BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 2492 Hearing Date: 6/28/2014 ----------------------------------------------------------------- |Author: |Alejo | |----------+------------------------------------------------------| |Version: |5/12/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Alison Dinmore | |: | | ----------------------------------------------------------------- SUBJECT: Community revitalization DIGEST: This bill makes several changes to the statutes that allow local governments to form and administer Community Revitalization and Reinvestment Authorities (CRIAs) to finance local economic development. ANALYSIS: Existing law: 1)Authorizes local governments to create CRIAs to use tax increment revenue to improve infrastructure, assist businesses, and support affordable housing in disadvantaged communities. 2)Allows an authority to carry out a community revitalization and investment plan within a CRIA. It also requires that at least 80% of the land calculated by census tracts or census block groups within the area must be characterized by both of the following conditions: a) An annual median household income that is less than 80% of the statewide annual median income. b) Three of the following four conditions: AB 2492 (Alejo) Page 2 of ? i. Non-seasonal unemployment that is at least 3% higher than the statewide median, as specified ii. Crime rates that are 5% higher than the statewide median crime rate, as specified iii. Deteriorated or inadequate infrastructure such as streets, sidewalks, water supply, sewer treatment or processing, and parks iv. Deteriorated commercial or residential structures 1)Provides that the CRIA may, among other things, do the following: a) Provide funding to rehabilitate, repair, upgrade, or construct infrastructure. b) Provide for seismic retrofits of existing buildings in accordance with all applicable laws and regulations. c) Acquire and transfer real property including through the use of eminent domain. A CRIA must retain controls and establish restrictions or covenants (such as affordability requirements) running with the land sold or leased for private use for such periods of time and under such conditions as are provided in the community revitalization and investment plan. d) Issue bonds. e) Borrow money, receive grants or accept financial or other assistance or investment from the state or the federal government or any other public agency or private lending institution for any project within its area of operation, and may comply with any conditions of the loan or grant. A CRIA may qualify for funding as a disadvantaged community. f) Adopt a community revitalization and investment plan. AB 2492 (Alejo) Page 3 of ? g) Make loans or grants to owners or tenants to improve, rehabilitate, or retrofit buildings or structures within the plan area. 4) Requires that at least 25% of all tax revenues that are allocated to the CRIA shall be deposited into a separate Housing Fund and used for the purposes of increasing, improving, and preserving the community's supply of low- and moderate-income housing available at an affordable cost. This bill: 1) Allows a CRIA to use a combination of both the U.S. Census Bureau census track and census block groups' data to identify a project area. 2)Allows a CRIA to use, at its discretion, statewide, countywide, or citywide annual median income to identify a project area. 3) Allows a CRIA to use unemployment data from the periodic American Community Survey published by the U.S. Census Bureau, in addition to the labor market information published by the Employment Development Department (EDD) in March of the year the CRIA plan is prepared. 4) Provides that crime rates are documented by records maintained by the law enforcement agency that has jurisdiction in the proposed plan area for violent or property crime offenses, that are at least 5% higher than the statewide average crime rate for violent or property crime offenses, as defined by a specified Department of Justice report. The crime rate shall be calculated by taking the local crime incidents for violent or property crimes, or any offense within those categories, for the most recent calendar year for which the Department of Justice maintains data, divided by the total population of the proposed plan area, multiplied by 100,000. If the local crime rate for the proposed plan area exceeds the statewide average rate for either violent or property crime, or any offense within these categories, by more than 5%, then the condition shall be met. 5) Gives CRIAs the same authority as an Enhanced Infrastructure AB 2492 (Alejo) Page 4 of ? Financing District (EIFD), to receive funds allocated to it pursuant a resolution adopted by a city, county, or special district to transfer these funds from: a) The increased property tax revenues that the city, county, or special district receives from the dissolution of redevelopment agencies (RDAs). b) Property taxes received by a city or county in lieu of former vehicle license fee funds, or c) Funds derived from various assessments that may be imposed by special districts. COMMENTS: 1)Purpose of the bill. According to the author, after the passage of AB 2 (Alejo, Chapter 2, Statutes of 2015) (see Comment No.2 below), several localities had particular concerns about implementation and definitions in that bill that would affect their ability to create an authority. This bill is an attempt to address those concerns, provide technical changes, and clarify several provisions, including: a) Which level of government can be used as a reference point for annual median household income b) Unemployment rates should be measured using average annual unemployment rates c) Crime rate as defined as violent or property crime that is 5% above the statewide average rate, and how to calculate it d) Stating that a CRIA has the ability to receive transferred funds received through resolutions passed by cities, counties, or special districts AB 2492 (Alejo) Page 5 of ? 