BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 441|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
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
SB 441
Page 2
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.
SB 441
Page 3
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
SB 441
Page 4
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
SB 441
Page 5
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
SB 441
Page 6
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
SB 441
Page 7
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
**** END ****
SB 441
Page 8