BILL ANALYSIS
AB 2531
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Date of Hearing: May 19, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2531 (Fuentes) - As Amended: April 29, 2010
Policy Committee: Housing and
Community Development Vote: 5 - 0
Local Government 7 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill gives redevelopment agencies additional authority to
provide loans, loan guarantees and other financial assistance to
businesses, assists nonprofits and public agencies in
establishing small business incubators, and clarifies the City
of Los Angeles' authority to apply for and administer federal
funding for economic development.
FISCAL EFFECT
1)No immediate state effects, since the bill does not authorize
new redevelopment, extend the life of existing redevelopment,
or revise criteria for establishing an RDA.
2)Potential long term effects on property tax revenue growth to
the extent that non-traditional uses of tax increment funds -
such as for job training - result in less brick and mortar
investment, and hence less property tax growth in RDAs over
time.
Such impacts could affect other local agencies - such as
counties and schools - once redevelopment areas expire and the
increment property taxes are allocated back to the underlying
local jurisdictions.
3)Redevelopment has traditionally focused on long-lasting
"bricks and mortar" investments in public improvements,
commercial and industrial projects, and affordable housing.
This is partly because the funding sources for these
investments are bonds repaid by added property values, and
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taxes, created by the investments. While much of the spending
authorized by this bill is generally consistent with the
traditional emphasis on bricks-and-mortar spending, the
provision allowing spending for job training is not. While it
can be argued that a well-trained workforce is an integral
part of investments in a community, the bill nevertheless
raises the question of whether tax increment funds - which
represent property taxes diverted from other local
governmental agencies such as schools - are the appropriate
source for job training and placement services.
SUMMARY (CONTINUED)
Specifically, this bill:
1)Expands the definition of redevelopment to include providing
direct assistance to businesses through loans, loan
guarantees, and other financial assistance in connection with
new or existing facilities within redevelopment project areas
for industrial and manufacturing uses, for the provision or
replacement of machinery and equipment in those facilities.
2)States that the direct assistance is expected to result in the
retention or expansion of the number of persons employed in
the industrial or manufacturing jobs and to:
a) Reduce emissions of greenhouse gases
b) Increase the use of clean, renewable, or alternative
energy
c) Increase energy efficiency
d) Increase the use of recycled and locally sourced
materials
e) Increase the efficiency in water, wastewater and
stormwater systems
f) Increase the efficiency of construction methods
g) Reduce demolition and construction-induced pollution and
waste material generation
h) Improve indoor air quality
i) Reduce building operation costs through increased
operation and maintenance efficiency
j) Reduce public infrastructure costs related to
development
3)Adds job training, job placement, apprenticeship and
pre-apprenticeship programs and services relating to
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construction or to the operation of businesses in project
areas to the possible uses of redevelopment.
4)Prohibits a redevelopment agency from amending a redevelopment
plan to increase or extend the project time limits in order to
collect additional tax increment for the purpose of fulfilling
this legislation.
5)Contains a sunset date of January 1, 2016, for all of the
provisions added by this measure.
COMMENTS
1)Rationale . According to the sponsor, the City of Los Angeles,
this bill is an effort to expand the ability of redevelopment
agencies to create jobs in the emerging green sector and
create green sustainable communities.
Under existing law, redevelopment agencies have authority to
provide financial assistance to business and property owner to
promote job retention or expansion in connection with
sustainable manufacturing and industrial uses. The sponsor
states that this bill is in intended to "clarify and expand
the authority of a redevelopment agency to provide financial
assistance to property owners and business tenants to retrofit
and rehabilitate buildings in a redevelopment project area to
retain or expand manufacturing and industrial."
2)California Redevelopment Law . The Community Redevelopment Law
allows local officials to set-up redevelopment agencies,
prepare and adopt redevelopment plans, and finance
redevelopment activities. The Law repeatedly underscores the
need for the public sector's intervention when private
enterprise cannot accomplish the redevelopment of blighted
areas. Before redevelopment officials can wield their
extraordinary powers of property tax increment funding and
property management (including eminent domain), they must
determine if an area is blighted.
A blighted area must be predominantly urbanized with a
combination of conditions that are so prevalent and
substantial that they can cause a serious physical and
economic burden that can not be helped without redevelopment.
In addition, a blighted area must have at least one of four
conditions of physical blight and at least one of seven
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conditions of economic blight.
Predominantly urbanized means that at least 80% of the land in
the project area:
a) has been or is developed for urban uses (consistent with
zoning), or
b) is an integral part of an urban area, surrounded by
developed parcels.
The four conditions of physical blight are:
a) unsafe or unhealthy buildings;
b) conditions that prevent or hinder the viable use of
buildings or lots;
c) incompatible land uses that prevent development of
parcels;
d) irregular and inadequately sized lots in multiple
ownerships.
The seven conditions of economic blight are:
a) depreciated or stagnant property values;
b) impaired property values because of hazardous wastes;
c) abnormally high business vacancies, low lease rates, or
a high number of abandoned buildings;
d) serious lack of necessary neighborhood commercial
facilities;
e) serious residential overcrowding;
f) an excess of adult-oriented businesses that result in
problems;
g) a high crime rate that is a serious threat to public
safety and welfare.
In order to fund redevelopment, a redevelopment agency keeps
the property tax increment revenues generated from increases
in property values within a redevelopment project area. When
it adopts a redevelopment plan for a project area and selects
a base year, the agency "freezes" the amount of property tax
revenues that other local governments receive from the
property in that area. In future years, as the project area's
assessed valuation grows above the frozen base, the resulting
property tax revenues --- the property tax increment --- go to
the redevelopment agency instead of going to the underlying
local governments.
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To get the capital they need to carry out their activities,
redevelopment officials issue property tax allocation bonds.
Redevelopment officials also create long-term debt by signing
development contracts with property owners and builders, and
they take out loans from the underlying city or county.
Redevelopment agencies repay these debts by pledging the
property tax increment revenues that come from the project
area. By capturing property tax increment revenues over the
decades, redevelopment agencies gain access to a generally
steady, long-term revenue stream. Once the tax increment
revenues pay off these debts, the agency ceases to receive its
share of tax revenues. The other local governments ---
cities, counties, special districts, school districts --- then
enjoy their earlier shares of the now-expanded property tax
base.
The diversion of property tax increment financing does not
usually harm schools because the State General Fund makes up
the missing revenues. The State General Fund automatically
backfills the difference between what a school district
receives in property tax revenues and what the district needs
to meet its revenue allocation limit. When a redevelopment
agency diverts property tax increment revenues from a school
district, the State General Fund pays the difference.
3)Related Legislation . AB 2043 (Torrico) expands the eligible
uses of redevelopment funding to include mortgage assistance
to homeowners. That bill is currently pending in this
committee.
AB 2065 (Calderon) allows the City of Downey to expand their
redevelopment area and use additional tax increment financing
to recoup rent and improvements it is making related to the
Tesla Motors project. That bill is currently pending in this
committee.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081
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