BILL ANALYSIS �
SB 450
Page 1
SENATE THIRD READING
SB 450 (Alan Lowenthal)
As Amended August 15, 2011
Majority vote
SENATE VOTE :39-0
HOUSING 7-0 APPROPRIATIONS 17-0
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|Ayes:|Torres, Atkins, Bradford, |Ayes:|Fuentes, Harkey, |
| |Cedillo, Hueso, Jeffries, | |Blumenfield, Bradford, |
| |Miller | |Charles Calderon, Campos, |
| | | |Davis, Donnelly, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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SUMMARY : Makes various reforms to the activities of
redevelopment agencies (RDA) in fulfilling the requirements to
increase, preserve and improve low and moderate income housing.
Specifically, this bill :
1)Requires RDAs to post a copy of their annual report on the
agency's or the community's Internet Web site.
2)Requires RDAs to include the following information as part of
the annual report:
a) The percentage of funds from the Low and Moderate Income
Housing Fund (L&M fund) used for planning and general
administration costs;
b) An itemized list of planning and general administration
expenditures from the L&M fund and an explicit description
of how the expenditures are necessary for the production,
improvement or preservation of low- and moderate-income
housing;
c) Information describing the employees that are paid from
the L&M fund including the title, salary, wages, benefits,
and the nature of the employee's activities eligible to be
paid out of the L&M fund;
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d) A list of the overhead costs that are paid directly or
indirectly from the L&M fund;
e) A statement of the amount and percentage of funds
deposited into the L&M fund exclusive of debt proceeds
expended for planning and administration in each of the
preceding five fiscal years that begin after December 31,
2011;
f) A list of all the properties owned by a RDA purchased
with L&M funds, the date of acquisition for each property,
a RDA's intended purpose for the property, and the amount
if any of L&M funds used to acquire and maintain the
property;
g) For each fiscal year since the agency's last adopted
implementation plan, a list of the replacement housing
obligations of the RDA including the number of units that
must be replaced, location, and status of the replacement
and production units; and,
h) For each housing project in which the agency provided
more than $500,000 in financing during the fiscal year, the
amount of agency financing in comparison to the source and
amount of each non-agency funding source, including other
public financing, tax credit equity and private financing.
3)Provides an agency that has deposited less than $100,000 in
the L&M Fund is exempt from providing the information required
by a) through h) above.
4)Requires the legislative body to adopt a separate written
resolution finding that based on the annual report the actual
planning and general administrative expenses do not exceed the
limits allowed.
5)Requires the Controller, on or before April 1 of each year, to
post of its Web site a list of RDA's with major audit
violations.
6)Allows the Controller to consult with locally affected
community groups as part of determining if an agency has
corrected a major audit violation.
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7)Allows a RDA that is subject to a court order as a result of a
major audit violation to continue to issue, sell, or deliver
bonds or incur debt to increase, improve, preserve, or assist
in the construction, or rehabilitation of housing units for
extremely low, very low, low, or moderate income housing.
8)In the 60 day window between a court's initial finding of a
major audit violation and a final ruling, allows an RDA to pay
the budgeted operation and administration of the agency, as
opposed to only 75% of the budgeted amount.
9)Prohibits a RDA that is subject to a court order as result of
a major audit violation to exercise the power of eminent
domain.
10)Removes the statutory caps on the amount of a monetary
sanction that a court can order a RDA to pay for a major audit
violation and permits the court to determine a sanction that
is commensurate with the violation.
11)Prohibits a RDA from paying a court sanction from the L&M
fund or any other special fund related to housing.
12)Provides that an action filed by a court to compel an RDA to
correct a major audit violation does not preclude an action by
any other interested party or a resident of the jurisdiction.
13)Makes failure to comply with the restrictions regarding
eligible expenditures for planning and general administration
from the L&M Fund a "major audit violation."
14)Requires the Department of Housing and Community Development
(HCD) to conduct audits of RDAs to ensure compliance with the
housing provisions of the Community Redevelopment Law (CRL).
