Amended in Senate April 6, 2015

Senate Bill No. 441

Introduced by Senator Leno

February 25, 2015

An act to begin delete amend Section 33333.7 of end delete begin insert add Section 34177.7 to end insert the Health and Safety Code, relating to redevelopment.

LEGISLATIVE COUNSEL’S DIGEST

SB 441, as amended, Leno. San Francisco redevelopment: housing.

The Community Redevelopment Law authorizes the establishment of redevelopment agencies in communities to address the effects of blight, as defined. Existing law dissolved redevelopment agencies as of February 1, 2012, and provides for the designation of successor agencies that are required to wind down the affairs of the dissolved redevelopment agencies and to, among other things, make payments due for enforceable obligations. begin delete Existing law authorized the former Redevelopment Agency of the City and County of San Francisco, subject to the approval of the board of supervisors of that city and county, to incur indebtedness exclusively for specified Low and Moderate Income Housing Fund activities until January 1, 2014, or until the agency replaced all of the housing units demolished prior to the enactment of the replacement housing obligations, and to receive tax increment revenues to repay indebtedness incurred for those activities until no later than January 1, 2044, as specified. end delete begin insert Existing law prohibits dissolved redevelopment agencies from issuing bonds or incurring other indebtedness on or after June 29, 2011. Existing law authorizes successor agencies to, among other things, issue bonds or incur indebtedness after that date to refund the bonds or indebtedness of a former redevelopment agency or to finance debt service spikes, as specified. The issuance of bonds or incurrence of other indebtedness by a successor agency is subject to the approval of the oversight board of the successor agency. end insert

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This bill would make a technical, nonsubstantive change to the provision authorizing the former Redevelopment Agency of the City and County of San Francisco to incur indebtedness exclusively for specified Low and Moderate Income Housing Fund activities.

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This bill would authorize the successor agency to the Redevelopment Agency of the City and County of San Francisco to issue bonds or incur other indebtedness to finance the construction of affordable housing and infrastructure required by specified enforceable obligations, subject to the approval of the oversight board. The bill would provide that bonds or other indebtedness authorized by its provisions would be considered indebtedness incurred by the dissolved redevelopment agency, would be listed on the Recognized Obligation Payment Schedule, and would be secured by a pledge of moneys deposited into the Redevelopment Property Tax Trust Fund. The bill would authorize the successor agency to require affected taxing entities to make certain determinations as to the related subordination of revenues, and would thereby impose a state-mandated local program. The bill would also require the successor agency to make diligent efforts to obtain the lowest long-term cost financing and to make use of an independent financial advisor in developing financing proposals.

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This bill would make legislative findings and declarations as to the necessity of a special statute for the City and County of San Francisco.

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The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

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This bill would provide that no reimbursement is required by this act for a specified reason.

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Vote: majority. Appropriation: no. Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program:  begin delete no end delete begin insert yes end insert .

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert The Legislature hereby finds and declares all of
the following: end insert

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(a) The Department of Finance has provided written
confirmation to the successor agency to the Redevelopment Agency
of the City and County of San Francisco (successor agency) that
the following projects are finally and conclusively approved as
enforceable obligations:

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(1) The Mission Bay North Owner Participation Agreement.

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(2) The Mission Bay South Owner Participation Agreement.

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(3) The Disposition and Development Agreement for Hunters
Point Shipyard Phase 1.

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(4) The Candlestick Point-Hunters Point Shipyard Phase 2
Disposition and Development Agreement.

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(5) The Transbay Implementation Agreement.

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(b) The enforceable obligations described in subdivision (a)
require the successor agency to fund and develop affordable
housing, including 1,200 units in Transbay, 1,445 units in Mission
Bay North and Mission Bay South, and 1,358 units in Candlestick
Point-Hunters Point Shipyard Phases 1 and 2. In addition, the
successor agency is required to fund and develop public
infrastructure in the Transbay Redevelopment Project Area
pursuant to the Transbay Implementation Agreement, which is
necessary to improve the area surrounding the Transbay Transit
Center.

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(c) Due to insufficient property tax revenues in the
Redevelopment Property Tax Trust Fund, of the total number of
affordable housing units that the successor agency is obligated to
fund and develop under the enforceable obligations described in
subdivision (a), the successor agency has been able to finance the
construction of only 642 units. Additionally, the successor agency
has not been able to fulfill its public infrastructure obligation
under the Transbay Implementation Agreement.

