BILL ANALYSIS
AB 1859
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Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1859 (Norby) - As Amended: April 8, 2010
SUBJECT : Local government: change or organization or
reorganization.
SUMMARY : Extends the powers of a local agency formation
commission (LAFCO) to approve, disapprove, or conditionally
approve a request by a redevelopment agency to establish,
extend, or expand a project area. Specifically, this bill :
1)Adds to the definition of "change of organization" a proposal
for the establishment, expansion, or extension of a
redevelopment agency's project area.
2)Defines a "project area" to mean a redevelopment project
established, or proposed to be established, expanded, or
extended, by a redevelopment agency for redevelopment
purposes, pursuant to the Community Redevelopment Law.
3)Extends the powers of a LAFCO to review and approve, or
disapprove with or without amendment, wholly, partially, or
conditionally, a request to establish, expand, or extend a
redevelopment agency's project area.
4)Provides, with regard to a proposal to establish, expand, or
extend a redevelopment project area, that a LAFCO shall only
have the power to review a redevelopment agency's proposal for
financial soundness, and to approve or deny the request, or to
require a specified pass-through funding level as a condition
to approval.
5)Provides that a LAFCO shall have no power to review or
consider a finding of blight.
6)Provides that nothing in this act shall be construed to affect
judicial review of a finding
of blight.
7)Specifies that no reimbursement is required by this act
because a local agency or school district has the authority to
levy service charges, fees, or assessments sufficient to pay
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for the program or level of service mandated by this act.
EXISTING LAW :
1)Establishes the procedures for the organization and
reorganization of cities, counties, and special districts
under the Cortese-Knox-Hertzberg Local Reorganization Act of
2000.
2)Specifies that the definition of "change or organization"
means any of the following:
a) A city incorporation;
b) A district formation;
c) An annexation to, or detachment from a city or district;
d) A disincorporation of a city;
e) A district dissolution;
f) A consolidation of cities or special districts;
g) A merger or establishment of a subsidiary district; or,
h) A proposal for the exercise of new or different
functions or classes of services, or divestiture of the
power to provide particular functions or classes of
services, within all or part of the jurisdictional
boundaries of a special district.
3)Provides for the following duties and powers for a LAFCO,
among other specified duties:
a) To review and approve or disapprove with or without
amendments, wholly, partially, or conditionally, proposals
for changes of organization or reorganization, consistent
with written policies, procedures, and guidelines adopted
by the commission.
b) Provides that the commission may initiate proposals for
any of the following:
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i) The consolidation of a district;
ii) The dissolution of a district;
iii) A merger;
iv) The establishment of a subsidiary district;
v) The formation of a new district or districts; and,
vi) A reorganization that includes any of the changes
mentioned above.
4)Requires redevelopment agencies to hold public hearings prior
to adopting or amending a redevelopment plan.
5)Authorizes redevelopment agencies to utilize tax increment
financing to fund projects in a redevelopment area.
6)Requires redevelopment agencies to make payments to affected
taxing entities to alleviate the financial burden or detriment
that the affected taxing entities may incur as a result of the
redevelopment plan.
7)Establishes a fixed mathematical formula for the amount of tax
increment that redevelopment agencies must pay affected taxing
entities during the life of the redevelopment plan.
8)Requires that a redevelopment agency must provide the affected
taxing agencies with the preliminary report in no more than 90
days before the public hearing on the plan.
9)States that challenges can be brought against redevelopment
agencies through litigation or through a referendum process.
10)Requires redevelopment agencies to submit preliminary reports
to the Department of Finance (DOF) and the Department of
Housing and Community Development (HCD) 45 days prior to
public hearings on proposed amendments and adoptions.
11)Prohibits redevelopment agencies from amending a
redevelopment plan without first documenting new findings of
blight.
