BILL ANALYSIS Ó
SB 441
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Date of Hearing: July 1, 2015
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
SB
441 (Leno) - As Amended April 6, 2015
SENATE VOTE: 26-13
SUBJECT: San Francisco redevelopment: housing
SUMMARY: Authorizes the successor agency to the redevelopment
agency of the City and County of San Francisco (successor
agency) to issue bonds or incur indebtedness to finance the
affordable housing requirements of four designated projects.
Specifically, this bill:
1)Includes legislative findings and intent.
2)Authorizes the successor agency, subject to the approval of
the oversight board, to 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 Partnership
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Agreement;
ii. The Mission Bay South Owner Partnership
Agreement;
iii. The Disposition and Development Agreement for
Hunters Point Shipyard Phase Two;
iv. The Transbay Implementation Agreement.
a) The infrastructure requirements of the Transbay
Implementation Agreement.
1)Authorizes the successor agency to pledge any property tax
revenues available in the Redevelopment Property Tax Trust
Fund that are not otherwise obligated to pay the bonds or
other indebtedness that result from financing the above
enforceable obligations.
2)Provides that bonds issued for the enforceable obligations
listed in 2) may be sold at either a negotiated or competitive
sale.
3)Provides that bonds issued for the enforceable obligations
listed in 2) may be issued or incurred on an equal basis with
outstanding bonds or other indebtedness of the successor
agency and the successor agency may pledge the revenues of
other outstanding bonds or indebtedness to the bonds issued.
4)Provides that bonds issued for the enforceable obligations
listed in 2) have the same lien priority as the pledge of
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outstanding bonds for other indebtedness and are valid,
binding, and enforceable in accordance with those terms.
5)Allows the successor agency to subordinate to the bonds or
other indebtedness issued for enforceable obligations listed
in 2) the amount that is required to be paid out through pass
through agreements or to other taxing entities.
6)Requires the successor agency to provide the affected taxing
entity with substantial evidence that sufficient funds will be
available to pay both the debt service on the bonds issued for
the enforceable obligations listed in 2) and pass through
agreements to the other taxing entities.
7)Requires a taxing entity to approve or disapprove the request
for subordination 45 days after receipt of the request from
the successor agency.
8)Provides that a successor agency may disapprove a request for
subordination only if it finds based on 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.
9)Provides that if the taxing entity does not act within 45 days
after receiving the successor agency's request, the request to
subordinate will be deemed approved and will be final and
conclusive.
10)Provides that an action may be brought against the validity
of bonds or other obligations and the legality and validly of
all proceedings taken by the successor agency authorizing the
bonds or other obligations for the enforceable obligations
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listed in 2).
11)Requires the Department of Finance (DOF) to be notified of
any action brought to challenge the validity of bonds or other
obligations and the legality and validly of all proceedings
taken by the successor agency authorizing the bonds or other
obligations for the enforceable obligations listed in 2).
12)Requires a challenge to the issuance of bonds or incurrence
of indebtedness by the successor agency must be brought within
30 days after the date that the oversight board approves the
resolution for the successor agency to issue bonds or the
incur debt for the enforceable obligations listed in 2).
13)Allows an oversight board to direct the successor agency to
issue bonds or incur debt for the enforceable obligations
listed in 2).
14)Provides that after the successor agency issues bonds, incurs
debt, or executes an amended enforceable obligation for the
enforceable obligations listed in 2) the oversight board
cannot unilaterally approve any amendments to or early
termination of the bonds, indebtedness, or enforceable
obligations.
15)Provides that if DOF either reviews and approves or fails to
request review within five days of an oversight board's action
approving the issuance of bonds or incurrence of debt for the
enforceable obligations listed in 2) the scheduled payment of
the bonds or other indebtedness will be listed on the
Recognized Obligation Payment Schedule (ROPS) and is not
subject to further review and approval by DOF or the
Controller.
