BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 1484|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 1484
Author: Assembly Budget Committee
Amended: 6/25/12 in Senate
Vote: 21
ASSEMBLY FLOOR : Not relevant
SUBJECT : Budget Act of 2012: Redevelopment
SOURCE : Author
DIGEST : This bill addresses numerous issues related to
the dissolution of redevelopment agencies (RDAs) and
related matters necessary for the implementation of the
Budget Act of 2012. The bill contains measures necessary
to achieve GF solutions of approximately $3.2 billion in
the budget year.
ANALYSIS : As part of the 2011-12 Budget agreement, the
Legislature took action to eliminate RDAs in AB 26 X1
(Blumenfield), Chapter 5, Statutes of 2011-12 First
Extraordinary Session, and institute a new alternative
voluntary redevelopment program in AB 27 X1, (Blumenfield),
Chapter 6, Statutes of 2011-12 First Extraordinary Session.
By virtue of AB 27 X1, RDAs could avoid elimination if the
communities that formed them agreed to participate in the
alternative voluntary redevelopment program that called for
them to remit annual payments to K-12 education. The
California Redevelopment Association challenged the
constitutionality of both pieces of legislation. After an
CONTINUED
AB 1484
Page
2
expedited review, the California Supreme Court released its
ruling December 29, 2011, holding that both AB 26 X1 and AB
27 X1 were invalid. As a result, RDAs were dissolved as of
February 1, 2012, with their affairs to be resolved by
successor agencies (SAs), including the disposal of former
RDA assets. Under current law, the elimination of RDAs
will result in property tax revenues being used to pay
required payments on existing bonds and other obligations,
make pass-through payments to local governments, with
remaining property tax revenues to be allocated to cities,
counties, special districts and school and community
college districts. The budget assumes that approximately
$1.7 billion will be received by K-14 education and serve
to offset the state's Prop 98 General Fund obligation, with
an additional $1.5 billion to be received from freed-up
former RDA cash and cash-equivalent assets during the
budget year.
This bill is the redevelopment trailer bill for the 2012-13
Budget. It clarifies certain matters associated with the
dissolution of RDAs and addresses substantive issues
related to administrative processes, affordable housing
activities, repayment of loans from communities, use of
existing bond proceeds, and the disposition or retention of
former RDA assets. In addition, the bill includes a
variety of measures designed to enhance compliance with
current law. The bill contains the following provisions:
1.Property Assets, Loans and Bond Proceeds . The
legislation allows SAs that have received a "finding of
completion" (FOC) from the Department of Finance (DOF)
additional discretion regarding former RDA real property
assets, loan repayments to the local government community
that formed the RDA (RDA communities) and use of proceeds
from bonds issued by the former RDA. The FOC requires
that amounts due with respect to cash and cash-equivalent
assets, property tax allocations and pass-through payment
amounts are paid, as discussed below. The FOC is an
indication that all amounts determined to be due from the
former RDA or the SA have been paid and satisfied. SAs
in receipt of a FOC will be allowed to:
A. Retain non-governmental physical assets in a
separate trust until DOF has approved a long-range
AB 1484
Page
3
property management plan. The plan must be submitted
to the oversight board (OB) and DOF no more than six
months after the FOC has been issued and be based on
an inventory of assets including: purpose of
acquisition; legal description; estimate of current
value; estimate of derived annual income;
environmental history; potential transit-related use;
and history of development proposals. The plan must
also address the use or disposition of all the
properties in the trust, including: retention for
future development; sale of property; or use of
property to fulfill an enforceable obligation (EO).
B. Include as EOs legitimate loans between the former
RDA and the RDA community, subject to approval of the
OB. Interest on the loan would be calculated at the
Local Agency Investment rate, repaid beginning 2013-14
over a reasonable number of years, with repayment
limited to amount equal to half the growth over the
2012-13 property tax allocated to local governments.
These repayments would be subordinated to loan
repayments to the Low and Moderate Income Housing Fund
(LMIHF) and subject to a 20 percent set-aside for
affordable housing.
C. Use certain existing proceeds stemming from bonds
issued by the former RDA on or before December 31,
2010 for purposes for which the bonds were sold. If
remaining bond proceeds cannot be spent in a manner
consistent with the bond covenant, the proceeds would
be used to defease the bond.
1.Bond Issuance . The legislation refines the circumstances
under which refunding or other types of refinancing bonds
to be issued by the SA would be allowed. These
refinements include limitations and restrictions
regarding: principal amount of debt; payment acceleration
or restructuring; total interest costs; and amount of
property taxes pledged as security. The bill states that
certain bond issuances may be subject to local government
approval or agreements regarding subordination and are
subject to OB approval and review by DOF. Under the
legislation, SAs may seek a waiver from DOF of the
two-year statute of limitations that would generally
AB 1484
Page
4
apply.
