BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1151 HEARING: 4/18/12
AUTHOR: Steinberg FISCAL: No
VERSION: 3/29/12 TAX LEVY: No
CONSULTANT: Weinberger
SUCCESSOR AGENCIES' ASSETS
Creates an alternative process that allows communities to
use their former redevelopment agencies' assets for
economic development and housing purposes.
Background and Existing Law
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (RDAs), prepare
and adopt redevelopment plans, and finance redevelopment
activities.
A redevelopment agency kept the property tax increment
revenues generated from increases in property values within
a redevelopment project area. As a redevelopment project
area's assessed valuation grew above its base-year value,
the resulting property tax revenues - the property tax
increment - went to the RDA instead of going to the
underlying local governments. When a redevelopment agency
diverted property tax revenues from a school district, the
State General Fund paid the difference.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and
returning billions of dollars of property tax revenues to
schools, cities, and counties to fund core services. Among
the statutory changes that the Legislature adopted to
implement the 2011-12 budget, AB X1 26 (Blumenfield, 2011)
dissolved all RDAs.
AB X1 26 established successor agencies to manage the
process of unwinding former RDAs' affairs. With the
exception of seven cities that chose not to serve as
successor agencies, the city or county that created each
former RDA now serves as that RDA's successor agency. Each
successor agency has an oversight board that is responsible
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for supervising it and approving its actions. Oversight
boards are comprised of seven members, including city,
county, special district, and school district
representatives, appointed by local governments that serve
the area. The Department of Finance can review and request
reconsideration of an oversight board's decisions.
Successor agencies must dispose of former RDAs' assets, at
an oversight board's direction, pursuant to specific
statutory requirements. The disposal must be done
expeditiously and in a manner aimed at maximizing value.
Successor agencies must transfer proceeds from asset sales
and related funds that are no longer needed for approved
development projects or to otherwise wind down the affairs
of the agency to the county auditor-controller for
distribution as property tax proceeds. Successor agencies
also must remit unencumbered balances of RDA funds to the
county auditor-controller for distribution to local taxing
entities in the county.
Local government officials worry that requiring successor
agencies to dispose of former RDAs' assets rapidly and
without any planning could lead to a "fire sale" of former
RDA property, allowing private entities to acquire valuable
public assets at steeply discounted prices. They want
legislators to modify the statutes governing former RDAs'
assets to allow communities to benefit from a more
deliberative and strategic approach to managing those
assets.
Proposed Law
Senate Bill 1151 creates an alternative process by which
communities can use their former redevelopment agencies'
assets for specified economic development and housing
purposes. The alternative process requires a Community
Development and Housing Joint Powers Authority to develop a
long-range asset management plan to govern the disposition
and use of former redevelopment agency assets that are
placed into a Sustainable Economic Development and Housing
Trust Fund.
I. Community Development and Housing Joint Powers
Authority. A related bill, SB 1156 (Steinberg, 2012),
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allows a city council and county board of supervisors
representing the geographic territory served by a former
redevelopment agency to form a Community Development and
Housing Joint Powers Authority to carry out the Community
Redevelopment Law's provisions. In a jurisdiction where a
Community Development and Housing Joint Powers Authority is
formed, pursuant to SB 1156's provisions, by August 1,
2012, SB 1151 exempts a successor agency from having to:
Remit unencumbered balances of redevelopment agency
funds to the county auditor-controller for
distribution to taxing entities.
Dispose of the former redevelopment agency's assets
and properties as directed by the oversight board.
Transfer proceeds from asset sales and related
funds that are no longer needed for approved
development projects or to otherwise wind down the
affairs of the agency to the county auditor-controller
for distribution as property tax proceeds.
II. Sustainable Economic Development and Housing Trust
Fund. In a jurisdiction where a Community Development and
Housing Authority is formed by August 1, 2012, SB 1151
establishes a Sustainable Economic Development and Housing
Trust Fund. The trust fund serves as the repository of the
unencumbered balances for each former redevelopment
agency's funds, assets, and properties. The bill defines
"assets" as including: real and personal property holdings,
tax revenues, former redevelopment project revenues, other
revenues and investment accounts, deeds of trust and
mortgages held by the former agency, rents, fees, charges,
moneys, accounts receivable, contracts rights, and other
rights to payment of whatever kind or other real or
personal property.
SB 1151 requires the Community Development and Housing
Joint Powers Authority to administer the Sustainable
Economic Development and Housing Trust Fund and allows the
trust fund to accept revenues from any source, including
tax revenues, grants, and loans, in addition to the former
redevelopment agency's assets.
SB 1151 allows moneys in the Sustainable Economic
Development and Housing
Trust Fund to be used for:
Purchasing, acquiring, financing, or maintaining
public or private infrastructure needed for infill
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development consistent with the provisions of SB 375
(Steinberg, 2008).
