BILL ANALYSIS Ó
SENATE COMMITTEE ON BUDGET AND FISCAL REVIEW
Senator Mark Leno, Chair
2015 - 2016 Regular
Bill No: SB 107 Hearing Date: September
11, 2015
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|Author: |Committee on Budget and Fiscal Review |
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|Version: |September 10, 2015 Amended |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Mark Ibele |
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Subject: General Subject: Local government.
Summary: This bill contains additional provisions and provides
specificity to existing law governing the dissolution of
redevelopment agencies (RDAs) and the wind-down of their
existing activities and obligations. In addition, the measure
addresses several ongoing issues relating to state-local fiscal
situations. The bill is related to the implementation of the
Budget Act of 2015.
Background: This measure includes numerous provisions which clarify and
simplify the RDA dissolution process and address local fiscal
situations. Specifically, the bill would:
1.Clarify that the Department of Finance's (DOF's) actions with
respect to the dissolution and reconciliation process for RDAs
are exempt from the Administrative Procedures Act (APA).
2.Redefine and clarify the definition of administrative cost
allowance as the maximum amount of administrative costs that
may be paid by a successor agency (SA) from the Redevelopment
Property Tax Trust Fund (RPTTF) in a fiscal year, and the sole
funding source for any legal expenses related to civil actions
regarding the RDA dissolution process.
3.Add the following new calculations for administrative costs:
a. Five percent of the property tax allocated to the SA
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on the Recognized Obligation Payment Schedule (ROPS)
through June 30, 2016, and up to three percent of the
property tax allocated to the Redevelopment Obligation
Retirement Fund (RORF) thereafter through June 30, 2016.
b. From July 1, 2016, and thereafter, up to three
percent of the actual property tax distributed to the SA
for payment of approved enforceable obligations (EOs),
not to exceed 50 percent of the total RPTTF distributed
to pay for EOs in the preceding year, whether or not
administrative costs are paid within the administrative
cost allowance or not, with the limitation inapplicable
if these costs are paid from sources other than the
property tax.
c. From January 1, 2012, and thereafter, not less than
$250,000 in any fiscal year unless reduced by the
oversight board (OB) or by agreement with the SA.
4. Allow sponsoring entities to provide funds to an SA for
purposes of paying legal expenses related to civil actions
contesting the RDA dissolution and reconciliation process
and allow these funds to be an EO for repayment, only in the
event that judicial relief is granted to the SA.
5. Make certain clarifications that the following are EOs:
a. Written agreements entered into no later than
June 27, 2011, for the purposes of refunding of bonds
that were issued prior to January 1, 2011.
b. Agreements entered into by a former RDA prior to
June 28, 2011, if the agreement relates to state
highway infrastructure improvements.
c. Agreements pursuant to loans or development
obligations imposed by federal agencies, including US
Department of Housing and Urban Development.
1. Create an annual, rather than biannual, process for ROPS
beginning with the July 1, 2016 period.
2. Allow for expenditure of the entire indebtedness
obligation proceeds associated with low- and moderate-income
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housing purposes. Clarify annual reporting requirements for
the low- and moderate-income housing funds.
3. Establish that the local governments that authorized the
creation of a RDA may loan funds to the RDA for costs or for
EOs, only to the extent that the SA receives an insufficient
distribution from the RPTTF, and:
a. The loan shall be repaid from the source of
funds originally approved for payment of the underlying
EO.
b. The interest payable will be calculated at a
rate not to exceed the Local Agency Investment Fund
(LAIF) interest rate earned.
c. Repayment will be made to the extent property
tax revenue allocated to the SA is available after EOs
on the ROPS are fulfilled.
4. Allow the county auditor-controller, as well as DOF, to
have the authority to require any documents associated with
EOs to be provided to them.
5. Prescribe that ROPS items that are subject to active
litigation are not required to be disputed in a meet and
confer with DOF on other disputed items.
6. Indicate that all agreements entered or re-entered between
an SA and the city or county that formed the RDA, and
executed after June 27, 2012, are not EOs, unless they are
related to the RDA wind-down process. Disallows funding for
any item reduced or eliminated by DO and clarify that OB are
not allowed to approve post June 27, 2012 re-entered
agreements.
7. Specify that RDA wind-down activities do not include
planning, design, redesign, development, demolition,
alteration, construction, construction financing, site
remediation, site development or improvement, land
clearance, seismic retrofits, or other similar work, unless
such work is undertaken pursuant to an EO.
8. State that SAs may not create EOs to repay loans entered
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into between the RDA and the city or county that formed it,
except as expressly provided for in law.
9. Establish that for a final and conclusive determination
regarding an EO, the SA must provide a copy of the request
to the county auditor-controller and to DOF, which will have
100 days from the date of the request for a final and
conclusive determination for denial or approval of the
request. Specify that for a final and conclusive
determination request submitted prior to June 30, 2015, DOF
shall have until December 31, 2015 to approve or deny.
10. Facilitate the issuance of bonds or other indebtedness
for the purposes of low- and moderate-income housing and
various infrastructure in the City and County of San
Francisco, by allowing the pledge of revenues available in
the RPTTF that are not otherwise pledged, subject to the
approval of the OB.
