BILL ANALYSIS
SENATE HOUSING & COMMUNITY DEVELOPMENT COMMITTEE
Senator Denise Moreno Ducheny, Chair
Bill No: AB 269 Hearing:June
21, 2004
Author: MullinFiscal:Yes
Version: As proposed to be
amended Consultant:Mark
Stivers
POOLING REDEVELOPMENT FUNDS IN SAN MATEO COUNTY
Background and Existing Law :
Under the Community Redevelopment Law (CRL), redevelopment
agencies must set aside 20% of their annual property tax
increment revenues in a Low and Moderate Income Housing
Fund (L&M Fund) to increase, improve, and preserve
affordable housing. L&M Funds can be used to buy land,
build structures, buy buildings, rehabilitate buildings,
subsidize housing, pay bonds or other indebtedness,
maintain mobilehomes, preserve subsidized units, replace
destroyed housing units, and other related uses.
Article XVI, Section 16 of the California Constitution
provides that tax increment which accrues to a
redevelopment agency must be used to pay indebtedness to
finance the "redevelopment project." As a general rule,
this is interpreted to mean that the use of tax increment
must benefit the project area. However, state law
specifically allows for L&M funds to be spent inside or
outside a project area, but within the territorial
jurisdiction of the agency, upon a finding that the use
will be of benefit to the project. This finding is
considered final and conclusive.
Current law also contains a number of exceptions to the
rule that L&M funds must be spent within the jurisdiction.
There is a general statute that, until January 1, 2008,
allows contiguous redevelopment agencies located within
adjoining cities within a single Metropolitan Statistical
Area to participate in a joint powers authority (JPA) for
the purpose of pooling their L&M funds for affordable
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housing uses.
The Contra Costa County Redevelopment Agency may use its
L&M funds within the incorporated limits of the City of
Walnut Creek on sites contiguous to the Pleasant Hill
BART Station Area Redevelopment Project area.
The Orange County Development Agency may use its L&M
funds within the incorporated limits of any city within
the County of Orange.
The County of Solano and the Cities of Fairfield, Suisun
City and Vacaville may create a joint powers agency for
the purpose of pooling L&M funds in order to provide
housing for the retention of Travis Air Force Base.
Each of these exceptions is subject to a number of
conditions that ensure the efficient and beneficial use of
the funds and that the expenditure outside the jurisdiction
will not result in racial or economic segregation. Among
the conditions common to two or more of the exceptions are:
The community has an up-to-date housing element that has
been approved by HCD.
The agency has met at least 50% of its share of the
regional housing need for very low and low-income
households.
The agency has met its replacement housing need or
encumbered and contractually committed sufficient funds
to meet these requirements
Funds may only be used to pay for the direct costs of
constructing, substantially rehabilitating, or preserving
the affordability of housing units and not for planning
and administration or offsite improvements.
The funds may only be used to finance housing that is
affordable to very low and low-income households.
The funds may not be spent in an area that has more than
50% minority or low-income.
The development to be funded shall not result in any
residential displacement from the site where the
development is to be built.
If less than all the units in the development are
affordable to, and occupied by, low- or moderate-income
persons, any agency assistance may not exceed the amount
needed to make the housing affordable to, and occupied
by, low- or moderate-income persons.
HCD shall review each use of funds for compliance.
With respect to individual exceptions, the following
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conditions also apply, among others:
The agency does not have an indebtedness to its L&M fund.
The agency is not subject to sanctions for failure to
expend or encumber a housing fund excess surplus.
The city in which the development will occur has approved
the agency's use of funds.
The aggregate number of units assisted shall include at
least 10 percent that are affordable to extremely low
income households and 40 percent that are affordable to
very low income households.
The agency must make a finding that no other reasonable
means of financing the housing is available in sufficient
amount.
The agency shall transfer more than 50% its L&M funds.
Proposed Law :
Assembly Bill 269 allows any redevelopment agency within
San Mateo County to participate in a joint powers authority
for the purpose of pooling L&M funds subject to the
following conditions:
Eligibility to participate
The host jurisdiction of the agency must have a housing
element that is current and that has been certified by
HCD.
The host jurisdiction has met ___ percent of its regional
housing need for low and very low income households in
the current or previous housing element cycle.
The agency must not owe money to its L&M fund.
The agency must have met its replacement housing
obligation or contractually committed funds to meet those
obligations.
