BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 450|
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THIRD READING
Bill No: SB 450
Author: Lowenthal (D), et al.
Amended: 4/11/11
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 4/5/11
AYES: DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal,
Pavley, Rubio, Simitian
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/26/11
AYES: Kehoe, Walters, Alquist, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Emmerson
SUBJECT : Redevelopment agencies housing expenditures
SOURCE : State Controller John Chiang
California Rural Legal Assistance Foundation
Western Center on Law and Poverty
DIGEST : This bill reforms how redevelopment agencies
spend their Low and Moderate Income Housing Funds.
ANALYSIS : The Community Redevelopment Law requires that
each redevelopment agency submit the final report of any
audit undertaken by any other local, state, or federal
government entity to its legislative body and to
additionally present an annual report to the legislative
body containing specified information.
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This bill requires the agency to include additional
information relating to any "major audit violations", as
defined, any corrections to those violations, and planning
and general administrative expenses of the Low and Moderate
Income Housing Fund (LMIHF).
This bill authorizes the State Controller (Controller) to
conduct quality control reviews of independent financial
audit reports and require the Controller to the results of
his/ her reviews. The Controller would be required to
comply with certain notification and referral provisions in
the event that the audit was conducted in a manner that may
constitute unprofessional conduct.
This bill requires the Department of Housing and Community
Development to conduct audits of redevelopment agencies to
ensure compliance with the housing provisions of the
Community Redevelopment Law. This bill requires each
agency to annually deposit 0.05 percent of any tax
increment deposited into the LMIHF into the Redevelopment
Agency Accountability Fund, which this bill creates, to
fund the department audits.
Existing law requires that funds used for purposes of
increasing, improving, and preserving a community's supply
of low- and moderate-income housing be held in a separate
LMIHF until used. Existing law limits the planning and
general administrative costs which may be paid with moneys
from the LMIHF.
This bill revises the costs and expenses which may be
considered planning and general administrative costs for
the purposes of being paid from the LMIHF. Except as
provided, this bill prohibits an agency from expending more
than 15 percent of the tax increment deposited in the fund
for planning and general administrative costs. This bill
imposes other reporting and accountability measures on
agencies with respect to the use of moneys in the fund for
planning and administrative purposes.
Existing law requires, except as specified, each agency to
expend over each 10-year period of the implementation plan,
the moneys in the Low and Moderate Income Fund to assist
housing for persons of moderate, low, and very low income
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according to specified calculations.
This bill instead requires that at least 70 percent of the
agency's expenditures from the fund directly assist the new
construction, acquisition, and substantial rehabilitation
or preservation of rental housing for persons of extremely
low, very low, low, or moderate income, 20 percent of which
is required to be directed towards rental housing for
persons of extremely low-income.
Existing law requires an agency that has failed to expend
or encumber excess surplus in the LMIHF within one year to
disburse the surplus voluntarily to the appropriate county
housing authority or another public agency or to expend or
encumber the surplus within two additional years.
This bill deletes these provisions. This bill modifies the
definition of the term "excess surplus."
Whenever low- or moderate-income housing dwelling units are
destroyed or removed from the low- and moderate-income
housing market as part of a redevelopment that is subject
to a written agreement with the agency, or where financial
assistance has been provided by the agency, the agency is
required to provide replacement housing within four years
of the destruction or removal.
This bill modifies the agency's obligation to provide
replacement housing to low- or moderate-income persons and
families and would impose new requirements on the agency
with respect to the replacement housing plan and housing
specifications. If a court has found that an agency has
failed to comply with these provisions, this bill requires
the court, at a minimum, to issue an order temporarily
prohibiting the agency from issuing any debt for any
project area, except as specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2011-12 2012-13 2013-14 Fund
Diversion of L&M Transfer of approximately $540
Special*
increment annually from RDAs to new state
special fund
HCD audits Staffing costs covered by RDA
Special*
L&M funds
SCO audit reviews (Cost pressures) up up to
$281General
to $370
DOJ investigation/ Unknown, likely minor costs
General
prosecution
Board of Accountancy Unknown staffing
pressuresSpecial**
Investigations/auditor
appeals
* Redevelopment Agency Accountability Fund
** Accountancy Fund
SUPPORT : (Verified 5/26/11)
State Controller John Chiang (co-source)
California Rural Legal Assistance Foundation (co-source)
Western Center on Law and Poverty (co-source)
California Coalition for Rural Housing
Aging Services of California
American Federation of State, County and Municipal
Employees
Corporation of Supportive Housing
County of Los Angeles
Housing California
San Luis Obispo Housing Trust Fund
OPPOSITION : (Verified 5/26/11)
City of Lakewood
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Department of Finance
ARGUMENTS IN SUPPORT : According to the author's office,
while many redevelopment agencies spend their LMIHF in a
timely and effective way to maximize affordable housing
production, recent government and press reports have
exposed a number of agencies that spend LMIHF in
inappropriate ways, including excessive planning and
administrations costs, underwriting salaries of city staff,
and buying property that is never used for affordable
housing. Moreover, oversight of redevelopment agencies is
lax. Auditors hired by the agencies themselves do not
always check for or report violations, statutes of
limitations are unnecessarily short, and court remedies are
weak. This bill is intended to present a comprehensive
package of reforms relating to how redevelopment agencies
expend their housing funds and to how the state and others
oversee agency compliance. The goal of these reforms is to
enact clear requirements and establish robust oversight
mechanisms to ensure that all agencies maximize the use of
their LMIHF funds to produce affordable housing for all
income groups.
ARGUMENTS IN OPPOSITION : Department of Finance opposes
this bill for the following reason:
"This bill conflicts with the Administration's
redevelopment reform proposal contained in AB 101
(Assembly Budget Committee). That bill, which will
generate $.17 billion in 2011-12 General Fund savings
that have already been scored by the Budget Conference
Committee, will eliminate RDAs and replace them with
successor agencies tasked with winding down RDA
operations and debt. AB 101 also will terminate the
future shift of tax increment revenues to L&M funds.
"Any L&M funds on deposit when AB 101 is enacted would
either be provided to the local housing authority in
which the RDA was located, or could be retained by the
successor agency to be used in accordance with existing
law."
RJG:kc 5/27/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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