BILL ANALYSIS Ó
AB 1585
Page 1
Date of Hearing: March 21, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1585 (John A. Pérez) - As Amended: March 15, 2012
SUBJECT : Redevelopment.
SUMMARY : Makes changes to the process of dissolving
redevelopment agencies (RDAs), including requiring the funds on
deposit in the Low-and Moderate-Income Housing Fund (L&M Fund)
of the former RDA to remain with the entity that assumes the
housing functions rather than being distributed as property tax
revenue. Specifically, this bill :
1)Clarifies that the "administrative cost allowance" is 5% of
the property tax, including property tax that was allocated to
the former RDA and the successor agency for the 2011-2012
fiscal year.
2)Specifies that employee costs associated with work on specific
project implementation activities, including, but not limited
to, construction inspection, project management, or actual
construction, are not subject to the administrative cost
allowance cap.
3)Specifies that costs incurred to fulfill collective bargaining
agreements for layoffs or terminations of city employees who
performed work for the former RDA are enforceable obligations
payable from property tax funds.
4)Provides that obligations to employees that are transferred
from the former RDA or successor agency to the entity assuming
the housing functions are enforceable obligations payable from
property tax funds.
5)Requires the successor agency or designated local authority to
enter into an agreement with the entity assuming the housing
functions and to reimburse it for any costs of the employee
obligations if an employee is transferred to the housing
successor entity.
6)Adds the following categories of enforceable obligations and
requires their approval by the Oversight Board:
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a) Loans made by the former the city, county, or city and
county that created the RDA to the RDA if the loan was made
within two years of the date of the creation of a project
area, if the loan was for the project area; and,
b) Loans made from the city or county to the former RDA to
make a payment to the State's Supplemental Educational
Revenue Augmentation Fund (SERAF).
1)Clarifies that repayment of SERAF loans made from the L&M Fund
to the former RDA to be deposited into the L&M Fund maintained
by the entity that assumes the housing functions.
2)Requires the Oversight Board to do the following in order to
deem other loan agreements from the city, county, or city and
county to the former RDA an enforceable obligation:
a) Makes a finding that the loan was for legitimate
redevelopment purposes; and,
b) Conditions its approval on the loan being repaid to the
city, county, or city and county based on a defined
schedule over a reasonable term, at an interest rate not to
exceed the interest rate earned by funds deposited into the
Local Agency Investment Fund.
1)Provides that when listing the payment dates for enforceable
obligations on the Recognized Obligation Payment Schedule
(ROPS), the successor agency may list payments on an annual
basis.
2)Specifies that the successor agency is a legally distinct and
separate body that acts by resolution, can sue and be sued,
and can have additional powers that may be conferred upon it.
3)Allows a city, county, or city and county, or joint powers
authority that authorized the creation of the former RDA and
elected not to be the successor agency to subsequently reverse
that decision and serve as the successor agency.
4)Requires any amounts on deposit in the L&M Fund of a former
RDA to be transferred to the city, county, or city and county
that elected to retain the responsibility for performing the
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housing functions of the former agency.
5)Requires any amounts on deposit in the L&M Fund that are
transferred to the L&M Fund of the succeeding housing entity
to be maintained in a separate account and used for the
purposes defined in the Community Redevelopment Law relating
to authorized uses of the L&M Fund.
6)Requires the entity that assumes the housing functions of the
former RDA to enforce affordability covenants and other
related activities as defined in Community Redevelopment Law.
7)Requires, where there is no local housing authority that
elected to accept authority for performing the housing
functions, that any amounts on deposit in the L&M Fund be
deposited in the State Low-and Moderate Income Housing Trust
Fund (State Trust Fund), created by this measure, administered
by the Department of Housing and Community Development (HCD),
to be awarded on a competitive basis to projects within the
counties in which it was collected.
8)Requires, when awarding funds out of the State Trust Fund,
that priority must be given to eligible projects that serve
extremely low-, very low-, and low-income families and
individuals.
9)Defines "succeeding housing entity" as the entity that assumes
responsibility for retaining the housing assets and functions
previously performed by the RDA.
10)Requires the succeeding housing entity to contract to expend
at least 80% of the monies in the L&M Fund within two years of
the date of receipt of those monies.
