BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 974


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          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        |
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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