FISCAL EFFECT : Unknown
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COMMENTS :
1)AB 1859 gives additional powers to LAFCOs by allowing a LAFCO
to approve, disapprove, or conditionally approve a request by
a redevelopment agency to establish, extend, or expand a
project area. The bill gives LAFCOs the power to review a
redevelopment agency's proposal to establish, expand or extend
a project area for financial soundness, and allows the LAFCO
to either approve or deny the request. Additionally, AB 1859
gives a LAFCO the option to require a specified pass-through
funding level as a condition to approval.
2)The author believes that giving LAFCOs additional power over
redevelopment agencies would encourage more transparency and
more public input in the expansion or creation of
redevelopment project areas. The author notes that unlike
other governments, redevelopment agencies can incur bonded
indebtedness without voter approval and use the power of
eminent domain to benefit private interests. The author
believes that redevelopment has become a rapidly growing drain
on California's public resources, while amassing enormous
power with little public awareness or oversight. By using
LAFCOs to openly vet the financial burdens for local
governments dealing with redevelopment projects, the author
believes that citizens will be more informed about the true
costs of redevelopment. According to the author, this bill is
explicit that LAFCOs would not be given the power to review
findings of blight - that power is left to the courts.
3)In California, the establishment and revision of local
government boundaries is governed by the
Cortese-Knox-Hertzberg Local Government Reorganization Act of
2000. The Act was a comprehensive revision of the
Cortese-Knox Local Government Reorganization Act of 1985,
which was itself a consolidation of three major laws governing
boundary changes. LAFCOs have numerous powers under the Act,
but those of primary concern are the power to act on local
agency boundary changes and to adopt spheres of influence for
local agencies. Among the purposes of LAFCOs are the
discouragement of urban sprawl and the encouragement of the
orderly formation and development of local agencies.
4)Purpose of Redevelopment in Existing Law . Existing law
contained in the Health and Safety Code declares that it is
the policy of the state, with respect to redevelopment:
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a) To protect and promote the sound development and
redevelopment of blighted areas and the general welfare of
the inhabitants of the communities in which they exist by
remedying such injurious conditions through the employment
of all appropriate means.
b) That the redevelopment of blighted areas and the
provisions for appropriate continuing land use and
construction policies in them constitute public uses and
purposes for which public money may be advanced or expended
and private property acquired, and are governmental
functions of state concern in the interest of health,
safety, and welfare
of the people of the state and of the communities in which
the areas exist.
c) The Legislature further finds and declares that a
fundamental purpose of redevelopment is to expand the
supply of low- and moderate-income housing, to expand
employment opportunities for jobless, underemployed, and
low-income persons, and to provide an environment for the
social, economic, and psychological growth and well-being
of all citizens.
5)Redevelopment Agencies in California . According to the
"Redevelopment Agency Fact Sheet" published by the Senate
Local Government Committee in October 2009, there are
425 community redevelopment agencies, 398 of which are active.
Local officials have created over 200 new agencies and over
500 project areas over the last 30 years, and about two dozen
have been dissolved since 1952, when redevelopment law
started.
6)Tax Increment Financing . Redevelopment is financed primarily
by tax increment revenue.
In 1952, California voters adopted Article XVI, Section 16 of
the California Constitution, which provides for tax increment
financing for redevelopment projects. Tax increment financing
is based on the assumption that a revitalized project area
will generate more property taxes than were being produced
prior to redevelopment. When a redevelopment project area is
adopted, the current assessed values of the property within
the project area are designated as the base year value. Tax
increment comes from the increased assessed value
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of property, not from an increase in tax rate. Any increases in
property value, as assessed because of change of ownership or
new construction, will increase tax revenue generated
by the property, the majority of which goes to the agency.
Taxing entities such as the county, school districts, and
special districts that serve the project area continue to
receive all the tax revenues they were receiving the year the
redevelopment project was formed (called the base year).