11)Specifies that if within four years of the date of receipt of
the L&M Fund monies the succeeding housing entity has not
spent the monies, then the excess amount, minus the amount
necessarily reserved for the ongoing monitoring and
maintenance of affordable housing projects shall be
transferred to the State Trust Fund for expenditure by HCD.
12)Prohibits excess funds from being transferred to HCD if the
succeeding housing entity applies for, and receives, a time
extension waiver from HCD.
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13)Specifies if the waiver is granted the funds shall remain
with the succeeding housing entity for an additional two
years.
14)Requires HCD in approving a waiver to consider, among other
factors, all of the following:
a) Whether the city, county, city and county, or housing
authority has a site specific project plan with local
approvals, including the issuance of building permits;
b) Whether the project has secured financing; and,
c) Evidence that some funds have been expended from the L&M
Fund.
15)Authorizes a succeeding housing entity to reapply at the end
of the two-year period for a renewal of the previously granted
waiver.
16)Authorizes a succeeding housing entity to transfer all or a
portion of the monies in the L&M Fund to another succeeding
housing entity within the same county, to be spent on
affordable housing if all of the following conditions are met:
a) The funds will be spent on projects that primarily
benefit low-income families or families that are below low
income;
b) Both succeeding housing entities involved in the
transfer adopt a resolution detailing the need for the
transfer of funds and the intended use of the funds by the
receiving jurisdiction; and,
c) The funds will be spent in compliance with the
requirements outlined in comments #18-21.
1)Requires the succeeding housing entity, within 45 days of the
date this measure is enacted, or 45 days from the receipt of
moneys from the L&M Fund, whichever is later, to notify HCD of
the amount of money on deposit in the L&M Fund and the
entity's plan for spending it.
2)Requires, within two years from the date of notification to
HCD, the succeeding housing entity to report to HCD the
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percentage of funds that it has entered into contract to
spend.
3)Requires at the end of four years the succeeding housing
entity to report to HCD if there are any remaining moneys in
the L&M Fund and to notify HCD if it will be applying for a
waiver or transferring the excess funds to HCD.
4)Requires that assets and properties of the former RDA, under
the direction of the Oversight Board, be disposed of in an
expeditious but orderly manner that preserves the value of the
assets.
5)Provides that the first ROPS for the period of January 1,
2012, through June 20, 2012, may, if necessary, include the
following:
a) The total amount of payments required for enforceable
obligations over the next two six-month periods; and,
b) In the case of debt obligations, the amount of the
annual debt service reserve set-asides and any other
amounts required under indenture or similar documents.
1)Clarifies that the member of the Oversight Board representing
special districts should represent the special district having
the largest property tax share within the redevelopment
project areas of the former RDA.
2)Provides that when appointing a member of the Oversight Board
from the employees of the former RDA, if the majority of the
employees were city or county employees, then the appointment
should be made from the organization that represents those
employees.
3)Provides that if there is no employee organization that
represents the employees of the former RDA, city, or county,
then the appointment should be made from among the employees
of the successor agency.
4)Provides that an employee that is appointed to the oversight
board is deemed not to have a conflict of interest, solely due
to his or her employment, in voting to approve a contract as
an enforceable obligation.
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5)Requires all actions taken by an Oversight Board to be adopted
by resolution.
6)Allows the successor agency, subject to approval of the
Oversight Board, to enter into a financing agreement,
including issuing bonds, to fund required payments under an
enforceable obligation that exceed the property tax revenue
available to the successor agency when the payment is due.
7)Provides that a successor agency is not permitted to create
additional enforceable obligations except when necessary to
pay the financing costs of existing enforceable obligations.
8)Allows the successor agency, subject to Oversight Board
approval, to temporarily increase the administrative cost
allowance to carry out the requirements of an enforceable
obligation, to cover litigation costs, or to maintain and
preserve the value of assets while in the possession of the
successor agency.
9)Requires the Oversight Board to direct the successor agency to
do the following:
a) Compile a complete inventory of existing real property
assets of the former RDA by project area; and,
b) Include in the inventory the general categories of real
property assets, the purpose for which the assets were
originally acquired, the original purchase price of each
asset, and the estimated current market value.
1)Requires the Oversight Board, prior to disposing of any
assets, to receive and review the inventory of assets prepared
by the successor agency and adopt a policy or strategy for
disposal or transfer of such assets that ensures it is done in
an expeditious but orderly manner that preserves the value of
the asset.
