BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE 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. Background 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 of ? 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 of ? 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 support. AB 2031 (Bonta) 3/17/16 Page 4 of ? 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 of ? State Revenue Impact No estimate. Comments 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 of ? 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 vote. 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 of ? 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. -- END --