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16)Allows DOF to extend the time it has to review an action by
an oversight board approving the issuance of bonds or
incurrence of debt for the enforceable obligations listed in
2) for 60 days and to seek the assistance of the Treasurer in
evaluating a proposed action.
17)Provides that any bonds, indebtedness, or amended enforceable
obligations issued for the enforceable obligations listed in
2) will be considered indebtedness incurred by the dissolved
redevelopment agency with the same legal effect as those
entered into prior to June 29, 2011 and will be included in
the successor agency's ROPS, and will be secured by a pledge
of and lien on and be repaid out of the Redevelopment Property
Tax Trust Fund (RPTTF).
18)Provides that the successor agency will make diligent efforts
to ensure that the lowest long-term cost financing is obtained
and the financing will not have any bullets or spikes and will
not use variable rates.
19)Requires the successor agency to use an independent advisor
in developing financing proposals and make the work products
of the financial advisor available to DOF upon its request.
20)Finds that a special law is needed 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.
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21)Provides that no reimbursement is needed because the only
cost that may be incurred by a local agency or school district
are the result of a program for which legislative authority
was requested by the local agency or school district.
EXISTING LAW:
1)Requires RDAs to dissolve effective February 1, 2012, pursuant
to the California Supreme Court's decision in CRA v.
Matosantos (2011).
2)Establishes successor agencies to RDAs that would, except in
certain situations, be the city, county, or city and county in
the territorial jurisdiction of the former RDA. (Health and
Safety Code Section 34177)
3)Allows a city or county that authorized the creation of an RDA
to elect to retain the housing assets and functions previously
performed by the RDA. (Health and Safety Code Section 34176)
4)Requires the entity assuming the housing functions of the
former RDA to submit a list of all housing assets to DOF by
August 1, 2012, as specified. (Health and Safety Code Section
34177)
5)Allows the entity that assumed the housing functions to
designate the use of and commit indebtedness obligation
proceeds that remain after the satisfaction of enforceable
obligations that have been approved in a Recognized Obligation
Payment Schedule and that are consistent with the indebtedness
obligation covenants. (Health and Safety Code Section 34177)
6)Requires the proceeds to be derived from indebtedness
obligations that were issued for the purposes of affordable
housing prior to January 1, 2011, and were backed by the Low-
and Moderate-Income Housing Fund. (Health and Safety Code
Section 34177)
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7)Allows the RDA of the city and county of San Francisco to,
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, as specified, 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.
(Health and Safety Code Section 33333.7)
8)Allows the ability of the RDA of the city and county of San
Francisco to receive tax increment revenues to repay
indebtedness incurred for these Low- and Moderate- Income
Housing Fund activities to be extended until no later than
January 1, 2044. (Health and Safety Code Section 33333.7)
FISCAL EFFECT: 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 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
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.
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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.
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COMMENTS:
Background: In 2011, as a result of serious budget shortfalls,
the Governor proposed eliminating RDAs and creating a Voluntary
Alternative Redevelopment Program to replace them. Two pieces
of budget trailer legislation, AB1X 26 (Chapter 5, Statutes of
2011-12 First Extraordinary Session) and AB1X 27 (Chapter 6,
Statutes of 2011-12 First Extraordinary Session), were enacted
to achieve this goal. AB1X 26 provided for the dissolution of
RDAs and for the winding up of their obligations by successor
agencies. AB1X 27 which would have allowed RDAs to continue
operations if their local city or county made voluntary annual
payments benefitting schools, for the purpose of offsetting
state education costs. In CRA v. Matosantos (2011), the
California Supreme Court upheld the constitutionality of AB1X
26, but invalidated AB1X 27. This had the effect of dissolving
RDAs without giving them the option of continuing operations by
offsetting state education costs.
When RDAs were dissolved, successor agencies were established to
wind up the RDAs' obligations. Except in certain situations,
the successor agency is the city, county, or city and county in
the territorial jurisdiction of the former RDA. Cities and
counties were also given the option of taking over the housing
assets of their jurisdiction's RDA.