11. Address administrative aspects of OBs, including
establishing, clarifying or specifying that:
a. Alternate representatives can be appointed to
serve on OBs when members of the OB must be absent.
b. Resolutions, minutes, agendas, changes in
membership and certain other administrative documents
or actions to be considered by the OB do not need to be
submitted to DOF for approval.
c. County-wide OB shall be staffed by the county
auditor-controller, another county entity, or by a city
chosen by the county auditor-controller after
consultation with DOF, with associated costs to be
recovered from the RPTTF.
d. For counties with more than one OB (except
counties with more than 40 OBs), there will be only one
OB beginning July 1, 2018 (instead of July 1, 2016).
e. For counties with more than 40 OBs, commencing
July 1, 2018, there shall be five OBs, with their
respective jurisdictions generally coterminous with the
respective borders of the 1st through 5th supervisorial
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districts.
f. An OB will cease to exist when its SA (or for
county-wide OB, all the SAs within the county) has been
dissolved.
1. Clarify and institute certain new provisions regarding
issuances of a finding of completion (FOC) by DOF,
specifically:
a. In addition to other options, allow an SA to
receive a FOC upon entering into a written installment
payment plan with DOF for payment of the amounts due
pursuant to the due diligence review.
b. Stipulate that an SA may not receive a FOC
unless it enters into a written payment plan with DOF
by December 31, 2015.
c. Allow the creation of an EO with the SA if
amounts due pursuant to the written payment plan are
reduced pursuant to a final judicial determination.
d. Provide that failure by an SA to pay amounts due
under the written agreement will result in: permanent
ineligibility for an FOC; invalidation of OB actions,
including EO loan agreements; disallowance of any
long-range property management plan; and potential
recalibration of the last and final ROPS.
e. Allow for an amendment to the written
installment payment plan if DOF determines the
necessity based on SA's fiscal condition.
1. Clarify the legal obligation of sponsoring entities to
return RDA assets when ordered to do so, provided the assets
were not transferred pursuant to an EO.
2. Expand the ability of the OB to direct the SA to transfer
ownership of assets with a governmental purpose to an
appropriate public jurisdiction, to include parking
facilities and lots dedicated solely to public parking,
unless such properties generate revenues in excess of
reasonable maintenance costs. Allows local governments to
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exclude from repayment any costs of construction of the
parking facilities and permits a revision to the Long-Range
Property Management Plan (LRPMP) to include public parking
lots and facilities as a government purpose asset.
3. Allow pension and State Water Project overrides that are
not pledged to RDA-related debt service to go entirely to
the levying entity for the payment due on such obligations.
Provide that pledged overrides not needed for RDA debt
service return in their entirety to the levying entity.
4. Define the process and timelines for the submission,
review and reconciliation for adjustments during the annual
ROPS process, and provide for the review by the county
auditor-controller and notification of DOF.
5. Define the process of final dissolution of the SA and the
required actions of various parties, including the
retirement of all EOs and the disposal of all assets, and
specify that an RDA that failed to generate any tax
increment is considered dissolved.
6. Clarify the application of tax increment caps and plan
expiration dates and provide that qualifying loan repayments
to cities or counties are exempt from the caps.
7. Specify that loan agreements are defined as:
a. Loans for money entered into between the
sponsoring city or county and the former RDA.
b. Agreements entered into between the sponsoring
local government and the former RDA related to a
transfer of real property.
c. An arrangement whereby a third-party developed
infrastructure for the former RDA under contract by the
sponsoring local government, with the loan amount not
to exceed $5.0 million.
8. Require that loans are to be repaid from the effective on
the date of loan origination, with interest calculated at a
rate not to exceed simple interest rate of three percent,
recalculated quarterly, and payment applied first to
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principal and then to interest. Specify that this provision
would not have an impact on loans previously approved or
affect legal judgments in either City of Watsonville v.
Department of Finance or City of Glendale v. Department of
Finance.
9. Stipulate that proceeds of bonds issued by RDAs prior to
December 31, 2010 should be used as expeditiously as
possible with any proceeds that cannot be used in a manner
consistent with the bond covenants applied to the defeasance
of the bonds.
10. Provide for a tiered structure regarding the use of
proceeds of bonds issued by RDAs between January 1, 2011 and
June 30, 2011, with the incremental percentage of proceeds
that may be expended equal to:
a. Five percent upon a FOC.
b. Fifteen percent with an approved last and final
ROPS.
c. Twenty-five percent for bonds issued between
January 1, 2011 and January 31, 2011, inclusive, for a
total of forty-five percent.
d. Twenty percent for bonds issued between February
1, 2011 and February 28, 2011, inclusive, for a total
of forty percent.
e. Fifteen percent for bonds issued between March
1, 2011 and March 31, 2011, inclusive, for a total of
thirty five percent.
f. Ten percent for bonds issued between April 1,
2011 and April 30, 2011, inclusive, for a total of
thirty percent.
g. Five percent for bonds issued between May, 2011
and May 31, 2011, inclusive, for a total of twenty five
percent.
