BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1151 (Steinberg) - Sustainable Economic Development and
Housing Trust Fund: long-range asset management plan.
Amended: March 29, 2012 Policy Vote: G&F 6-3, T&H 5-3
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Mark McKenzie
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 1151 would create an alternative process that
allows communities to use their former redevelopment agencies'
assets for economic development and housing purposes.
Fiscal Impact:
Unknown General Fund revenue loss to the extent that
balances of former RDA funds and assets and properties are
retained by Community Development and Housing Authorities
(JPAs) instead of being remitted to county
auditor-controllers for allocation to local agencies,
including schools. The value of former RDA unencumbered
balances, assets, and properties is unknown but could be in
excess of $2 billion statewide, not including L&M funds.
Approximately 50 percent of these funds would be distributed
to schools in the near-term, absent this bill. In general,
any property tax proceeds diverted from schools results in
an equivalent General Fund cost, pursuant to Proposition
98's minimum funding guarantees.
Unknown General Fund costs to the Department of Finance
(DOF), potentially in the range of $1 million annually, to
audit long-range asset management plans annually. For
illustrative purposes, DOF recently redirected 20-25 PY of
audit staff to review successor agency recognized obligation
payment schedules (ROPS) as part of the RDA dissolution
process.
Background: Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property taxes that is
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades. RDAs
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used tax increment financing to address issues of blight,
construct affordable housing, rehabilitate existing buildings,
and finance development and infrastructure projects.
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) Chap 5/2011 dissolved all RDAs and
established procedures for winding down RDA activity. Existing
law requires successor agencies to dispose of former RDAs'
assets and properties, at an oversight board's direction, in an
expeditious manner aimed at maximizing value. Successor
agencies are required to make any payments related to
enforceable obligations, as specified in an adopted recognized
obligation payment schedule (ROPS) and remit unencumbered
balances of RDA funds and proceeds from asset sales to the
county auditor-controller for distribution to local taxing
entities in the county. Successor agencies cannot enter into
new enforceable obligations.
Proposed Law: SB 1151 would require a Community Development and
Housing Authority (JPA) established pursuant to SB 1156 (a
companion measure to this bill) to prepare a long-range asset
management plan that governs the disposition and ongoing use of
specified former RDA assets and funds. Specifically, this bill
would:
Exempt a JPA formed by August 1, 2012 from the requirements in
AB X1 26 for disposing of assets and properties of a former
RDA and remitting those assets with unencumbered balances of
RDA funds to the auditor-controller for allocation.
Establish a Sustainable Economic Development and Housing Trust
Fund (Trust Fund) to serve as the repository of the
unencumbered balances for each former RDA's funds, assets, and
properties, as well as revenues accepted from any other
source.
Authorize a JPA to use the Trust Fund for public or private
infrastructure needed for infill development, affordable
housing, land acquisitions, clean energy, education, job
training, transitional housing for former inmates transferred
to a county pursuant to the 2011 realignment, loans for
development activities, and environmental mitigation,
including cleaning up brownfield sites.
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Require a JPA 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 plan must:
(1) inventory all assets, assess their value and purpose for
acquisition, and determine the current value of real property
assets; (2) address the use or disposition of all of the
assets in the trust; and (3) outline a strategy for maximizing
the long-term social and monetary value of the real property
and assets in the Trust Fund consistent with the provisions of
SB 1156 in order to create high wage and high skill jobs and
plus affordable housing.
Require the JPA to submit this long-range asset management
plan to the Department of Finance (DOF) for approval by
December 1, 2012. DOF may approve the plan or return it for
revisions by December 31, 2012. A JPA must update and
resubmit its plan annually to DOF by each December 1
thereafter. DOF, as a condition of granting its approval, may
require that K-14 schools and local agencies receive a minimal
amount of funding from the dissolution of assets.
Require any entity receiving financial support under this bill
or SB 1156 to incorporate into any and all agreements a jobs
plan, which describes how the project will create construction
careers that pay prevailing wages and a program for community
outreach, local hire, and job training.
Related Legislation: The following bills have also identified
uses for former RDA assets:
SB 986 (Dutton), which authorizes successor agencies to use
the proceeds of certain bonds issued by former redevelopment
agencies to fulfill an enforceable obligation of the former
agency or enter into new enforceable obligations funded by
those bond proceeds until December 31, 2014.
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. SB 1156 is a
companion measure to this bill.
SB 1335 (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.
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AB 1235 (Hernandez), which provides all the authority, rights,
powers, duties, obligations and protections provided by the
Polanco Redevelopment Act to successor agencies.
AB 1585 (Perez), which makes numerous amendments to the
statutes governing the redevelopment dissolution process.
Staff Comments: In addition to this bill and the related but
competing legislative proposals noted above, the Governor's May
Revision proposes to use cash or cash equivalent assets held by
successor agencies to former RDAs to offset its Proposition 98
obligations. The Proposition 98 offset is proposed is estimated
to be $1.4 billion in 2012-13 and $600 million in 2013-14. In
addition, the May Revision assumes General Fund savings of about
$800 million in 2011-12 and $900 million in 2012-13 as a result
of increased property tax revenues flowing to schools,
offsetting General Fund payments that would otherwise be
required under Proposition 98. Any proposal that reserves a
portion of former RDA assets for other purposes, including this
bill, would reduce the amount of funding available to offset
General Fund education spending and exacerbate the projected
state budget deficit.
Recommended Amendments: This bill establishes an alternative
framework for the disposition of former RDA assets for
communities that form a JPA by August 1, 2012. This timing is
necessary because successor agencies are working now to
distribute those assets. Since the bill, as drafted would not
take effect until January 1, 2013, Staff recommends an amendment
to add an urgency clause.
Proposed amendments would:
Change references to "Community Development and Housing
Authority" to "Sustainable Communities Investment
Authority."
Require the assets of each former RDA to be placed in a
Sustainable Economic Development and Housing Trust Fund,
regardless of whether a JPA has been formed.
Require the JPA to develop the long-range asset
management plan when a JPA is voluntarily formed. In cases
where a JPA has not been voluntarily formed, the plan shall
be developed at the direction of the oversight board that
was established by ABX1 26 to supervise the activities of a
former RDA.
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Clarify that no assets may be liquidated until the
long-range asset management plan is approved by DOF.