BILL ANALYSIS Ó SENATE COMMITTEE ON ENVIRONMENTAL QUALITY Senator Wieckowski, Chair 2015 - 2016 Regular Bill No: AB 2783 ----------------------------------------------------------------- |Author: |E. Garcia, Eggman, C. Garcia, Gomez, Steinorth | ----------------------------------------------------------------- |-----------+-----------------------+-------------+----------------| |Version: |6/23/2016 |Hearing |June 29, 2016 | | | |Date: | | |-----------+-----------------------+-------------+----------------| |Urgency: |No |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant:|Joanne Roy | | | | ----------------------------------------------------------------- SUBJECT: Affordable Housing and Sustainable Communities Program ANALYSIS: Existing law: 1) Creates the Strategic Growth Council (SGC). (Public Resources Code (PRC) §75121). 2) Establishes the Affordable Housing and Sustainable Communities (AHSC) Program. (PRC §75210 et seq.). a) Provides that the purpose of the AHSC program is to reduce greenhouse gas (GHG) emissions through projects that implement land use, housing, transportation, and agricultural land preservation practices to support infill and compact development and that support related and coordinated public policy objectives as specified. b) Directs SGC to develop and administer the AHSC program, and develop guidelines and selection criteria for implementation. c) To be eligible for funding from the AHSC program, requires a project to demonstrate the following: i) Reduction in GHG emissions; ii) Implementation of an adopted or draft Sustainable Communities Strategy (SCS); if an SCS is AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 2 of ? not required for the region, a regional plan that includes policies and programs that reduce GHG emissions; iii) Consistency with the state planning priorities established to achieve the state's environmental goals. d) Provides a list of eligible types of projects for funding, such as: i) Intermodal, affordable housing projects that support infill and compact housing. ii) Transit capital projects and programs supporting transit ridership. iii) Transit-oriented development projects, including affordable housing and infrastructure at or near transit stations or connecting those developments to transit stations. e) Requires that at least 50% of the funding for AHSC benefit projects in disadvantaged communities. f) Requires SGC when revising its guidelines to develop the guidelines and selection criteria, conduct at least two public workshops to receive and consider public comments, and publish the draft guidelines on its Internet website at least 30 days prior to the public meeting. 3) Defines "disadvantaged communities" to mean communities identified by the California Environmental Protection Agency (CalEPA) based on geographic, socioeconomic, public health, and environmental hazard criteria, and may include, but are not limited to, either of the following (Health and Safety Code (HSC) §39711): a) Areas disproportionately affected by environmental pollution and other hazards that can lead to negative public health effects, exposure, or environmental degradation; or b) Areas with concentrations of people that are of low AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 3 of ? income, high unemployment, low levels of homeownership, high rent burden, sensitive populations, or low levels of educational attainment. 4) Defines "rural area" as an area that meets specified criteria, including: a) the area is eligible for financing under the Rural Development Administration of the US Department of Agriculture; the area is located in a nonmetropolitan area as defined in HSC §50090; or, the area is either an incorporated city with a population of 40,000 or less, or an unincorporated area which adjoins a city having a population of 40,000 or less, as specified. (HSC §50199.21). 5) Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund and requires the Department of Finance, in consultation with the California Air Resources Board (ARB) and any other relevant state agency, to develop, as specified, a three-year investment plan for the moneys deposited in the GGRF. (Government Code §16428.8). 6) Prohibits the state from approving allocations for a measure or program using GGRF moneys except after determining that the use of those moneys furthers the regulatory purposes of AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006), and requires moneys from the GGRF be used to facilitate the achievement of reductions of GHG emissions in California. (HSC §39712). This bill: 1) Requires SGC to consider revisions to the guidelines and selection criteria for affordable housing projects that qualify for funding under the AHSC Program for a rural innovation project area (RIPA), as follows: a) Allow projects to be built at nonmetropolitan density requirements based on net density. b) Revise the definition of "net density." Modify the Rural Innovation Project Area (RIPA) within AHSC by lowering density requirements. AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 4 of ? c) Provide additional loan assistance for projects that receive 4% low-income housing tax credits, by increasing the amount to $100,000 per restricted unit to be added to the base amount for loan calculation purposes. d) Require scoring to consider the extent to which an application demonstrates walkable corridors and incorporates features that encourage bicycling, which will exist upon completion of the project. 