BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 504


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          ASSEMBLY THIRD READING


          AB  
          504 (Gonzalez)


          As Amended  March 26, 2015


          Majority vote


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          |Committee       |Votes |Ayes                 |Noes                 |
          |                |      |                     |                     |
          |                |      |                     |                     |
          |----------------+------+---------------------+---------------------|
          |Local           |6-3   |Gonzalez, Alejo,     |Maienschein, Linder, |
          |Government      |      |Chiu, Cooley,        |Waldron              |
          |                |      |Gordon, Holden       |                     |
          |                |      |                     |                     |
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          SUMMARY:  Authorizes a city to delegate to or contract with a  
          nonprofit public benefit corporation for certain administrative or  
          ministerial planning functions, and requires a city to retain all  
          nonadministrative or nonministerial planning functions.   
          Specifically, this bill:  


          1)Allows a city to delegate to, or authorize pursuant to a  
            contract with, a nonprofit public benefit corporation, as  
            defined, the performance of administrative or ministerial  
            planning functions and powers.










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          2)Requires a city to retain all nonadministrative or  
            nonministerial planning functions.


          3)Requires a nonprofit public benefit corporation performing  
            administrative or ministerial planning functions and powers to  
            comply with the city's charter, contracting rules, municipal  
            code, ordinances, and any other applicable parts of a general  
            plan, community plan, specific plan, or other plan, and all  
            applicable local and state laws, including, but not limited to,  
            the California Public Records Act, and the Ralph M. Brown Act.


          4)Requires any planning action taken by a nonprofit public benefit  
            corporation to be appealable to the legislative body of the  
            city.


          5)Requires, on or before July 1, 2016, and annually thereafter for  
            as long as the planning functions and powers continue to be  
            delegated or an authorizing contract is in effect pursuant to 1)  
            above, a nonprofit public benefit corporation to report to the  
            legislative body of the city on its planning functions it has  
            undertaken in the previous calendar year that includes, but is  
            not limited to, a detailed description of each planning function  
            and an explanation of how it is consistent with the city's  
            charter, municipal code, ordinances, and any applicable parts of  
            a general plan, community plan, specific plan or other plan, and  
            all applicable local and state laws.


          6)Requires each report to be reviewed and approved by the  
            legislative body of the city at a noticed public hearing.


          7)Defines a nonprofit public benefit corporation as a corporation  
            organized under the Nonprofit Public Benefit Corporation Law.










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          8)States that the Legislature hereby finds and declares that  
            maintaining uniformity in the planning responsibilities of  
            cities within this state, including charter cities, has a direct  
            impact on the well-being of all residents of this state, and  
            that the Legislature finds and declares that authorizing a city  
            to delegate to, or authorize pursuant to a contract with, a  
            nonprofit public benefit corporation the performance of  
            administrative or ministerial planning functions and powers  
            within the State of California is an issue of statewide concern  
            and not a municipal affair.  Declares that this act shall apply  
            to every city in this state, including a charter city and  
            charter city and county.


          EXISTING LAW:  


          1)Allows a city to make and enforce within its limits all local,  
            police, sanitary, and other ordinances and regulations not in  
            conflict with general laws.


          2)Establishes the Nonprofit Corporation Law in the Corporations  
            Code, and allows a nonprofit public benefit corporation to be  
            formed under the law for any public or charitable purposes, as  
            specified.


          FISCAL EFFECT:  None


          COMMENTS:  


          1)Bill Summary.  This bill allows cities to delegate to, or  
            authorize pursuant to a contract with, a nonprofit public  
            benefit corporation (nonprofit corporation), as defined, for the  
            performance of administrative or ministerial planning functions  
            and powers, and requires cities to retain all nonadministrative  








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            or nonministerial planning functions.  Should a nonprofit  
            corporation undertake administrative or ministerial planning  
            functions, this bill requires the nonprofit to comply with the  
            city's charter, contracting rules, municipal code, ordinances,  
            and any other parts of a general plan, community plan, specific  
            plan, or other plan, and all applicable local and state laws,  
            including, but not limited to, the California Public Records Act  
            and the Ralph M. Brown Act.  This bill requires any planning  
            action taken by a nonprofit corporation to be appealable to the  
            legislative body of the city, and requires the nonprofit  
            corporation to report annually to the city on the planning  
            functions it has undertaken in the previous calendar year, and  
            how those actions are consistent with the city's charter,  
            municipal code, ordinances, and other specified plans and laws.   
            This bill states that this subject of delegation of powers is an  
            issue of statewide concern, and not a municipal affair, and  
            thereby, the bill's provisions would apply to all cities in  
            California, including charter cities.


            This bill is author-sponsored.


