BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 26X1|
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THIRD READING
Bill No: AB 26X1
Author: Blumenfield (D)
Amended: 6/14/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011: Redevelopment Agencies
SOURCE : Author
DIGEST : This bill makes statutory changes necessary to
implement the portions of the 2011-12 budget related to
community redevelopment.
ANALYSIS : This bill is one of two budget trailer bills
on redevelopment. This bill eliminates redevelopment
agencies (RDAs) and specifies a process for the orderly
wind-down of RDA activities. The other bill (either SB 15X
or AB AB 27X) would create an alternative voluntary
redevelopment program. This bill has a
contingent-enactment clause such that this bill would not
become effective unless the other bill also becomes
effective. A $1.7 billion State General Fund solution is
scored from the two bills.
It is anticipated that most cities and counties that
created an existing RDA will elect to participate in the
alternative voluntary redevelopment program. To the extent
a community elects not to participate in the voluntary
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alternative program, this bill would direct the property
tax otherwise available to the RDAs: (1) to continue
"pass-through payments" to schools and other local
governments; (2) to fund outstanding RDA-related debt and
administration; and (3) to schools and other local taxes
agencies.
Specifically, this bill:
Current Redevelopment Agencies
1. Eliminates redevelopment agencies (RDAs) as of
October 1, 2011. As part of the process of reducing
RDA's activity prior to their elimination, effective
the date of adoption of this legislation, the bill
would, among other restrictions, prohibit RDAs from:
a. issuing of new or expanded debt of any
type (except under certain conditions, emergency
refunding bonds);
b. making loans or advances or grants or
entering into agreements to provide funds or
financial assistance;
c. executing new or additional contracts,
obligations, or commitments;
d. amending existing agreements or
commitments;
e. selling or otherwise disposing of
existing assets;
f. acquiring real property for any purpose
by any means;
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g. transferring or assigning any assets,
rights, or powers to any entity;
h. accepting financial assistance from any
public or private source that is conditioned on
the issuance of debt;
i. adopting or amending redevelopment plans
or making new finding with respect to blight;
j. entering into new partnerships, imposing
new assessments, or increasing staff or
compensation; and
aa. other actions that would result in
ongoing commitments.
2. Requires RDAs to continue to make all scheduled
payments for enforceable obligations (defined below),
perform obligations established pursuant to enforceable
obligations, set aside required reserves, preserve
assets, cooperate with Successor Agencies (as defined
below), and to take all measures to avoid triggering a
default under an enforceable obligation. Would also
require the RDAs to prepare a preliminary inventory of
enforceable obligation payments and provide this to the
county auditor-controller within 60 days of the
effective date of this bill, which inventory would be
reviewed by the State Controller's Office and the
Department of Finance. The bill would require that
unencumbered RDA funds be conveyed to the county
auditor-controller for distribution to the taxing
entities in the county, including cities, counties, a
city and a county, school districts and special
districts.
3. Extends the time period allowed for challenges to the
validity of RDAs' bonds or other obligations or to
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agency and legislative body determinations and findings
issued or adopted after January 1, 2011. These
challenges could be brought two years following
approval of the action, as opposed to the current
60-day and 90-day review periods.
4. Requires the county auditor-controller to complete a
financial audit of each RDA in the county by March 1,
2012, in order to establish each agency's assets,
liabilities, pass-through payment obligations to other
taxing entities, the amount and terms of indebtedness,
and to certify the initial Recognized Obligation
Payment Schedule (defined below). The audits are to be
submitted to the State Controller by March 15, 2012.
Successor Agencies
5. Establishes Successor Agencies to the RDAs effective
October 1, 2011, that would be, except in certain
situations, such as those involving an RDA based on a
joint powers authority, the entity that created the
redevelopment agency. If no local agency elects to be
the Successor Agency, a designated local authority
would be formed, whose three members would be appointed
by the Governor.
