BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 2031           Hearing Date:     6/14/2016
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          |Author:   |Bonta, Atkins                                         |
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          |Version:  |3/17/2016                                             |
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          |Urgency:  |No                     |Fiscal:      |No              |
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          |Consultant|Alison Dinmore                                        |
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          SUBJECT:  Affordable Housing Special Beneficiary Districts


            DIGEST:  This bill authorizes a city or county that formed a  
          redevelopment agency (RDA) that has received a finding of  
          completion from the Department of Finance (DOF) to bond against  
          the property tax revenues it receives as a result of RDA  
          dissolution for affordable housing purposes, without voter  
          approval.  

          ANALYSIS:
          
          Existing law:
          
            1)  Dissolves RDAs as of February 1, 2012, and institutes a  
              process for winding down their activities.

            2)  Requires DOF to issue a finding of completion to the  
              successor agency within five business days, once the  
              following conditions have been met and verified:

               a)     The successor agency has paid the full amount as  
                 determined during the due diligence reviews and the  
                 county auditor-controller has reported those payments to  
                 DOF


               b)     The successor agency has paid the full amount as  
                 determined during the July true-up process








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               c)     The successor agency has paid the full amount upon a  
                 final judicial determination of the amounts due and  
                 confirmation that those amounts have been paid by the  
                 county auditor-controller



            1)  Allows the successor agency, upon receiving the finding of  
              completion, to:

              a)    Retain dissolved RDA assets


              b)    Place loan agreements between the former RDA and  
                sponsoring entity on the Recognized Obligation Payments  
                Schedule (ROPS), as an enforceable obligation, provided  
                the oversight board makes a finding that the loan was for  
                legitimate redevelopment purposes


              c)    Utilize proceeds derived from bonds issued prior to  
                January 1, 2011, in a manner consistent with the original  
                bond covenants

            1)  Requires, after DOF issues a finding of completion, the  
              successor agency to prepare a long-range property management  
              plan that addresses the disposition and use of the real  
              properties of the former RDA and requires the report to be  
              submitted to the oversight board and DOF for approval no  
              later than six months following the issuance to the  
              successor agency of the finding of completion.  

          This bill:

            1)  Defines "affordable housing" as a dwelling for purchase or  
              lease by persons of families who qualify as low or moderate  
              income, very low-income households, or extremely low-income  
              households. 

            2)  Defines "beneficiary district" as an affordable housing  
              special beneficiary district that exists for a limited  
              duration as a distinct local governmental entity for the  
              purposes of receiving rejected distributions of property tax  
              revenues and providing financial assistance to promote  








          AB 2031 (Bonta)                                    Page 3 of ?
          
          
              affordable housing within its boundaries.  

            3)  Defines "distributions of property tax revenues" to mean  
              all property tax revenues a city or county is entitled to  
              receive as a result of the dissolution of RDAs.

            4)  Authorizes a city or county that formed an RDA and is the  
              successor agency that received a finding of completion after  
              dissolving its RDA from DOF to adopt an ordinance or  
              resolution to reject its distribution of property tax  
              revenues and redirect those revenues to a beneficiary  
              district.  Once the funds are rejected and redirected, the  
              local jurisdiction no longer has control over it.  


            5)  Requires the county auditor-controller upon request to  
              transfer all of a city's or county's rejected property taxes  
              to the beneficiary district and provides that a beneficiary  
              district can only promote the development of affordable  
              housing within its boundaries. 


            6)  Allows a beneficiary district to promote the development  
              of affordable housing by doing any of the following:


               a)     Issuing bonds to be repaid from the property tax  
                 revenues directed to the beneficiary district


               b)     Providing financial assistance for the development  
                 of affordable housing, including but not limited to  
                 providing loans, grants, and other financial incentives  
                 and support


               c)     Taking other actions the board determines will  
                 promote the development of affordable housing within its  
                 boundaries


               d)     Prohibits a beneficiary district from undertaking  
                 any obligation that requires an action after the date it  
                 ceases to exist, including issuing a bond that requires  
                 any repayment of the bond obligation








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            1)  Requires a beneficiary district to comply with the Ralph  
              M. Brown Act and the California Public Records Act.  


            2)  Provides that when a beneficiary district ceases to exist,  
              its public record will be the property of the city or county  
              that rejected its distribution of property tax proceeds. 


            3)  Provides that on or after the date a beneficiary district  
              ceases to exist, the beneficiary district will no longer  
              have authority to conduct any business including but not  
              limited to taking an action or making any payment, and any  
              funds of the beneficiary district will automatically  
              transfer to the city or county that rejected its  
              distribution of property tax revenues that had been  
              redirected to the beneficiary district.  


            4)  Provides that a beneficiary district will be governed by a  
              board composed of the following five members:   


               a)     Three members of the city council, if the city  
                 council formed the RDA and became the successor agency to  
                 the RDA; or three members of the county board of  
                 supervisors, if the county formed the RDA and became the  
                 successor agency to the RDA 


               b)     The treasurer of the city or county that formed the  
                 RDA and became the successor agency to the RDA 


               c)     One member of the public who lives within the  
                 boundaries of the beneficiary district


          COMMENTS:

          1)  Purpose of the bill.  According to the author, it takes  
            years to put enough affordable housing on the market to make  
            an impact on prices.  Depending on the project, construction  








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            can take a few weeks to several months.  In addition, average  
            approval time is eight months to a year in cities like San  
            Francisco and Los Angeles.  Finally, with the dissolution of  
            redevelopment agencies, and no permanent source of funding  
            from the state to support the construction of affordable  
            housing, there is no ongoing revenue to subsidize the  
            construction of affordable and workforce housing.

