BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 441


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          SENATE THIRD READING


          SB  
          441 (Leno)


          As Amended  April 6, 2015


          Majority vote


          SENATE VOTE:  26-13


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Housing         |5-2  |Chau, Burke, Chiu,    |Steinorth, Beth     |
          |                |     |Lopez, Mullin         |Gaines              |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Local           |7-1  |Gonzalez, Alejo,      |Linder              |
          |Government      |     |Chiu, Cooley, Low,    |                    |
          |                |     |Mullin, Waldron       |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |12-5 |Gomez, Bloom, Bonta,  |Bigelow, Chang,     |
          |                |     |Calderon, Nazarian,   |Gallagher, Jones,   |
          |                |     |Eggman, Eduardo       |Wagner              |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Rendon, Weber, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |








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          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 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.  


             b)   The infrastructure requirements of the Transbay  
               Implementation Agreement. 










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          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) above, may be sold at either a negotiated or  
            competitive sale.


          3)Provides that bonds issued for the enforceable obligations  
            listed in 2) above, 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) above, have the same lien priority as the pledge  
            of 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) above, 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) above, and pass  
            through agreements to the other taxing entities. 










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          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  
            listed in 2) above. 


          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)  
            above. 


          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) above.  









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          13)Allows an oversight board to direct the successor agency to  
            issue bonds or incur debt for the enforceable obligations  
            listed in 2) above.


          14)Provides that after the successor agency issues bonds, incurs  
            debt, or executes an amended enforceable obligation for the  
            enforceable obligations listed in 2) above, 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) above, 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. 


          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) above, 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) above, 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  








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            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 California  
            Constitution Article IV, Section 16, because of the unique  
            circumstances relating to affordable housing in the City and  
            County of San Francisco. 


          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. 


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, this bill is expected to result in net General Fund  
          (GF) 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.  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  








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          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:  


          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, AB 26 X1 (Blumenfield), Chapter  
          5, Statutes of 2011-12 First Extraordinary Session, and AB 27 X1  
          (Blumenfield), Chapter 6, Statutes of 2011-12 First  
          Extraordinary Session, were enacted to achieve this goal.  AB 26  
          X1 provided for the dissolution of RDAs and for the winding up  
          of their obligations by successor agencies.  AB 27 X1 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 AB 26 X1, but invalidated AB 27 X1.   
          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  








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          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  
          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 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.  








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          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  
          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) of 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.  SB 1404 was  
          vetoed by the Governor.




          Analysis Prepared by:                                             
                          Rebecca Rabovsky / H. & C.D. / (916) 319-2085     
                                                                  FN:  








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