6. Requires Successor Agencies to make payments on
legally enforceable obligations using property tax
revenues when no other funding source is available or
when payment from property tax revenues is required by
an enforceable obligation. Pursuant to this
requirement, Successor Agencies would be responsible
for preparing, on a semi-annual basis, a Recognized
Obligation Payment Schedule that would set forth a
schedule of obligated payments including the date,
amount, and source of funds for each payment.
7. Requires the Recognized Obligation Payment Schedule
to be certified by an external auditor approved by the
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county auditor-controller, and approved by the
Oversight Board (as described below), the State
Controller's Office, and the Department of Finance.
The first Recognized Obligation Payment Schedule would
be submitted by December 15, 2011. The Recognized
Obligation Payment Schedule would be established
pursuant to the identification of enforceable
obligations, which are obligations entered into by the
RDA and are legally enforceable. These enforceable
obligations would include:
a. bonds, including debt Service, reserves,
or other required payments;
b. loans borrowed by the agency for a lawful
purpose;
c. payments required by the federal
government;
d. pre-existing obligations to the state;
e. obligations imposed by state law;
f. legally enforceable payments to RDA
employees, including pension obligations;
g. judgments and settlements entered into by
a court or arbitration, retaining appeal rights;
h. legally binding contracts that do not
violate the debt limit or public policy; and
i. contracts necessary for administration of
the RDA, such as for office space, equipment and
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supplies, to the extent permitted.
Enforceable obligation would not include any
agreements, contracts, or arrangements between the
city, county, or city and county that created the RDA
and the former RDA.
8. Provides that all assets, properties, contracts,
books and records, buildings and equipment of the
former RDA be conveyed to the Successor Agencies on
October 1, 2011. The Successor Agencies would dispose
of RDA assets as directed by the Oversight Board with
the proceeds transferred to the county
auditor-controller for distribution to taxing Agencies.
The bill would require the Successor Agencies to
compensate the taxing Agencies for the value of
property and assets retained by the Successor Agencies
in an amount proportional to the taxing agencies' share
of the property tax. The value of any assets retained
by the Successor Agencies would be at market value as
determined by the county assessor for the 2011 property
tax lien date, unless some other agreement is reached
between the parties. Governmental facilities, such as
roads, school buildings, parks, and fire stations may
be transferred to the appropriate public jurisdiction.
9. Authorizes the Successor Agency to prepare, for the
Oversight Board, a proposed administrative budget that
includes estimated administrative expenses, proposed
sources of payment and proposals for services to be
provided, but does not include funding for the retained
development projects, which must be funded from the
Successor Agency's own budget. The administrative
budget for the Successor Agency would be funded from a
continued tax increment equal to the greater of
$250,000 or 5 percent of the property tax allocated to
the Successor Agency for the 2011-12 fiscal year. This
would decline to 3 percent for each fiscal year
thereafter. The Successor Agency can employ staff and
officers of the RDA provided the total compensation
does not exceed the amount paid in 2010 unless approved
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by the Oversight Board.
Oversight Boards
10. Establishes a Seven-member Oversight Board for each
Successor Agency that would generally consist of the
following representatives: (i) one member appointed by
the County Board of Supervisors; (ii) one member
appointed by the mayor of the city that formed the RDA;
(iii) one member appointed by the largest special
district; (iv) one member appointed by the county
superintendent of schools; (v) one member appointed by
the Chancellor of the California Community Colleges;
(vi) one member appointed by the county board of
supervisors to represent the public; (vii) one member
appointed by the mayor or the chair of the board of
supervisors from the largest representative employee
organization of the former RDA. Special appointment
rules would apply if a "city and county", or joint
powers authority formed the RDA. Beginning July 1,
2016, one Oversight Board will be formed in each
county.
11. Requires the Oversight Board to approve the following
actions of the Successor Agency:
a. establishment of new repayment terms for
outstanding loans where such terms have not been
established prior to July 1, 2011;
b. issuance of refunding bonds;
c. set aside of reserves as required by bond
indentures;
d. merger of project areas;
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e. acceptance of federal or state grants
that are conditioned upon the provision of
matching funds in an amount greater than 5
percent;
f. establishment of the Recognized
Obligation Payment Schedule; and
g. a request to hold portions of moneys in
the housing fund in order to pay recognized
obligations related to housing.
