BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 441 |Hearing |4/29/15 |
| | |Date: | |
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|Author: |Leno |Tax Levy: |No |
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|Version: |4/6/15 |Fiscal: |Yes |
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|Consultant|Weinberger |
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SAN FRANCISCO SUCCESSOR AGENCY'S AFFORDABLE HOUSING
ENFORCEABLE OBLIGATIONS
Allows San Francisco's successor agency to issue bonds to pay
for recognized obligations.
Background and Existing Law
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (RDAs), prepare and
adopt redevelopment plans, and finance redevelopment activities.
As a redevelopment project area's assessed valuation grew above
its base-year value, the resulting property tax revenues - the
property tax increment - went to the RDA instead of going to the
underlying local governments. The RDA kept the property tax
increment revenues generated from increases in property values
within a redevelopment project area. State law required
redevelopment agencies to set aside 20% of their property tax
increment revenues to increase, improve, and preserve the supply
of affordable housing (AB 3674, Montoya, 1976).
In response to criticism that some redevelopment projects seemed
to continue without end, the Legislature required local
officials to limit the length of time during which redevelopment
plans remained in effect, RDAs could issue debt, and property
tax increment could be diverted to RDAs (AB 1290, Isenberg,
1993). In 2000, six of San Francisco's oldest redevelopment
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project areas were about to reach some of the statutory
deadlines on RDA activities. The Legislature extended the
deadlines and allowed San Francisco officials to use the
resulting funds to replace more than 6,700 affordable housing
units that the RDA had demolished and not replaced during the
years before state law imposed replacement housing requirements
on RDAs (SB 2113, Burton, 2000). The Burton bill required San
Francisco to focus on low-income housing, limit its
administrative spending, and get state approval before incurring
more debt. The time extension excluded schools' share of
property tax revenues, avoiding a continuing cost to the State
General Fund.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and returning
billions of dollars of property tax revenues to schools, cities,
and counties to fund core services. Among the statutory changes
that the Legislature adopted to implement the 2011-12 budget, AB
X1 26 (Blumenfield, 2011) dissolved all RDAs. The California
Supreme Court's 2011 ruling in California Redevelopment
Association v. Matosantos upheld AB X1 26, but invalidated AB X1
27 (Blumenfield, 2011), which would have allowed most RDAs to
avoid dissolution.
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AB X1 26 established successor agencies to manage the process of
unwinding former RDAs' affairs. With limited exceptions, the
city or county that created each former RDA now serves as that
RDA's successor agency. Each successor agency has an oversight
board that is responsible for supervising it and approving its
actions. One of the successor agencies' primary
responsibilities is to make payments for enforceable obligations
entered into by former RDAs. The statutory definition of an
"enforceable obligation" includes bonds, specified bond-related
payments, some loans, payments required by the federal
government, obligations to the state, obligations imposed by
state law, legally required payments related to RDA employees,
judgments or settlements, and other legally binding and
enforceable agreements or contracts that are not otherwise void
as violating the debt limit or public policy.
The Department of Finance (DOF) can review and request
reconsideration of an oversight board's decisions. A successor
agency can request that DOF issue a binding, "final and
conclusive" determination that an enforceable obligation is
valid.
The Department of Finance has determined that specified
development projects approved by San Francisco's former RDA in
the Transbay, Mission Bay, and Hunter's Point
shipyard/Candlestick Point areas are finally and conclusively
approved enforceable obligations. When completed, those
projects will account for more than 3,300 additional units of
affordable housing. However, current law does not allow San
Francisco's successor agency to issue debt backed by former tax
increment revenues to finance the projects. As a result, San
Francisco officials' only option under current law is to divert
as much former tax increment revenue as possible over many years
in order to accumulate enough capital to construct the
affordable housing projects on a pay-as-you-go basis. As an
alternative, San Francisco officials want legislators to allow
them to accelerate the completion of these projects by financing
the costs through bonds issued by the successor agency.
Proposed Law
Senate Bill 441 allows the Successor Agency to the Redevelopment
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Agency of the City and County of San Francisco, in addition to
the powers granted to each successor agency, and notwithstanding
any other provision of the statutes governing successor
agencies, to issue bonds or incur other indebtedness to finance:
The affordable housing requirements of the following
enforceable obligations:
o The Mission Bay North Owner Participation
Agreement.
o The Mission Bay South Owner Participation
Agreement.
o The Disposition & Development Agreement for
Hunters Point Shipyard Phase 1.
o The Candlestick Point-Hunters Point Shipyard
Phase 2 Disposition & Development Agreement.
o The Transbay Implementation Agreement.
