BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 654|
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THIRD READING
Bill No: SB 654
Author: Steinberg (D)
Amended: 1/31/12
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 1/10/12
AYES: DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal,
Pavley, Rubio, Simitian
SENATE APPROPRIATIONS COMMITTEE : 8-0, 1/19/12
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Steinberg
NO VOTE RECORDED: Runner
SUBJECT : Redevelopment housing funds
SOURCE : Author
DIGEST : This bill allows the host city or county of a
dissolving redevelopment agency to retain the funds on
deposit in the agencys housing fund and expands the types
of agency loans from the host city or county that are
considered enforceable obligations.
Senate Floor Amendments of 1/31/12 delete the urgency
clause.
ANALYSIS : Historically, the Community Redevelopment Law
has allowed a local government to establish a redevelopment
area and capture all of the increase in property taxes that
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is generated within the area (referred to as "tax
increment") over a period of decades. The Law requires
redevelopment agencies to deposit 20 percent of tax
increment into a Low and Moderate Income Housing Fund (L&M
fund) to be used to increase, improve, and preserve the
community's supply of low and moderate income housing
available at an affordable housing cost.
In 2011, the Legislature enacted two bills, AB 26X
(Blumenfield) and
AB 27X (Blumenfield), Chapters 5 and 6, respectively, of
the First Extraordinary Session. AB 26X eliminated
redevelopment agencies and established procedures for
winding down the agencies, paying off enforceable
obligations, and disposing of agency assets. In defining
"enforceable obligations," AB 26X included a loan agreement
between an agency and its host city or county that was
executed within two years of the date of creation of the
redevelopment agency. AB 26X also included provisions
allowing the host city or county of a dissolving
redevelopment agency to retain the housing assets and
functions previously performed by the agency, except for
funds on deposit in the agency's L&M fund. If the host
city or county chooses not to retain these assets and
functions, a local housing authority or the state's
Department of Housing and Community Development (HCD) may
assume them.
AB 27X allowed redevelopment agencies to avoid elimination
if they made payments to schools in the current budget year
and in future years. In December, the California Supreme
Court in California Redevelopment Association v. Matosantos
upheld AB 26X and overturned AB 27X. As a result, all of
the state's roughly 400 redevelopment agencies will
dissolve on February 1, 2012.
This bill makes the following changes to AB 26X, the
redevelopment agency elimination bill:
1. Allows a host city or county of a dissolving agency to
retain the funds on deposit in the agency's L&M fund and
requires the city or county to expend those funds in
compliance with the housing provisions of the Community
Redevelopment Law. If the city or county chooses not to
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retain these funds, the local housing authority or HCD
may do so.
2. Requires, rather than permits, an entity assuming the
housing functions of an agency to enforce affordability
covenants on affordable housing properties.
3. Expands the definition of an "enforceable obligation" to
include two additional types of loan agreements between
an agency and its host city or county: (a) a loan that
was executed within two years of the date of creation of
a project area, if the loan is specific to that project
area; and (b) a loan to fund the agency's 2009-10 SERAF
(Supplemental Educational Revenue Augmentation Fund)
payment to schools.
Comments
Undoing a last minute change . The State Controller's
"Community Redevelopment Agencies Annual Report" for the
fiscal year ended June 30, 2010 shows a statewide aggregate
"unreserved designated" balance of $967 million and an
"unreserved undesignated" balance of $391 million in agency
L&M funds. The language of Governor Brown's initial
proposal to eliminate redevelopment agencies would have
allowed host cities and counties to retain the L&M fund
balances of a dissolving agency. The bill that the
Legislature ultimately enacted, however, reversed this
authority. At the time, staff stated that the change was
made out of a concern that allowing retention of L&M fund
balances potentially could be viewed as a reallocation of
property tax and thus trigger a two-thirds vote requirement
for all of AB 26X. Legislative Counsel has since settled
on the view that L&M funds are assets of the redevelopment
agencies under Article XVI, Section 16 of the State
Constitution and not property taxes under Section 1 of
Article XIII A. This view is reflected in the majority
vote key for this bill. This bill restores the governor's
original proposal to allow cities and counties to keep L&M
fund balances and continue to use them to develop
affordable housing.
Start-up loans . Because it often takes years after the
adoption of a project area for a redevelopment agency to
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begin receiving sufficient tax increment to issue bonds,
most host cities and counties jump-start work in project
areas by making loans to the agency to be repaid with
future tax increment. AB 26X only recognizes as
"enforceable obligations" loans made within two years of
the creation of the agency, which practically only affects
an agency's first project area. Many agencies have
multiple project areas. This bill adds to the definition
of "enforceable obligations" loans made within the first
two years of the adoption of a project area, provided that
the loan is specific to that project area. The bill does
not recognize loans made at a later date, in which case the
host city or county may not receive repayment of those
later loans.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2012-13 2013-14
2014-15 Fund
Local retention of One-time loss of up to
$700,000 General
RDA housing funds in savings
SUPPORT : (Verified 1/19/12)
Abode Communities
Affirmed Housing Group
Aging Services of California
Angelus Plaza
Bay Area Local Initiatives Support Corporation
BONNEWIT development services
Boston Financial Investment Management, L.P.
Building Futures with Women and Children
Cabrillo Economic Development Corporation
California Housing Consortium
California Housing Partnership Corporation
California Infill Builders Association
Charities Housing
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Cities of Brea, Buena Park, Chico, Citrus Heights, Hanford,
La Palma, Oakland, Palm Springs, Riverside, and San Mateo
CLIFFORD BEERS HOUSING
Community Housing Improvement Systems and Planning
Association, Inc.
Community Housing Partnership
EAH Housing
East Bay Developmental Disabilities Legislative Coalition
EDEN Housing
Enterprise Community Partners, Inc
Equity Community Builders LLC
EveryOne Home
Housing Authority of the city of Riverbank
Housing Consortium of the East Bay
Housing Leadership Council of San Mateo County
Housing Now
Human Investment Project (HIP) Housing
Jamboree Housing Corporation
John Stewart Company
Las Palmas Foundation
LINC Housing
Mercy Housing California
MidPen Housing
Napa Valley Community Housing
North Bay Housing Coalition, Inc.
Peoples' Self-Help Housing Corporation
Petaluma Ecumenical Properties (PEP Housing)
Resources for Community Development
Sacramento Yolo Mutual Housing Association
San Diego Housing Federation
SHELTER, Inc. of Contra Costa County
Silicon Valley Bank
Skid Row Housing Trust
South County Housing Corporation
Step Up on Second
SWJ Housing
Tenderloin Neighborhood Development Corporation
The Housing Trust of Santa Clara County
The Non-Profit Housing Association of Northern California
ARGUMENTS IN SUPPORT : According to the author's office,
this bill is intended to preserve for affordable housing
the roughly $2 billion in outstanding balances in the L&M
funds maintained by redevelopment agencies throughout the
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state. In the absence of this legislation, those funds
will be liquidated and distributed as property tax revenues
to local agencies, as prescribed in AB 26X. Late last
year, the Legislature supported these same changes in SB 8X
(Senate Budget and Fiscal Review Committee), but Governor
Brown vetoed that bill, stating that it was "premature" in
light of the then-pending litigation.
JJA:mw 1/31/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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