12. Requires that the Oversight Board direct the
Successor Agencies to:
a. dispose of all assets and properties
expeditiously and in a manner aimed at maximizing
value;
b. cease performance in connection with and
terminate all existing agreements that do not
qualify as enforceable obligations;
c. transfer housing obligations and low and
moderate set-aside funds to the applicable
entity;
d. terminate any agreement between the RDA
and any public entity in the county which
obligates the RDA to provide funding for debt
service or other payments if in the best interest
of the taxing entities;
e. determine whether any contract, payments,
or agreements between the RDA and private parties
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should be dissolved or renegotiated based on
taxing entities' best interests; and
f. submit repayment schedules for repayment
of amounts borrowed from the housing fund.
1. Establishes that all Oversight Board actions are
subject to review by the Department of Finance. The
Department of Finance will notify the Oversight Board
within 72 hours of the action that it wishes to review
the decision. In the event the Department of Finance
decides to review the action, it will have 10 days to
either approve the action or return it to the Oversight
Board for reconsideration.
Property Tax Revenues
2. Creates the Redevelopment Property Tax Trust Fund and
the Redevelopment Obligation Retirement Fund. Property
tax revenues associated with each former RDA in each
county would be deposited in the Redevelopment Property
Tax Trust Fund which will be administered by the county
auditor-controller. Estimates of the amounts to be
allocated and distributed from this account will be
provided to the Department of Finance semi-annually.
3. Requires the county auditor-controller to determine
the amount of property tax increment that would have
been allocated to each RDA and to deposit that amount
in a Redevelopment Property Tax Trust Fund. The county
auditor-controller is charged with administering this
fund for the benefit of holders of agency debt and the
taxing Agencies that receive pass-through payments.
4. Requires the county auditor-controller to allocate
funds from the Redevelopment Property Tax Fund in the
following order:
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a. Local agencies, school districts, and
community college districts in the amount that
would have been received by such Agencies as
their share of the property tax base and that
would have been paid pursuant to statutory and
contractual pass-through agreements;
b. To the Redevelopment Obligation
Retirement Fund for Successor Agencies for
payments listed in the Recognized Obligation
Payment Schedule and administration; and
c. To local agencies, school districts
and community college districts in the
proportional shares of what would have been
received absent redevelopment and adjusted for
pass-through agreements.
Other Matters
1. Allows for the continuation of housing activities by
the Successor Agency, which would be permitted to
assume responsibility for housing obligations and to
use the existing balance in the low and moderate income
housing fund set-aside for these purposes. If the
Successor Agency chooses not to assume the housing
activity responsibilities, the funds would be
transferred to the local housing authority or to the
Department of Housing and Community Development.
2. Provides that that the terms of existing memoranda of
understanding with employee organizations representing
former RDA employees would remain in force unless a new
agreement is reached prior to that date. The Successor
Agency will become the employer of all employees of the
RDA upon its dissolution and will assume all
obligations under any memoranda of understanding.
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3. Pursuant to language adopted in SB 70 (Chapter 7,
Statutes of 2011), specifies that beginning for fiscal
years 2012-13, the amounts of additional property tax
received by school districts, county offices of
education, charter schools and community college
districts, as a result of the elimination of RDAs,
would be in addition to the Prop 98 minimum funding
guarantee. These amounts (as well as amounts going to
other taxing agencies) would increase over time as
enforceable obligations are paid down.
4. Specifies that if a community elects to participate
in the Alternative Voluntary Redevelopment Program (as
created in the second RDA bill), and later falls out of
compliance with that voluntary program, then the
provisions of this bill apply with conforming changes
to implementation dates.
5. Appropriates $500,000 to the Department of Finance
for administrative costs associated with this bill.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
AGB:nl 6/15/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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