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(d) The successor agency can more expeditiously construct the
3,361 additional units of required affordable housing and the
necessary infrastructure improvements if it is able to issue bonds
or incur other indebtedness secured by property tax revenues
available in the Redevelopment Property Tax Trust Fund to finance
these obligations.

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(e) It is the intent of the Legislature to authorize the successor
agency to issue bonds or incur other indebtedness for the purpose
of financing the construction of affordable housing and
infrastructure required under the enforceable obligations described
in subdivision (a). These bonds or other indebtedness may be
secured by property tax revenues available in the successor
agency’s Redevelopment Property Tax Trust Fund from those
project areas that generated tax increment for the Redevelopment
Agency of the City and County of San Francisco upon its
dissolution, if the revenues are not otherwise obligated.

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(f) Authorizing the successor agency to issue bonds or incur
other indebtedness to finance the enforceable obligations described
in subdivision (a) will financially benefit the affected taxing entities,
insofar as it will ensure that funds which would otherwise flow to
those entities as “residual” payments pursuant to paragraph (4)
of subdivision (a) of Section 34183 of the Health and Safety Code
will not be redirected to fund these enforceable obligations.
Instead, the enforceable obligations will be funded with the
proceeds of the bonds or debt issuances.

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(g) The housing situation in the City and County of San
Francisco is unique, in that median rents and sales prices are
among the highest in the state. Because of this, the City and County
of San Francisco is currently facing an affordable housing crisis.

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begin insert SEC. 2. end insert   

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begin insert Section 34177.7 is added to the end insert begin insert Health and Safety
Code end insert begin insert , to read: end insert

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begin insert 34177.7. end insert   

(a) (1) In addition to the powers granted to each
successor agency, and notwithstanding any other provision of this
division, including, but not limited to, Sections 34162 and 34189,
the successor agency to the Redevelopment Agency of the City and
County of San Francisco may issue bonds or incur other
indebtedness to finance all of the following:

(A) The affordable housing requirements of the following
enforceable obligations:

(i) The Mission Bay North Owner Participation Agreement.

(ii) The Mission Bay South Owner Participation Agreement.

(iii) The Disposition and Development Agreement for Hunters
Point Shipyard Phase 1.

(iv) The Candlestick Point-Hunters Point Shipyard Phase 2
Disposition and Development Agreement.

(v) The Transbay Implementation Agreement.

(B) The infrastructure requirements of the Transbay
Implementation Agreement.

(2) The successor agency to the Redevelopment Agency of the
City and County of San Francisco may pledge to the bonds or
other indebtedness incurred pursuant to this section any property
tax revenues available in the Redevelopment Property Tax Trust
Fund that are not otherwise obligated.

(b) Bonds issued pursuant to this section may be sold at either
a negotiated or a competitive sale. The bonds issued or other
indebtedness incurred pursuant to this section may be issued or
incurred on a parity basis with outstanding bonds or other
indebtedness obligations of the successor agency to the
Redevelopment Agency of the City and County of San Francisco,
and the successor agency may pledge the revenues pledged to
those outstanding bonds or other indebtedness obligations to the
issuance of bonds or other indebtedness incurred pursuant to this
section. The pledge, when made in connection with the issuance
of bonds or other indebtedness obligations under this section, shall
have the same lien priority as the pledge of outstanding bonds or
other indebtedness, and shall be valid, binding, and enforceable
in accordance with its terms.

(c) (1) Prior to incurring any bonds or other indebtedness
pursuant to this section, the successor agency to the Redevelopment
Agency of the City and County of San Francisco may subordinate
to the bonds or other indebtedness the amount required to be paid
to an affected taxing entity pursuant to paragraph (1) of subdivision
(a) of Section 34183, provided that the affected taxing entity has
approved the subordinations pursuant to this subdivision.

(2) At the time the successor agency requests an affected taxing
entity to subordinate the amount to be paid to it, the successor
agency shall provide the affected taxing entity with substantial
evidence that sufficient funds will be available to pay both the debt
service on the bonds or other indebtedness and the payments
required by paragraph (1) of subdivision (a) of Section 34183,
when due.