2.Housing Successor Assets . The bill requires that a
listing of housing assets be submitted to DOF by August
1, 2012, with such assets to include those transferred
between February 1, 2012 and the submission date of the
listing. The bill requires that DOF review and object to
any asset or transfer, with any objections potentially
subject to a meet and confer resolution process. Assets
transferred to the housing successor entity are to be
used for affordable housing activities, while disallowed
assets would go to the SA for disposal or retention
pursuant to an approved property management plan. The
bill indicates that housing assets includes:
A. Real and personal property acquired for low and
moderate income housing with any source of funds.
B. Funds encumbered by an enforceable obligation to
build or acquire low and moderate income housing.
C. Loans or grant receivables funded from the LMIHF
from homebuyers, homeowners, developers, or other
parties.
D. Funds derived from rents or operation of properties
acquired for low and moderate income housing purposes
by other parties financed with any source of funds.
E. Streams of rents or other payments from low and
moderate income housing financed with any source of
funds.
F. Repayments of loans or deferrals owed to the LMIHF.
G. Certain other properties deemed at the OBs
discretion to be housing assets, such as mixed use
developments that contribute to community value or
benefit local governments.
1.Housing Fund Loans and Bonds . The bill allows repayment
of loans made from the LMIHF, which repayments could
begin in 2013-14, but would be limited to one-half of the
annual growth over the 2012-13 level in property taxes
AB 1484
Page
5
distributed to local governments. These repayments would
take priority over loan repayments to RDA communities (20
percent of those latter loan repayments are to be set
aside for affordable housing activities). The housing
successor may use certain bond proceeds derived from
bonds issued before January 1, 2011, and secured by the
LMIHF, for affordable housing projects.
2.Validation Actions . Under the legislation, the two-year
time limit for validation actions related to findings
determinations of a former RDA, redevelopment bonds and
similar financings, and various related redevelopment
plans and efforts, would be tolled until DOF has issued a
FOC. The two-year limit would not apply once the FOC has
been issued by DOF.
3.Assets and Transfers . The legislation directs the
Controller to examine asset transfers that occurred after
January 31, 2012. The bill directs each SA to retain a
licensed accountant to conduct a due diligence review
(DDR), or arrange for an audit by the county-auditor
controller, of unobligated cash or cash equivalent
balances that would be available for transfer to local
governments. The review must include value of assets
previously transferred from either the former RDA or the
SA and the entity to which such assets were transferred.
DOF may adjust amounts available for distribution to
local governments and must provide an explanation for any
adjustment. The SA may request a meet and confer
resolution process for any disputed amounts. The SA is
required to transfer determined amounts to the county
auditor-controller and report such amounts to DOF.
Assets identified for transfer but not transferred could
be subject to offset in an amount equivalent to asset
value (as discussed further below). The DDR must:
A. Reconcile assets, balances and liabilities of the
SA with amounts previously reported to the Controller.
B. Specify total funds, including the LMIHF,
identified for distribution to local governments after
subtracting restricted amounts and non-cash items.
C. Indicate the asset sum available for distribution
AB 1484
Page
6
to local governments.
D. Be submitted to the OB, the county
auditor-controller and DOF for review.
1. Property Tax Allocations . The bill specifies that if
the former RDA or SA did not pay property tax or
certain pass-through payments due to local governments
for the 2011-12 fiscal year, or these amounts were not
remitted by the county auditor controller, such amounts
will be offset (as discussed further below) through
future reductions in property tax allocations, from
available SA reserves or other funds, by reductions in
sales taxes allocable to the county, or by other means
as appropriate. The bill requires the county
auditor-controller to provide a report to DOF for each
SA regarding the distribution that includes the total
funds available for allocation, the pass-through
amounts, the amounts distributed to SAs, and the
amounts distributed to local governments. The bill
makes no changes in the current treatment of
pass-through amounts, and expresses the intent that
full payment of pass-through amounts are to be made.
2. Offsets for Unpaid Amounts . Under the bill, if
amounts due to local governments pursuant to the DDR,
prior property tax allocations, and pass-through
payments are not remitted, these amounts may be
recovered, as appropriate, by actions directed to the
entity to which the funds were transferred, the RDA
community or the SA. These actions could include an
offset of either sales and use tax or property tax
allocations, or legal actions against any third party
in receipt of the funds. Offsets amounts found to be
unwarranted by a court would result in a reimbursement
of that amount or a reversal of the offset, and a
penalty imposed on the state.
3. Successor Agencies . The bill clarifies that SAs are
local public entities separate from the RDA community,
and which succeed to the organizational status of the
former RDA but without redevelopment powers except
those related to and necessary for the payment of EOs.
Under the bill, SAs are required to provide an annual
AB 1484
Page
7
post-audit of SA financial transactions, and when all
RDA debt is retired, dispose of all assets, end
pass-through payments and terminate. For SAs that do
not have a FOC from DOF, assets are to be disposed of
with proceeds benefiting local governments.
4. Oversight Boards . The bill clarifies OB membership
qualifications of the representative of the former
employees of the RDA. It provides that OB members are
protected by the immunities applicable to public
entities and actions are to be taken by resolution.
The bill allows OBs to contract for administrative
support and specifies that OBs cannot reestablish loan
agreements between the SA and community.