15)Requires HCD to review all of the following in audits of
RDAs:
a) Agency compliance with production and replacement of
housing obligations;
b) Recording and monitoring of affordability covenants;
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c) Provision of relocation assistance;
d) Propriety of deposits to and expenditures from the L&M
Fund;
e) Compliance with the debt limit of the agency;
f) Adoption of a legally sufficient implementation plan;
g) Major audit violations as defined in the Health and
Safety Code Section 33080.8; and,
h) Accounting practice or provision of the CRL in the
discretion of the department.
16)Requires RDAs to annually remit .05% of the L&M tax increment
to HCD to conduct redevelopment audits.
17)Requires HCD to determine, on or before April 1 of each year,
whether an audit or investigation from the previous year,
contains a major audit violation and post those on the HCD
Internet Web site.
18)Requires on or before June 1 of each year, HCD to determine
if a major audit violation has been corrected by consulting
with each affected agency and locally affected community
groups.
19)Requires HCD to direct RDAs to take action to correct audit
violations.
20)Provides that if HCD determines that an RDA has not taken
action within 180 days to correct an audit violation, it must
forward all relevant documents to the Attorney General (AG)
for action.
21)Requires HCD to forward a copy of any audit or investigation
of a RDA to the AG and the Controller.
22)Requires HCD to notify an RDA and its legislative body when
it sends an audit violation to the AG.
23)Prohibits HCD from initiating or settling any litigation or
to resolve any audit or investigation in a manner contrary to
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law.
24)Allows the Controller to conduct quality control reviews of
RDA audits to the extent feasible within existing resources
and to communicate the results of the review to the RDA and
the independent auditor.
25)Requires that if the Controller finds that an audit was
conducted in an unprofessional manner, to refer the case to
the California Board of Accountancy (Board).
26)Provides that if the Board determines that the independent
auditor conducted the audit in an unprofessional manner then
the auditor is prohibited from performing any RDA audits for
three years and the Board may impose additional penalties.
27)Provides that whenever the Controller determines through two
consecutive quality control reviews that an audit was not
performed in substantial conformity with guidelines in state
law, the Controller will notify the auditor and the Board in
writing.
28)Gives the auditor 30 days after receiving the Controller's
notice to file an appeal or the Controller's determination is
final.
29)Provides that if the auditor files an appeal, the Board will
investigate and may find that the Controller's determination
will not be upheld and has no effect or schedule an appeal for
hearing.
30)Provides that if the Controller's determination becomes
final, the auditor is prohibited from conducting audits for
three years and is subject to any additional conditions
ordered by the Board.
31)Provides that no later than March 1, following the date at
which the Controller's determination becomes final, the
Controller will notify each RDA of the auditors that are
ineligible as a result of misconduct.
32)Allows the Board to take any disciplinary action against an
auditor that it deems appropriate under the law.
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33)Requires a RDA that is found to have deposited less into the
L&M Fund then required by law or to have spent money from the
L&M Fund for purposes other than increasing, improving, and
preserving the community's supply of affordable housing, to
repay the funds with interest, plus an additional 50 % of that
amount and interest.
34)Applies the 10-year statute of limitations for failure to
deposit or expend L&M funds correctly to merged redevelopment
project areas and to any other moneys that any agency must
deposit in the L&M fund in addition to tax increment.
35)Prohibits repayment of any L&M funds required to meet the
set-a-side requirements to come from any other funds
designated for affordable housing.
36)Establishes a double cap on the amount of L&M funds that an
RDA can spend on planning and general administrative costs.
37)Places a 10% cap on the amount of L&M funds that a RDA can
spend on general administrative costs including:
a) Employee compensation costs and related non-personnel
costs, such as travel and training, paid to or on behalf of
any agency, city, or county employee whose duties include
permissible L&M housing activities other than direct
program and project administration (i.e., line staff);
b) Employee compensation costs and related non-personnel
costs paid to or on behalf of any agency, city, or county
employee who supervises or manages line staff or who
provides general administrative services, such as finance,
legal, and human resources that indirectly support
permissible L&M housing activities;
c) Overhead costs, such as rent, equipment, and supplies;
and,
d) The total value of any contracts for agency planning or
administrative services that are related to permissible
housing activities and that are not associated with a
specific development project.
