BILL ANALYSIS �
SB 1156
Page 1
Date of Hearing: June 27, 2012
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
SB 1156 (Steinberg) - As Amended: June 20, 2012
SENATE VOTE : 21-15
SUBJECT : Sustainable Communities Investment Authority
SUMMARY : Allows local governments to establish a Sustainable
Communities Investment Authority after July 1, 2012, to finance
specified activities within a sustainable communities investment
area. Specifically, this bill :
1)Allows the city council and board of supervisors representing
a sustainable communities investment area to form a joint
powers authority to create a Sustainable Communities
Investment Authority (Authority) after July 1, 2012, to carry
out Community Redevelopment Law.
2)Provides that if the sustainable communities investment area
is within an incorporated area, the following apply:
a) The city council forms the governing board of the
Authority and establishes the parameters of the proposed
economic development within the sustainable communities
investment area with the county's approval;
b) A governing board for the sustainable communities
investment area made up of three members appointed by the
city and two by the county; and
c) If the city designates a sustainable communities
investment area that consists of only one project, 100%
percent of the tax increment is invested in the project,
with the county's approval.
1)If the sustainable communities investment area is within an
unincorporated area, the Authority may be formed by the board
of supervisors.
2)Provides that members of any governing board formed for a
sustainable communities investment area serve for four year
terms and can only be removed by the appointing authority for
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cause.
3)Allows an Authority to enter into financial and other
agreements with community colleges, K-12 school districts, and
private businesses to facilitate the development and operation
of articulated career technical education pathways.
4)Allows an Authority to adopt a plan for a sustainable
communities investment area without a finding of blight.
5)Provides that a plan for a sustainable communities investment
area will terminate 30 years from the date of the first
issuance of bond indebtedness by the Authority.
6)Limits a sustainable communities investment area within the
geographic boundaries of a metropolitan planning organization
(MPO), where a sustainable communities strategy (SCS) has been
adopted and approved by the state Air Resources Board, to
including the following:
a) A transit priority area, provided the planned major
transit stop or the high-quality transit corridor will be
scheduled to be completed within the planning horizon
established by the Code of Federal Regulations;
b) A transit priority area may include a military base
reuse plan with a contaminate site; and
c) Small walkable communities as defined in Section 21094.5
of the Public Resources Code, except that small walkable
communities may also be designated in a city that is within
the sustainable communities investment area of a MPO. No
more than one small walkable community project area shall
be designated within a city.
d) Sites that are restricted to clean energy manufacturing
that are consistent with the SCS if they are within the
geographic boundaries of a MPO.
1)Limits clean energy manufacturing to the following:
a) Manufacture of components, parts, or materials for the
generation of renewable energy resources;
b) Equipment designed to make buildings more
energy-efficient or the component parts;
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c) Public transit vehicles or components parts of public
transit vehicles; and
d) Alternative fuel vehicles or component parts of
alternative fuel vehicles.
1)Provides that solely for the purposes of a plan for a
sustainable communities investment area, an Authority may
receive tax increment funds, if the local government with land
use jurisdiction has adopted the following:
a) A sustainable parking standards ordinance that restricts
parking in transit priority project areas to encourage
transit use to the greatest extent feasible;
b) An ordinance creating a jobs plan that describes how the
project will create construction careers that pay
prevailing wages and create living wage permanent jobs, and
that contains a program for community outreach, local hire,
and job training;
c) For transit priority areas and small walkable
communities within an MPO, a plan consistent with the use
designation, density, building intensity, and applicable
policies for the area in the SCS and that for new
residential construction provides a density of at least 20
dwelling units per net acre and for nonresidential uses
provides a minimum floor area ratio of 0.75; and
d) For small walkable communities outside an MPO, a plan
for new residential construction that provides a density of
at least 20 dwelling units per net acre and for
nonresidential uses provides a minimum floor area ratio of
0.75.
1)Requires that for small walkable communities, transit
projects, and clean energy manufacturing sites within an MPO,
an Authority must get the agreement of the MPO that the plan
for the sustainable communities investment area is consistent
with the use designation, density, building intensity and
applicable policies of the SCS.