1)Background on CRIAs. Last year, the Legislature passed and the Governor signed AB 2, which authorized cities and counties to create CRIAs to use tax increment financing to improve infrastructure, assist businesses, and support affordable housing in disadvantaged communities. A CRIA can freeze property taxes at the time the plan for revitalizing the area is approved, collect all the tax increment or the increase in property taxes that is generated after that point, and use it on specified activities. No portion of the local schools' share of tax increment may go to the authority. CRIAs must set-aside 25% of revenues for affordable housing and must replace any existing affordable housing units that are removed as a result of their activities. CRIAs may only be created in areas which are predominantly low-income and have a high unemployment and crime rate. At least 80% of a CRIA project area, based on U.S. Census data, must have an annual median household income that is less than 80% of the statewide annual median income. In addition, a CRIA must meet three of the four following conditions: a) Non-seasonal unemployment is at least 3% higher than statewide median unemployment. b) Crime rates are 5% higher than statewide median crime rates. c) Deteriorated or inadequate infrastructure, such as streets, sidewalks, water supply, sewer treatment or processing, and parks. d) Deteriorated commercial or residential structures. 3) Greater flexibility for the creation of a CRIA. According to the sponsor, the League of California Cities, this bill is intended to clarify where CRIAs can be created. The sponsor worked with the Department of Justice to revise the means of AB 2492 (Alejo) Page 6 of ? determining the crime rate necessary to meet the standard to qualify an area as a CRIA and the EDD to update the mechanism for determining the unemployment rate. Further, the bill ensures that a CRIA may also receive funds derived from other city, county, or special district sources, subject to any conditions those entities may impose on the use of these funds. These options are already included in EIFD law, so this change offers identical flexibility for a CRIA to also be eligible to receive funds from these sources. 4) Disadvantaged communities. The committee received feedback from the City of Cudahy, stating that it did not qualify under the current requirements to establish a CRIA and requested this bill be amended to clarify the appropriate data sets and definitions to include disadvantaged communities. This change would permit the City of Cudahy, which suffers from high levels of poverty and socioeconomic disadvantages, and is arguably an intended beneficiary of a CRIA, to qualify. The author will accept an amendment providing that a CRIA may also carry out a community revitalization plan within a community revitalization and investment area if the census tracts or census blocks, or both, in the area are identified as a disadvantaged community as described in Health and Safety Code 39711. 5) Opposition. One tool that state law grants to CRIAs, that is not available through an EIFD, is the power to take private property through the power of eminent domain and to pay for it using tax increment revenues. Some property owners object to the way in which former RDAs used their eminent domain authority, arguing that RDAs' use of eminent domain hurt businesses and depressed property values in some communities. Others oppose this bill due to a concern that changes in this bill will expand the types of communities and neighborhoods in which local governments can exercise the power of eminent domain for economic development purposes by forming a CRIA. 5) Double-referral. This bill was heard in the Senate Governance and Finance Committee on June 15 and passed out on a 5-2 vote. Related Legislation: AB 2 (Alejo, Chapter 2, Statutes of 2015) - authorized local governments to create CRIA to use tax increment revenue to AB 2492 (Alejo) Page 7 of ? improve the infrastructure, asset businesses, and support affordable housing in disadvantaged communities. SB 628 (Beall, Chapter 785, Statutes of 2014) - allowed local agencies to create EIFDs to finance specified infrastructure projects and facilities. Assembly Votes: Floor:51-29 L.Gov:6-2 H&CD:5-2 FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, June 22, 2016.) SUPPORT: League of California Cities (sponsor) City of Thousand Oaks OPPOSITION: California Alliance to Protect Property Rights Howard Jarvis Taxpayers Association Fieldstead and Company -- END --