BILL ANALYSIS �
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THIRD READING
Bill No: AB 27X1
Author: Blumenfield (D)
Amended: 6/15/11 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SUBJECT : Budget Act of 2011: Redevelopment Agencies
SOURCE : Author
DIGEST : This bill make statutory changes necessary to
implement the portions of the 2011-12 budget related to
community redevelopment.
Senate Floor Amendments of 6/15/11delete the provision
relating to the Community Development Agency for the City
of Los Angeles and the Bernardi settlement. Those
amendments had removed a cap on tax increment imposed by
the 1977 Bernardi settlement in the former Central Business
District project area in Los Angeles.
ANALYSIS : As amended June 15, 2011, this bill is one of
two budget trailer bills on redevelopment. This bill
creates an alternative voluntary redevelopment program.
The first bill (either SB 14X or AB 26X) eliminates
redevelopment agencies (RDAs) and specifies a process for
the orderly wind-down of RDA activities. The other bill
has a contingent-enactment clause such that it would not
become effective unless this bill also becomes effective.
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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. When a
community elects to participate in the voluntary
alternative program, it becomes exempt from the elimination
provisions of the other bill. A community that elects to
participate would be required to provide a shift of its
proportional share of $1.7 billion to schools for 2011-12.
In 2012-13, and thereafter, a community would have to shift
its proportional share of $400 million to schools, fire
districts, and transit districts, with specified ongoing
adjustments. For new debt or new project areas,
communities in the alternative program would have to shift
80-percent of the school shares, minus pass-throughs, to
schools. The bill includes intent language that future
legislation could reduce that shift if RDA projects meet
certain criteria for reform and statewide benefit. The
ongoing shift to schools in 2012-13, and thereafter, would
be on top of the Proposition 98 minimum-funding guarantee.
The low-mod housing set-aside is fully funded in 2012-13,
and thereafter.
Specifically, this bill:
Alternative Voluntary Redevelopment Program
1. Allows communities to be exempt from the elimination
of existing RDAs if a city or county (community) elects
to participate in the alternative program established
by this bill. If a community intends to participate in
the program, it shall adopt a non-binding resolution to
that effect and notify the Department of Finance prior
to October 1, 2011. The alternative program includes
the following requirements or options for the
community:
a. Requires adoption of a binding resolution
to participate in the program no later than
November 1, 2011, or December 1, 2011, as
specified;
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b. Requires community remittances to
schools, fire districts, and transit districts -
see additional detail on remittances below;
c. Specifies intent for future legislation
to reduce a community's remittances below the
baseline levels of this bill, if certain reforms,
or projects that meet statewide goals, are
adopted.
d. Specifies that participation in the
program constitutes an agreement, on the part of
the city of county to assign to the state its
rights to any payments owed from a RDA, in the
circumstance where the required community
remittances are not made;
e. Allows RDAs, for 2011-12 only, to be
exempt from making the full allocation to the Low
and Moderate Housing Fund, but includes the
intent that these allocations be maintained to
the extent feasible and requires that RDA's make
a finding that it cannot meet its other
obligations unless the allocation is reduced;
f. Specifies that if a community falls out
of compliance with the voluntary program, the
requirements of elimination in the first bill are
reestablished and the RDA is prohibited from
issuing new debt.
Community Remittances
2. The voluntary program includes a requirement for
Community Remittances from the city or county that
creates the RDA to fund schools, fire districts, and
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transit districts. These remittances can be funded
from any available city or county funds not otherwise
obligated for other uses. In choosing to continue
redevelopment under the provisions of this legislation,
a city or county may enter into an agreement with the
RDA in that jurisdiction, whereby the RDA will transfer
a portion of its tax increment to the city or county,
in an amount not to exceed the annual remittance
required pursuant to this bill, for the purpose of
financing activities within the redevelopment area that
are related to redevelopment project goals.
3. Calculation of Community Remittances in 2011-12 will
result in a total of about $1.7 billion. The
calculation for remittances in 2011-12 is based on a
combination of the RDA's proportional share of net tax
increment after debt and pass-throughs, and an RDA's
proportional share of gross tax increment after
pass-throughs. Excluding pass-throughs means an RDA
would not be penalized for prior action to pay a
higher-than-average pass-through to schools. The data
are from the 2008-09 Controller reports. Once the
proportional shares for each RDA are determined, those
shares are applied to the $1.7 billion to determine the
required remittance for each community. If a community
believes the data is outdated such that debt as a share
of increment has increased more than 10 percent since
the 2008-09 report, it may request a proportionate
reduction in their payment through the Director of
Finance.
4. Calculation of Community Remittances in 2012-13, and
thereafter, will result in a total of about $400
million - probably growing over time. The calculation
for remittances in 2012-13 and thereafter is based on
two calculations:
a. The first calculation is built off the
2011-12 remittances as adjusted to: (1) reduce the
base target from $1.7 billion to $400 million; and
(2) to adjust each RDA's amount based on changes
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to tax increment revenue for existing project
areas and to exclude new debt (debt added after
November 1, 2011);
b. The second calculation is built off
80-percent of the "school's share" of new debt
added after November 1, 2011, and for any new
project areas or project area expansion. This
80-percent of the schools' share would reflect
that the 20-percent low-moderate housing set-aside
is being kept whole in the outyears. Intent
language in the bill reflects that future
legislation could be adopted allowing communities
to reduce their remittances below this 80-percent
school share for new debt, if certain reforms, or
projects that meet statewide goals, are adopted.
5. Community Remittances directed to schools. Directs
most of the community remittances in 2011-12 (all but
$4 million of the $1.7 billion) to county Education
Revenue Augmentation Funds (ERAF). Funds would be
directed to schools and districts that overlap with the
RDA areas and allocated based on the basis of Average
Daily Attendance (ADA). In 2012-13, the amount
directed to ERAF would be about $340 million. In
2011-12, this would be off-setting to the State's
Proposition 98 payment to schools, but in 2012-13, and
thereafter, the funds for schools would be net new
funding - in addition to the Proposition 98 funding
level.
6. Community Remittances to fire districts and transit
districts. Directs $4.3 million in 2011-12 and about
$60 million in 2012-13, and thereafter, to special
districts within the RDA area that provide fire and
transit services. The amounts shall be transferred to
the Special District Allocation Fund, and allocated to
those special districts based on their proportional
share of tax increment.
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7. Audits. Authorizes audits for the calculation of
annual community remittances, and requires adjustments
to prospective payments if audits identify prior over
or under payment.
Other Matters
8. Intent to enact future legislation to focus
redevelopment funds on projects that advance statewide
goals. This bill cites the intent to pass further
legislation that would allow communities to reduce
their remittance to schools below the 80-percent level
for new debt, if projects are selected that advance
statewide goals in the areas of transportation,
housing, economic development, job creation, and
environmental sustainability.
9. Severability and contingent enactment. Specifies
that most of the provisions of this bill are
non-severable to the other provisions, such that if one
provision is found invalid, then the other specified
provisions are also found invalid. Specifies that the
provisions of this act are severable with the
provisions of the first bill that eliminates
redevelopment. So if provisions of this bill are found
invalid, the provisions of the first bill could remain
in effect. Provisions of the other RDA bill specify it
is enacted only if this bill is enacted.
10. Appropriates $500,000 to the Department of Finance
for administrative costs associated with this bill.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
AGB:DLW:nl 6/15/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: NONE RECEIVED
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