BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                        SB 441|
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                                   THIRD READING 


          Bill No:  SB 441
          Author:   Leno (D)
          Amended:  4/6/15  
          Vote:     21  

           SENATE GOVERNANCE & FIN. COMMITTEE:  5-0, 4/29/15
           AYES:  Hertzberg, Beall, Hernandez, Lara, Pavley
           NO VOTE RECORDED:  Nguyen, Moorlach

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 5/28/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   San Francisco redevelopment:  housing


          SOURCE:    Author


          DIGEST:  This bill allows San Francisco's successor agency to  
          issue bonds to pay for recognized obligations.


          ANALYSIS:   


          Existing law:


          1)Establishes successor agencies to manage the process of  
            unwinding former redevelopment agencies' (RDAs') affairs.   
            With limited exceptions, the city or county that created each  
            former RDA now serves as that RDA's successor agency. Each  








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            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.  


          2)Defines an "enforceable obligation" as including 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.


          3)Allows the Department of Finance (DOF) to review and request  
            reconsideration of an oversight board's decisions.  


          4)Allows a successor agency to request that DOF issue a binding,  
            "final and conclusive" determination that an enforceable  
            obligation is valid.


          This bill:


          1)Allows the successor agency to the Redevelopment 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  
            specified enforceable obligations that the DOF has recognized  
            as final and conclusive.


          2)Allows San Francisco's successor agency to pledge to the bonds  
            or other indebtedness incurred pursuant to this bill's  
            provisions any property tax revenues available in the  
            Redevelopment Property Tax Trust Fund (RPTTF) that are not  
            otherwise obligated.








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          3)Allows bonds issued pursuant to this bill's provisions to be  
            sold at either a negotiated or a competitive sale and  
            specifies other characteristics of the bonds.  


          4)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.


          5)Specifies how an action may be brought pursuant to state law  
            to determine the validity of bonds or other obligations  
            authorized by this bill, the pledge of revenues to those bonds  
            or other obligations authorized by this bill, and the legality  
            and validity of specified proceedings related to the bonds or  
            other obligations.  


          6)Requires that the San Francisco successor agency's actions  
            authorized by this 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 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.  This bill specifies the conditions that apply to  
            the DOF's review of an oversight board's approval of an action  
            authorized by this bill.


          7)Directs that any bonds, indebtedness, or amended enforceable  
            obligations authorized by this bill must be:


             a)   Considered indebtedness incurred by the dissolved RDA,  
               with the same legal effect as if the bonds, indebtedness,  
               financing agreement, or amended enforceable obligation had  







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               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. 


             b)   Included in the successor agency's Recognized Obligation  
               Payment Schedule.


             c)   Secured by a pledge of, and lien on, and must be repaid  
               from moneys deposited from time to time in the RPTTF. 


          8)Specifies that property tax revenues pledged to any bonds,  
            indebtedness, or amended enforceable obligations authorized by  
            this bill are taxes allocated to the successor agency pursuant  
            to specified provisions of state law.


          9)Requires San Francisco's successor agency to make diligent  
            efforts to ensure that the lowest cost long-term financing is  
            obtained.  


          10)Prohibits the financing from providing for any bullets or  
            spikes or using variable rates. 


          11)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 DOF at its request.


          12)Contains legislative findings 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.


          Background









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          The DOF 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.


          Comments  


           Purpose of the bill.  This bill 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.  This 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, this 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.  This bill 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.


          Unique?  This bill contains legislative findings that cite the  
          uniqueness of San Francisco's affordable housing crisis to  
          explain why this bill grants San Francisco's successor agency  
          new authority to issue bonds or other indebtedness.  While the  







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          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.  This bill may establish a precedent that  
          invites other successor agencies to ask the Legislature for  
          similar authority.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes

          According to the Senate Appropriations Committee, 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 RPTTF for  
          specified projects, rather than financing those projects on a  
          pay-as-you-go (pay/go) basis.  This bill results in reduced  
          General Fund expenditures over the next 10 years, followed by 30  
          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 10-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 this bill will have on  
          payments to schools from the RPTTF.  In general, any reductions  
          in amounts allocated to schools from the RPTTF must be  







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          backfilled from the state General Fund, while any increased  
          allocations to schools from the RPTTF will reduce General Fund  
          expenditures, pursuant to the Proposition 98 minimum funding  
          guarantees.  It is noted that the school share of property tax  
          revenues in the City and County of San Francisco is  
          approximately 35 percent of total revenues.

          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 10  
          years.


          SUPPORT:   (Verified5/29/15)


          California Apartment Association
          San Francisco Mayor Edwin M. Lee


          OPPOSITION:   (Verified5/29/15)


          None received


          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          5/30/15 18:01:31


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