2)Provides that in disposing of assets and properties, the
Oversight Board may direct the successor agency to transfer
ownership of assets that were constructed or used for a
purpose integral to the operation of a governmental purpose,
like parking facilities, to the appropriate public
jurisdiction.
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3)Requires the auditor-controller to deposit the unitary and
supplemental tax increment due to the former RDA into the
Redevelopment Property Tax Trust Fund (Property Tax Trust
Fund).
4)Requires the auditor-controller, in making the first annual
distributing from the Property Tax Trust Fund, to reserve any
funds necessary to cover payments made in the second half of
the calendar year, as described in the ROPS, that are in
excess of the amount that is anticipated to be deposited in
the Property Tax Trust Fund from the May or June allocation.
5)Provides that in distributing property tax revenues associated
with the payment of a retired recognized obligation, the
auditor-controller should only distribute property tax to the
extent that it is not currently required for the payments of
other recognized obligations.
6)Deletes the requirement that the California Law Revision
Commission draft a Community Redevelopment Law clean-up bill
by January 1, 2013.
7)Includes an urgency clause.
EXISTING LAW :
1)Dissolves RDAs as of February 1, 2012.
2)Requires RDAs prior to dissolution to continue to make all
scheduled payments for enforceable obligations, perform
obligations established pursuant to enforceable obligations,
set aside required reserves, preserve assets, and to take all
measures to avoid triggering a default under an enforceable
obligation.
3)Requires the RDAs, prior to dissolution, to prepare an
enforceable obligation payment schedule, containing all
payments obligated to be made and provide this to the county
auditor-controller.
4)Requires 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.
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5)Establishes successor agencies to the RDAs that would, except
in certain situations, such as those involving an RDA based on
a joint powers authority, be the entity that created the RDA.
If no local agency elects to be the successor agency, a
designated local authority is be formed, whose three members
are 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.
7)Defines enforceable obligations for successor agencies to
include, but not limited to:
a) Bonds, including debt service, reserves, or other
required payments;
b) Loans borrowed by the agency for a lawful purpose
including loans from the L&M Fund;
c) Payments required by the federal government;
d) Pre-existing obligations to the state or obligations
imposed by state law;
e) Legally enforceable payments to agencies' employees,
including pension obligations and other obligations
conferred through a collective bargaining agreement;
f) Judgments and settlements entered into by a court or
arbitration, retaining appeal rights;
g) Legally binding contracts that do not violate the debt
limit or public policy; or,
h) Contracts necessary for administration of the agency,
such as for office space, equipment and supplies, to the
extent permitted.
8)Provides that enforceable obligations would not include any
agreements, contracts, or arrangements between the city,
county, or city and county that created the RDA and the former
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RDA, except for loans made within two years of the RDA's
creation.
9)Requires successor agencies to take control of all assets,
properties, contracts, books and records, buildings and
equipment of the RDAs on February 1, 2012.
10)Requires successor agencies to dispose of an RDA's assets as
directed by the Oversight Board with the proceeds transferred
to the county auditor-controller for distribution to taxing
agencies within the county. Governmental facilities, such as
roads, school buildings, and fire or police stations would be
conveyed to the appropriate public jurisdiction.
11)Requires 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.
12)Creates the Redevelopment Obligation Retirement Fund and the
Redevelopment Property Tax Trust Fund. Property tax revenues
associated with each former RDA in each county will be
deposited in the Property Tax Trust Fund which will be
administered by the county auditor-controller.
13)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 Trust
Fund.
14)Requires the county auditor-controller to allocate funds from
the Trust Fund in the following order:
a) Local agencies, school districts and community college
districts in the amount that would have been received by
such agencies pursuant to statutory and contractual
pass-through agreements;
b) Redevelopment Obligation Retirement Fund for successor
agencies' payments listed in the Recognized Obligation
Payment Schedule and administration; and,
c) Cities, the county, schools, community college
districts, and enterprise special districts according to
their in the proportional shares of what would have been
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received absent redevelopment and adjusted for pass-through
agreements.
FISCAL EFFECT : Unknown
COMMENTS :
1)In June of 2011 the Legislature passed and the Governor signed
of ABX1 26 (Blumenfield) ÝChapter 5, Statues of 2011 First
Extraordinary Session] which set up the process for the
dissolution of redevelopment agencies. There was also a
companion measure, ABX1 27 (Blumenfield) ÝChapter 6, Statues
of 2011 First Extraordinary Session], which created an
Alternative Voluntary Redevelopment Program for cities or
counties to opt into.
