BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 806                           |Hearing    | 6/15/16 |
          |          |                                 |Date:      |         |
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          |Author:   |Dodd                             |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |6/6/16    Amended                |Fiscal:    |No       |
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          |Consultant|Weinberger                                            |
          |:         |                                                      |
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                      Community development: economic opportunity



          Allows all counties and cities to acquire, sell, or lease  
          county-owned or city-owned real property to promote economic  
          development, subject to specified requirements.


           Background 

           The California Constitution (Article XVI, Section Six) prohibits  
          counties and general law cities from making a gift of public  
          funds.  Courts have determined that charter cities are not  
          subject to that prohibition.

          State law generally allows a city to dispose of real property in  
          any way it chooses if doing so is for the common benefit.  A  
          city may sell or lease real property for less than fair market  
          value, without violating the constitutional prohibition against  
          making a gift of public funds, if the sale or lease serves a  
          public purpose.

          State law generally requires a county to sell or lease property  
          using a competitive sealed-bid process.  A county board of  
          supervisors must, by a two-thirds vote, adopt a resolution in a  
          regular open meeting declaring its intention to sell or lease  
          the property.  The resolution must describe the property and the  
          terms upon which it will be sold or leased.  At least three  
          weeks after adopting the resolution, the board must hold a  







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          public meeting at which sealed proposals to purchase or lease  
          the property must be considered.  State law exempts a county  
          from these requirements, and allows it to sell real property at  
          less than fair market value, to provide housing that is  
          affordable to low and moderate income residents.

          Until 2011, the Community Redevelopment Law allowed local  
          officials to set up redevelopment agencies (RDAs), prepare and  
          adopt redevelopment plans, and finance redevelopment activities.  
           The Law authorized RDAs to sell or lease property without  
          public bidding as long as the RDA provided public notice and  
          held a public hearing.  Citing a significant State General Fund  
          deficit, Governor Brown's 2011-12 budget proposed eliminating  
          RDAs and returning billions of dollars of property tax revenues  
          to schools, cities, and counties to fund core services.  Among  
          the statutory changes that the Legislature adopted to implement  
          the 2011-12 budget, AB X1 26 (Blumenfield, 2011) dissolved all  
          RDAs.  The Community Redevelopment Law specified the manner in  
          which former redevelopment agencies could sell or lease real  
          property.  Those provisions now apply to successor agencies to  
          redevelopment agencies. State law requires successor agencies to  
          prepare a long-range property management plan and dispose of  
          property under that plan. 

          If a successor agency has transferred property to a city or  
          county as part of a long-range property management plan, state  
          law allows the city or county to use use alternative procedures  
          to dispose of the property for economic development purposes (SB  
          470, Wright, 2013).  The 2013 Wright bill also allowed a city or  
          county to establish a program under which it loans funds to  
          owners or tenants for the purpose of rehabilitating commercial  
          buildings or structures.

          Some local officials want the Legislature to expand counties'  
          and general law cities statutory authority to acquire, sell, or  
          lease public property for economic development by allowing the  
          alternative procedures enacted by the 2013 Wright bill to be  
          used for any city- or county-owned property.


           Proposed Law

           Assembly Bill 806 deletes statutory language that limits the  
          authority to sell or lease city-owned or county-owned property  








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          for economic development purposes to property that is governed  
          by a long-range property management plan.  As a result, the bill  
          allows a city, county, or city and county to sell or lease any  
          county-owned or city-owned property to create an economic  
          opportunity, as defined in state law.

          AB 806 allows a city, county, or city and county to acquire  
          property in furtherance of the creation of an economic  
          opportunity. 

          AB 806 requires that the creation of an economic opportunity  
          must be subject to a specified statute that requires public  
          agencies to disclose specified information, hold hearings, and  
          produce reports relating to economic development subsidies.

          For the purposes of specified statutes authorizing the sale,  
          lease, or transfer of property for the creation of an economic  
          opportunity, AB 806 prohibits a city, county, or city and county  
          from selling, leasing, or otherwise transferring, at a price  
          that is less than the fair market value, any real property that  
          was acquired through eminent domain.  AB 806 exempts from this  
          prohibition any property that is governed by a long-range  
          property management plan pursuant to a specified statute.

          AB 806 requires that a loan provided by a city or county to  
          owners or tenants for the purpose of rehabilitating commercial  
          buildings or structures must be in the form of a written loan  
          agreement that includes:
                 A payment schedule,

                 The terms for interest calculation,

                 The rights and remedies of the parties in the case of  
               default, and

                 Any other material terms of the loan.

          AB 806 specifies that loan agreements, sale agreements, and  
          lease agreements that meet specified criteria are included in  
          the statutory definition of "economic opportunity."

