develop, or construct,
or cause to be rehabilitated, developed, or constructed, for
rental or sale to persons and families of low- or
moderate-income an equal number of replacement dwelling units
at affordable housing costs, as defined by state law, within
the territorial jurisdiction of the authority.
24)Requires an authority to prepare a feasible method or plan
for relocating:
a) Families and persons to be temporarily or permanently
displaced from housing facilities in the plan area; and
b) Nonprofit local community institutions to be
temporarily or permanently displaced from facilities used
for institutional purposes in the project area.
25)Requires the relocation plan to comply with the relocation
plan and assistance requirements of state law.
26)Requires an authority to annually review the plan, prepare
an independent financial audit, and adopt an annual report in
a public hearing.
27)Provides that if an authority fails to provide the annual
report, the authority shall not spend any funds received
pursuant to a resolution, as specified, until the authority
has provided the report, except for funds necessary to carry
out its specified obligations regarding housing for persons
of low- and moderate-income.
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28)Requires an authority to conduct a protest proceeding every
10 years. If between 25% and 50% of residents and property
owners file protest, the authority must not initiate any new
projects until an election of property owners and residents
is held. If a majority of the electorate votes against the
authority, it must not take any further action to implement
the plan.
29)Requires an authority to contract every five years for an
independent audit to determine compliance with affordable
housing maintenance and replacement requirements, which must
be conducted according to guidelines established by the
Controller. An authority must provide a copy of the
completed audit to the Controller.
30)Requires, if an audit demonstrates a failure to comply with
the statutory requirements, that an authority must adopt and
submit to the Controller, as part of the audit, a plan to
achieve compliance with those provisions. The plan must
contain specified means of achieving compliance.
31)Requires the Controller to review and approve the compliance
plan, and require the plan to stay in effect until compliance
is achieved.
32)Enumerates penalties, including specified fines, which apply
to an authority that fails to provide a copy of a completed
audit to the Controller after receiving a written notice from
the Controller. The Attorney General may, at the
Controller's request, take action to collect the fines.
33)Provides that if the Attorney General fails to respond to
the Controller's request within 90 days of its receipt, then
any other available remedies may be exercised.
34)Provides that an action filed pursuant to this section to
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compel an authority to comply with this section is in
addition to any other remedy and is not an exclusive means to
compel compliance.
The Senate amendments:
1)Correct numerous cross-references, address renumbering issues
and make technical, clarifying changes.
2)Expand on the notice requirements for required meetings and
public hearings, and delete the provision permitting an
authority to provide notice of the public hearings to tenants
of properties within the proposed area of the plan in a manner
of its choosing.
3)Clarify that if less than 25% of the combined number of
property owners and residents in the area who are at least 18
years of age file a protest, the authority may adopt the plan
at the conclusion of the third public hearing by ordinance.
4)Provide that if the authority is loaned funding for
administrative expenses, both the property owners and
residents within the plan area will be made third party
beneficiaries of the repayment of the loan.
5)Prohibit 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.
6)Clarify that an authority is prohibited from spending revenue
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for any purpose that is not identified as part of the plan.
7)Require the relocation plan to comply with the relocation plan
and assistance requirements of state law.
8)Expand on the required elements of an authority's housing
program.
9)Delete the provision that nothing in existing state law
defining income shall prevent the authority from adopting
separate family size adjustment factors or programmatic
definitions of income to qualify households, persons, and
families for the programs of the authority.
10)Provide that the authority shall require the lower- and very
low-income dwelling units developed pursuant to the plan to
remain available at an affordable housing cost to lower- and
very low-income households for at least 45 years, as
specified.
11)Expand on the required elements of the replacement housing
plan.
12)Limit replacement housing to within the plan area.
13)Require the authority, not less than 30 days prior to
adopting a replacement housing plan by resolution, to make
available a draft of the proposed replacement housing plan for
review and comment.
14)Delete the provision allowing an authority, for specified
purposes, to aggregate new or substantially rehabilitated
dwelling units in one or more project areas, if the authority
finds, based on substantial evidence, after a public hearing,
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that the aggregation will not cause or exacerbate racial,
ethnic, or economic segregation.
15)Specify that if an authority fails to provide the annual
report, the authority shall not spend any funds received
pursuant to a resolution, as specified, until the authority
has provided the report, except for funds necessary to carry
out its specified obligations regarding housing for persons of
low- and moderate-income.
16)Provide that, if the Attorney General fails to respond to the
Controller's request to collect fines from a noncompliant
authority within 90 days of its receipt, then any other
available remedies may be exercised.
17)Provide that an action filed pursuant to this section to
compel an authority to comply with this section is in addition
to any other remedy and is not an exclusive means to compel
compliance.
FISCAL EFFECT: According to the Senate Appropriations
Committee:
1)Potentially major redirection of local property tax revenues
from participating local agencies, excluding schools, to an
authority over a period of decades. Since the bill prohibits
schools from participating, there is no state fiscal impact
related to the redirection of local property tax revenues.
2)Estimated one-time costs to the State Controller's Office
(SCO) of up to $100,000 before the end of 2021 (General Fund)
to establish guidelines for periodic financial and performance
audits that include provisions for determining compliance with
affordable housing requirements as well as secondary review
and compliance measures for failure to achieve initial
compliance on the regular audit schedule. (Staff assumes up to
1 Personnel Year of audit staff time)
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3)Estimated periodic SCO costs in the range of $50,000 to
$100,000 (General Fund) on a periodic basis for accepting
audits and reviewing and approving secondary compliance plans
submitted by agencies that fail to comply with initial audit
requirements. (Staff assumes up to 1PY of audit work on a
periodic basis). These costs would only be incurred to the
extent an agency is out of compliance.
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 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 AB 27 X1. 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
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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 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. 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 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,
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what economic development tool can local governments use? This
proposal provides a viable option targeting the state's
disadvantaged poorer areas and neighborhoods."
Arguments in support: Supporters argue that eliminating
redevelopment agencies did not eliminate the need for California
communities to build more affordable housing, eliminate blight,
foster business activity, clean up contaminated brownfields, and
create jobs. This bill is a tool that can be used in the
state's disadvantaged communities, which was the original focus
of redevelopment. Supporters contend that the bill will ensure
public accountability by requiring an authority to conduct an
annual review and reporting process, and periodically allows
local residents to prohibit an authority from taking further
actions. While it is unrealistic to expect that a single
economic development tool will work in all California
communities, in supporters' view this bill is a viable option
for bringing investments to communities that are in need of
vital services.
Arguments in opposition: Opponents are concerned that this bill
would set up new government entities with the power of eminent
domain, and contend that the beneficiaries of these property
takings are often developers and large business interests. They
oppose provisions in this bill which allow authorities to use
land acquisition and management powers that largely replicate
powers exercised by former redevelopment agencies. Opponents
also question the need for the bill, as last year the
Legislature passed SB 628 (Beall), Chapter 785, Statutes of
2014, which provided local governments with new tax increment
financing tools to pay for local economic development by forming
an enhanced infrastructure financing district (EIFD). EIFDs do
not give local governments the power of eminent domain.
Related legislation:
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AB 2280 (Alejo) of 2014: Would have established an authority
and given it the same rights, responsibilities and powers as
redevelopment agencies. 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:
Rebecca Rabovsky / H. & C.D. / (916) 319-2085
FN:
0002352