1. Allow for expenditure of 45 percent of post-2010 bond
proceeds to be expended if their issuance was delayed due to
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actions of a metropolitan regional transportation district
or resulted from refunding or refinancing of other bonds
issued prior to 2011.
2. Indicate specific provisions regarding the LRPMPs,
including that:
a. SAs with no RDA property must submit a plan
stating that fact.
b. Compensation agreements may be arranged with the
affected taxing entity prior to approval of the LRPMP.
c. DOF must only consider whether the LRPMP
represents a good faith effort and shall approve LRPMP
with alacrity.
d. OB actions to dispose of property pursuant to a
LRPMP do not require DOF approval.
1. Create a last and final ROPS process that may take place
beginning January 1, 2015, which must be acted on by DOF
within 100 days after approval by the OB. Indicate that the
sponsoring entity loans would be repaid at the simple
interest rate of not to exceed four percent with payments
not to exceed a threshold of 15 percent of the sums that
would otherwise flow to the taxing entities, and allow for
the use of the alternative loan repayment plan. Stipulate,
for a last and final ROPS, the following conditions:
a. Remaining debt of the SA is limited to
administrative costs and payments pursuant to EOs with
defined payment schedules.
b. All remaining obligations have been previously
listed on a ROPS and approved for payment by DOF.
c. Except for the litigation involving Los Angeles
Unified School District and the County of Los Angeles,
the SA is not a party to outstanding or unresolved
litigation.
1. End "negative bailout," thus providing annual fiscal
relief to the counties of Stanislaus, Trinity, Plumas and
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Lassen. Negative bailout occurs if the health and welfare
costs that the state assumed for a county exceed the
additional property tax the county receives from the schools
(pursuant to the post Proposition 13 property tax shift),
reducing through statute the county's property tax revenue
by the difference.
2. Provide fiscal relief for specified cities in Riverside
County incorporated after 2004-Jurupa Valley, Menife,
Wildomar and Eastvale-which experienced fiscal stress due to
lost revenue from the VLF swap, for which they were
ineligible, and the loss of the enhanced VLF rate redirected
in 2011 to fund public safety realignment.
3. Terminate, over a five-year period, the requirement of
four cities in Santa Clara County to reimburse the county
for the loss of ERAF due to Tax Equity Allocations (TEA), a
program that provides property tax to cities that levied
little or no property tax prior to Proposition 13 by
shifting property taxes from the county.
4. Allow the County of San Benito to participate in an
Educational Revenue Augmentation Fund (ERAF) repayment
program (for which they are currently ineligible), in order
to pay amounts owed to the ERAF, resulting state forgiveness
of approximately $3.4 million of the $4 million owed by the
county.
5. Provide for an appropriation, identifying the measure as a
budget bill.
Fiscal Effect:The bill would result in additional General Fund
near term annual costs in the range of $135 million to $310
million, due to Proposition 98 guarantee requirements and direct
payments to local governments.
Comments:AB 26 X1 (Blumenfield), Chapter 5, Statutes of 2011,
First Extraordinary Session, eliminated the state's
approximately 400 RDAs, replacing them with locally-organized
SAs assigned with the task of retiring the outstanding debts and
addressing other legal obligations of RDAs. The process of
winding-down redevelopment agencies was not expected to be a
straightforward process without uncertainty and controversy;
however, the extreme complexity of dissolving the program and
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the time required to accomplish this was unexpected. The process
has somewhat delayed the receipt of property taxes by school
districts and often resulted in a lack of clarity for local
governments. Most, but not all, of these issues have been
resolved over the last year, and the Administration is
continuing the ongoing workload involved with winding down the
state's former RDAs.
In terms of additional property tax increment, from 201112 to
201415, approximately $1.3 billion in property tax revenue has
gone to cities, $1.6 billion to counties, and $531 million to
special districts. The budget anticipates that in 201415 and
201516 combined, cities will receive an additional $580 million,
counties $660 million, and special districts $200 million. For
the period through 2018-19, the Administration expects cities to
receive $2.9 billion, counties $3.5 billion and special
districts $1.1 billion. From 201112 through 2014-15,
approximately $4.4 billion will be returned to K14 schools. The
budget anticipates Proposition 98 General Fund savings resulting
from the dissolution of RDAs will be $964 million in 201415 and
$1.1 billion in 201516. On an ongoing basis, Proposition 98
General Fund savings stemming from RDA dissolution are estimated
to be well over $1.0 billion annually.
This measure represents a reasonable attempt to implement a
final resolution for the dissolution of RDAs, as well as resolve
several long standing issues related to state-local fiscal
relations. The bill allows for a number of broad-based benefits
for local governments including the use of bond proceeds,
allowance of certain re-entered agreements, use of proceeds of
bonds issued for low- and moderate-income housing, as well as
other benefits related to specific communities. The bill also
addresses the definition of loan agreements and, in aggregate,
is likely to reduce the amount of uncertainty and litigation
moving forward.
Support: None on file
Opposed: None on file
-- END --
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