(3) Within 45 days after receipt of the agency’s request, the
affected taxing entity shall approve or disapprove the request for
subordination. An affected taxing entity may disapprove a request
for subordination only if it finds, based upon substantial evidence,
that the successor agency will not be able to pay the debt service
payments and the amount required to be paid to the affected taxing
entity. If the affected taxing entity does not act within 45 days after
receipt of the agency’s request, the request to subordinate shall
be deemed approved and shall be final and conclusive.

(d) An action may be brought pursuant to Chapter 9
(commencing with Section 860) of Title 10 of Part 2 of the Code
of Civil Procedure to determine the validity of bonds or other
obligations authorized by this section, the pledge of revenues to
those bonds or other obligations authorized by this section, the
legality and validity of all proceedings theretofore taken and, as
provided in the resolution of the legislative body of the successor
agency to the Redevelopment Agency of the City and County of
San Francisco authorizing the bonds or other obligations
authorized by this section, proposed to be taken for the
authorization, execution, issuance, sale, and delivery of the bonds
or other obligations authorized by this section, and for the payment
of debt service on the bonds or the payment of amounts under other
obligations authorized by this section. Subdivision (c) of Section
33501 does not apply to any such action. The Department of
Finance shall be notified of the filing of any action as an affected
party.

(e) Notwithstanding any other law, including, but not limited
to, Section 33501, an action to challenge the issuance of bonds or
the incurrence of indebtedness by the successor agency to the
Redevelopment Agency of the City and County of San Francisco
shall be brought within 30 days after the date on which the
oversight board approves the resolution of the successor agency
approving the issuance of bonds or the incurrence of indebtedness
authorized under this section.

(f) The actions authorized in this section shall be subject to the
approval of the oversight board, as provided in Section 34180.
Additionally, an oversight board may direct the successor agency
to the Redevelopment Agency of the City and County of San
Francisco to commence any of the transactions described in
subdivision (a) so long as the successor agency is able to recover
its related costs in connection with the transaction. After a
successor agency, with approval of the oversight board, issues
any bonds, incurs any indebtedness, or executes an amended
enforceable obligation pursuant to subdivision (a), the oversight
board shall not unilaterally approve any amendments to or early
termination of the bonds, indebtedness, or enforceable obligation.
If, under the authority granted to it by subdivision (h) of Section
34179, the Department of Finance either reviews and approves
or fails to request review within five business days of an oversight
board approval of an action authorized by this section, the
scheduled payments on the bonds or other indebtedness shall be
listed in the Recognized Obligation Payment Schedule and shall
not be subject to further review and approval by the department
or the Controller. The department may extend its review time to
60 days for actions authorized in this section and may seek the
assistance of the Treasurer in evaluating proposed actions under
this section.

(g) Any bonds, indebtedness, or amended enforceable obligation
authorized by this section shall be considered indebtedness
incurred by the dissolved redevelopment agency, with the same
legal effect as if the bonds, indebtedness, financing agreement, or
amended enforceable obligation had been issued, incurred, or
entered into prior to June 29, 2011, in full conformity with the
applicable provisions of the Community Redevelopment Law that
existed prior to that date, shall be included in the successor agency
to the Redevelopment Agency of the City and County of San
Francisco’s Recognized Obligation Payment Schedule, and shall
be secured by a pledge of, and lien on, and shall be repaid from
moneys deposited from time to time in the Redevelopment Property
Tax Trust Fund established pursuant to subdivision (c) of Section
34172, as provided in paragraph (2) of subdivision (a) of Section
34183. Property tax revenues pledged to any bonds, indebtedness,
or amended enforceable obligations authorized by this section are
taxes allocated to the successor agency pursuant to subdivision
(b) of Section 33670 and Section 16 of Article XVI of the California
Constitution.

(h) The successor agency to the Redevelopment Agency of the
City and County of San Francisco shall make diligent efforts to
ensure that the lowest long-term cost financing is obtained. The
financing shall not provide for any bullets or spikes and shall not
use variable rates. The successor agency shall make use of an
independent financial advisor in developing financing proposals
and shall make the work products of the financial advisor available
to the Department of Finance at its request.

