BILL ANALYSIS                                                                                                                                                                                                    

                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

          |Bill No:  |AB 2031                          |Hearing    |6/29/16  |
          |          |                                 |Date:      |         |
          |Author:   |Bonta                            |Tax Levy:  |No       |
          |Version:  |3/17/16                          |Fiscal:    |No       |
          |Consultant|Weinberger                                            |
          |:         |                                                      |

                   Local government:  affordable housing:  financing

          Allows a city or county to reject allocations of specified  
          revenues resulting from redevelopment agencies' dissolution to  
          make those revenues available to develop affordable housing. 


           Until 2011, the Community Redevelopment Law allowed local  
          officials to set up redevelopment agencies (RDAs), prepare and  
          adopt redevelopment plans, and finance redevelopment activities.  
           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,  
          ABX1 26 (Blumenfield, 2011) dissolved all RDAs.  The California  
          Supreme Court's 2011 ruling in California Redevelopment  
          Association v. Matosantos upheld ABX1 26, but invalidated ABX1  
          27 (Blumenfield, 2011), which would have allowed most RDAs to  
          avoid dissolution.

          AB X1 26 established successor agencies to manage the process of  
          unwinding former RDAs' affairs.  With limited exceptions, the  
          city or county that created each former RDA now serves as that  
          RDA's successor agency.  Each successor agency has an oversight  
          board that is responsible for supervising it and approving its  


          AB 2031 (Bonta) 3/17/16                                 Page 2  
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          actions.  The Department of Finance (DOF) can review and request  
          reconsideration of an oversight board's decisions.

          If a successor agency complies with state laws that require it  
          to remit specified RDA property tax allocations and cash assets  
          identified through a "due diligence review" process, it receives  
          a "finding of completion" from the DOF (AB 1484, Assembly Budget  
          Committee, 2012).

          One of the successor agencies' primary responsibilities is to  
          make payments for enforceable obligations entered into by former  
          RDAs.  Subject to statutory requirements, successor agencies'  
          obligations are payable out of a Redevelopment Property Tax  
          Trust Fund (RPTTF), which contains the revenues that would have  
          been allocated as tax increment to a former RDA.  After all  
          preexisting legal commitments and statutory obligations funded  
          from the RPTTF are made pursuant to state law, periodic  
          distributions of the remaining revenues in the RPTTF are made to  
          other taxing entities within the former RDA's territory.  

          The loss of the ongoing funding for affordable housing that RDAs  
          used to provide has left many local officials with few tools  
          they can use to respond to their communities' affordable housing  
          needs.  Some officials want to be able to dedicate the revenues  
          that their cities and counties receive as a part of the RDA  
          dissolution process to developing affordable housing.

           Proposed Law

           Assembly Bill 2031 creates an affordable housing beneficiary  
          district within the geographical boundaries of each successor  
          agency that has received a finding of completion. 

          AB 2031 defines an "affordable housing beneficiary district" as  
          a 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 financing  
          assistance to promote affordable housing within its boundaries.   

          AB 2031 requires a beneficiary district to be governed by a  
          five-member board comprised of:
                 Three members of the city council or board of  


          AB 2031 (Bonta) 3/17/16                                 Page 3  
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               supervisors that formed the former redevelopment agency;

                 The treasurer of the city or county that formed the  
               former redevelopment agency; and, 

                 A member of the public who lives within the boundaries  
               of the beneficiary district.  

          AB 2031 specifies the manner in which the beneficiary districts'  
          board members must be appointed and board vacancies filled,  
          establishes four-year terms for board members, prohibits board  
          members from receiving compensation, and requires board members  
          to elect a chairperson.

          AB 2031 allows a city or county that became the successor agency  
          to a former redevelopment agency and received a finding of  
          completion to reject, by adopting an ordinance or resolution,  
          its distributions of property tax revenues from the trust fund.   
          AB 2031 requires the county auditor-controller to transfer to  
          the beneficiary district all of the distribution of property tax  
          revenues from the trust fund that the city or county rejected.   
          With a specified exception, AB 2031 prohibits a city or county  
          that rejects its distributions of property tax revenues from  
          having any claim to, or control over, the distributions of  
          property tax revenues it may have otherwise received pursuant to  
          specified statutes governing former RDAs' dissolution.   

          AB 2031 requires that a beneficiary district must only promote  
          the development of affordable housing within its boundaries.  AB  
          2031 defines "affordable housing" as a dwelling available for  
          purchase or lease by persons and families who qualify as low or  
          moderate income, very low income households, or extremely low  
          income households, as those categories are defined in specified  
          statutes.  AB 2031 directs that a beneficiary district may  
          promote the development of affordable housing by doing any of  
          the following:
                 Issuing bonds to be repaid from the property tax  
               revenues directed to the district.

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


          AB 2031 (Bonta) 3/17/16                                 Page 4  
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                 Taking other actions that the board determines will  
               promote the financing of the development of affordable  
               housing within its boundaries.

          AB 2031 requires a beneficiary district to comply with specified  
          open meeting and public records statutes.

          AB 2031 prohibits a beneficiary district from undertaking any  
          obligation that requires an action after the date it will cease  
          to exist, including, but not limited to, issuing a bond that  
          requires any repayment of the bond obligation after the date the  
          beneficiary district will cease to exist.

          AB 2031 requires that:
                 A beneficiary district must cease to exist on the 90th  
               calendar day after the date the county auditor-controller  
               makes the final transfer of distributed property tax  
               revenues to the beneficiary district. 