Affordable housing.
Transitional housing for former inmate populations
transferred to the counties' jurisdiction pursuant to
the 2011 criminal justice realignment.
Loans to public or private entities for specified
development activities.
Environmental mitigation, including brownfield site
remediation.
Payment of the former redevelopment agency's
liabilities.
Land acquisition.
Clean energy and energy efficiency investments.
Educational, labor-management, and job training
programs leading to careers in high-need, high-growth,
or emerging regional economic sectors.
SB 1151 allows the Community Development and Housing Joint
Powers Authority to retain the proceeds of asset sales for
its ongoing sustainable economic development and affordable
housing activities and prohibits the proceeds from being
distributed as property tax pursuant to state law.
III. Long-range asset management plan. SB 1151 requires a
Community Development and Housing Authority to prepare a
long-range asset management plan to govern the disposition
and ongoing use of the Sustainable Economic Development and
Housing Trust Fund. The bill requires the plan to be
submitted to the Department of Finance (DOF) for approval
by December 1, 2012. DOF must approve the plan or return
the plan to the authority for revisions prior to final
approval, by December 31, 2012. The Authority must update
the plan annually and submit it to DOF for approval by
December 1 of each year.
SB 1151 allows DOF, as a condition of granting approval to
the long-range asset management plan submitted by the
authority, to establish a minimum asset distribution
requirement, to ensure that K-14 schools and local agencies
receive a minimal amount of funding from the dissolution of
assets of the trust pursuant to state law.
The bill requires the long-range asset management plan to
outline a strategy for maximizing the long-term social and
monetary value of the real property and assets in the trust
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for the purpose of:
sustainable economic development consistent with
specified statutes
creating high wage, high skill jobs, and
affordable housing.
SB 1551 requires the long-range asset management plan to
include an inventory of all assets in the trust, including
all assets identified by the auditor-controller
in the audit conducted pursuant to state law. The
inventory must consist of:
The date of the acquisition of the asset and the
value of the asset at that time, and an estimate of
the current value of the asset.
The purpose for which the asset was acquired.
For real property assets:
o Parcel data, including address, lot size,
and current zoning in the former agency
redevelopment plan or specific, community, or
general plan.
o An estimate of the current value of the
parcel, including, if available, any appraisal
information.
o A history of environmental contamination,
including designation as a brownfield, and any
related environmental studies and history of any
remediation efforts.
o A description of the strategic value of
the property with respect to its potential for
transit-oriented development and advancing the
planning objectives of the member agencies of the
Community Development and Housing Authority.
o A brief history of previous development
proposals and activity, including rental or lease
of property.
SB 1151 requires the long-range asset management plan to
address the use or disposition of all of the assets in the
trust. Permissible uses include:
Retaining the asset for governmental use, pursuant
to state law.
Selling the asset.
Retaining the asset in the trust for future use.
SB 1151 states that an authority doesn't need to maximize
the monetary value of an asset if an alternative deployment
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of the asset furthers social and community objectives
determined by the authority and is consistent with
specified statutes. The bill prohibits property disposed
of by the authority from being the subject of real estate
speculation.
IV. Other provisions. SB 1151 requires all entities
receiving financial support from or authorized by its
provisions to incorporate into all agreements a jobs plan,
which shall describe how the project will create
construction careers that pay prevailing wages, living wage
permanent jobs, and a program for community outreach, local
hire, and job training. The plan must also describe the
project developer's commitment to offer jobs to
disadvantaged California residents, including veterans of
the Iraq and Afghanistan wars, people with a history in the
criminal justice system, and single parent families.
SB 1151 contains a legislative finding and declaration that
the assets, properties, contracts, leases, books and
records, buildings, and equipment of former redevelopment
agencies constitute a valuable resource that should be
maintained for the purpose of economic development and
housing within the communities served by the former
redevelopment agency.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . State law requires successor
agencies to dispose of former RDA's assets "expeditiously
and in a manner aimed at maximizing value." Local
officials are concerned that a lack of specific guidance on
how to achieve this outcome will result in successor
agencies' selling useful public assets to private entities
at prices that are far short of the assets' actual value or
selling assets that would produce greater public benefit if
they were retained and managed by local governments. SB
1151 allows local communities to avoid the problems
associated with the rapid liquidation of former RDA assets.
The long range asset management plans required by SB 1151
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will produce specific valuation and environmental
information about former RDA properties and will facilitate
those properties' integration into local land use plans.
The Sustainable Economic Development and Housing Trust
Funds created by SB 1151 provide local governments with a
pool of resources to use in support of important local
development priorities including infill development,
affordable housing, environmental mitigation, clean energy,
education and job-training. SB 1151 promotes the wise
management of public assets.
