BILL NUMBER: AB 634 CHAPTERED 09/21/99 CHAPTER 442 FILED WITH SECRETARY OF STATE SEPTEMBER 21, 1999 APPROVED BY GOVERNOR SEPTEMBER 21, 1999 PASSED THE ASSEMBLY AUGUST 30, 1999 PASSED THE SENATE AUGUST 25, 1999 AMENDED IN SENATE AUGUST 24, 1999 AMENDED IN SENATE AUGUST 17, 1999 AMENDED IN SENATE JULY 12, 1999 AMENDED IN SENATE JULY 1, 1999 AMENDED IN ASSEMBLY APRIL 21, 1999 AMENDED IN ASSEMBLY APRIL 5, 1999 INTRODUCED BY Assembly Member Wildman FEBRUARY 23, 1999 An act to amend Section 53895 of the Government Code, and to amend Sections 33080.1, 33080.2, 33334.12, and 33672.5 of, and to add Section 33121.5 to, the Health and Safety Code, relating to redevelopment. LEGISLATIVE COUNSEL'S DIGEST AB 634, Wildman. Local agencies: redevelopment: use of funds and delegation. (1) The Community Redevelopment Law requires a redevelopment agency to present annually an audit report to its legislative body, and requires the agency to expend or encumber excess surplus, as defined, in its Low and Moderate Income Housing Fund. This bill would require a redevelopment agency to submit to its legislative body any audit undertaken by another governmental agency; would revise the information required to be included in the annual report, including requiring the report to include a calculation of the excess surplus in the fund; and would revise the definition of excess surplus to exclude the unspent portion of the proceeds of bonds or indebtedness and related income. The bill would require the legislative body to review those reports and take appropriate action, thereby creating a state-mandated local program. The bill would require the Department of Housing and Community Development to develop and periodically revise the methodology to be used in the calculation of excess surplus, as specified. By imposing these new requirements on local agencies, the bill would create a state-mandated local program. The bill would provide that when a decision, determination, or other action by the agency or legislative body is required by the Community Redevelopment Law, neither the agency nor the legislative body shall delegate the obligation to decide, determine, or act to another entity unless a provision in this law specifically provides for that delegation. The bill would make other clarifying and nonsubstantive technical changes. (2) Existing law requires the county auditor, upon request of a redevelopment agency, to provide a statement each fiscal year concerning the allocation of taxes to the redevelopment agency and other agencies. This bill would require that statement to specify the gross amount of tax-increment revenue allocated to the redevelopment agency and any payments to other taxing agencies, thereby imposing a state-mandated local program. (3) This bill would incorporate additional changes in Section 33080.2 of the Health and Safety Code proposed by SB 497, to be operative if SB 497 and this bill are both enacted and become effective on or before January 1, 2000, and this bill is enacted last. (4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement, including the creation of a State Mandates Claims Fund to pay the costs of mandates that do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 53895 of the Government Code is amended to read: 53895. (a) An officer of a local agency who fails or refuses to make and file his or her report within 20 days after receipt of a written notice of the failure from the Controller shall forfeit to the state: (1) One thousand dollars ($1,000), in the case of a local agency with total revenue, in the prior year, of less than one hundred thousand dollars ($100,000), as reported in the Controller's annual financial reports. (2) Two thousand five hundred dollars ($2,500) in the case of a local agency with total revenue, in the prior year, of at least one hundred thousand dollars ($100,000) but less than two hundred fifty thousand dollars ($250,000), as reported in the Controller's annual financial reports. (3) Five thousand dollars ($5,000) in the case of a local agency with total revenue, in the prior year, of at least two hundred fifty thousand dollars ($250,000), as reported in the Controller's annual financial reports. (b) Upon the request of the Controller, the Attorney General shall prosecute an action for the forfeiture in the name of the people of the State of California. SEC. 2. Section 33080.1 of the Health and Safety Code is amended to read: 33080.1. Every redevelopment agency shall submit the final report of any audit undertaken by any other local, state, or federal government entity to its legislative body within 30 days of receipt of that audit report. In addition, every redevelopment agency shall present an annual report to its legislative body within six months of the end of the agency's fiscal year. The annual report shall contain all of the following: (a) (1) An independent financial audit report for the previous fiscal year. "Audit report" means an examination of, and opinion on, the financial statements of the agency which present the results of the operations and financial position of the agency, including all financial activities with moneys required to be held in a separate Low and Moderate Income Housing Fund pursuant to Section 33334.3. This audit shall be conducted by a