2)Requires the jobs plan to contain programs for outreach to
disadvantaged California residents, including veterans of the
Iraq and Afghanistan wars, people with a history in the
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criminal justice system, and single parent families.
3)Requires all entities that receive financial support from the
Authority to enter into an agreement with the Authority that
includes the entity's commitments to fulfill applicable
portions of the jobs plans.
4)Provides that for purposes of collecting tax increment under
Section 16 of Article XVI of the Constitution, the terms
"district" and" affected taxing entity" exclude a school
district and special districts.
5)Requires the Authority to approve any bond financing.
6)Permits a state or local pension fund system to invest capital
in the public infrastructure projects and private commercial
residential developments undertaken by an Authority.
7)Grants an Authority the ability to exercise the powers of the
Marks-Roos Local Bond Pooling Act of 1985.
8)Allows an Authority to implement local transaction and use
tax, except that the resolution authorizing the tax may
designate the use of the tax.
9)Establishes a process to prequalify developers for
construction contracts in excess of $1,000,000.
10)Requires the Department of Industrial Relations to monitor
and enforce compliance with prevailing wage requirements for
projects that include funds from an Authority and shall charge
each awarding body or developer for the reasonable and
directly related costs of monitoring and enforcing compliance
with the prevailing wage requirements of each project.
11)Defines, for the purpose of exempting small walkable
communities from the California Environmental Quality Act
(CEQA), the following terms:
a) "Floor area ratio" as the ratio of gross building area
(GBA) of development, exclusive of structured parking
areas, proposed for the project divided by the total net
lot area (NLA);
b) "Gross building area" as the sum of all finished areas
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of all floors of a building included within the outside
faces of its exterior walls; and
c) "Net lot area" means the area of a lot excluding
publicly dedicated land, private streets that meet local
standards, and other public use areas as determined by the
local land use authority.
1) Makes legislative findings.
EXISTING LAW :
1)Dissolves redevelopment agencies as of February 1, 2012
(Health and Safety Code Section 34170).
2)Establishes the Community Redevelopment Law (CRL), which
governs the authority to establish a redevelopment agency and
the authority for a redevelopment agency to function as an
agency and to adopt and implement a redevelopment plan (Health
and Safety Code Section 33000 et seq.).
3)Requires the California Law Revision Commission to draft a CRL
clean-up bill for consideration by the Legislature no later
than January 1, 2013 (Health and Safety Code 34189).
4)Defines a "small walkable community project" as a project that
is in an incorporated city that is not within the boundaries
of an MPO and that satisfies the following requirements:
a) Has a project area of approximately one-quarter mile
diameter of contiguous land completely within the existing
incorporated boundaries of the city;
b) Has a project area that includes a residential area
adjacent to a downtown retail area; and
c) The project has a density of at least eight dwelling
units per acre or a floor area ratio for retail or
commercial uses of not less than 0.50.
(Public Resources Code Section 21094.5)
FISCAL EFFECT : Unknown
COMMENTS :
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In 2011, the Legislature approved and the Governor signed two
measures, ABX1 26 and ABX1 27 that together dissolved
redevelopment agencies as they existed at the time and created a
voluntary redevelopment program on a smaller scale. In
response, the California Redevelopment Association (CRA), League
of California Cities, along with other parties, filed suit
challenging the two measures. The Supreme Court denied the
petition for peremptory writ of mandate with respect to ABX1 26.
However, the Court did grant CRA's petition with respect to ABX1
27. As a result, all redevelopment agencies were required to
dissolve as of February 1, 2012.
Over the last sixty years, redevelopment agencies used tax
increment to finance affordable housing, community development,
and economic development projects. The dissolution of
redevelopment agencies has created a void and an effort to
create new tools that would support community and economic
development activities. SB 1156 would allow cities and counties
to establish Sustainable Communities Investment Authorities
(Authorities) to use tax increment financing, on a limited
scale, along with other financing tools to support the goals SB
375 (Steinberg), Chapter 728, Statutes of 2008.