                 On and after the date a beneficiary district ceases to  
               exist, the beneficiary district must not have the authority  
               to conduct any business, including taking any action or  
               making any payment

                 Any funds of the beneficiary district must automatically  
               transfer to the city or county that rejected its  
               distributions of property tax revenues that were thereafter  
               directed to the district.

                 The terms of the members of the board of a beneficiary  
               district shall expire on the date the beneficiary district  
               ceases to exist.

                 Any legal right of the beneficiary district on or after  
               the date the beneficiary district ceases to exist,  
               including the right to repayment pursuant to a loan made by  
               the beneficiary district, is the right of the city or  
               county that rejected its distributions of property tax  
               revenues that was thereafter directed to the district.

                 When a beneficiary district ceases to exist, a public  
               record of the beneficiary district shall be the property of  
               the city or county that rejected its distribution of  
               property tax proceeds.


          AB 2031 (Bonta) 3/17/16                                 Page 5  
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           State Revenue Impact

           No estimate.


           1.  Purpose of the bill  .  Redevelopment agencies' dissolution  
          left California without any permanent source of funding to  
          support the construction of affordable housing.  AB 2031  
          empowers local governments to address the affordable housing  
          crisis using revenues generated by the former RDAs' dissolution.  
           The bill allows eligible cities and counties to pass an  
          ordinance to issue bonds for affordable housing without raising  
          taxes or diverting property taxes from other sources.  AB 2031  
          allows cities and counties to tap the revenues they receive from  
          a Redevelopment Property Tax Trust Fund to repay bonds for  
          affordable housing.  By front-loading projects with a bond,  
          cities and counties can build a larger number of affordable  
          housing units more quickly and address displacement.

          2.   Voter approval for local debts  .  State law requires  
          supermajority voter approval for debt that encumbers general  
          purpose revenues.  Two-thirds of voters must approve before a  
          city or county can commit a portion of the property tax revenues  
          that flow into its general fund, as a limited obligation, to  
          repay bonds used to build infrastructure.  The financing  
          approach authorized by AB 2031, by diverting revenues before  
          they are placed into a government's general fund and requiring  
          debt to be issued through a special district, may thread the  
          needle of avoiding any legal requirements to obtain two-thirds  
          voter approval.  However, as a matter of policy, a city or  
          county's decision to "reject" net available revenues that would  
          otherwise flow into its general fund so that those revenues can  
          instead repay affordable housing bonds warrants the same voter  
          scrutiny that state law requires for limited obligation bonds.   
          AB 2031 may erode the California Constitution's voter approval  
          requirement for public debt.

          3.   Too narrow  ?  AB 2031 may unintentionally exclude some cities  
          and counties from the authority granted by the bill.   
          Specifically, the bill allows property tax allocations from a  


          AB 2031 (Bonta) 3/17/16                                 Page 6  
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          RPTTF to be rejected only by "a city or county that became the  
          successor agency to a former redevelopment agency."  This  
          language could exclude the City of Los Angeles, which elected  
          not to become the successor agency to its former redevelopment  
          agency.  In addition to Los Angeles, six other local governments  
          did not become successor agencies, but instead allowed an  
          appointed "designated local authority" to take responsibility  
          for unwinding the affairs of their former RDAs.  The bill's  
          narrow language also may exclude counties that never formed an  
          RDA, but that receive allocations from a RPTTF.  The Committee  
          may wish to consider amending AB 2031 to apply the bill's  
          provisions to: 
                 Any city or county in which the former RDA's successor  
               entity has received a finding of completion, regardless of  
               whether the city or county is the successor agency, and  

                 Any county that receives RPTTF allocations to use the  
               bill's authority, regardless of whether that county had  
               ever formed an RDA.

          4.   Let's get technical  .  AB 2031 specifically defines what the  
          phrase "distribution of property tax revenues" means for the  
          purposes of the bill's provisions.  With one exception, the bill  
          consistently refers to distributions of property tax revenues.   
          To make the bill's language more consistent, the Committee may  
          wish to consider amending AB 2031 to substitute the term  
          property tax "revenues" in place of the reference to property  
          tax "proceeds" on page 5, line 17.

          5.   Double-referred  .  The Senate Rules Committee has ordered a  
          double-referral of AB 2031, first to the Senate Committee on  
          Transportation & Housing, which has jurisdiction over bill  
          relating to housing policy, and then to the Senate Governance &  
          Finance Committee, which has jurisdiction over bills relating to  
          local government bonds.  The Senate Transportation & Housing  
          Committee passed AB 2031 at its June 14, 2016 hearing on a 8-3  

           Assembly Actions

           Assembly Housing and Community Development Committee:  5-2
          Assembly Local Government Committee:           7-1
          Assembly Floor:                              51-27


          AB 2031 (Bonta) 3/17/16                                 Page 7  
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          Senate Transportation and Housing Committee:   8-3

           Support and  
          Opposition   (6/23/16)

           Support  :  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; Cities of Oakland and Walnut Creek;  
          Community Housing Opportunities Corporation; East Bay Asian  
          Local Development Corporation; East Bay Developmental  
          Disabilities Legislative Coalition; Equity Community Builders;  
          EveryOne Home; Housing Leadership Council of San Mateo County;  
          MidPen Housing; Non-profit Housing Association of Northern  
          California; 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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