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
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|Policy |Local Government |Vote:|5 - 3 |
|Committee: | | | |
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| |Housing and Community | |4 - 2 |
| |Development | | |
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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
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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,
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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
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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
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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
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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