            This bill empowers local governments to rapidly address the  
            affordable housing crisis.  The bill allows cities to pass an  
            ordinance to issue bonds for affordable housing without  
            raising taxes or diverting property taxes from other sources.   
            AB 2031 allows cities to tap any portion of their net  
            available revenue to use bonds for affordable housing.  The  
            net available, also known as "boomerang funds," is distributed  
            by the county auditor-controller to cities from the  
            Redevelopment Property Tax Trust Fund (RPTTF).  By  
            front-loading projects with a bond, cities can build more  
            units more quickly and address displacement. 

          2)  Background of RDAs.  Historically, Community Redevelopment  
            Law allowed a local government to establish a redevelopment  
            area and capture all of the increase in property taxes  
            generated within the area (referred to as "tax increment")  
            over a period of decades.  The law required redevelopment  
            agencies to deposit 20% of tax increment into a low- and  
            moderate-income housing fund to be used to increase, improve,  
            and preserve the community's supply of low- and  
            moderate-income housing available at an affordable-housing  
            cost. 

            In 2011, facing a severe budget shortfall, the Governor  
            proposed eliminating RDAs to deliver more property taxes to  
            other local agencies. Ultimately, the legislature acted and  
            RDAs were dissolved as of February 1, 2012.  

            When RDAs were dissolved, successor agencies were established  
            to wind down their obligations and responsibilities.   
            Generally, the city or county that formed the RDA serves as  
            the successor agency.  Successor agencies are required to  
            receive a "finding of completion" from DOF, which requires  
            undergoing due diligence reviews and making payments to DOF.   
            Once it receives a finding of completion, a successor agency  
            has additional discretion regarding former agency real  
            property assets, loan repayments to the local government  








          AB 2031 (Bonta)                                    Page 6 of ?
          
          
            community that formed the agency, and use of proceeds from  
            bonds issued by the former RDA.  
          3)  Boomerang funds.  RDA froze the property tax rate at the  
            time they were created and captured any increase in property  
            taxes to pay for their activities.  Dissolution redirected  
            those property taxes into a Redevelopment Property Tax Trust  
            Fund (RPTTP), which the county auditor-controller distributes  
            to the taxing entities, including cities, counties, and  
            special districts.  

            This bill would allow a city or county that serves as the  
            successor agency to an RDA that has received a finding of  
            completion from the DOF to redirect the property taxes it  
            receives as a result of redevelopment dissolution, also known  
            as "boomerang funds," to a beneficiary district.  The  
            boomerang funds would be redirected before they are deposited  
            into the city's or county's general fund.  A beneficiary  
            district could bond against the revenues from the boomerang  
            funds, provide loans and grants for an affordable housing  
            development, or take other actions that the board of the  
            beneficiary district determines support the development of  
            affordable housing within its boundaries.  According to the  
            sponsor, permitting the beneficiary district to bond on these  
            boomerang funds would provide more money up front for the  
            construction of affordable housing projects.  Because the  
            property taxes are deposited into the beneficiary district and  
            not into the city's or county's general fund, no voter  
            approval is required to allow the affordable housing  
            beneficiary district to bond against the income stream from  
            the ongoing property tax distribution.  

          4)  Beneficiary districts.  The geographic boundaries of the  
            affordable housing beneficiary district are limited to the  
            jurisdiction of the city or county that serves as the  
            successor agency.  A five-member board made up of  
            representatives of either the city or county, the treasurer of  
            the city or county, and one member of the public would oversee  
            the activities of a housing beneficiary district.  Once the  
            duties of the successor agency are complete and all the bonds  
            and obligations of the former RDA are paid, then the  
            beneficiary district would cease to exist and any money held  
            by the beneficiary district would transfer to the city or  
            county that created it.  

          5)  Opposition.  According to the Howard Jarvis Taxpayers  








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            Association, while no money will be diverted from other local  
            agencies to pay off these bonds, it represents poor fiscal  
            policy.  These bonds will be on the books for decades, and  
            ultimately, directly or indirectly, will be the responsibility  
            of the taxpayers to pay off.  The California Constitution  
            requires a two-thirds vote for most local government bond  
            debt.  This bill establishes a bad precedent not only by  
            removing the vote requirement, but also because it opens the  
            door for other taxes or other forms of property assessment. 

          6)  Double-referral.  This bill has been double-referred to this  
            committee and the Senate Governance and Finance Committee. 

          Assembly Votes:

               Floor:    51-27
               L.Gov:         7-1
               H&CD:     5-2
          
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  No    Local:  
           No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          June 8, 2016.)
          
            SUPPORT:  

          City of Oakland (co-sponsor)
          Non-profit Housing Association of Northern California  
          (co-sponsor)
          American Federation of State, County and Municipal Employees  
          (AFSCME)
          Burbank Housing Development Corporation
          California Apartment Association
          California Coalition for Rural Housing
          California Housing Consortium
          California Housing Partnership Corporation
          City of Walnut Creek
          Community Housing Opportunities Corporation
          East Bay Asian Local Development Corporation
          East Bay Developmental Disabilities Legislative Coalition
          Equity Community Builders
          EveryOne Home








          AB 2031 (Bonta)                                    Page 8 of ?
          
          
          Housing Leadership Council of San Mateo County
          MidPen Housing
          Northern California Community Loan Fund
          Peoples' Self Help Housing
          Sacramento Housing Alliance
          San Diego Housing Federation
          Sonoma County Board of Supervisors
          The Arc and United Cerebral Palsy California Collaboration

          


          OPPOSITION:

          Howard Jarvis Taxpayers Association

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