BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 107|
|Office of Senate Floor Analyses | |
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UNFINISHED BUSINESS
Bill No: SB 107
Author: Committee on Budget and Fiscal Review
Amended: 9/10/15
Vote: 21
SENATE FLOOR: Not relevant
ASSEMBLY FLOOR: Not available
SUBJECT: General Subject: Local government
SOURCE: Author
DIGEST: 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, this bill
addresses several ongoing issues relating to state-local fiscal
situations. This bill is related to the implementation of the
Budget Act of 2015.
Assembly Amendments delete the prior version of the bill and
insert current language.
ANALYSIS: This bill includes numerous provisions which clarify
and simplify the RDA dissolution process and address local
fiscal situations. Specifically, this bill:
1) Clarifies 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.
2) Redefines and clarifies the definition of administrative
cost allowance as the maximum amount of administrative costs
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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) Adds the following new calculations for administrative
costs:
a) Five percent of the property tax allocated to the SA
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 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.
1) Allows 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 allows these funds to be an EO for repayment, only in
the event that judicial relief is granted to the SA.
2) Makes 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
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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) Creates an annual, rather than biannual, process for ROPS
beginning with the July 1, 2016 period.
2) Allows for expenditure of the entire indebtedness
obligation proceeds associated with low- and moderate-income
housing purposes. Clarifies annual reporting requirements
for the low- and moderate-income housing funds.
3) Establishes 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.
1) Allows the county auditor-controller, as well as DOF, to
have the authority to require any documents associated with
EOs to be provided to them.
2) Prescribes 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.
3) Indicates 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
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are related to the RDA wind-down process. Disallows funding
for any item reduced or eliminated by DO and clarifies that
OB are not allowed to approve post June 27, 2012 re-entered
agreements.
4) Specifies 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.
5) States that SAs may not create EOs to repay loans entered
into between the RDA and the city or county that formed it,
except as expressly provided for in law.
6) Establishes 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.
7) Facilitates 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.
8) Addresses administrative aspects of OBs, including
establishing, clarifying or specifying that:
a) Alternates 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.
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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 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) Clarifies and institutes 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
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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) Clarifies 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) Expands 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
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) Allows 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.
Provides that pledged overrides not needed for RDA debt
service return in their entirety to the levying entity.
4) Defines 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) Defines 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) Clarifies 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.
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7) Specifies 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.
1) Requires 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
principal and then to interest. Specifies that this
provision will 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.
2) Stipulates 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.
3) Provides 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.
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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) Allows for expenditure of 45 percent of post-2010 bond
proceeds to be expended if their issuance was delayed due to
actions of a metropolitan regional transportation district
or resulted from refunding or refinancing of other bonds
issued prior to 2011.
2) Indicates 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) Creates 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. Indicates that the
sponsoring entity loans would be repaid at the simple
interest rate of not to exceed four percent with payments
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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) Ends "negative bailout," thus providing annual fiscal
relief to the counties of Stanislaus, Trinity, Plumas and
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) Provides 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) Terminates, over a five-year period, the requirement of
four cities in Santa Clara County to reimburse the county
for the loss of the Educational Revenue Augmentation Fund
(ERAF) due to Tax Equity Allocations, 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) Allows the County of San Benito to participate in an ERAF
repayment program (for which they are currently ineligible),
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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) Provides for an appropriation, identifying the bill as a
budget bill.
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 RDAs was
not expected to be a straightforward process without uncertainty
and controversy; however, the extreme complexity of dissolving
the program and 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 bill represents a reasonable attempt to implement a final
resolution for the dissolution of RDAs, as well as resolve
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several long standing issues related to state-local fiscal
relations. Thies 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. Thies
bill also addresses the definition of loan agreements and, in
aggregate, is likely to reduce the amount of uncertainty and
litigation moving forward.
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: Yes
According to the Senate Budget and Fiscal Review Committee, this
bill results 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.
SUPPORT: (Verified9/11/15)
None received
OPPOSITION: (Verified9/11/15)
None received
Prepared by: Mark Ibele / B. & F.R. / (916) 651-4103
9/11/15 17:15:25
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