BILL ANALYSIS Ó
SB 441
Page 1
Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
SB
441 (Leno) - As Amended April 6, 2015
SENATE VOTE: 26-13
SUBJECT: San Francisco redevelopment: housing.
SUMMARY: Allows the successor agency to the Redevelopment
Agency of the City and County of San Francisco (SF successor
agency) to issue bonds or incur other indebtedness to finance
the affordable housing requirements of several designated
projects. Specifically, this bill:
1)Allows the SF 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 Participation Agreement;
ii) The Mission Bay South Owner Participation Agreement;
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iii) The Disposition and Development Agreement for
Hunters Point Shipyard Phase 1;
iv) The Candlestick Point-Hunters Point Shipyard Phase 2
Disposition and Development Agreement; and,
v) The Transbay Implementation Agreement.
b) The infrastructure requirements of the Transbay
Implementation Agreement.
2)Allows the SF successor agency to pledge any property tax
revenues available in the Redevelopment Property Tax Trust
Fund (RPTTF) that are not otherwise obligated to pay the bonds
or other indebtedness that results from financing the above
enforceable obligations.
3)Allows bonds to be sold at either a negotiated or a
competitive sale.
4)Specifies that bonds issued or other indebtedness incurred may
be issued or incurred on a parity basis with outstanding bonds
or other indebtedness obligations of the SF successor agency.
5)Allows the SF successor agency to pledge the revenues pledged
to those outstanding bonds or other indebtedness obligations
to the issuance of bonds or other indebtedness. Requires the
pledge, when made in connection with the issuance of bonds or
other indebtedness obligations to have the same lien priority
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as the pledge of outstanding bonds or other indebtedness, and
shall be valid, binding, and enforceable in accordance with
tis terms.
6)Requires, prior to incurring any bonds or other indebtedness,
the SF successor agency to subordinate to the bonds or other
indebtedness the amount required to be paid to an affected
taxing entity that is required to be paid out through pass
through agreements, provided that the affected taxing entity
has approved the subordinations, pursuant to the bill's
provisions.
7)Requires, at the time the SF successor agency requests an
affected taxing entity to subordinate the amount to be paid to
it, the SF 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 or other
indebtedness and the pass through agreements to the other
taxing entities.
8)Requires, within 45 days after receipt of the agency's
request, the affected taxing entity to approve or disapprove
the request for subordination. Allows an affected taxing
entity to disapprove the request for subordination only if it
finds, based upon 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.
Specifies that if the affected taxing entity does not act
within 45 days after receipts of the agency's request, the
request to subordinate shall be deemed approved and shall be
final and conclusive.
9)Allows an action to be brought, pursuant to determine the
validity of bonds or other obligations authorized by the
bill's provisions, the pledge of revenues to those bonds or
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other obligations authorized by this section, the legality and
validity of all proceedings theretofore taken and, as provided
in the resolution of the legislative bond of the SF successor
agency authorizing the bonds or other obligations authorized
by the bill's provisions, proposed to be taken for the
authorization, execution, issuance, sale, and delivery of the
bonds or other obligations, and for the payment of debt
service on the bonds or the payment of amounts under other
obligations, as authorized.
10)Requires the Department of Finance to be notified of the
filing of any action as an affected party.
11)Requires an action to challenge the issuance of bonds or the
incurrence of indebtedness by the SF successor agency to 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.
12)Specifies for the Department of Finance (DOF), that under the
authority granted to DOF under existing law, DOF either
reviews and approves or fails to request review within five
business days of an oversight board approval of an action
authorized by the bill's provisions, that the scheduled
payments on the bonds or other indebtedness shall be listed in
the Recognized Obligation Payment Schedule (ROPS) and shall
not be subject to further review and approval by DOF or the
Controller. Allows DOF to extend its review time to 60 days
for actions authorized, pursuant to the bill's provisions, and
to seek the assistance of the Treasurer in evaluating proposed
actions.
13)Specifies that any bonds, indebtedness, or amended
enforceable obligations to be considered indebtedness incurred
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by the dissolved redevelopment agency (RDA), 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, shall be
included in the SF successor agency's ROPS, and shall be
secured by a pledge of, and lien on, and shall be repaid from
moneys deposited form time to time in the RPTTF, as specified.
States that property tax revenues pledges to any bonds,
indebtedness, or amended enforceable obligations are taxes
allocated to the SF successor agency, as specified.
14)Requires the SF successor agency to make diligent efforts to
ensure that the lowest long-term cost financing is obtained,
and that the financing shall not provide for any bullets or
spikes and shall not use variable rates. Requires the SF
successor agency to make use of an independent financial
advisor in developing financing proposals and requires the
work products of the financial advisor available to DOF at its
request.
15)Declares that a special law is necessary 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 related to affordable housing in the City
and County of San Francisco, in conjunction with the
affordable housing and infrastructure requirements of the
enforceable obligations, specified in the bill's provisions.
16)Provides that no reimbursement is required 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, as specified.
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17)Makes a number of findings and declarations.
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.
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.
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.
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 ROPS and that are
consistent with the indebtedness obligation covenants.
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.
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
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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.
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.
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.
Increased General Fund allocations to San Francisco schools of
approximately $131 million over the ten-year period from
2025-26 through 2034-35.
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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 effect 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% 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.
COMMENTS:
1)Bill Summary. This bill authorizes the SF successor agency to
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issue bonds or incur other indebtedness to finance the
construction of specified affordable housing and
infrastructure enforceable obligations. This bill is
sponsored by Edwin M. Lee, Mayor of San Francisco.
2)Background on 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 redevelopment plans remained in effect, and required
that RDAs must meet their housing obligations before they
terminate a project area. SB 211 (Torlakson), Chapter 741,
Statutes of 2001, suspended the time limits on a redevelopment
plan's effectiveness and on the diversion of property tax
increment revenues to repay its debts until the RDA "fully
complied with its obligations."
In 2000, six of San Francisco's oldest redevelopment project
areas were about to reach some of the statutory deadlines on
RDA 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 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
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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 that the Burton bill
allowed it to finance.
3)Author's Statement. 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 1,000 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 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 3,300
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.
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"SB 441 will authorize San Francisco to use bond financing to
fund and construct over 3,300 units of affordable housing and
complete public infrastructure for a new residential
neighborhood surrounding the Transbay Terminal Center. This
bill allows the San Francisco Successor Agency to fulfill, in
an expeditious manner with less impact on taxing entities,
enforceable obligations that the California Department of
Finance has finally and conclusively determined to have
survived redevelopment dissolution."
4)Previous Legislation. SB 1404 (Leno, 2014) 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
with the following veto message:
I am returning Senate Bill 1404 without my signature.
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
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alternatives.
5)Arguments in Support. Supporters argue that this bill will
provide funding for over 3,000 units of affordable housing in
the near term, and will actually hasten the wind down of
redevelopment in San Francisco.
6)Arguments in Opposition. None on file.
7)Conflicting Legislation. This bill amends one of the same
sections as AB 113 (Budget). Should both bills continue to
progress, amendments may be needed.
8)Double-Referral. This bill was heard by the Housing and
Community Development Committee on July 1, 2015, and passed
with a 5-2 vote.
REGISTERED SUPPORT / OPPOSITION:
Support
Honorable Edwin M. Lee, Mayor of San Francisco [SPONSOR]
City and County of San Francisco
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California Apartment Association
Opposition
None on file
Analysis Prepared by:Debbie Michel / L. GOV. / (916)
319-3958