38)Places a 10% cap on the amount of L&M funds that a RDA can
spend on program and project staff costs, including employee
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compensation costs and related non-personnel costs that are
directly and necessarily associated with development of a
specific housing development project including, negotiation
and project management of disposition and development
agreements, land leases, loan agreements and similar
affordable housing agreements, redevelopment agency work on
entitlements for eligible affordable housing developments,
loan processing, and servicing, inspection for new
rehabilitation units, construction monitory and monitoring
affordable housing units.
39)Allows a RDA to spend any difference between the cap on
"general administrative and planning" (employee compensation
for executive management cost and overhead costs) and actual
administrative expenditures on "program and project staff
costs."
40)Requires employee compensation for executive and management
staff, to be justified by an independent cost allocation study
that is no more than six years old and not represent a greater
proportion of the employees total compensation than the
proportion of employees working directly and exclusively on
activities required for the L&M fund in comparison to the
total number of employees supervised, managed and directly
supported by the employee
41)Provides that the limitations planning and administrative
costs do not apply to a specific project area during the first
five years.
42)Provides that the planning and administrative costs apply to
project areas where the project area is amended or if the tax
increment of a new or amended project area is deposited into
an L&M fund covering more than one project area.
43)Prohibits an RDA from spending L&M funds on any of the
following:
a) Code enforcement;
b) Land use planning or development of or revision of the
housing element except for the payment of normal
project-related planning fees that is applicable to similar
development projects, except that an RDA may spend L&M
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funds on the cost of staff participation in the development
of the housing element provided that those costs are
counted toward the 10% cap on planning and administration
costs;
c) Lobbying; and,
d) Administration of non-redevelopment activities that are
not related to the activities required under the L&M fund.
44)Provides that the completion of the current 10-year
implementation plan for a RDA (provided the 10-year period
began before January 1, 2010), the proportionality
requirements dictated by regional housing needs assessment
(RHNA) no longer apply, and funds must be expended from the
L&M fund as follows:
a) Requires at least 75% of each RDA's expenditures from
the L&M Fund shall directly assist the new construction,
acquisition, and substantial rehabilitation or preservation
of housing for persons of extremely low, very low, or low
income;
b) Requires at least 50% of each RDA's expenditures from
the L&M Fund shall directly assist the new construction,
acquisition, and substantial rehabilitation or preservation
of housing for persons of extremely low or very low income;
and,
c) Requires that at least 25% of each RDA's expenditures
from the L&M Fund shall directly assist the new
construction, acquisition, and substantial rehabilitation
or preservation of housing for persons of extremely low
income.
45)Allows an RDA to count expenditures for extremely low-income
housing toward the percentages required for very low-income
and to count expenditures for extremely low- and very
low-income toward the percentages required for low-income.
46)Deletes the ability of an agency to adjust the
proportionality requirement for units constructed with
non-redevelopment funds.
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47)Requires a RDA to demonstrate in each implementation plan at
the end of five years that the agency's aggregate expenditures
from the L&M fund exclusive of debt service payments from the
onset of the new proportionality requirements satisfy the
requirements.
48)Defines "preservation" as preserving affordability of an
assisted housing development that is eligible for prepayment
for termination or the rental restrictions may expire within
five years.
49)Defines "housing for persons of extremely low income" as
housing that is available at a rent or housing cost that is
affordable to households earning 30% of the area median income
or 30% of the statewide median income, whichever is greater.
50)Provides that if a RDA has deposited less than $2 million in
the L&M fund in the first five years after the onset of the
new proportionality requirements, the RDA has 10 years to
fulfill the requirements to spend the L&M funds in the
percentages described above for extremely low, low and
very-low income housing for the first time.
51)Allows, for purposes of the proportionality requirements, an
agency to count contractually obligated funds as expended
funds, provided that the contract is with an entity that is
independent of the agency or the community for the development
for a specific eligible housing development.
