BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 504


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          GOVERNOR'S VETO


          AB  
          504 (Gonzalez)


          As Enrolled  September 14, 2015


          2/3 vote


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          |ASSEMBLY:  |      | (May 14,      |SENATE: |26-14 | (September 9,   |
          |           |53-27 |2015)          |        |      |2015)            |
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          |ASSEMBLY:  |      |(September 10, |        |      |                 |
          |           |52-28 |2015)          |        |      |                 |
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          Original Committee Reference:  L. GOV.




          SUMMARY:  Authorizes a city to delegate to or contract with a  
          nonprofit public benefit corporation for the performance of  
          ministerial planning functions, and requires a city to retain  
          all nonministerial planning functions.  








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          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 ministerial planning functions, and  
            requires cities to retain all nonministerial planning  
            functions.  Should a nonprofit corporation undertake  
            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 certain types of planning functions 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, this bill's provisions would apply to all cities in  
            California, including charter cities, and also defines the  
            terms "ministerial" and "planning function."


            This bill is author-sponsored.









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          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.


            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:  a) The scope and oversight  
            of Civic San Diego; b) Conflicts of interest inherent and  








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            internal to Civic San Diego; c) The entitlement to a community  
            benefits plan; and, d) 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 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  








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            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 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."


          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:








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            "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).


            "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):









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                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 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  








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                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)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.


          6)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.  


          GOVERNOR'S VETO MESSAGE:


          This bill authorizes a city to contract with a nonprofit public  
          benefit corporation to perform ministerial planning functions  
          and requires the city to retain all other planning functions. 


          This legislation imposes statewide rules on local land use  
          planning that are intended to address a dispute in one  
          jurisdiction. These are issues that should be determined at the  
          local level.










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          Analysis Prepared by:                                             
                          Debbie Michel / L. GOV. / (916) 319-3958  FN:  
          0002470