SB 375 created a new procedure for land use planning that would
require local governments to plan in a way that would accomplish
the greenhouse gas reduction goals of AB 32: The California
Global Greenhouse Gas Reduction Act of 2006. SB 375 required
MPOs to adopt an SCS in their regional transportation plans for
the purpose of reducing greenhouse gas emissions, aligning
planning for transportation and housing, and creating specified
incentives for the implementation of those strategies. This bill
would authorize the use of tax increment as well as other
funding sources to finance some of the projects-small walkable
communities, transit priority areas and clean energy
manufacturing --that would be part of the SCS.
Purpose of the bill: According to the author, "this bill sets
forth a new vision of local economic development and housing
policy for the 21st century, focused on building sustainable
communities and creating the high skill, high wage jobs that are
the key to our future prosperity.
The purpose of bringing together the cities and the counties as
equal partners in an inclusive governance structure is to
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correct the old model of redevelopment that pitted cities
against counties and schools for limited tax revenues. Both
cities and counties have land use authority, and both share
responsibility for directing growth toward infill and
transit-oriented development consistent with SB 375 of 2008.
This bill will encourage cooperation, not competition, between
cities and counties in furtherance of sustainable economic
development.
This bill recognizes that economic development requires
investments both in the physical capital of our infrastructure
and the human capital of our workforce, and therefore authorizes
financial agreements with community colleges, K-12 school
districts, and industry to advance career education and
credentialing programs."
Financing tool : This bill relies upon tax increment financing,
in addition to several other potential funding sources,
including Mello Roos, capital investment from public pensions,
and local transaction and use taxes, to support the development
of transit priority areas, small walkable communities, and clean
energy manufacturing. One of the challenges of using tax
increment as a financing tool for community and economic
development in the post-redevelopment world is carving out the
schools portion of the tax increment. Section 16 of Article XVI
of the California Constitution gives authority to reapportion
property taxes among a city, city and county, and district or
other public corporation (otherwise known as taxing agencies)
for the purpose of redevelopment. SB 1156 excludes school
district and special district from "district" and "affected
taxing entity" for purposes of tax increment financing. This
exclusion is intended to protect the general fund by excluding
schools, but it could be unconstitutional to statutorily exclude
schools and special districts since the Constitution includes
them in the authorizing language for tax increment financing.
Application of Community Redevelopment Law (CRL) : The author's
intent is to apply the provisions of the CRL to sustainable
communities investment authorities. However, this is not clear
in the bill. The committee may wish to clearly state this
intent.
Applying the CRL, to sustainable communities investment
authorities presents challenges. Definitions and procedures in
the CRL will not translate in all cases to the new sustainable
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communities investment authority. Although the bill makes an
"authority" the same as an "agency" as defined in the CRL, that
is the only definition that is included in the bill to
coordinate the CLR and the new Authority. In order to apply the
CRL to Authorities formed under this bill, there would need to
be significant reworking of the CRL so that it could be applied
appropriately. For example, the CRL defines project areas as
meeting certain requirements, including approval by a project
area committee. It is not clear how this would translate to a
sustainable communities investment authority and what role if
any the project area committee would play.
Additionally, the CRL required redevelopment agencies to set
aside 20% of tax increment generated in project areas for the
creation, construction, and improvement of housing affordable to
low- and moderate-income families and individuals. The CRL also
contains inclusionary and production housing requirements
(Health and Safety Code Section 33413). In redevelopment project
areas, 15% of new and substantially rehabilitated dwellings
developed must be available at affordable housing cost to
persons of low or moderate-income. To fulfill this requirement,
RDAs could cause to be available two units outside the project
area, for every one unit within the project area. The committee
may wish to consider how this requirement would apply to transit
priority areas and small walkable communities financed by the
Authority. By definition, transit priority areas and small
walkable communities are smaller geographically than
redevelopment project areas. The committee may wish to
consider that this is an area where the inconsistency between
the CRL and new model proposed in this bill needs to be a
considered and addressed, otherwise this new tool will be
unworkable.
No finding of blight : Post-World War II, redevelopment was
created as a tool to combat urban decay and eradicate blight.