52)Provides that if a contract to expend funds from the L&M fund
for a specific eligible housing development is terminated, the
funds may no longer be counted towards meeting the
proportionality requirements.
53)Provides that if an RDA fails to meet the proportionality
requirements, they may not expend any money from the L&M fund
for households whose incomes exceed 50% of median income until
they have expended funds for extremely low, very low and
low-income housing that should have been spent in previous
implementation plan periods.
54)Provides that if an RDA fails to spend L&M funds in same
proportion as the number of persons in all age groups, they
may not expend any money from the L&M fund for senior
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households until they have expended funds for all-age housing
that should have been spent in previous implementation plan
periods.
55)Deletes the authority of an agency to disburse excess surplus
funds to the local housing authority.
56)Requires for each interest in real property acquired using
money from the L&M fund, an RDA within five years of acquiring
the property, must do one of the following:
a) Enter into a disposition and development agreement or a
land lease with a third party for the development of
housing affordable to persons and families of low and
moderate income;
b) Obtain final land use entitlements and secure full
financing for agency development for housing that is
affordable to persons and families of low and moderate
income housing; and,
c) Submit a remedial action plan for the property to the
appropriate oversight agency including, but not limited to,
the Department of Toxic Substances Control, the Regional
Water Quality Control Board or the Office of Human Health
Risk Assessment for the cleanup of contamination.
57)Provides that if a RDA has not completed one of the above
within five years, or if less than 10% of the dwelling units
or floor area of a project is developed within 10 years from
the date the agency originally acquired the property, the
agency must reimburse the L&M fund 150% of the amount expended
to acquire and maintain the property or 150% the current fair
market value of the property whichever is more.
58)Provides that if a RDA owns two or more adjacent properties
that make up a single redevelopment project the date of
acquisition will be the date of acquisition for the last
acquired property provided that the date is not later than
five years after the acquisition of the last property.
59)Provides that a RDA may adopt a resolution to petition HCD
for an extension of the five year deadline and the department
may grant a single extension of up to five years if the
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department makes a finding that the failure to complete the
required activities is beyond the agency's control and that
the agency has a feasible plan for development.
60)Requires HCD to solicit comments from known or expected
parties interested in an extension petition.
61)Requires HCD to establish a schedule of fees to cover the
cost of reviewing the petition and to charge the RDA from
funds other than those designated for affordable housing.
62)Provides that a RDA must deposit 150% of the fair market
value of the property at the time it is sold or transferred or
if the property is not sold or transferred of the fair market
value of the land at the time a building permits is issued for
the property if either of the following conditions exist:
a) A property acquired using moneys from the L&M fund is
sold or transferred for purpose other than housing that is
affordable to persons and families of low and moderate
income; or,
b) A property that is acquired using money from the L&M
fund is developed such that less than 50% of the floor area
or a percentage of the floor area equal to the amount of
L&M moneys that were used to acquire the property whichever
is less, is housing for persons and families of low and
moderate income.
63)Requires that for units destroyed within the project area on
or after January 1, 2012, an RDA is required to replace vacant
units such that the replacement units are available at
affordable housing costs and occupied by persons and families
in the same or lower income category in the same proportion as
the units occupied or last occupied by low and moderate income
households in the property.
64) Requires generally an RDA to replace destroyed units with
new construction.
65)Provides that up to 25% of the replacement obligation
incurred during a five-year implementation plan may be
fulfilled by either of the following:
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a) With units that have been rehabilitated such that the
after-rehabilitation values increased by 50% or more of the
pre-rehabilitation value and the units being replaced were
either:
i) At risk of demolition or closure due to substandard
conditions and occupied by extremely low or very low
income households; and,
ii) Vacant due to substandard conditions.
b) With substantially rehabilitated multi-family units that
the agency has substantially rehabilitated with in the
project area, two units for each unit the agency is
obligated to replace, or outside the project area three
units for each unit the agency is obligated to replace.
66)Requires a RDA to adopt a separate written resolution after a
public hearing that based on substantial evidence that the
rehabilitation of the replacement dwelling units complies with
the replacement unit requirements.
