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