7)Although there is no formal system of review or approval of
redevelopment plans beyond the agency and the city or county
that created it, Community Redevelopment Law provides for
several oversight mechanisms. Challenges can be brought
against redevelopment agencies through litigation or through a
referendum process. Furthermore, SB 1206 (Kehoe),
Chapter 595, Statutes of 2006, added the Attorney General as an
"interested party" in
actions regarding the validity of an ordinance adopting a
redevelopment plan, for purposes
of protecting the interests of the state. In addition, the law
requires redevelopment agencies
to report certain activities to DOF and HCD. In some cases,
redevelopment agencies are also required to form Project Area
Committees to oversee plan adoptions and a limited range
of redevelopment activities.
8)Questions . The Committee may wish to ask the author the
following questions:
a) Existing law (Government Code 56031) lists the given
purposes of LAFCOs, including discouraging urban sprawl,
preserving open-space and prime agricultural lands,
efficiently providing government services, and encouraging
the orderly formation and development of local agencies
based upon local conditions and circumstances. The
Committee may wish to discuss how the mission of LAFCOs
relates to redevelopment agencies, since LAFCOs are
concerned with establishment and revision of local
government boundaries, and the provision of municipal
services and the cities, counties, and special districts
that provide those services.
b) AB 1859 creates a new duty, or mandate, for LAFCOs to
review a redevelopment agency's proposal for financial
soundness. The Committee may wish to consider whether
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LAFCOs have the expertise necessary to analyze
redevelopment proposals.
c) AB 1290 (Isenberg), Chapter 942, Statutes of 1993,
provided resolution of a long-standing dispute between
cities, counties and the state over the financial impacts
of redevelopment projects by prescribing, through statutory
formula, the pass-through payments of tax increment
revenues by redevelopment agencies to affected taxing
agencies. However, AB 1859 gives LAFCOs the authority to
require a specified level
of pass-through funding as a condition to their approval,
which is in direct conflict with the compromise achieved in
AB 1290. Is it the author's intent to undo the prescribed
statutory formula in existing law?
d) While it seems that the author's intent is to give
additional powers to LAFCOs in a prospective manner, the
Committee may wish to ask the author to amend the bill to
add language that makes it clear that the new process
through LAFCO would only be triggered if there was creation
of new project or expansion of an existing area, as of
January 1, 2011.
e) AB 1859 gives additional responsibilities to LAFCOs to
approve or disapprove a request to establish, expand, or
extend a redevelopment agency's project area, through an
existing process in LAFCO law that deals with proposals for
change of organization or reorganization. The
Cortese-Knox-Hertzberg Act contains detailed processes for
how a LAFCO deals with these proposals. Is it the author's
intent to piggy-back on the existing procedures for a
change of organization or reorganization? If so, the
author may need additional cross-references in other
sections of the Cortese-Knox-Hertzberg Act.
9)The author notes that redevelopment agencies have enormous
power with little public oversight. Rather than mandating
that redevelopment agencies go through a new process that
gives additional powers and duties to LAFCO, another option
the author may wish to pursue is reforming the existing
redevelopment process to provide more transparency.
10)Arguments in Support : Local government agencies that take
issue with a redevelopment agency's establishment, expansion,
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or extension of a redevelopment area are left with little
choice but to challenge the action in court. This bill would
subject redevelopment agencies to an additional layer of
oversight, and would therefore increase the ability of the
public to be aware of the actions of redevelopment agencies,
and to participate in such discussions at their local LAFCO.
Arguments in Opposition : The League of California Cities
(League) and the California Redevelopment Association (CRA),
in opposition, write that the review of redevelopment plans by
LAFCOs would serve none of the purposes of LAFCOs to
facilitate orderly growth and development by determining
logical local agency boundaries, preserve prime agricultural
lands, and discourage urban sprawl, and instead, would only
prolong and make more expensive what is an already exceedingly
complex, lengthy and costly process. Additionally, because
the past five years have seen the passage of a number of bills
that have tightened what redevelopment funds can be used for,
how redevelopment agencies may exercise their authority, and
what agencies must include in their annual reports, the League
and CRA believe that the Legislature should allow these
reforms to take hold before inserting another layer of costly
oversight.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
League of CA Cities
CA Redevelopment Association
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958