BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 806 |Hearing | 6/15/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Dodd |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/6/16 Amended |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Weinberger | |: | | ----------------------------------------------------------------- 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 AB 806 (Dodd) 6/6/16 Page 2 of ? 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 AB 806 (Dodd) 6/6/16 Page 3 of ? 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 AB 806 (Dodd) 6/6/16 Page 4 of ? 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. AB 806 (Dodd) 6/6/16 Page 5 of ? 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 AB 806 (Dodd) 6/6/16 Page 6 of ? 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. -- END --