BILL ANALYSIS                                                                                                                                                                                                    Ķ



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 580 (Liu) - Surplus residential property:  affordable  
          housing:  historic buildings
          
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          |Version: February 26, 2015      |Policy Vote: T. & H. 10 - 0     |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 4, 2015       |Consultant: Mark McKenzie       |
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          This bill does not meet the criteria for referral to the  
          Suspense File.







          Bill  
          Summary:  SB 580 would make changes to the Roberti Act, which  
          governs the sale of surplus property in the corridor of state  
          highway route (SR) 710, to specify procedures for the sale of  
          historic homes, and to allow for the resale of certain  
          properties purchased by a public housing entity, under specified  
          circumstances.


          Fiscal  
          Impact:  
           Minor one-time costs to the Department of Transportation  
            (Caltans) to update regulations regarding the sale of surplus  







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            property in the SR 710 corridor.  (State Highway Account)

           Unknown secondary fiscal impacts related to the authority for  
            public housing-related entities to resell properties purchased  
            at less than fair market value.  See staff comments.


          Background:  Under existing law, whenever Caltrans determines that real  
          property acquired for highway purposes is no longer necessary,  
          that property may be sold or exchanged upon terms, standards,  
          and conditions established by the California Transportation  
          Commission (CTC).  Proceeds from the sale are returned to the  
          State Highway Account.  If a proposed state highway route  
          location is rescinded, existing law requires Caltrans to sell  
          any excess real property acquired for the rescinded route  
          location and use the proceeds to fund the state highway project  
          that is proposed as the alternative to the rescinded route.

          For decades Caltrans has proposed the SR 710 extension project  
          to close a roughly 4.5-mile unconstructed gap in the freeway  
          from just north of SR 10 in Los Angeles to SR 210 in Pasadena.  
          Beginning in 1953, when the location of the SR 710 Gap Closure  
          Project was originally identified, Caltrans acquired nearly 600  
          properties in the corridor with the intent to eventually remove  
          structures and construct the freeway project.  The proposed  
          project has engendered considerable and ongoing controversy over  
          the years, evoking both strong support and opposition from  
          various parties, and has been the subject of numerous lawsuits.   
          Caltrans has been an unwilling long-term property manager for  
          years, which was the subject a 2012 Bureau of State Audits  
          report that criticized Caltrans' management of over 400 rental  
          properties.  Among the over 460 homes that Caltrans currently  
          owns in the corridor, 97 have been declared to be of federal or  
          state historical significance.  

          Existing law, the Roberti Act, establishes priorities and  
          procedures for the disposition of surplus residential properties  
          in the SR 710 corridor.  Under the act, Caltrans must offer  
          surplus single-family residences in the following priority  
          order:
           First, at the appraised fair market value to a former owner  
            who currently occupies the residence.
           Second, at an affordable price to a current low- or  
            moderate-income occupant who has occupied the property for at  








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            least two years.
           Third, at an affordable price to a current occupant with  
            household income of up to 150% of the area median income who  
            has occupied the property for at least five years.  
           Fourth, to housing-related public and private entities that  
            provide affordable housing at a price necessary to make the  
            housing affordable to present tenants and households of low or  
            moderate income, on the condition that the purchasing entity  
            rehabilitate and develop the property as limited-equity  
            cooperative housing with first right of occupancy to present  
            tenants.  If cooperative housing is not feasible, the  
            purchasing entity must use the property for low- and  
            moderate-income rental or owner-occupied housing, with the  
            first right of occupancy to present tenants.
           Lastly, at fair market value with priority given to occupants,  
            then to previous occupants, and then to persons who intend to  
            be owner-occupants.  
          With respect to properties offered to income-qualified buyers,  
          as noted in the second and third priorities above, Caltrans must  
          provide repairs required by lenders and government housing  
          assistance programs prior to the sale or provide the occupants  
          with a replacement dwelling. 

          The Roberti Act requires that proceeds from the sale of surplus  
          residential properties in the SR 710 corridor must be used for  
          providing repairs to other properties in the corridor prior to  
          sale and for allocation by the CTC to fund projects located in  
          Pasadena, South Pasadena, Alhambra, La Canada Flintridge, and  
          the 90032 postal ZIP Code, as specified.  The Los Angeles County  
          Metropolitan Transportation Authority must submit a proposed  
          program of projects to be funded with these proceeds, and CTC  
          has final authority to approve these local projects.  No funds  
          can be used to advance or construct any proposed SR 710 tunnel. 