          2)Nonprofit Public Benefit Corporations and Background on Civic  
            San Diego.  Existing law allows a nonprofit public benefit  
            corporation to be formed under the Nonprofit Corporation Law  
            contained in the Corporations Code, for any "public" or  
            "charitable" purposes.  


            The City of San Diego formed Centre City Development Corporation  
            (CCDC) in 1975 and the Southeastern Economic Development  
            Corporation (SEDC) in 1980, to provide economic development  
            services.  The City of San Diego, over time, delegated some land  
            use approval functions to both CCDC and SEDC, and in 2012, CCDC  
            was renamed to Civic San Diego, and SEDC was merged into Civic  
            San Diego.










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            Civic San Diego is a nonprofit public benefit corporation,  
            formed under the California nonprofit public benefit corporation  
            law, and is organized and operated exclusively for charitable  
            purposes.  Civic San Diego has one single member that has voting  
            rights - the City of San Diego.  Civic San Diego is not a city  
            department, and Civic San Diego employees are not City of San  
            Diego employees.  In recent years, Civic San Diego has been  
            carrying out much of the winding down of the City of San Diego's  
            former redevelopment agency (RDA), under a consultant agreement  
            with the Successor Agency and Housing Successor Agency, and has  
            recently expressed an interest in expanding its scope beyond its  
            current role into the neighborhoods of Encanto and City Heights.


            On April 10, 2015, a petition was filed in the Superior Court of  
            California, County of San Diego by the San Diego County Building  
            and Construction Trades Council, AFL-CIO, and Murtaza Baxamusa,  
            Ph.D., a Director on the Civic San Diego Board of Directors,  
            against Civic San Diego and the City of San Diego for  
            declaratory relief concerning:  1) The scope and oversight of  
            Civic San Diego; 2) Conflicts of interest inherent and internal  
            to Civic San Diego; 3) The entitlement to a community benefits  
            plan; and, 4) The entitlement to a formal appeals process for  
            decisions made by Civic San Diego.


          3)Author's Statement.  According to the author, "Prior to the  
            dissolution of statewide redevelopment, California allowed  
            cities and counties the authority to establish redevelopment  
            agencies (RDAs) in order to eliminate blight through  
            development, reconstruction and rehabilitation of residential,  
            commercial, industrial and retail districts. These activities  
            were funded by local property taxes and subject to city or  
            county approval.


            "After the dissolution of redevelopment, the organizations that  
            the City of San Diego used to administer its RDA program merged  
            to form a nonprofit organization that is now known as Civic San  








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            Diego - which has land use authority in various San Diego  
            neighborhoods to perform planning, zoning and permitting  
            functions.  Despite the dissolution of redevelopment, Civic San  
            Diego has continued to permit development but without the  
            benefit of local property tax financing.


            "In an effort to replace this lost funding, Civic San Diego  
            successfully applied for roughly $58 million in federal new  
            market tax credits, which are required to be used in low-income  
            communities.  However, unlike redevelopment funds, allocating  
            these tax credits does not require approval by the city council,  
            nor does AB 504 seek to require city council approval of the  
            purpose.


            "Moreover, Civic San Diego has pursued plans to expand their  
            permitting and planning authority to include the City of San  
            Diego neighborhoods of City Heights and Encanto.  Using new  
            market tax credits and bank loans, Civic San Diego has begun  
            putting together a $100 million investment fund to finance  
            development projects that it could potentially have the ability  
            to permit and approve without oversight by the city council,  
            which voters elected to make decisions regarding the planning,  
            zoning and permitting of development in their neighborhoods.


            "California's decision to end redevelopment eliminated  
            requirements regarding community reinvestment work done by  
            groups like Civic San Diego. As it stands now, if residents do  
            not agree with what Civic San Diego has planned for their  
            community, they can only go to the board of directors of this  
            nonprofit organization - which is not accountable to the city  
            council that was elected to be stewards of the city's  
            development.


            "Civic San Diego's potential authority to dramatically engineer  
            the future of neighborhoods with little supervision or  








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            accountability presents a serious conflict of interest.   
            Furthermore, the City of San Diego's arrangement with Civic San  
            Diego is comparatively new, unique in the State of California,  
            and has not been sufficiently examined.  Local leaders and good  
            government advocates have even openly questioned the legality of  
            the arrangement.


            "AB 504 will address this conflict of interest and clarify state  
            law for future local government arrangements by requiring any  
            zoning, planning and permitting activity by a private individual  
            or nonprofit organization made on behalf of a local government  
            to earn final approval by the local government's governing board  
            before implementation."


          4)Delegation of Land Use Powers and Legislative Counsel Opinion.   
            The California Constitution allows a city to "make and enforce  
            within its limits, all local, police, sanitary, and other  
            ordinances and regulations not in conflict with general laws,  
            known as the police power of cities."  It is from this  
            fundamental power that local governments derive their authority  
            to regulate land through planning, zoning, and building  
            ordinances, thereby protecting public health, safety and  
            welfare.