certified public accountant or public accountant, licensed by the State of California, in accordance with Government Auditing Standards adopted by the Comptroller General of the United States. The audit report shall meet, at a minimum, the audit guidelines prescribed by the Controller's office pursuant to Section 33080.3 and also include a report on the agency's compliance with laws, regulations, and administrative requirements governing activities of the agency, and a calculation of the excess surplus in the Low and Moderate Income Housing Fund as defined in subdivision (g) of Section 33334.12. (2) However, the legislative body may elect to omit from inclusion in the audit report any distinct activity of the agency that is funded exclusively by the federal government and that is subject to audit by the federal government. (b) A fiscal statement for the previous fiscal year that contains the information required pursuant to Section 33080.5. (c) A description of the agency's activities in the previous fiscal year affecting housing and displacement that contains the information required by Sections 33080.4 and 33080.7. (d) A description of the agency's progress, including specific actions and expenditures, in alleviating blight in the previous fiscal year. (e) A list of, and status report on, all loans made by the redevelopment agency that are fifty thousand dollars ($50,000) or more, that in the previous fiscal year were in default, or not in compliance with the terms of the loan approved by the redevelopment agency. (f) A description of the total number and nature of the properties that the agency owns and those properties the agency has acquired in the previous fiscal year. (g) Any other information that the agency believes useful to explain its programs, including, but not limited to, the number of jobs created and lost in the previous fiscal year as a result of its activities. SEC. 3. Section 33080.2 of the Health and Safety Code is amended to read: 33080.2. The legislative body shall review any report submitted pursuant to Section 33080.1 and take any action it deems appropriate on that report no later than the first meeting of the legislative body occurring more than 21 days from the receipt of the report. SEC. 3.5. Section 33080.2 of the Health and Safety Code is amended to read: 33080.2. (a) When the agency presents the annual report to the legislative body pursuant to Section 33080.1, the agency shall inform the legislative body of any major violations of this part based on the independent financial audit report. The agency shall inform the legislative body that the failure to correct a major violation of this part may result in the filing of an action by the Attorney General pursuant to Section 33080.8. (b) The legislative body shall review any report submitted pursuant to Section 33080.1 and take any action it deems appropriate on that report no later than the first meeting of the legislative body occurring more than 21 days from the receipt of the report. SEC. 4. Section 33121.5 is added to the Health and Safety Code, to read: 33121.5. When a decision, determination, or other action by the agency or legislative body is required by this part, neither the agency nor the legislative body shall delegate the obligation to decide, determine, or act to another entity unless a provision of this part specifically provides for that delegation. SEC. 5. Section 33334.12 of the Health and Safety Code is amended to read: 33334.12. (a) (1) Upon failure of the agency to expend or encumber excess surplus in the Low and Moderate Income Housing Fund within one year from the date the moneys become excess surplus, as defined in paragraph (1) of subdivision (g), the agency shall do either of the following: (A) Disburse voluntarily its excess surplus to the county housing authority or to another public agency exercising housing development powers within the territorial jurisdiction of the agency in accordance with subdivision (b). (B) Expend or encumber its excess surplus within two additional years. (2) If an agency, after three years has elapsed from the date that the moneys become excess surplus, has not expended or encumbered its excess surplus, the agency shall be subject to sanctions pursuant to subdivision (e), until the agency has expended or encumbered its excess surplus plus an additional amount, equal to 50 percent of the amount of the excess surplus that remains at the end of the three-year period. The additional expenditure shall not be from the agency's Low and Moderate Income Housing Fund, but shall be used in a manner that meets all requirements for expenditures from that fund. (b) The housing authority or other public agency to which the money is transferred shall utilize the moneys for the purposes of, and subject to the same restrictions that are applicable to, the redevelopment agency under this part, and for that purpose may exercise all of the powers of a housing authority under Part 2 (commencing with Section 34200) to an extent not inconsistent with these limitations. (c) Notwithstanding Section 34209 or any other provision of law, for the purpose of accepting a transfer of, and using, moneys pursuant to this section, the housing authority of a county or other public agency may exercise its powers