BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 441 (Leno) - San Francisco redevelopment: housing
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|Version: April 6, 2015 |Policy Vote: GOV. & F. 5 - 0 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: May 18, 2015 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: SB 441would authorize the San Francisco redevelopment
successor agency to issue bonds or incur other indebtedness to
finance the construction of specified affordable housing and
infrastructure enforceable obligations.
Fiscal
Impact: This bill is expected to result in additional net
General Fund expenditures of approximately $273 million over 40
years by authorizing bond financing pledged by revenues in San
Francisco's Redevelopment Property Tax Trust Fund (RPTTF) for
specified projects, rather than financing those projects on a
pay-as-you-go (pay/go) basis. The bill would result in reduced
General Fund expenditures over the next ten years, followed by
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thirty years of increased General Fund expenditures, as follows:
Reduced General Fund allocations to San Francisco school
entities of approximately $79 million over the five-year
period from 2015-16 through 2019-20.
Reduced General Fund allocations to San Francisco schools of
approximately $6 million over the five-year period from
2021-22 through 2024-25.
Increased General Fund allocations to San Francisco schools of
approximately $131 million over the ten-year period from
2025-26 through 2034-35.
Increased General Fund allocations to San Francisco schools of
approximately $227 million over the remaining 20 year period
of bond repayment, ending in 2054-55.
These impacts are a result of the affect the bill would have on
payments to schools from the RPTTF. In general, any reductions
in amounts allocated to schools from the RPTTF must be
backfilled from the state General Fund, while any increased
allocations to schools from the RPTTF would reduce General Fund
expenditures, pursuant to the Proposition 98 minimum funding
guarantees. Staff notes that the school share of property tax
revenues in the City and County of San Francisco is
approximately 35 percent of total revenues.
Staff notes that all figures noted here are based on comparative
scenarios for financing the projects (pay/go vs. bonding) with
data provided by San Francisco's successor agency. Using the
pay/go scenario, total RPTTF expenditures to finance the
projects would be approximately $598 million, most of which
would occur over the next 8-10 years. If the successor agency
issues bonds to finance the projects, total RPTTF expenditures
for debt service would be approximately $1.38 billion over the
next 40 years, with three phases of 30-year bonds issued over
the next ten years.
Background: Historically, the Community Redevelopment Law has allowed a
local government to establish redevelopment agencies (RDAs) and
capture all of the increase in property taxes that is generated
within the project area beyond the base year value (referred to
as "tax increment") over a period of decades. Prior to their
dissolution pursuant to ABx1 26 (Blumenfield) Chap 5/2011, RDAs
used tax increment financing (including the school share),
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oftentimes issuing long-term debt in the form of tax allocation
bonds, to address issues of blight, construct affordable
housing, rehabilitate existing buildings, and finance
development and infrastructure projects.
Existing law establishes procedures for winding down RDA
activity, including a requirement that successor agencies
dispose of former RDAs' assets under direction of an oversight
board. Successor agencies are required to make any payments
related to enforceable obligations, as specified in an adopted
biannual recognized obligation payment schedule (ROPS), and
remit unencumbered balances of RDA funds to the county
auditor-controller for distribution to local taxing entities in
the county. The Department of Finance (DOF) reviews each ROPS
to determine if the listed payments meet the statutory criteria
for repayment, and has the authority to disallow any payments
that do not meet those criteria. 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 units of affordable
housing. Under current law, San Francisco's successor agency is
not authorized to issue new debt backed by the Redevelopment
Property Tax Trust Fund (RPTTF), and instead must finance these
projects on a pay-as-you-go basis with RPTTF funds. The pay/go
model is expected to obligate nearly all RTTPF funds in the near
future, leaving very little residual amounts for disbursement to
schools and other taxing entities.
Proposed Law:
SB 441 would authorize the successor agency to the San
Francisco RDA to issue bonds or incur other indebtedness to
finance the infrastructure requirements of the Transbay
Implementation Agreement and the affordable housing components
of the following enforceable obligations:
The Mission Bay North Owner Participation Agreement.
The Mission Bay South Owner Participation Agreement.
The Hunters Point Shipyard Phase 1 Disposition and
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Development Agreement.
The Candlestick Point-Hunters Point Shipyard Phase 2
Disposition and Development Agreement.
The bill would authorize the successor agency to pledge any
property tax revenues available in the RPTTF to the bonds or
other indebtedness, and do the following:
Authorize bonds to be sold at either a negotiated or
competitive sale and issued on a parity basis with other
outstanding bonds or indebtedness, as specified.
Specify the manner in which the successor agency may
make certain required RPTTF payments to taxing entities
subordinate to the bonds or other debt, upon approval of
that taxing entity.
Specify how an action may be brought to determine the
validity of bonds or other obligations authorized by the
bill, the pledge of revenues those debt instruments, and
the legality and validity of specified proceedings related
to the bonds.
Require all actions in the bill to be subject to
approval of the oversight board.
Require scheduled bond payments to be listed in the ROPS
if DOF either reviews and approves or fails to request
review within five days of an oversight board approval.
The action is not subject to further review by DOF or the
Controller, except as specified.
Specify that any bonds or indebtedness authorized by
this bill would be considered debt incurred by the
dissolved RDA with the same legal effect as if it had been
issued, incurred, or entered into prior to June 29, 2011,
and included on the successor agency's ROPS, as specified.
Require the successor agency to ensure that the lowest
long-term financing is obtained, prohibit the financing
from using variable rates or bullets or spikes, and require
the successor agency to use an independent financial
advisor.
Staff
Comments: SB 441 would allow the San Francisco successor agency
to accelerate the construction of affordable housing and
infrastructure. In total, these projects will result in the
construction of 2,783 units. Providing bond financing will help
complete construction of nearly 400 units in the period from
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2018-20 that would otherwise have been constructed in the
2021-25 timeframe. This would also free up RPTTF funds for
schools and the City and County of San Francisco in the near
term.
The San Francisco successor agency expects to have approximately
$344 million in RPTTF revenues over the next five years. Under
the pay/go scenario, the successor agency expects to dedicate
$315 million of RPTTF funds for these projects in the period
from 2015-16 through 2019-20, leaving only $28 million in
residual revenues for distribution to taxing entities (only $10
million of which is for schools). Under SB 441, the successor
agency would issue $427 million in bonds in the 2015-16 through
2019-20 period. After paying $89 in debt service over this
period, there would be $255 million in RPTTF funds for
distribution to taxing entities, $89 million of which would go
to schools.
For the period from 2020-21 through 2024-25, the successor
agency expects to have approximately $554 million in RPTTF
revenues. Under the pay/go scenarios, the agency would dedicate
$217 million to project expenditures, leaving $337 million for
distribution to taxing entities (about $118 million for
schools). Under SB 441, the successor agency would issue $103
million in bonds. After paying $198 million in debt service,
there would be $356 million available for distribution to taxing
entities from 2020-21 through 2024-25, $124 million of which
would go to schools. The successor agency would issue another
$67 million in bonds in the years after 2025.
In summary, using bond financing authorized by SB 441, San
Francisco's schools would receive an additional $85 million in
RPTTF funds over the next ten years than they would have under
current law (decreasing General Fund obligations), followed by
$358 million in decreased RPTTF allocations to schools (and
increased General Fund obligations) over the 30 years
thereafter. The net overall impact over the next 40 years would
be increased General Fund expenditures of approximately $273
million.
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