2) If SGC determines that it will not make revisions, requires SGC to provide the Legislature an explanation by March 1, 2017. Background 1) Strategic Growth Council. SGC was established by SB 732 (Steinberg, Chapter 729, Statutes of 2008), and is tasked with coordinating state agency activities so they assist and support the planning and development of sustainable communities that strengthen the economy, ensure social equality, and enhance environmental stewardship. The objectives of SGC include: a) Improving air and water quality. b) Protecting natural resources and agricultural lands. c) Increasing the availability of affordable housing. d) Promoting public health. e) Improving transportation. f) Encouraging greater infill and compact development. g) Revitalizing community and urban centers. h) Assisting state and local entities in the planning of sustainable communities and meeting AB 32 goals. SGC is comprised of agency secretaries from the California Business Consumer Services and Housing Agency, Health and Human Services, CalEPA, State Transportation Agency, Department of Food and Agriculture, and the Natural Resources Agency; the director of the Governor's Office of Planning and Research; and three public members appointed by the Governor, Senate Committee on Rules, and Speaker of the Assembly. 2) Affordable Housing, and Sustainable Communities (AHSC) AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 5 of ? Program. SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) established the AHSC Program to reduce GHG emissions through projects that implement land use, housing, transportation, and agricultural land preservation practices to support infill and compact development. The broader AHSC Program is implemented in two components: a) the housing and infrastructure-focused AHSC Program; and, b) the Sustainable Agricultural Lands Conservation (SALC) Program, which focuses on protection of agricultural lands under threat of conversion to non-agricultural uses. SB 862 provided a continuous appropriation of 35% of cap-and-trade funds for investments in transit, affordable housing, and sustainable communities. Of this, 10% is for transit and inter-city rail capital programs; 5% for low carbon transit operations; and 20% for affordable housing and sustainable communities. A primary goal of the AHSC Program furthers the objectives of the California Global Warming Solutions Act (AB 32, Núñez and Pavley, Chapter 488, Statutes of 2006), and The Sustainable Communities and Climate Protection Act of 2008 (SB 375, Steinberg, Chapter 728, Statutes of 2008). The AHSC Program invests in projects that reduce GHG emissions by supporting more compact, infill development patterns, encouraging active transportation and transit usage, and protecting agricultural land from sprawl development. The AHSC Program also supports related and coordinated public policy objectives, including the following: Reducing air pollution; Improving conditions in disadvantaged communities; Supporting or improving public health and other co-benefits as defined in HSC §39712; Improving connectivity and accessibility to jobs, housing, and services; Increasing options for mobility, including the implementation of the Active Transportation Program; Increasing transit ridership; Preserving and developing affordable housing for lower income households; and, Protecting agricultural lands to support infill development. AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 6 of ? SGC administers, and Department of Housing and Community Development (HCD) implements, the AHSC Program. In addition, SGC and HCD coordinate with the Air Resources Board to manage the program, including developing program guidelines, evaluating applications, preparing agreements, monitoring agreement implementation, and reporting. AHSC is a competitive grant/loan program funded by GGRF moneys. Eligible projects include those that will achieve GHG emission reductions and benefit disadvantaged communities through increasing accessibility of affordable housing, employment centers, and key destinations via low-carbon transportation resulting in fewer vehicle miles travelled through shortened or reduced vehicle rip length or mode shift transit, bicycling, or walking. Funding applicants track metrics in accordance with the Air Resources Board's Funding Guidelines. Fifty percent of all funding in this program must benefit disadvantaged communities. 1) Rural Innovation Project Area (RIPA) projects. RIPA projects are a component of the AHSC Program, where the focus is on projects in rural areas, as defined. According to SGC, for RIPA projects, and across other project areas, the key to maximizing GHG reduction for housing projects will be higher densities, reducing parking, and incorporating mixed use elements in to the development. For both housing and transportation projects, proximity to a central business district and providing some kind of subsidy to incentivize transportation use will help yield greater GHG reductions. 