BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2031| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 2031 Page 2 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 AB 2031 Page 3 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. AB 2031 Page 4 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 AB 2031 Page 5 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 AB 2031 Page 6 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 AB 2031 Page 7 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 AB 2031 Page 8 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. AB 2031 Page 9 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 **** END ****