67)Provides that if a court finds that an RDA has failed to
comply with replacement housing requirements, the court shall
prohibit the agency from issuing any debt for any project
areas except debt from which all proceeds will be deposited in
the L&M fund until the court determines that the RDA has
complied with this section.
68)Adds the following to the information a RDA is required to
include in a replacement housing plan:
a) A description of the occupancy and affordability
restrictions to be imposed on replacement dwelling units;
b) Substantial evidence supporting a finding that the
replacement dwelling units will meet the needs of
households in the income categories of the households
displaced from the dwelling units that the replacement
units are intended to replace; and,
c) A declaration of whether the RDA intends to rehabilitate
existing dwelling units.
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69)Provides that if an RDA ceases its activities prior to the
end of an affordability covenant, then it will designate a
successor agency that will monitor and enforce the covenants
for the remaining period of the covenant.
70)Provides that if no successor agency is designated at the
time a RDA ceases its activities then the community must
monitor and enforce the covenants for the remaining period of
the covenant.
71)Includes intent language regarding the need for greater
accountability and more auditing of RDAs.
72)Deletes the authority given to RDAs to offer money in the L&M
fund of a merged project area to the housing authority for the
purpose of constructing or rehabilitating affordable housing
if the funds have been deposited in the L&M fund for six years
but have not been spent.
73)Adds the following to the list of required information the
implementation plan for an RDA must include:
a) The proposed amount of expenditure for the L&M Fund for
new construction, acquisition and substantial
rehabilitation or preservation for housing for persons of
extremely low, very low or low income during each year of
the implementation plan;
b) The replacement units that satisfy each replacement
housing obligation;
c) In the case when replacement units have been destroyed
or removed, but units are not yet complete, the proposed
location of the replacement units that are not yet
complete; and,
d) A complete accounting for compliance with the RDA's
affordable housing obligation over the life of the plan
including the total number of units the RDA is obligated to
replace and the total number of units required to be
construct before the end for the project area life.
74)Includes the following information for all affordable housing
units that are replaced, constructed, rehabilitated or have
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covenants attached to them and are included in the database
required by existing law:
a) The street address and assessor's parcel number of the
property and for properties that are listed as a group the
number of units;
b) The size of each unit based on the number of bedrooms;
c) The affordability level of each unit;
d) The year in which the construction or substantial
rehabilitation of the unit was complete;
e) The date of recordation and document number of the
affordability covenants or restrictions;
f) The date on which the covenants or restrictions expire;
g) For projects developed prior to January 1, 2002, a
statement of the effective period of the land use controls
established in the plan at the time the unit was developed;
h) For owner-occupied units that have changed ownership
during the previous implementation plan period the date and
document number of the new affordability covenants or other
document recorded to ensure that the affordability
restrictions run with the land; and,
i) Whether units count toward replacement units and the
units they are replacing;
75)Requires the following information as part of the
implementation plan for owner-occupied and rental units that
are required to replace units, are counted toward the RDA's
housing obligation and are not included in the database
required by existing law:
a) The streets address and if available assessor's parcel
number of the property;
b) For properties where units are listed as a group, the
number of units;
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c) The affordability level of each unit;
d) The date of recordation and document number or
restrictions; and,
e) Whether the units count toward the replacement
obligation and reference the destroyed units they are
replacing.
76)Permits the implementation plan to omit any property that is
used to confidentially house victims of domestic violence
77)Provides that failure to meet any of the following
obligations will be an ongoing violation until the RDA has
fulfilled the obligation:
a) The deposit and expenditure requirements for the L&M
fund;
b) The obligation to eliminate project deficits to the L&M
fund;
c) The obligation to expend or encumber excess surplus
funds;
d) The obligation to provide relocation assistance;
e) Replacement and production housing obligations;
f) The obligation to monitor and enforce affordability
covenants; and,
g) The obligation to continue the project past the
effectiveness date of the redevelopment plan in order to
meet unfulfilled housing requirements.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill will result in estimated costs of
approximately $540,000 to HCD for conducting audits, to be paid
for by transfers of L&M funds by RDAs. Additional estimated
costs of approximately $300,000 for the State Controller for
carrying out activities related to their enhanced role in
overseeing audits and auditors. There will be unknown, but
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likely minor costs for the Department of Justice and the Board
of Accountancy for enforcement actions stemming from audits by
HCD and audit reviews by the Controller.