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begin insert SEC. 3. end insert   

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The Legislature finds and declares that a special law
is necessary and that a general law cannot be made applicable
within the meaning of Section 16 of Article IV of the California
Constitution because of the unique circumstances relating to
affordable housing in the City and County of San Francisco in
conjunction with the affordable housing and infrastructure
requirements of the enforceable obligations specified in this act.

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begin insert SEC. 4. end insert   

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No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district are the result of a program for which legislative authority
was requested by that local agency or school district, within the
meaning of Section 17556 of the Government Code and Section 6
of Article XIII B of the California Constitution.

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SECTION 1.  

Section 33333.7 of the Health and Safety Code
is amended to read:

33333.7.  

(a)  Notwithstanding the time limits set forth in
paragraph (1) of subdivision (a) of Section 33333.6, as that
paragraph (1) read on December 31, 2001, the Redevelopment
Agency of the City and County of San Francisco may, subject to
the approval of the Board of Supervisors of the City and County
of San Francisco, retain its ability to incur indebtedness exclusively
for Low and Moderate Income Housing Fund activities eligible
under Sections 33334.2 and 33334.3 until January 1, 2014, or until
the agency replaces all of the housing units demolished prior to
the enactment of the replacement housing obligations in Chapter
970 of the Statutes of 1975, whichever occurs earlier. The ability
of the agency to receive tax increment revenues to repay
indebtedness incurred for these Low and Moderate Income Housing
Fund activities may be extended until no later than January 1,
2044. Nothing in this paragraph shall be construed to extend a
plan’s effectiveness, except to incur additional indebtedness for
Low and Moderate Income Housing Fund activities, to pay
previously incurred indebtedness, and to enforce existing
covenants, contracts, or other obligations.

(b)  Annual revenues shall not exceed the amount necessary to
fund the Low and Moderate Income Housing Fund activities of
the agency. The agency shall neither collect nor spend more than
10 percent for the planning and administrative costs authorized
pursuant to subdivision (e) of Section 33334.3. Revenues received
under this paragraph shall not exceed the amount of tax increment
received and allocated to the agency pursuant to the plan, as it has
been amended, less the amount necessary to pay prior outstanding
indebtedness, and less the amount of the project area’s property
tax revenue that school entities are entitled to receive pursuant to
Chapter 3 (commencing with Section 75) and Chapter 6
(commencing with Section 95) of Part 0.5 of Division 1 of the
Revenue and Taxation Code if the plan had not been amended.
Additionally, revenues collected under this paragraph are subject
to the payments to affected taxing entities pursuant to Section
33607.

(c)  The activities conducted with revenues received under this
paragraph shall be consistent with the policies and objectives of
the community’s housing element, as reviewed and approved by
the department, and shall address the unmet housing needs of very
low, low- and moderate-income households. The activities shall
also be consistent with the community’s most recently approved
consolidated and annual action plans submitted to the United States
Department of Housing and Urban Development, and if the director
deems it necessary, the annual action plans shall be submitted to
the department on an annual basis. No less than 50 percent of the
revenues received shall be devoted to assisting in the development
of housing that is affordable to very low income households.

(d)  The agency shall not incur any indebtedness pursuant to
this paragraph until the director certifies, after consulting with the
agency, the net difference between the number of housing units
affordable to persons and families of low and moderate income
that the agency destroyed or removed prior to January 1, 1976,
and the number of housing units affordable to persons and families
of low and moderate income that the agency rehabilitated,
developed, or constructed, or caused to be rehabilitated, developed,
or constructed within the project areas adopted prior to January 1,
1976.

(e)  The agency shall not incur any indebtedness pursuant to
this paragraph unless the director of the department certifies
annually, prior to the creation of indebtedness, all of the following:

(1)  The community has a current housing element that
substantially complies with the requirements of Article 10.6
(commencing with Section 65580) of Chapter 3 of Division 1 of
Title 7 of the Government Code.

(2)  The community’s housing element indicates an unmet need
for Low and Moderate Income Housing Fund activities.

(3)  The agency’s most recent independent financial audit report
prepared pursuant to Section 33080.1 reports acceptable findings
and no major violations of this part.

(4)  The agency has complied with subdivision (a) of Section
33334.2.

(5)  The agency has met the requirements of this part with
respect to the provision of dwelling units for persons and families
of low or moderate income, including, but not limited to, the
requirements of Section 33413.

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