          Proposed Law:  
            SB 580 would make changes to the Roberti Act.  After offering  
          surplus single-family residences at fair market value to current  
          occupants, or at an affordable price to current occupants (as  
          noted in priorities 1-3 above), this bill would:
           Authorize a public housing-related entity who purchases a  
            property (under the 4th priority noted above) to resell that  
            property and dedicate any profits from the sale to the  
            construction of affordable housing within its jurisdiction.








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           Specify that surplus historic homes that are sold pursuant to  
            the 4th priority noted above must first be offered to public  
            housing-related entities for affordable housing purposes (who  
            may subsequently resell the property pursuant to the bill) or  
            to a nonprofit private entity dedicated to rehabilitating and  
            maintaining the historic home for public and community access  
            and use.
           Define historic home as surplus residential property that is  
            listed on, or for which an application has been filed for  
            listing on, at least one of the following by January 1, 2015:
                  o         The California Register of Historic Places.
                  o         The National Register of Historic Places, as  
                    specified.
                  o         The National Register of Historic Places, as  
                    previously established pursuant to the National  
                    Historic Preservation Act.




          Related  
          Legislation:  SB 416 (Liu), Chap 468/2013, revised the Roberti  
          Act to expedite the sale of surplus residential properties in  
          the SR 710 corridor, including an authorization for Caltrans to  
          sell certain properties in "as-is" condition rather than  
          rehabilitating prior to sale, and giving priority to tenants in  
          good standing with rent obligations.  The bill also removed the  
          surface option for closing the SR 710 gap from consideration and  
          required that proceeds from the sale of surplus property must be  
          used for rehabilitation of properties prior to sale, as  
          specified for allocation by the CTC exclusively to fund projects  
          located in Pasadena, South Pasadena, Alhambra, La Caņada  
          Flintridge, and the 90032 postal ZIP Code.  


          Staff  
          Comments:  Apart from the minor state fiscal impact on Caltrans  
          to update Roberti Act regulations regarding the sale of surplus  
          SR 710 residential properties, the remaining fiscal impacts are  
          indirect and unquantifiable.  Caltrans has published draft  
          regulations, which authorize a buyer to resell the surplus  
          property during the term of use and resale restrictions, subject  
          to certain terms and conditions.  Regarding the circumstances in  
          which the buyer was a private or public housing-related entity  








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          (which would be affected by this bill), the draft regulations  
          require:
             1)   Any "net equity" (the difference between the original  
               fair market value and sale price) must be divided evenly  
               between the entity and the California Housing Finance  
               Agency (CalHFA), which is the state's affordable housing  
               bank.


             2)   Any "net appreciation" (the difference between the sales  
               price upon resale and the sum of the net equity, remaining  
               principal loan balance, and other charges) must be divided  
               between the entity and CalHFA pursuant to a proportionate  
               share schedule over a period of years.  Essentially, the  
               more time that has passed between original sale and resale,  
               the more funds the purchasing entity may keep.  The entity  
               may retain all appreciation if the resale occurs after five  
               years.


             3)   All net proceeds retained by the original purchasing  
               entity must be used to preserve, upgrade, and expand the  
               supply of affordable housing in the jurisdiction of the SR  
               710 corridor.


          Final regulations may include revisions to this section, but  
          they illustrate what may occur upon resale under current law.


          SB 580 would instead require that all proceeds from the resale  
          of a property originally sold to a public housing -related  
          entity at a "reasonable price" may be retained by that entity  
          for the construction of affordable housing within its  
          jurisdiction.  It should be noted that these provisions would  
          not have a direct impact on state funds.  Under current law, and  
          this bill, proceeds from the original sale of surplus properties  
          to public and private housing entities must be used to  
          rehabilitate other properties in the corridor and for local  
          transportation projects in the surrounding communities.  To the  
          extent that draft regulations envision the payment of some share  
          of funds from the resale of property originally purchased by a  
          public housing -related entity to CalHFA, this bill could result  
          in a redirection of some of the proceeds away from CalHFA.   








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          Staff notes that CalHFA is not supported by state funds, and  
          typically functions by making low interest rate loans for  
          affordable housing through the sale of tax exempt bonds.  It is  
          impossible to quantify or predict the amount of revenues that  
          could be directed away from CalHFA as a result of the bill, as  
          the impacts are entirely dependent upon the future behavior of  
          public housing-related entities regarding the sale of a subset  
          of SR 710 surplus properties.  In either case noted here, the  
          proceeds in question would be used to supply more affordable  
          housing, and would not be available for other state uses.  




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