COMMENTS :
Background: Community Redevelopment Law (CRL) requires RDAs to
set-a-side 20% of tax increment generated in a project area to
increase, improve, and preserve affordable housing. The intent
of the L&M fund was to avoid gentrification in blighted
communities and to avoid displacement of the existing residents.
RDAs capture approximately 12% of the state's property taxes
for their activities and generate about $1 billion each year for
affordable housing. This bill would reform several different
components of the L&M fund in an effort to achieve greater
oversight and production of affordable housing.
Auditing: Existing law requires RDAs to contract with an
independent auditor each year to review the financial statements
of the agency. Independent auditors are required to review the
RDAs financial statements and identify "major audit" violations
which are defined by law. RDAs must inform the local
legislative body of any major audit violations and correct them.
The Controller which receives the audits and reviews them has
the authority to forward a major audit violation to the AG if it
is not corrected and the AG may take action against the RDA
including prohibiting it from expending funds or incurring new
debt. In past years, HCD had also audited the L&M fund to
ensure compliance; this function has been drastically reduced
over the years as a result of budget constraints.
This bill would make several reforms to oversight and auditing
of RDAs. The Controller would have the authority to report
independent auditors whose actions are unprofessional or violate
law to the Board of Accountancy. Auditors who are found by the
Board to be in violation of the law may be banned from auditing
RDAs for three years.
HCD would have the funding and authority to audit the L&M funds
of RDAs to determine compliance. If the department determined
that a RDA did not fulfill its obligations to spend L&M funds in
a timely and appropriate matter, it can refer the violations to
the AG for action. RDAs will pay .05% of their tax increment to
fund HCD's auditing.
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General administration and planning: Existing law gives RDAs
relatively broad authority to spend L&M funds on planning,
administration, and project costs. This bill creates a double
cap system that would restrict spending for general and
administrative costs to 10% of the L&M Fund and program and
project costs to 10% of the L&M Fund. The general
administrative and planning cost are described above and
generally relate to employee compensation, travel expenses,
executive and management salaries and consulting contracts
necessary to meet the requirements of creating, preserving, and
improving low and moderate income housing. The program and
project costs are for specific project-related costs like
monitoring of a specific housing development project including
project management of disposition and development agreements,
land leases, loan agreements and similar affordable housing
agreements, redevelopment agency work on entitlements for
eligible affordable housing developments, loan processing, and
servicing, inspection for new rehabilitation units, construction
monitory and monitoring affordable housing units.
If an RDA does not expend all of the funds allowed for general
planning and administration, it can apply the remaining amount
to program and project costs. However, program and project
costs cannot be spent on general administration and planning.
New requirements for land with L&M fund: Existing law requires
a RDA to take certain steps to develop properties purchased
using L&M funds within the first five years of acquisition. If
the RDA does not take steps to develop the property (including
zoning changes, disposition and development agreements) within
five years, the RDA can adopt a resolution to extend the
deadline by five years but if nothing is done after five years
they must sell the property and deposit the proceeds back in the
L&M fund.
This bill would require that RDAs enter into a disposition
agreement with a third party to develop the property, obtain
final land use entitlement and secure full financing for the
affordable housing development within five years. If the RDA
fails to take these steps, they can petition HCD for a five year
extension. If an RDA does not take steps to develop a property
within the timeframe and certain benchmarks are not met, it must
reimburse the L&M fund 150% of the amount that was used to
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acquire and maintain the property or 150% of the current market
value, whichever is greater.
Proportionality requirements: Existing law requires that the
L&M fund be spent to assist households that are very low and low
income at the same income levels that are required as part of
the RHNA under housing element law. This bill would delete the
proportionally requirement and rather require that at least 75%
of the agency's expenditures from the L&M fund assist extremely
low, very low or low-income households or persons. It further
requires that 25% of each of the agency's expenditures directly
assist extremely-low income households and that an additional
50% assist extremely low and very-low income households. These
sub requirements count against the 75% requirements.