within the territorial jurisdiction of a city redevelopment agency located in that county. (d) The amount of excess surplus that shall be transferred to the housing authority or other public agency because of a failure of the redevelopment agency to expend or encumber excess surplus within one year shall be the amount of the excess surplus that is not so expended or encumbered. The housing authority or other public agency to which the moneys are transferred shall expend or encumber these moneys for authorized purposes not later than three years after the date these moneys were transferred from the Low and Moderate Income Housing Fund. (e) (1) Until a time when the agency has expended or encumbered excess surplus moneys pursuant to subdivision (a), the agency shall be prohibited from encumbering any funds or expending any moneys derived from any source, except that the agency may encumber funds and expend moneys to pay the following obligations, if any, that were incurred by the agency prior to three years from the date the moneys became excess surplus: (A) Bonds, notes, interim certificates, debentures, or other obligations issued by an agency, whether funded, refunded, assumed, or otherwise, pursuant to Article 5 (commencing with Section 33640). (B) Loans or moneys advanced to the agency, including, but not limited to, loans from federal, state, or local agencies, or a private entity. (C) Contractual obligations which, if breached, could subject the agency to damages or other liabilities or remedies. (D) Obligations incurred pursuant to Section 33445. (E) Indebtedness incurred pursuant to Section 33334.2 or 33334.6. (F) Obligations incurred pursuant to Section 33401. (G) An amount, to be expended for the operation and administration of the agency, that may not exceed 75 percent of the amount spent for those purposes in the preceding fiscal year. (2) This subdivision shall not be construed to prohibit the expenditure of excess surplus funds or other funds to meet the requirement in paragraph (2) of subdivision (a) that the agency spend or encumber excess surplus funds, plus an amount equal to 50 percent of excess surplus, prior to spending or encumbering funds for any other purpose. (f) Nothing in this section shall be construed to limit any authority a redevelopment agency may have under other provisions of this part to contract with a housing authority for increasing or improving the community's supply of low- and moderate-income housing. (g) For purposes of this section: (1) "Excess surplus" means any unexpended and unencumbered amount in an agency's Low and Moderate Income Housing Fund that exceeds the greater of one million dollars ($1,000,000) or the aggregate amount deposited into the Low and Moderate Income Housing Fund pursuant to Sections 33334.2 and 33334.6 during the agency's preceding four fiscal years. The first fiscal year to be included in this computation is the 1989-90 fiscal year, and the first date on which an excess surplus may exist is July 1, 1994. (2) Moneys shall be deemed encumbered if committed pursuant to a legally enforceable contract or agreement for expenditure for purposes specified in Section 33334.2 or 33334.3. (3) (A) For purposes of determining whether an excess surplus exists, it is the intent of the Legislature to give credit to agencies which convey land for less than fair market value, on which low- and moderate-income housing is built or is to be built if at least 49 percent of the units developed on the land are available at affordable housing cost to lower income households for at least the time specified in subdivision (e) of Section 33334.3, and otherwise comply with all of the provisions of this division applicable to expenditures of moneys from a low- and moderate-income housing fund established pursuant to Section 33334.3. Therefore, for the sole purpose of determining the amount, if any, of an excess surplus, an agency may make the following calculation: if an agency sells, leases, or grants land acquired with moneys from the Low and Moderate Income Housing Fund, established pursuant to Section 33334.3, for an amount which is below fair market value, and if at least 49 percent of the units constructed or rehabilitated on the land are affordable to lower income households, as defined in Section 50079.5, the difference between the fair market value of the land and the amount the agency receives may be subtracted from the amount of moneys in an agency's Low and Moderate Income Housing Fund. (B) If taxes that are deposited in the Low and Moderate Income Housing Fund are used as security for bonds or other indebtedness, the proceeds of the bonds or other indebtedness, and income and expenditures related to those proceeds, shall not be counted in determining whether an excess surplus exists. The unspent portion of the proceeds of bonds or other indebtedness, and income related thereto, shall be excluded from the calculation of the unexpended and unencumbered amount in the Low and Moderate Income Housing Fund when determining whether an excess surplus exists. (C) Nothing in this subdivision shall be construed to restrict the authority of an agency provided in any other provision of this part to expend funds from the Low and Moderate Income Housing Fund. (D) The department