Redevelopment and replacement of affordable housing units in San
Francisco : Prior to the dissolution of redevelopment, state law
required RDAs to set aside 20% of their property tax increment
revenues to increase, improve, and preserve the supply of
affordable housing. State law also required local officials to
limit the length of time during which RDA plans remained in
effect, and required that RDAs must meet their housing
obligations before they terminate a project area.
In 2000, six of San Francisco's oldest RDA project areas were
about to reach some of the statutory deadlines on RDA
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activities. The Legislature, in SB 2113 (Burton), Chapter 661,
Statutes of 2000, 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. Specifically, the
Legislature allowed San Francisco officials to extend the
deadline for establishing debt in the older project areas until
2014, or until the RDA replaced all of the demolished housing
units, whichever date was earlier, and to extend the deadline
for receiving property tax increment revenues to pay for their
housing debts until 2044.
SB 2113 (Burton) also 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, therefore not
impacting the state's General Fund.
Before state law dissolved RDAs, San Francisco's RDA had been
able to finance the construction of 867 of the 6,709 replacement
affordable housing units. Because DOF does not recognize the
financing of the remaining 5,842 replacement affordable housing
units as an enforceable obligation of the former RDA, San
Francisco officials are unable to issue debt backed by former
tax increment revenues to finance the remaining replacement
housing units.
Purpose of this bill : According to the author, "at the time of
redevelopment dissolution in 2012, the former redevelopment
agency had just started planning and funding for the affordable
housing projects in Transbay and Hunters Point
Shipyard/Candlestick Point and had completed or approved less
than 1000 units of affordable housing at Mission Bay. In 2013
and 2014, the California Department of Finance finally and
conclusively determined that the Successor Agency's obligations
to fund affordable housing and public infrastructure in the
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Major Approved Development Projects were enforceable under
redevelopment dissolution law and thus constituted continuing
obligations of the San Francisco Successor Agency, also known as
the Office of Community Investment and Infrastructure.
Redevelopment dissolution law generally does not provide
successor agencies with the authority to issue tax allocation
bonds to complete surviving enforceable obligations, except
where contracts explicitly pledged specific amounts. As a
result, the completion of San Francisco's affordable housing
program in the Major Approved Development Projects cannot be
financed and would require, in the next several years, the set
aside of large amounts of property tax revenues from the 3300
affordable units in Transbay, Mission Bay, and Hunters Point
Shipyard/Candlestick Point and for public infrastructure (other
than the Transbay Transit Center) in the Transbay area."
Related legislation :
SB 1404 (Leno) (2014): Similar to this bill, would have allowed
the successor agency of the City and County of San Francisco
to receive property tax increment from six specified
redevelopment project areas, and issue debt to pay for specified
replacement housing obligations. The bill was vetoed and
included the following veto message:
I am returning Senate Bill 1404 without my signature.
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This bill allows the Successor Agency of the former City and
County of San Francisco Redevelopment Agency to create a new
enforceable obligation to replace approximately 5,800 units of
affordable housing.
Without a doubt, San Francisco faces extraordinary housing
affordability challenges, compounded by the number of
affordable units previously destroyed by the former
redevelopment agency. I applaud the author and the mayor's
continued efforts to increase affordability in this area. This
bill as drafted, however, would grant this particular
Successor Agency the ability to use tax increment and
redevelopment law in a way that no other successor agency in
the state has been granted.
I am directing the Department of Finance to work closely with
the author and sponsors of this measure to explore other
alternatives.
REGISTERED SUPPORT / OPPOSITION:
Support
City and County of San Francisco, Edwin M. Lee, Mayor (sponsor)
California Apartment Association
Opposition
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None on file
Analysis Prepared by:Lisa Engel / H. & C.D. / (916)
319-2085