            The California Supreme Court has stated:


            "Under the police power granted by the Constitution, counties  
            and cities have plenary authority to govern, subject only to the  
            limitation that they exercise this power within their  
            territorial limits and subordinate to state law.  Apart from  
            this limitation, the 'police power [of a county or city] under  
            this provision?is as broad as the police power exercisable by  
            the Legislature itself.   Candid Enters., Inc. v. Grossmont  
            Union High                              School Dist., 39 Cal. 3d  
            878, 885 (1985).








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            "A city must act within all applicable statutory provisions so  
            there will be no conflict with general laws.  A city's actions  
            must also meet constitutional principles of due process;       
            they must be reasonable and nondiscriminatory, and not arbitrary  
            or capricious.  


            "A city also has the authority to enter into contracts that  
            enable it to carry out its necessary functions.  A city's  
            authority to enter into such contracts is not absolute, and it  
            is well                                                  settled  
            that 'a local government may not contract away its right to  
            exercise its police power in the future, and land use  
            regulations involve the exercise of police power.'"      Alameda  
            County Land Use Assn. v. City of Hayward (1995) 38 Cal.App.4th  
            1716, 1724.


            According to a Legislative Counsel opinion dated April 17, 2015,  
            at the request of the author of this bill to examine "whether a  
            city may contract away its land use authority to a nonprofit  
            public benefit corporation and whether the Legislature may  
            authorize a city to contract away its land use authority to a  
            nonprofit public benefit corporation," Legislative Counsel drew  
            the following conclusion (for brevity, the citations are  
            removed):


                We have determined that a city may not, and the  
                Legislature may not authorize a city to, contract away  
                to a nonprofit entity its police powers, which includes  
                land use authority.  However, it is well established  
                that a "governmental entity does not contract away its  
                police power unless the contract amounts to the  
                'surrender' or 'abnegation' of a proper governmental  
                function."  Whether a contract amounts to a surrender or  
                abnegation of a local government's police power will  








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                depend upon the facts of the contract.  With respect to  
                contracts with private parties, "the fact that a third  
                party, whether private or governmental, performs some  
                role in applications and implementation of the  
                established legislative scheme does not render the  
                legislation invalid as an unlawful delegation.  The  
                general rule is that while a public body may not  
                delegate its power of control over public affairs to a  
                private group, it may delegate the performance of  
                administrative functions to such groups if it retains  
                ultimate control over administration so that it may  
                safeguard the public interest."  Ultimately, "[p]owers  
                which require the exercise of judgment and  
                discretion?.must necessarily remain with the public  
                agency and cannot be delegated."  Thus, the issue in  
                each case of delegation is whether ultimate control over  
                matters involving the exercise of judgment and  
                discretion has been retained by the public entity.  If  
                the performance of the function being delegated does not  
                constitute the exercise of police powers because the  
                city retains ultimate control of matters involving  
                exercise of judgment and discretion, then a city may,  
                and the Legislature may authorize a city to, delegate  
                such a function.


                For the foregoing reasons, it is our opinion that a city  
                may not contract away its land use authority to a  
                nonprofit corporation, and the Legislature may not  
                authorize a city to contract away its land use authority  
                to a nonprofit corporation.  However, it is also our  
                opinion that a city may, and the Legislature may  
                authorize a city to, by contract, delegate to a  
                nonprofit corporation the performance of certain  
                functions so long as that delegation does not constitute  
                a surrender or abnegation of the city's police power.


          5)Policy Considerations.  The Legislature may wish to consider the  








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            following:


             a)   Terminology.  The terms used in this bill -  
               "administrative" and "ministerial" planning functions and  
               powers could be open to interpretation at the local level.   
               Given the case law on this issue of delegation of legislative  
               land use functions, the Legislature may wish to consider  
               whether these terms are consistent with court actions and  
               plainly understood.


             b)   Necessary?  Given the lawsuit filed on April 10, 2015, the  
               Legislature may wish to consider whether legislation is  
               necessary, or whether this issue is best left to the Courts  
               to decide.


          6)Arguments in Support.  Supporters argue that clarifying Civic  
            San Diego's legal standing will remove uncertainty and help  
            reduce the possibility of expensive and disruptive lawsuits, and  
            that the current arrangement does not provide the public  
            transparency and accountability necessary to incorporate public  
            opinion and community needs.


          7)Arguments in Opposition.  Opponents argue that this bill could  
            slow development to a crawl, putting at risk millions in  
            development and thousands of good paying jobs.  




          Analysis Prepared by:                                               
                          Debbie Michel / L. GOV. / (916) 319-3958  FN:  
          0000327











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