BILL ANALYSIS Ó SB 441 Page 1 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 | | | | | | | | | | | | SB 441 Page 2 ------------------------------------------------------------------ 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. SB 441 Page 3 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. SB 441 Page 4 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. SB 441 Page 5 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 SB 441 Page 6 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 SB 441 Page 7 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 SB 441 Page 8 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. SB 441 Page 9 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: SB 441 Page 10 0001740