5. Polanco Act Provisions . The legislation provides
that existing clean-up plans and liability limits
authorized under the Polanco Redevelopment Act shall be
transferred to the SA and may be transferred to the
successor housing entity at the respective entity's
request.
6. RDA Communities . The bill would allow RDA
communities that elected not to be the SA to opt back
in at a later date. It allows RDA communities to grant
loans to the SA for certain costs and be repaid out of
administrative costs or the property tax increment,
upon approval of the OB. In addition, the bill
provides that RDA communities may use the land use
plans and functions of the RDA, provided that no new
project areas or expanded boundaries of project areas
are created or increase the amount of obligated
property tax results.
7. Administrative Costs . The bill clarifies that the
five percent limit on administrative costs is based
initially on the property tax allocated for the
Recognized Obligation Payment Schedule (ROPS) and
allows the OB to reduce this amount upon SA approval.
In addition, administrative costs would exclude certain
litigation expenses and expenses related to employees
costs associated with project specific activities.
8. Enforceable Obligations . The bill allows for
AB 1484
Page
8
required bond reserves to be included as EOs, along
with costs associated with collective bargaining
agreements for layoffs or terminations, the transfer of
employees to the housing successor entity, and
repayments of loans from the LMIHF. It also specifies
that once funding for an EO is deleted or reduced by
DOF, the funding may not be restored except as agreed
to through the meet and confer resolution process or
pursuant to court order. The bill allows SAs to
petition DOF to provide written confirmation that its
determination regarding an enforceable obligation is
final and conclusive.
9. ROPS Timing and Reporting Issues . The bill provides
for certain changes regarding filing and reporting
requirements for ROPs, including: allowing SAs to amend
the initial Enforceable Obligation Payment Schedule
(EOPS) to provide for continued payment of EOs until
the ROPS is approved by the OB and DOF; requiring the
submission by SAs of each ROPS to the county
administrative officer, county auditor-controller, and
DOF at the same time it is submitted to the OB;
specifying ROPS for the January 1, 2012 through June
30, 2012 period are to include payments made or to be
made by the former RDA and SA from January 1 2012 and
June 30, 2012; and directing SAs to submit ROPS for the
January 1, 2013 through June 30, 2013 period by
September 1, 2012, and to submit the OB-approved ROPS
for the July 1, 2013 through December 31, 2013 to DOF
and county auditor-controller 90 days before the
property tax distribution. Under the bill, DOF is
provided 45 days to make its determination of the EOs
on the ROPS and SAs are given the ability to request
additional review and a meet and confer resolution
process with five days.
10. Other ROPS Issues . The bill specifies, if an SA that
does not submit ROPS by the deadlines, it may be fined
or have its administrative cost allowance reduced and
DOF may direct the county-auditor controller withhold
amounts for payments on EOs. SAs must submit a copy of
the ROPS to DOF in a manner provided by DOF. The bill
indicates that if DOF reviews and eliminates or
modifies any item approved by the OB, DOF shall provide
AB 1484
Page
9
notice to the SA and the county auditor-controller as
to the reasons for the action.
11. Severability . The bill states that if any provision
of the act is held invalid, the invalidity shall not
affect other provisions of the act which can be given
effect without the invalid provision. Thus, provisions
of the act are severable.
12. Appropriation . The bill appropriates $22 million
from the General Fund for allocation by the Director of
Finance, including an amount of up to $2 million for
allocation by the Administrative Office of the Courts
to the Superior Court of California, Sacramento.
Allocation of funds by the Director of Finance shall be
effective no sooner than 30 days following after the
director notifies the Joint Legislative Budget
Committee.
Comments
According to the Senate Budget and Fiscal Review Committee,
the legislation recognizes that the RDA dissolution actions
adopted as part of the 2011-12 budget resulted in
significant changes in and disruption to local governments'
redevelopment activities. In addition, subsequent court
actions and decisions have had unintended impacts on timing
of various payments and reporting requirements and the
ability of local governments to comply with the new law.
The bill also acknowledges that there has been evidence of
noncompliance with the law by some entities, particularly
with respect to the scheduling of enforceable obligations
to be made from property tax revenues and the transfer of
former RDA assets. In view of this situation and these
events, the legislation is intended to clarify ambiguities,
fill in areas of incompleteness, and reconcile various
deadlines that have resulted from the 2011 legislation or
are due to subsequent legal events. In addition to
providing a mechanism for helping to ensure compliance with
current law, the bill creates significant opportunities for
local governments to be repaid for past financial
commitments to redevelopment, complete various projects,
and lay out future development plans using the substantial
amount of real property and other assets acquired by the
AB 1484
Page
10
former RDA.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
According to the Senate Budget and Fiscal Review Committee,
provisions of the bill are estimated to ensure the receipt
of additional property tax revenues by local governments,
$3.2 billion of which would be received by local school
districts and provide corresponding General Fund relief.
There would also be receipt of additional funds and assets
by local governments beginning in 2013-14, relative to
current law.
AGB:n 6/27/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****