Replacement housing requirements: Existing law requires a RDA
to replace any units that are destroyed or removed for low and
moderate income persons and households from a project area,
within four years with an equal number of units at the same
affordability level within the jurisdiction of the agency. RDAs
are required to ensure that 30% of the new and substantially
rehabilitated units developed by the agency and 15% of the all
new units developed within the project are area affordable to
low-and moderate income households.
This bill makes various changes to the requirements for
replacement units including that if units are destroyed or
removed that are unoccupied they must be replaced by units that
are affordable at the same level as the last occupants.
Replacement units are also required to be new construction
except that 25% of replacement units may be rehabilitated units
in the project area.
Enforcement: Existing law generally allows a three year statute
of limitations for enforcing RDA violations. However, in one
case, failure of an RDA to deposit the required percentage of
tax increment into the L&M fund or misspending L&M funds, the
statute of limitations is 10-years to bring an action to
enforce.
This bill would provide that failure to meet any of the
following obligations will be an ongoing violation until the RDA
has fulfilled the obligation:
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1)The deposit and expenditure requirements for the L&M fund;
2)The obligation to eliminate project deficits to the L&M fund;
3)The obligation to expend or encumber excess surplus funds;
4)The obligation to provide relocation assistance;
5)Replacement and production housing obligations;
6)The obligation to monitor and enforce affordability covenants;
and,
7)The obligation to continue the project past the effectiveness
date of the redevelopment plan in order to meet unfulfilled
housing requirements.
The bill would also require that RDAs that fail to deposit or
spend L&M funds as required must reimburse the L&M fund by 150%
of the reimbursement amount with interest.
Purpose of the bill: According to the author, while many
redevelopment agencies spend their L&M funds in a timely and
effective way to maximize affordable housing production, recent
government and press reports have exposed a number of agencies
that spend L&M funds 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 L&M funds to produce
affordable housing for all income groups.
A recent report by the Senate Office of Oversight and Outcomes
(SOOO) looked at the housing expenditures from 12 redevelopment
agencies, seven of which had showed consistently high planning
and administration expenditures and five chosen at random. SOOO
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made the following findings:
1)No assurance. Current laws and oversight give the Legislature
and public no assurance that redevelopment agencies are using
at least 20% of revenues to efficiently create affordable
housing.
2)Lax records. Many redevelopment agencies use their low- and
moderate-income housing funds to cover costs in other city
departments - such as public works, finance, and personnel -
without documenting that the resources are directly related to
an affordable housing project.
3)Loose law. Each year redevelopment agencies must "determine"
the need to spend any housing set-aside money on planning and
administration. In an unpublished portion of its opinion, an
appellate court found that the law limiting planning and
administrative costs gives so much discretion to redevelopment
agencies that they are largely shielded from lawsuits - even
those agencies that make assertions unsupported by facts.
Furthermore, many redevelopment agency officials do not know
about the law, ignore it, or comply by passing a pro forma
resolution.
4)Questionable spending. Some redevelopment agencies use their
housing set-aside funds in what appear to be impermissible
ways, such as hiring a Sacramento lobbyist, funding a public
relations campaign, and paying a non-profit housing rights
center to offer residents legal advice.
5)Unreliable audits. Each redevelopment agency must get an
annual independent financial audit, yet these audits are of
inconsistent quality. Many Certified Public Accountants fail
to test or make note of compliance with housing set-aside fund
laws.
6)Code enforcement. Some redevelopment agencies use their
housing set-aside funds to pay for code enforcement, which is
permitted only when the code enforcement work is directly
linked to efforts to develop, improve, or preserve affordable
housing.
In October 2010, the Los Angeles Times also reported a number
of irregularities in the spending of L&M funds. The article
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cited examples of agencies that spent "most of their
affordable housing money over the decade on 'planning and
administration' - but never built a single unit." The article
also cited examples of agencies that used L&M funds to buy
properties that were never used for affordable housing.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0002227