On July 18, 2011 the CA Redevelopment Association (CRA) and
the League of CA Cities, along with other petitioners, sued
the State via the Director of Department of Finance (Ana
Matosantos) on the constitutionality of AB X1 26 and ABX1 27
and asked for a stay of these measures. On August 17, 2011
the California Supreme Court issued a modified order that
stayed almost all provisions of both measures except Part 1.8
of the Health and Safety Code which suspended the activities
of all RDAs and prohibited the issuance of new debt.
On December 29, 2011 the Supreme Court issued its final
judgment and denied CRA's petition for peremptory writ of
mandate with respect to ABX1 26. However, the Court did grant
CRA's petition with respect to AB X1 27; thereby throwing out
all provisions related to the Alternative Voluntary
Redevelopment Program, yet maintaining the Legislature's
ability to dissolve RDAs pursuant to the provisions of ABX1
26. The Court also extended all of the statutory deadlines
contained in Health and Safety Code, Division 24, Part 1.85
(Sections 34170-34191) and arising before May 1, 2012, by four
months; thus moving the effective date for the dissolution of
RDAs from October 1, 2011 to February 1, 2012.
The Supreme Court's ruling meant all RDAs were subject to ABX1
26 and set in motion the
process laid out in ABX1 26 for shutting down and disbursing
their assets. The process focuses on two goals: (1) ensuring
existing financial obligations are honored and paid; and (2)
minimizing any additional RDA obligations so that more funds
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are available to transfer for other governmental purposes.
On February 1, 2012, all redevelopment agencies in California
were dissolved and the process for unwinding their financial
affairs began. Given the scope of these agencies' funds,
assets, and financial obligations, the unwinding process will
take time. Prior to their dissolution, RDAs received over $5
billion in property tax revenues annually and had tens of
billions of dollars of outstanding bonds, contracts, and
loans.
2)AB 1585 is a response to those concerns and attempts to
facilitate a smooth wind-down of redevelopment agencies. This
measure makes a variety of technical changes that are intended
to ease the process of dissolution and provide greater
direction to the successor agencies, Oversight Boards, and
successor housing entities that are integral to the
dissolution process. It also requires that the L&M funds that
have been deposited by former RDAs continue to be used for
affordable housing in the county in which they were collected.
3)AB 1585 makes several significant changes to the provisions in
ABX1 26 regarding L&M funds:
a) Keeps the money on deposit in an L&M Fund with the
successor housing entity to be spent on activities allowed
under the housing provisions in the Community Redevelopment
Law or, if there is no successor housing entity, requires
the funds to be transferred to HCD;
b) Requires the successor housing entity to expend 80% of
the funds within two years and returns the funds to HCD
within four years if the funds are not spent, but gives it
the option to petition HCD for more time to spend the funds
if specified criteria can be met;
c) Designates the types of affordable housing projects that
HCD can fund from monies that are transferred to the
department from jurisdictions that decide not to keep the
housing functions of the former RDA; and,
d) Authorizes the voluntary transfer of L&M Funds between
jurisdictions within the county if certain conditions are
met.
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4)AB X1 26 specifies that, except for loan agreements made
within the first two years of the life of the agency, or loans
that relate to issued securities, it does not recognize other
inter agency loans to be enforceable obligations. Instead, it
effectively treats them as contributions of funds. AB 1585
adds the following to what can be considered an enforceable
obligation: 1) loan agreements between the former RDA and the
city, county, or city and county that created it, made within
two years of the date of the creation of a project area, if
the loan was for the project area; 2) loans made from the city
or county to the former RDA to make a payment to SERAF; and,
3) other loans subject to Oversight Board finding.
5)ABX1 26 provides that the liability of the successor agency
only extends as far as the money available from tax increment
and former assets of the agency will fund. AB 1585 goes on to
further clarify that the successor agency is a legally
distinct and separate body that acts by resolution, can sue
and be sued, and can have additional powers that can be
conferred upon it.