2) Cap-and-trade auction revenue. Since November 2012, ARB has conducted more than14 cap-and-trade auctions, generating over $4 billion in proceeds to the state. The latest auction in May 2016 fell sharply below expectations as buyers purchased a mere 2% of the carbon credits, which will provide $10 million for state programs. State law specifies that the auction revenues must be used to facilitate the achievement of GHG emissions reductions and outlines various categories of allowable expenditures. Statute further requires the Department of Finance, in consultation with ARB and any other relevant state agency, to develop a three-year investment plan for the auction AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 7 of ? proceeds, which are deposited in the GGRF. a) Disadvantaged communities. SB 535 (de León, Chapter 830, Statutes of 2012) requires the Department of Finance, in the investment plan, to allocate at least 25% of available moneys in the GGRF to projects that provide benefits to disadvantaged communities, and at least 10% to projects located within disadvantaged communities. To meet the SB 535 mandate, the Office of Environmental Health Hazard Assessment, under CalEPA's guidance, developed a tool (termed CalEnviroScreen) to assess and rank census tracts across the state that are disproportionately affected by multiple types of pollution and areas with vulnerable populations. CalEPA has designated 25% of census tracts in California as disadvantaged communities for the purpose of investing cap-and-trade proceeds. Additionally, SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014) requires ARB to develop guidelines on maximizing benefits for disadvantaged communities by agencies administering GGRF funds. b) Legal consideration of cap-and-trade auction revenues. The 2012-13 Budget analysis of cap-and-trade auction revenue by the Legislative Analyst's Office noted that, based on an opinion from the Office of Legislative Counsel, the auction revenues should be considered mitigation fee revenues, and their use requires that a clear nexus exist between an activity for which a mitigation fee is used and the adverse effects related to the activity on which that fee is levied. Therefore, in order for their use to be valid as mitigation fees, revenues from the cap-and-trade auction must be used to mitigate GHG emissions or the harms caused by GHG emissions. In 2012, the California Chamber of Commerce filed a lawsuit against the ARB claiming that cap-and-trade auction revenues constitute illegal tax revenue. In November 2013, the superior court ruling declined to hold the auction a tax, concluding that it is more akin to a regulatory fee. In February of 2014, the plaintiffs filed AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 8 of ? an appeal with the 3rd District Court of Appeal in Sacramento. That case is currently pending. Comments 1) Purpose of Bill. According to the author, "In over three years of guideline and program feedback, almost none of rural communities' recommendations have been treated with the gravity they deserve and the only response has been creating the RIPA, but with the same thresholds and scoring criteria as the other two project prototypes. The longer we wait to make substantive, meaningful changes in the RIPA, the more good quality rural housing projects will be denied access and the more money will be left on the table." 2) AHSC Program and rural projects. In the first round of funding in 2015, out of the 36 projects that received funding, two projects were in rural areas. SGC convened four stakeholder meetings over the fall of 2015 to receive public comment and consider changes to the program. Recognizing that rural projects were not able to compete well against urban projects, SGC changed the guidelines to set aside 10% of the total AHSC funding for rural areas. As a result, applicants in rural areas now compete against other rural projects rather than against urban projects, which generally have an advantage of being able to show a greater reduction in vehicle-miles traveled (VMT). In January 2016, SGC released a notice of funding availability for the AHSC Program, which included the new RIPA 10% set-aside and guidelines. In the current round of applications for AHSC funding, a total of 130 applications were received in all categories, 23 of which for RIPA. Awards are expected to be announced in September 2016. Because the current round of AHSC Program funding, which is the first time utilizing the newly revised guidelines, will be awarded in a few months, the Committee may wish to consider whether this bill is premature and if it would be prudent to see whether the guideline revisions satisfactorily address the RIPA funding issue before potential legislative action. 3) Lowering the density requirement seems antithetical to the goal of reducing GHG emissions. AB 2783 proposes to require AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 9 of ? SGC to consider lowering the net density requirement for affordable housing projects that qualify under RIPA. The revisions of the guidelines have recently been through a public process with public input; and the revisions reflect a reasonable way to ensure that affordable housing projects in rural areas are competitive for funding while achieving the goals of the AHSC program. The fundamental criteria for programs/projects funded by cap-and-trade moneys is that the money is spent on actions that reduce GHG emissions. Since one of the purposes of the AHSC Program is to reduce GHG emissions by increasing affordable housing near transit, requiring the consideration of lowering the density requirements would likely not help achieve AB 32 GHG emissions reductions goals. DOUBLE REFERRAL: This measure was heard in Senate Transportation & Housing Committee on June 21, 2016, and passed out of committee with a vote of 10-0. SOURCE: California Coalition for Rural Housing SUPPORT: California Institute for Rural Studies California Rural Legal Assistance Foundation Center for Sustainable Neighborhoods Creswell Consulting Leadership Counsel for Justice & Accountability Public Interest Law Project Self-Help Enterprises Sierra Business Council OPPOSITION: None received -- END -- AB 2783 (E. Garcia, Eggman, C. Garcia, Gomez, and Steinorth) Page 10 of ?