shall develop and periodically revise the methodology to be used in the calculation of excess surplus as required by this section. The director shall appoint an advisory committee to advise in the development of this methodology. The advisory committee shall include department staff, affordable housing advocates, and representatives of the California Redevelopment Association, the California Society of Certified Public Accountants, the Controller, and any other authorities or persons interested in the field that the director deems necessary and appropriate. (h) Communities in which an agency has disbursed excess surplus funds pursuant to this section shall not disapprove a low- or moderate-income housing project funded in whole or in part by the excess surplus funds if the project is consistent with applicable building codes and the land use designation specified in any element of the general plan as it existed on the date the application was deemed complete. A local agency may require compliance with local development standards and policies appropriate to and consistent with meeting the quantified objectives relative to the development of housing, as required in housing elements of the community pursuant to subdivision (b) of Section 65583 of the Government Code. (i) Notwithstanding subdivision (a), any agency that has funds that become excess surplus on July 1, 1994, shall have, pursuant to subdivision (a), until January 1, 1995, to decide to transfer the funds to a housing authority or other public agency, or until January 1, 1997, to expend or encumber those funds, or face sanctions pursuant to subdivision (e). SEC. 6. Section 33672.5 of the Health and Safety Code is amended to read: 33672.5. (a) Upon the written request of a redevelopment agency for the purpose of assisting the agency, the county auditor or other officer responsible for allocation of tax revenues pursuant to Section 33670 shall prepare a statement each fiscal year, commencing with the 1992-93 fiscal year, for each redevelopment project area and each area added to a redevelopment project area by amendment, which provides for all the following: (1) The total taxable assessed value of secured, unsecured, and state-assessed railroad and nonoperating, nonunitary property. (2) The total taxable assessed value used by the county auditor to determine the division of taxes required by subdivision (a) of Section 33670. (3) The total taxable assessed value used by the county auditor to determine the division of taxes required by subdivision (b) of Section 33670. (4) The estimated amount of taxes calculated pursuant to subdivision (b) of Section 33670, as adjusted by subdivision (e) of Section 33670 and subdivision (a) of Section 33676. The statement shall specify the gross amount of tax-increment revenue allocated to the agency and any payments to other taxing entities that are deducted from the gross amount allocated. (5) The estimated amount of taxes to be allocated pursuant to subdivisions (c) and (d) of Section 100 of the Revenue and Taxation Code. (b) If requested to provide a statement pursuant to subdivision (a), the county auditor shall deliver each statement to the respective redevelopment agencies receiving property tax revenue on or before November 30 of each year. (c) (1) Upon the request of a redevelopment agency pursuant to subdivision (a), and concurrently with the disbursement of those property tax revenues, the county auditor shall prepare a statement which provides the amount of disbursement made pursuant to all of the following: (A) Section 33670. (B) Section 100 of the Revenue and Taxation Code. (C) Supplemental property tax revenues allocated pursuant to Sections 75 to 75.80 of the Revenue and Taxation Code, inclusive. (2) The statement provided pursuant to this subdivision shall also include corrections, updates, or adjustments, if any, to the property tax revenue amounts and taxable assessed values reported pursuant to subdivision (a) of Section 33670. (d) The county auditor shall also provide to a redevelopment agency, no later than 30 days after the receipt of a written request from that agency, information or clarification with respect to any statement issued pursuant to this section. (e) If any redevelopment agency requests a statement or information pursuant to this section, the agency shall reimburse the county auditor for all actual and reasonable costs incurred. SEC. 7. The Legislature finds and declares that Section 33121.5 of the Health and Safety Code, as added by Section 4 of this act, is declaratory of, and does not constitute a change in, existing law. SEC. 8. Section 3.5 of this bill incorporates amendments to Section 33080.2 of the Health and Safety Code proposed by both this bill and SB 497. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2000, (2) each bill amends Section 33080.2 of the Health and Safety Code, and (3) this bill is enacted after SB 497, in which case Section 3 of this bill shall not become operative. SEC. 9. Notwithstanding Section 17610 of the Government Code, if the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code. If the statewide cost of the claim for reimbursement does not exceed one million dollars ($1,000,000), reimbursement shall be made from the State Mandates Claims Fund.