BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 77|
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UNFINISHED BUSINESS
Bill No: SB 77
Author: Senate Budget and Fiscal Review Committee
Amended: 3/15/11
Vote: 27 - Urgency
PRIOR SENATE VOTES NOT RELEVANT
ASSEMBLY FLOOR : Not available
SUBJECT : Budget Act of 2011: Redevelopment agencies
SOURCE : Author
DIGEST : This bill eliminates redevelopment agencies
(RDAs) and specifies a process for the orderly wind-down of
RDA activities, including completion of some mid-phase
projects. This bill directs the property tax otherwise
available to the RDAs to instead: continue "pass-through
payments" to schools and other local governments; to
provide $1.7 billion in grant funds to the state for Trial
Court and Medi-Cal costs (in 2011-12 only); to fund
outstanding RDA-related debt, costs for enforceable
obligations, and successor agency administration costs; and
to provide new education and public safety funding to
support core local services (about $200 million in 2011-12
and about $1.9 billion annually thereafter).
Assembly Amendments delete the prior version of the bill
which expressed the intent of the Legislature to enact
statutory changes relating to the 2011 Budget Act and
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inserts language concerning redevelopment agencies.
ANALYSIS : Specifics of the bill:
Current Redevelopment Agencies
1. Eliminates redevelopment agencies as of July 1, 2011.
As part of the process of reducing RDAs activity prior
to their elimination, effective the date of adoption of
this legislation, the bill, among other restrictions,
prohibits 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;
g. transferring or assigning any assets,
rights, or powers to any entity;
h. accepting financial assistance from any
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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;
aa. other actions that would result in
ongoing commitments.
2. Requires RDAs to continue to make all scheduled
payments for enforceable obligations, perform
obligations established pursuant to enforceable
obligations, set aside required reserves, preserve
assets, cooperate with Successor Agencies, and to take
all measures to avoid triggering a default under an
enforceable obligation. Also requires 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
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.
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4. Requires the county auditor-controller to complete a
financial audit of each RDA in the county by November
1, 2011, 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 November 15, 2011.
Successor Agencies
5. Establishes Successor Agencies to the RDAs effective
July 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
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
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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;
i. contracts necessary for administration of
the RDA, such as for office space, equipment and
supplies, to the extent permitted.
Enforceable obligation would not include any
agreements, contracts, or arrangements between the
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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
July 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. Provides that the Successor Agency could:
a. Complete approved development projects,
constituting projects where construction, site
remediation, environmental assessment, or
property acquisition is required pursuant to an
enforceable obligation between the RDA and
parties other than the entity that created the
RDA and either (i) substantial performance under
the agreement has taken place prior to July 1,
2011 or (ii) the Oversight Board, and two of the
three following state officials - the Director of
Finance, the State Treasurer and the State
Controller, determine that it would be beneficial
for the taxing agencies or the communities to
continue the project even if there had not been
substantial performance, based on benefits to the
taxing agencies, special or unique circumstances,
or for the completion of multi-phase projects.
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b. Continue retained development projects,
constituting other projects not involving or
related to an enforceable obligation. These
would consist of projects planned by the former
RDA prior to dissolution that the city, county,
or city and county, as applicable, wishes to
continue by using its own funds. Such projects
would in general be projects that the Oversight
Board would otherwise direct the Successor Agency
to terminate because the project does not qualify
as an approved development project.
1. Allows the Successor Agency, to the extent necessary,
to fulfill an enforceable obligation of a former RDA to
provide financing for an approved development project,
to pledge all or part of its property tax revenue or
enter into an agreement with other taxing Agencies in
the RDA territory for the repayment of financing
provided by a state conduit issuer. These actions
would be subject to prior written approval by the
Oversight Board and two of the three following state
officials - the Director of Finance, the State
Treasurer, and the State Controller.
2. 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
by the Oversight Board.
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Oversight Boards
3. 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 county, county and city, or
joint powers authority formed the RDA. Beginning July
1, 2016, one Oversight Board will be formed in each
county.
4. 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. approval to have projects deemed to be
retained development projects;
g. establishment of the Recognized
Obligation Payment Schedule.
h. a request to hold portions of moneys in
the housing fund in order to pay recognized
obligations related to housing;
i. a request to pledge or enter into an
agreement for the pledge of property tax revenues
to provide financing for an approved development
project.
5. Requires that the Oversight Board direct the
Successor Agencies to:
a. dispose of all assets and properties
except those deemed to be part of approved
development plan 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;
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d. negotiate compensation agreements with
taxing agencies for retained development
projects;
e. 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;
f. determine whether any contract, payments,
or agreements between the RDA and private parties
should be dissolved or renegotiated based on
taxing entities' best interests;
g. 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 Public Health and Safety Fund, the
Redevelopment Property Tax Retirement Fund, and the
Redevelopment Property Tax Trust 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
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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, the
taxing Agencies that receive pass-through payments, and
the beneficiaries of the Public Health and Safety Fund.
4. Requires the county auditor-controller to allocate
funds from the Redevelopment Property Tax 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 as
their share of the property tax base and that
would have been paid pursuant to statutory and
contractual pass-through agreements;
b. During Fiscal Year 2011-12 only, to
the Public Health and Safety Fund an amount not
to exceed $1.7 billion dollars on an aggregate
basis statewide. A proportional funding amount
is required for each Successor Agency into the
Public Health and Safety Fund in order to
receive approval for new debt financing or
continuation of an Approved Development
Project, where there is not substantial
performance;
c. Successor Agency for payments listed
in the Recognized Obligation Payment Schedule;
d. Successor Agency approved
administrative costs required to be paid from
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former tax increment revenue, with any balance
payable to cities, the county, schools,
community college districts, and non-enterprise
special districts. The State Director of
Finance would determine the amount to be
allocated to the Public Health and Safety Fund
by each agency after needs for enforceable
obligations are taken into account.
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. Authorizes a city or a county, or a city and a
county, that formerly had an RDA, to borrow available
funds up to 2 percent of the total tax increment
received by the former RDA, in order to avert
bankruptcy, mitigate the impacts of potential reduction
in core services, or to meet an urgent need to fund a
current project. Such borrowing may occur upon
application to the county auditor-controller and
subject to terms mutually agreed upon.
3. Expresses the intent of the Legislature to provide
local governments with the means and tools to further
economic development and employment opportunities in
economically distressed areas. In particular, efforts
would focus on areas with significant constraints on
development, such as brownfields and former military
bases, and endeavor to foster green technology,
alternative technology, and low and moderate income
housing.
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4. 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.
5. 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: Yes
DLW:nl 3/15/11 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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