BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                              Senator Wieckowski, Chair
                                2015 - 2016  Regular 
           
          Bill No:            AB 2783
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          |Author:    |E. Garcia, Eggman, C. Garcia, Gomez, Steinorth       |
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          |-----------+-----------------------+-------------+----------------|
          |Version:   |6/23/2016              |Hearing      |June 29, 2016   |
          |           |                       |Date:        |                |
          |-----------+-----------------------+-------------+----------------|
          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Joanne Roy                                           |
          |           |                                                     |
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          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  







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                     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  








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                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.








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             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)  








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             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.








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             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  








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             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  








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                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  








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             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  


           
                                          
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