6)Suggested Amendments:
a) AB 1585 specifies that the successor agency is a legally
distinct and separate body that acts by resolution, can sue
and be sued, and can have additional powers that may be
conferred upon it. The Committee may wish to ask the
author to clarify from whom the successor agency is
separate. The amendment would read as follows:
On page 6, lines 14 & 15 strike "A successor agency shall
constitute a legally distinct and separate body" and
insert:
"For purposes of this article, a successor agency is a
public entity separate from the entity or entities that
authorized the creation of each redevelopment agency"
b) AB 1585 allows a city, county, or city and county, or
joint powers authority that authorized the creation of the
former RDA and elected not to be the successor agency to
subsequently reverse that decision and serve as the
successor agency. The Committee may wish to ask the author
to establish a timeline by which this decision would occur
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and clarify that any prior transactions of the successor
agency will be recognized despite the change in who serves
as the successor agency. The amendment would read as
follows:
On page 7, line 34 after "section." insert:
"Any reversal of this decision shall not become effective
for 60 day after notice has been given to the current
successor entity and the oversight board and shall not
invalidate any actions of the successor agency or the
oversight board taken prior to the effective date of the
transfer of responsibility."
c) In order to ensure transparency and accountability in
the actions of the successor agencies the Committee may
wish to ask the author to add in the requirement that the
successor agencies must follow the Brown Act and that there
must be an annual audit of the successor agency's financial
transactions and records. The amendments would read as
follows:
On page 6, line 18 after "it." insert:
"All successor agencies shall be deemed to be a local
entity for purposes of the Ralph M. Brown Act."
On page 14, between lines 12 and 13 insert:
"(m) Cause a postaudit of the financial transactions and
records of the successor agency to be made at least
annually by a certified public accountant."
d) AB 1585 and existing law have conflicting provisions on
how to deal with the transfer of housing assets. The
Committee may wish to ask the author to clarify these
provisions. The amendments would read as follows:
On page 8, line 9 strike "powers, duties, and
obligations" insert:
"powers, assets, liabilities, duties, and obligations,
excluding enforceable obligations of the successor
agency,"
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On page 8, line 21 after "obligation" insert:
", excluding enforceable obligations of the successor
agency,"
On page 20, line 14 after "agency" insert:
", other than those transferred pursuant to
subdivision (d)"
On page 20, line 28 after "powers" insert:
"assets, liabilities,"
On page 20, line 29 after "obligations" insert:
", excluding enforceable obligations of the successor
agency, but"
7)Support arguments: Supporters, including the CA Housing
Consortium, argue that "AB 1585 would ensure that the L&M
Funds that have been deposited by former RDAs continue to be
used for their originally intended purpose, affordable
housing. To strengthen that purpose, the bill requires that
80% of the funds must be spent within two years, which would
allow the 10,000-19,000 affordable apartments and
single-family homes at various stages of development to be
completed, thereby creating a significant number of jobs in
those communities. Any remaining funds would be redistributed
back into the county in which they were collected, with
priority given to affordable housing projects that serve low-,
very low-, and extremely low- income families and
individuals."
Opposition arguments: Opposition, the County of Santa Clara
Board of Supervisors, argues that "this measure undermines the
structure of redevelopment reforms contained in the enacted
Fiscal Year Budget. And while it seeks to clarify existing
law, it would likely result in greater confusion and delay in
the implementation of the orderly wind-down of redevelopment
agencies throughout California. While we support certain
technical provisions of the bill intended to ensure that
existing Affordable Housing Funds are transferred to
appropriate housing agencies, we can only do so in a bill that
does not fundamentally alter the intended winding-down of
redevelopment agencies."
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8)This measure was double referred to the Committee on Housing
and Community Development where it passed out on a 5-0 vote on
March 13, 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
Abode Services
Affirmed Housing Group
Aging Services of California
Allied Housing
Bay Area Local Initiatives Support Corporation
CA Housing Consortium
CA Redevelopment Association
Cambrian Center
Century Housing
Cities of Cerritos, Colton, Coronado, Fairfield, Lafayette,
Lakewood, Moorpark, and Vista
Community Housing partnership
County of Monterey
Daniel Solomon Design Partners
EAH Housing
Eden Housing, Inc.
Housing Authority of Kings County
Laurin Associates
League of California Cities
LifeSTEPS
Mercy Housing California
Palm Communities
Resources for Community Development
San Diego Housing Commission
Seaview Lutheran Plaza
Individual letters (15)
Opposition
County of Santa Clara
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Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958