Transfer of funds
No more than 25% of the agency's L&M funds may be
transferred to the JPA.
Each participating agency must hold a public hearing at
least 45 days prior to the transfer of L&M funds to the
JPA.
Expenditure of funds by the JPA
Funds must be used within 1/3 mile of El Camino Real on
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property provided by the San Mateo County Transit
Authority.
Funds may only be used for the direct costs of
constructing, substantially rehabilitating, or preserving
the affordability of low and very low income housing.
Funds may not be used for planning and admin costs,
offsite improvements, or fees or exactions levied solely
on funded projects.
The JPA shall make a finding that each proposed use of
funds will not exacerbate racial or social segregation.
HCD must verify each proposed use of funds to ensure
compliance with the provisions of this bill.
The JPA must expend or encumber and transferred funds
within two years. If not, the funds are returned to the
donor agency and deemed excess surplus.
The JPA must submit an annual report to HCD documenting
funds received and funds allocated or expended.
The JPA is subject to the replacement housing
requirements, relocation requirements, and all other
provisions that would otherwise apply to the use of L&M
funds by the agency directly.
The bill provides that no new JPA may be created nor
additional funds received by an existing JPA after January
1, 2009. The bill sunsets on January 1, 2010.
Comments :
1. Purpose of the bill .
2. Specifics preferred . Historically, the Legislature has
been more willing to support expenditures outside an
agency's jurisdiction when the specifics of the project are
known, as they were in Walnut Creek. Granting general
authority to pool or transfer funds raises concerns about
overconcentration of affordable housing and the ability to
hold individual agencies accountable for the expenditure of
L&M funds. This bill limits the use of pooled funds to
projects within 1/3 mile of El Camino Real on property
provided by SMCTA, yet it is unclear whether or not any
specific development have been proposed. The committee may
wish to consider whether or not there should be more
specifics about the developments to be funded before
granting special pooling authority.
3. How does this differ from existing law? Current law
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already allows contiguous agencies to pool housing
resources and spend them in any of the participating
jurisdictions. While this bill copies many of the
requirements from the pooling statute, there are two
differences, one that relates to the community's record in
producing affordable housing and the other to where pooled
funds may be spent. The current pooling statute requires
that a community have met 50% of its low and very low
income housing need. This bill would lower that percentage
to ___. The current pooling statute requires that funds
only be spent in the participating jurisdictions. The bill
requires that the funds be spent within 1/3 mile of El
Camino Real on SMCTA property but is silent on whether or
not it must be within a participating jurisdiction. The
committee may wish to consider whether relaxing current law
in these two respects is advisable.
4. Protecting against overconcentrations of affordable
housing . One of the historical concerns about spending L&M
funds outside a jurisdiction is that new affordable housing
will be concentrated in low-income and minority communities
rather than dispersed throughout all communities. While
the provisions of this bill on this topic are identical to
current pooling law, they simply require the JPA to make a
finding prior to each proposed expenditure of funds that
the use will not exacerbate racial or economic segregation.
To the extent that there are no standards for such a
finding, it is unclear what protection this provides
against overconcentration. The committee may wish to
consider a more direct protection by prohibiting the use of
pooled funds in an area that has more than 50% minority or
low-income population.
5. Constitutional questions . The California Constitution
allows redevelopment agencies to collect tax increment to
cure blight within a project area. Via statute, the
Legislature has deemed housing fund expenditures outside a
project area but within the jurisdiction to be a benefit to
the project area. However, as the ring expands further,
the constitutionality of expenditures outside the project
area becomes more suspect.
In 1988, Legislative Counsel opined, with respect to a bill
(SB 1719) that would have allowed the Indian Wells
Redevelopment Agency to transfer L&M funds outside its
jurisdiction:
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We do not think that the use of tax-increment revenues
by the redevelopment agency of the City of Indian
Wells to develop housing outside the city as proposed
by SB 1719 would constitute a loan, advance, or
indebtedness to finance or refinance redevelopment
within the meaning of Section 16 of Article XVI of the
California Constitution.
The concept proposed by this bill of allowing expenditure
outside an agency's jurisdiction raises the same
constitutional issues as SB 1719. The committee may wish
to consider whether it is constitutional for tax increment
money to be spent outside the community from which it
originated.
Previous Actions :
Assembly Floor: 78-0
Assembly Housing and Community Development: 6-0
Support and Opposition : (6/16/04)
Support : none received
Opposition :none received