BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 2031|
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                                   THIRD READING 


          Bill No:  AB 2031
          Author:   Bonta (D) and Atkins (D), et al.
          Amended:  8/19/16 in Senate
          Vote:     21 

           SENATE TRANS. & HOUSING COMMITTEE:  8-3, 6/14/16
           AYES:  Beall, Allen, Galgiani, Leyva, McGuire, Mendoza, Roth,  
            Wieckowski
           NOES:  Cannella, Bates, Gaines

           SENATE GOVERNANCE & FIN. COMMITTEE:  4-2, 6/29/16
           AYES:  Hertzberg, Beall, Hernandez, Lara
           NOES:  Nguyen, Moorlach
           NO VOTE RECORDED:  Pavley

           ASSEMBLY FLOOR:  51-27, 5/12/16 - See last page for vote

           SUBJECT:   Local government:  affordable housing:  financing


           SOURCE:    City of Oakland
           Non-profit Housing Association of Northern California 



          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.  

          Senate Floor Amendments of 8/19/16 change the entity that  
          controls the termination of the beneficiary district from the  
          state auditor-controller to the DOF.  These changes state that  








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          the beneficiary district shall cease to exist on the earlier of  
          the 90th calendar day after the date the DOF approves a request  
          to dissolve the successor entity, or the 20th anniversary of the  
          date that the successor entity received a finding of completion.  
           The amendments also make clarifying changes.  


          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.


              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, as an enforceable obligation, provided the  








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                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 households, 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  
             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 from  
             DOF after dissolving its RDA 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.  









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           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 use any funds provided to it for the express  
             purpose of promoting 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.


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


           2) Provides that beneficiary district shall cease to exist on  
             the earlier of the 90th calendar day after the date the DOF  
             approves a request to dissolve the successor entity, or the  
             20th anniversary of the date that the successor entity  








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             received a finding of completion.  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.


           1) Provides that this bill shall not apply to any city, county,  
             or city and county that formed a redevelopment agency if the  
             successor agency did not receive a finding of completion. 


          Background









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           1) 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 RDAs 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 community that formed the  
            agency, and use of proceeds from bonds issued by the former  
            RDA.  

          2)Boomerang funds.  RDAs 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,  
            which the county auditor-controller distributes to the taxing  
            entities, including cities, counties, and special districts.  

            This bill allows 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  








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            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.  

          3)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.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified8/19/16)


          City of Oakland (co-source)
          Non-profit Housing Association of Northern California  
          (co-source)
          American Federation of State, County and Municipal Employees
          Burbank Housing Development Corporation
          California Apartment Association
          California Coalition for Rural Housing
          California Housing Consortium
          California Housing Partnership Corporation








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          City of Oakland
          City of Walnut Creek
          Community Housing Opportunities Corporation
          Community Loan Fund
          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
          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:   (Verified8/19/16)




          Howard Jarvis Taxpayers Association 

          ARGUMENTS IN SUPPORT:  According to the author, it takes years  
          to put enough affordable housing on the market to make an impact  
          on prices.  Additionally, with the dissolution of RDAs, 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.  This bill 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.  By front-loading  
          projects with a bond, cities can build more units more quickly  
          and address displacement. 








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          ARGUMENTS IN OPPOSITION:  According to the Howard Jarvis  
          Taxpayers 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.

          ASSEMBLY FLOOR:  51-27, 5/12/16
          AYES:  Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,  
            Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,  
            Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,  
            Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,  
            Holden, Irwin, Levine, Lopez, Low, McCarty, Medina, Mullin,  
            Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas,  
            Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber,  
            Williams, Wood, Rendon
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,  
            Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes,  
            Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk
          NO VOTE RECORDED:  Burke, Jones-Sawyer

          Prepared by:Alison Dinmore / T. & H. / (916) 651-4121
          8/22/16 22:41:13


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