BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 441  


                                                                    Page  1








          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 441  
          (Leno) - As Amended April 6, 2015


           ----------------------------------------------------------------- 
          |Policy       |Housing and Community          |Vote:|5 - 2        |
          |Committee:   |Development                    |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |Local Government               |     |7 - 1        |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY: This bill authorizes the San Francisco redevelopment  
          successor agency, subject to the approval of the oversight  
          board, to issue bonds or incur other indebtedness to finance the  
          infrastructure requirements of the Transbay Implementation  







                                                                     SB 441  


                                                                    Page  2





          Agreement and the affordable housing components of four  
          designated projects.


          FISCAL EFFECT:


          Net General Fund (GF) 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.  Using the bond financing  
          authorized by this bill, San Francisco's schools would receive  
          $85 million more in RPTTF funds over the next ten years than  
          they would have under current law, thereby decreasing GF  
          backfill obligations. This will be followed by $358 million less  
          in RPTTF allocations to schools over the 30 years thereafter,  
          thus increasing GF obligations to backfill those losses to  
          schools.  





          Staff notes that all figures used here are based on comparative  
          scenarios for financing the projects (pay/go vs. bonding) with  
          data provided by San Francisco's successor agency.  





          COMMENTS:


          1)Purpose. 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  







                                                                     SB 441  


                                                                    Page  3





            than 1,000 units of affordable housing at Mission Bay.  In  
            2013 and 2014, the California Department of Finance (DOF)  
            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."



            Redevelopment dissolution law generally does not provide  
            successor agencies with the authority to issue tax allocation  
            bonds to complete enforceable obligations.  As a result, the  
            completion of San Francisco's affordable housing program  
            cannot be financed and would require, in the next several  
            years, the set aside of large amounts of property tax revenues  
            that would otherwise go to schools and other local taxing  
            entities.





            This bill is a narrowed version of last year's SB 1404 (Leno,  
            2014), which was vetoed by the Governor. This bill will  
            authorize San Francisco to use bond financing to fund and  
            construct the remaining affordable housing units that have  
            been determined to be enforceable obligations by DOF.





          2)Background. Historically, the Community Redevelopment Law had  
            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 in 2012, RDAs used tax  







                                                                     SB 441  


                                                                    Page  4





            increment financing (including the school share), 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. 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 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 units of affordable housing. Under current  
            law, San Francisco's successor agency is not authorized to  
            issue new debt backed by the 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.












                                                                     SB 441  


                                                                    Page  5





          3)Prior Legislation.  SB 1404 (Leno, 2014), a broader version of  
            this bill, would have allowed the San Francisco successor  
            agency 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 the veto message read, in part:


               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. 
            This year's bill is narrowed to include only projects that DOF  
            has finally and conclusively determined to be enforceable  
            obligations.


            Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081





















                                                                     SB 441  


                                                                    Page  6