The infrastructure requirements of the Transbay
Implementation Agreement.
SB 441 allows San Francisco's successor agency to pledge to the
bonds or other indebtedness incurred pursuant to the bill's
provisions any property tax revenues available in the
Redevelopment Property Tax Trust Fund that are not otherwise
obligated.
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SB 441 allows bonds issued pursuant to the bill's provisions to
be sold at either a negotiated or a competitive sale. The bonds
issued or other indebtedness incurred 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 the bill's
provisions. 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.
SB 441 specifies the manner in which San Francisco's successor
agency may make some statutorily required payments to an
affected taxing entity subordinate to the bonds or other
indebtedness, provided that the affected taxing entity has
approved the subordinations.
SB 441 specifies how an action may be brought pursuant to state
law to determine the validity of bonds or other obligations
authorized by the bill, the pledge of revenues to those bonds or
other obligations authorized by the bill, and the legality and
validity of specified proceedings related to the bonds or other
obligations. Specifically, the bill requires that:
The DOF must be notified of the filing of any validation
action as an affected party.
An action to challenge the issuance of bonds or the
incurrence of indebtedness by San Francisco's successor
agency must 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 the bill's
provisions.
SB 441 requires that the San Francisco successor agency's
actions authorized by the bill must be subject to the approval
of the oversight board. Additionally, an oversight board may
direct the successor agency to commence specified bond and debt
transactions so long as the successor agency is able to recover
its related costs in connection with the transaction. After a
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successor agency, with approval of the oversight board, issues
any bonds, incurs any indebtedness, or executes an amended
enforceable obligation, the oversight board is prohibited from
unilaterally approving any amendments to or early termination of
the bonds, indebtedness, or enforceable obligation. The bill
specifies the conditions that apply to the DOF's review of an
oversight board's approval of an action authorized by the bill.
SB 441 directs that any bonds, indebtedness, or amended
enforceable obligations authorized by the bill must 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.
Included in the successor agency's Recognized Obligation
Payment Schedule.
Secured by a pledge of, and lien on, and must be repaid
from moneys deposited from time to time in the
Redevelopment Property Tax Trust Fund.
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SB 441 specifies that property tax revenues pledged to any
bonds, indebtedness, or amended enforceable obligations
authorized by the bill are taxes allocated to the successor
agency pursuant to specified provisions of state law.
SB 441 requires San Francisco's successor agency to make
diligent efforts to ensure that the lowest cost long-term
financing is obtained. The bill prohibits the financing from
providing for any bullets or spikes or using variable rates. SB
441 requires the successor agency to make use of an independent
financial advisor in developing financing proposals and to make
the work products of the financial advisor available to the
Department of Finance at its request.
SB 441 contains legislative finding and declarations relating to
the unique need to finance affordable housing enforceable
obligations of San Francisco's successor agency with proceeds of
bonds or debt issued by the successor agency.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Senate Bill 441 will help San Francisco
address a severe housing crisis by accelerating the completion
of more than 3,300 critically-needed units of affordable housing
that are recognized obligations of the successor agency to San
Francisco's former RDA. The bill also expedites the completion
of public infrastructure improvements for development of a new
residential neighborhood surrounding the Transbay Terminal
Center that will include a significant component of affordable
housing units. By giving San Francisco's successor agency an
alternative to paying for these enforceable obligation
construction costs on a pay-as-you-go basis, the bill will
increase the amount of residual property tax revenues that will
be available to schools and other taxing entities during the
next several years. SB 441 also seeks to fulfill the goals of
the redevelopment dissolution law by shortening the length of
time that it will take for San Francisco's successor agency to
wind down the affairs of the City's former RDA.
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2. Unique ? SB 441 contains legislative findings that cite the
uniqueness of San Francisco's affordable housing crisis to
explain why the bill grants San Francisco's successor agency new
authority to issue bonds or other indebtedness. While the
features of San Francisco's housing market are indisputably
unique, it is not clear whether San Francisco's successor agency
is unique in having recognized enforceable obligations that
cannot currently be financed through the issuance of bonds or
other indebtedness. SB 441 may establish a precedent that
invites other successor agencies to ask the Legislature for
similar authority.
3. Special legislation . The California Constitution prohibits
special legislation when a general law can apply (Article IV,
§16). SB 441 contains findings and declarations explaining the
need for legislation that applies only to affordable housing in
the City and County of San Francisco.
4. Mandate . 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 XIIIB of the California
Constitution.
Support and
Opposition (4/23/15)
Support : San Francisco Mayor Edwin M. Lee.
Opposition : Unknown.
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