2. Local control . SB 1151 requires cities and counties to
submit their long range asset management plans for RDA
assets to the Department of Finance for approval. The bill
allows DOF to require cities and counties to make "minimum"
asset distributions each year. It is unclear how local
governments can engage in effective long-term planning for
the use of former RDA assets if those plans are subject to
annual changes and DOF can require local governments to
liquidate assets that may be integral to their long-term
plans. To allow local governments to exercise more
long-term control over the assets that they will manage
under SB 1151's provisions, the Committee may wish to
consider amending SB 1151 to eliminate DOF's ongoing
authority, after the year that the bill takes effect, to
review asset management plans and require minimum asset
distributions.
3. Cover your assets . It is likely that many local
governments will not form a Community Development and
Housing joint powers authority before August, 2012. Some
cities may not find county governments to be willing
partners. Some counties and cities may find SB 1151's
provisions to be too burdensome. Regardless of any local
government's reason for not forming a JPA, SB 1151 offers
no protection for former RDA assets in jurisdictions that
don't participate in a JPA. As a result, SB 1151 may not
reduce the likelihood of ill-advised asset liquidations in
many California communities. To ensure that all former RDA
assets are managed in a desirable manner, regardless of a
local government's ability or willingness to meet SB 1151's
JPA requirement, the Committee may wish to consider
amending the bill to:
Require all successor agencies to place former RDA
assets into a Sustainable Economic Development and
Housing Trust Fund.
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In communities that do not form a Community
Development and Housing JPA, grant oversight boards
the responsibility for managing the trust funds
pursuant to long-range planning requirements that
mirror the JPAs' long range planning requirements.
4. Undermining oversight ? State law generally gives
oversight boards broad discretion to approve or disapprove
successor agencies' actions. Each successor agency must,
every six months, draft a list of enforceable obligations
that are payable during a subsequent six month period.
This Recognized Obligation Payment Schedule" (ROPS) must be
adopted by the oversight board and is subject to review by
the county auditor-controller and the Department of
Finance. SB 1151 allows a Community Development and
Housing JPA to use funds in the Sustainable Economic
Development and Housing Trust Fund to pay a former RDA's
liabilities. SB 1151 does not limit this authority to
paying for liabilities that are recognized by an oversight
board as an enforceable obligation. The Committee may wish
to consider whether SB 1151 undermines the oversight board
process by allowing a Community Development and Housing JPA
to use proceeds from former RDA assets to pay for RDA
liabilities that an oversight board would not recognize as
an enforceable obligation.
5. Technical amendments . To clarify SB 1151's provisions,
the Committee may wish to consider making the following
technical amendments to the bill:
On page 8, line 25, after the "and" insert: "is"
On page 9, line 14, strike out "joint powers" on
line 15 strike out "authority specified in and
consistent with" and insert: "Community Development
and Housing Joint Powers Authority established
pursuant to"
On page 9, line 32, strike out "34191.2" and
insert: "34191.15"
6. Timing is everything . Regular statutes take effect on
the January 1 following their enactment; bills passed in
2012 take effect on January 1, 2013. The California
Constitution allows bills with urgency clauses to take
effect immediately if they're needed for the public peace,
health, and safety. SB 1151 offers communities an
alternative approach to managing former RDAs' assets if
they establish a JPA before August 1, 2012. However,
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because SB 1151 is not an urgency measure, its provisions
won't take effect until January 1, 2013. The Committee may
wish to consider amending SB 1151 to add an urgency clause,
allowing the bill to take effect as soon as it is enacted.
7. Back to Rules . Because some of SB 1151's new
provisions may fall within the Senate Transportation &
Housing Committee's policy jurisdiction, the Senate
Governance & Finance Committee will refer SB 1151, if it
passes, to the Senate Rules Committee for a possible
re-referral to Transportation & Housing.
8. Related bills . At its April 18 hearing, the Committee
also will hear:
SB 986 (Dutton), which allows successor agencies to
keep former RDAs' bond proceeds and enter into new
enforceable obligations funded by bond proceeds.
SB 1056 (Hancock), which expands the definition of
"enforceable obligation" to include financial
obligations related to a project funded with both tax
increment and federal school construction bonds.
SB 1156 (Steinberg), which allows a Community
Development and Housing Joint Powers Authority, and
some counties, to use tax increment financing and
other local revenues to finance specified local
economic development activities.
Other bills that amend the statutes governing the
disposition and use of former RDAs' assets include:
SB 1337 (Pavley), which allows a successor agency
to retain former RDA land that is a brownfield site
for the purpose of hazardous substance remediation or
removal.
AB 1585 (Perez), which makes numerous amendments to
the statutes governing the redevelopment dissolution
process.
Support and Opposition (4/12/12)
Support : California League of Conservation Voters, BRIDGE
Housing, California Labor Federation, LAANE, Los Angeles
County Federation of Labor, Mission Bay Development Group,
Natural Resources Defense Council.
Opposition : Unknown.
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