BILL ANALYSIS Ó AB 974 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 974 (Bloom) - As Amended March 26, 2015 ----------------------------------------------------------------- |Policy |Local Government |Vote:|5 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Housing and Community | |4 - 2 | | |Development | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill would allow redevelopment successor agencies, and entities performing the housing functions of former redevelopment agencies (RDAs), to spend bond proceeds from bonds AB 974 Page 2 issued by former RDAs between January 1, 2011, and June 28, 2011. FISCAL EFFECT: Significant General Fund impacts, in the tens of millions of dollars, over several fiscal years resulting from the continued repayment of bonds issued in 2011 from tax increment that would otherwise be redistributed to local taxing entities, including schools. Because the General Fund must backfill any amounts that would otherwise go to schools under Proposition 98's minimum funding guarantee, this bill would result in future General Fund impacts. COMMENTS: 1)Purpose. This bill continues the multi-year effort to allow redevelopment successor agencies to spend bond proceeds from bonds issued by former RDAs in 2011. According to the author, "It is estimated that approximately $750 million in 2011 RDA bond proceeds are currently sitting idle and cannot be used. If these proceeds were spent on their intended projects, it is estimated that 19,000 high wage construction and related jobs would be generated. The State has asserted that the vast majority of the 2011 RDA bonds must be defeased and their proceeds not spent on projects; however, over 90% of these bonds cannot be defeased for 10 years. During this ten year period nearly $1 billion will be spent on the debt service payments for these bonds, and the bond proceeds will continue to go unused. The vast majority of these bonds were issued for public works projects such as infrastructure construction and repair, new public facilities, AB 974 Page 3 and affordable housing. Bondholders who purchased tax-exempt bonds (approximately 70% of the bonds in question) for specific public works projects were promised tax-free returns. Per Federal Tax Law, tax-exempt bond proceeds must be used for their intended purpose, or the bonds could be subject to losing their tax-exempt status." 2)Background. In 2011, the Legislature approved and governor signed two measures, ABX1 26 and ABX1 27 that together dissolved redevelopment agencies as they existed and created a voluntary redevelopment program on a smaller scale. In response, the California Redevelopment Association, the League of California Cities and other partied, filed suit challenging the two measures. The Supreme Court denied the petition for peremptory writ of mandate with respect to ABX1 26 and granted the petition with respect to ABX1 27. As a result of the court's decision, all redevelopment agencies were required to dissolve as of February 1. 2012, and there was no authority for any new redevelopment program. In 2012, AB 1484 (Blumenfield), Chapter 26, made the statutory changes need to achieve budget savings related to the dissolution of redevelopment agencies. AB 1484 clarified the process for dissolving all redevelopment agencies, made various statutory changes associated with the dissolution of redevelopment agencies, and addressed a number of substantive issues related to administrative processes, affordable housing activities, repayment of loans from communities, use of existing bond proceeds, and the disposition or retention of former redevelopment agency assets. AB 1484 specified all proceeds from bonds issued in 2011 must be defeased, the exception being if the redevelopment agency has enforceable obligations with third parties to spend the proceeds. 3)Addressing the Governor's Veto. This bill is similar to AB 2493 (Bloom) of 2014 and AB 981 (Bloom) of 2013, both of which AB 974 Page 4 were vetoed by Governor Brown. AB 2493 would have allowed successor agencies to use proceeds derived from bonds issued between January 1, 2011, and June 28, 2011, if the project was consistent with a sustainable communities strategy or reduced greenhouse gas emissions. In his veto message the Governor stated, "I applaud the author's efforts to craft legislation to target specific projects for funding from 2011 bond proceeds. Funding for this measure, however, would come at the expense of lost property tax dollars to cities and counties that chose not to incur debt during this period, as well as special districts and schools. The cost to the general fund to backfill schools could be significant, to the tune of $500 million, at a time when the state is still recovering from deep recession." To address the veto, this bill would require a successor agency to refinance their 2011 bonds to lower interest rates when refinancing is allowed by the bond's indenture in order to reduce the fiscal impact to the state and other taxing entities due to the use of the 2011 bond proceeds. 4)Related Current Legislation. There are four additional bills regarding redevelopment pending in this Committee: a) AB 654 (Brown) would prohibit revenues derived from a property tax rate approved by voters in a city, county, or special district to pay for the State Water Project to be allocated to the Redevelopment Property Tax Trust Fund. b) AB 806 (Dodd) would make agreements entered into by a AB 974 Page 5 former redevelopment agency (RDA) prior to June 30, 2011, to fund state highway infrastructure improvements enforceable obligations, and makes various technical changes to redevelopment dissolution law regarding appointments to local oversight boards, modifications to existing contracts, and compensation agreements as part of the approval of long-range property management plans. c) AB 1009 (Garcia) would allow revenues from a voter-approved pension property tax to be allocated to the city or county whose voters approved the tax. d) AB 1412 (Perea) would allow for an expedited loan repayment schedule between a former RDA and a city or county, under specified conditions. 1)Related Prior Legislation. There have been numerous bills seeking to amend the statutes governing redevelopment dissolution. Among the most recent: a) AB 1963 (Atkins) Chapter 146, Statutes of 2014, extends the date by which DOF must approve a redevelopment successor agency's long-range management plan until January 1, 2016. b) AB 2493 (Bloom) of 2014 made numerous changes to the redevelopment dissolution process. That bill was vetoed by Governor Brown. c) SB 1129 (Steinberg) of 2014 made numerous changes to the redevelopment dissolution process. That bill was vetoed by Governor Brown. d) SB 1404 (Leno) of 2014 would have allowed San Francisco's successor agency to receive former tax AB 974 Page 6 increment revenues and issue debt to pay for specified replacement housing obligations. That bill was vetoed by Governor Brown. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081