          AB 806 requires that, before entering into a loan agreement, a  
          city, county, or city and county, must find, after a public  
          hearing, that the assistance is necessary for the economic  








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          feasibility of the development and that the assistance cannot be  
          obtained on economically feasible terms in the private market.

          The bill declares that:
                 A legislative body's determinations made pursuant to  
               specified statutes governing the acquisition, sale, lease,  
               or transfer of real property for the creation of an  
               economic opportunity are final and conclusive.

                 Specified statutes amended by the bill are an  
               alternative to any authority of a city, county, or city and  
               county to create an economic opportunity or to acquire,  
               sell, or lease property for economic development, found in  
               the Constitution, state law, local ordinance, or charter.

                 Specified statutes amended by the bill do not limit or  
               in any way affect, the application of any other such laws.

          AB 806 makes additional clarifying and conforming changes to  
          state law.


           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  AB 806 provides cities and counties  
          with additional flexibility to use city- or county-owned real  
          property to fulfill economic development goals.  In the wake of  
          redevelopment agencies' dissolution, local officials have lost  
          many of the tools that they previously used to promote economic  
          development within their communities.  AB 806 restores some  
          significant powers that cities and counties previously exercised  
          over the acquisition and disposition of public property pursuant  
          to provisions of the Community Redevelopment Law. The bill  
          builds upon the provisions of SB 470 (Wright, 2013) by granting  
          local officials authority to sell or lease any publicly owned  
          real property at less than fair market value to create an  
          economic opportunity.  AB 806 will benefit communities  
          throughout California by helping local officials get their  
          economic development efforts back on track.








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          2.   Accountability  .  State laws requiring advanced notice of a  
          proposed sale of land owned by a county, a public hearing on the  
          sale, a super-majority vote by county supervisors, and a  
          competitive sealed-bid sales process are intended to protect  
          taxpayers' interests in publicly-owned assets.  These  
          requirements ensure that local officials dispose of  
          publicly-owned lands transparently, with an opportunity for  
          public input, and in a manner that maximizes the compensation  
          the county receives.  AB 806 seeks to provide transparency for  
          the sale or lease of public property to create an economic  
          opportunity by requiring that public officials who use the  
          bill's provisions must comply with notice, hearing, and  
          reporting requirements that apply to economic development  
          subsidies.  The Committee may wish to consider whether AB 806's  
          broad exemption from the statutory requirements that generally  
          govern county land sales, including the super-majority vote and  
          sealed bidding requirements, strikes the right balance between  
          administrative flexibility and political accountability for  
          county property sales and leases.

          3.   Final and conclusive  .  One way that members of the public  
          can hold public officials accountable for selling or leasing  
          public property is by filing a lawsuit and asking a court to  
          determine whether a sale or lease complied with relevant state  
          laws.  AB 806 requires local legislative bodies to make  
          specified findings and determinations and, in some cases,  
          requires that evidence be included in the public record to  
          support their decisions.  However, the bill also declares that a  
          local legislative body's determinations are "final and  
          conclusive."  By including this declaration, AB 806 appears to  
          limit judicial discretion when reviewing the validity of a local  
          legislative body's determinations and whatever evidence may  
          support them.  The portions of the Community Redevelopment Law  
          that required city councils or county boards of supervisors to  
          make similar determinations relating to the sale or lease of  
          redevelopment property did not declare those determinations to  
          be "final and conclusive."  The Committee may wish to consider  
          amending AB 806 to delete the language declaring that local  
          officials' determinations are final and conclusive to allow for  
          greater judicial scrutiny of actions taken under the bill's  
          provisions.

          4.   Legislative history  .  As passed by the Assembly, AB 806  








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          contained provisions amending the state laws that govern the  
          dissolution of former redevelopment agencies.  The July 13, 2015  
          amendments deleted AB 806's contents and inserted language  
          relating to local government permit requirements for  
          stand-mounted antenna.  The Senate Governance & Finance  
          Committee never heard either of those versions of the bill.  The  
          April 14, 2016 amendments deleted AB 806's contents and inserted  
          the current language relating to local governments' property  
          management powers.     


           Assembly Actions

           Not relevant to the April 14, 2016 version of the bill.


           Support and  
          Opposition   (6/9/16)


           Support  :  California Association for Local Economic Development;  
          Cities of American Canyon, Azusa, Camarillo, Commerce,  
          Fairfield, Industry; Napa, Norwalk, and Redding; Fairfield  
          Suisun Chamber of Commerce; League of California Cities; Lystek  
          International, Ltd.


           Opposition  :  Unknown.



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