Redevelopment agencies were given fundamental tools including
the ability to acquire property through the power of eminent
domain, the authority to finance their activities by issuing
bonds and taking on debt, and the authority and obligation to
relocate people who have interests in the property acquired by
an agency. To establish redevelopment project areas, a
redevelopment agency was required to identify both physical and
economic blight in the project area that could not be mitigated
without the use tax increment. SB 1156 would allow sustainable
communities investment authority to establish a sustainable
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communities investment area without making a finding of blight.
In order to eradicate blight, redevelopment agencies had
authority to use eminent domain. SB 1156 would permit a
sustainable communities investment authority to use eminent
domain without a finding of blight. To avoid possible unintended
consequences from broadly authorizing the use of the Community
Redevelopment Law, the Committee may wish to consider amending
SB 1156 to specify which Community Redevelopment Law powers a
JPA can use without regard to blight.
Workability : According to the author, "SB 1156 would bring
together cities and counties as equal partners in an inclusive
governance structure to improve upon the old model of
redevelopment that often pitted cities against counties and
schools for limited tax revenues." In order to make a new tool
for community and economic development work it needs to set
reasonable and achievable standards for compliance. In order to
use tax increment to finance projects in a sustainable
communities investment area, this bill would require a city and
or county to adopt a sustainable parking ordinance that
encourages public transit and a jobs plan that would create
careers that pay prevailing wage. The committee may wish to
consider whether defining benchmarks for a sustainable parking
plan would be useful in helping cities and counties comply with
the requirements of the bill.
An Authority would be formed by a JPA between a city and county
in an incorporated area, the city would for a governing body and
establish the parameters of a sustainable communities investment
area with the approval of the county. A separate board is then
set up made up of three members representing the city and two
representing the county. Although the board for the area made
up of city and county representatives is formed, it is never
mentioned again in the bill. It's unclear what role the
governing body of the sustainable communities investment area
would play in the new financing tool, although it is defined and
membership is detailed it does not have a role in implementing
the authority or plan. The committee may wish to clarify the
governing structure for the Authority detailed in the bill.
The bill requires counties to sign off on sustainable
communities investment areas and projects, the bill does not
provide cities with an option to create their own sustainable
communities investment area to use only their portion of tax
increment. It is unclear if counties and cities could agree to
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collaborate on a sustainable communities investment area and
therefor if the new tool provided could be used by local
governments.
Housing issues: As introduced this bill provided a financing
tool for housing and economic development but has been amended
to finance selected developments that would accomplish the
planning goals of the SCS, including transit priority areas,
small walkable communities, and clean energy manufacturing.
Although housing is no longer specifically mentioned, the
Authority would be required to comply with the housing
provisions of the CRL. This raises some concerns.
Last year, SB 450 (Lowenthal) proposed significant
reforms to the CRL, including reforms to the housing
provisions. SB 450 was vetoed by the Governor because he
felt it was premature in light of the pending Supreme Court
decision on ABX1 26 and ABX1 27 in California Redevelopment
Association v. Matosantos. There is a reference in the
intent language of SB 1156 to incorporate the changes the
CRL made by SB 450, but SB 1156 does not do so. The
committee may wish to consider that the SB 450 reforms were
made to address abuses of the CRL and that in setting up a
new community economic development entity that is subject
to the CRL, it would be prudent to ensure that those
reforms are made to the CRL so that the same abuses don't
occur in the new sustainable communities investment
authority.
Redevelopment agencies were required to set aside 20% of
tax increment generated in redevelopment project areas for
the creation, improvement, and preservation of affordable
housing. The committee may wish to consider whether a 20%
set-aside is the appropriate amount in transit priority
areas where there would need to be a higher concentration
of residential units. Additionally, less money will be
generated because the schools portion of tax increment will
be excluded.
Under the CRL, redevelopment agencies could fulfill
their inclusionary housing requirements by causing to be
available by regulation or agreement two affordable housing
units outside the project area, for every one that would
have been available in the project area. The committee may
wish to consider that in the case of a transit priority
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area, the need for more residential units would argue
against allowing the Authority to meet the inclusionary
housing requirements of the CRL outside the transit
priority area.
Committee amendments:
The committee has suggested the following amendments to clarify
the bill and to require an Authority to set a-side 30% of tax
increment generated in a sustainable communities investment area
for housing affordable to low and moderate-income families:
Clarify how the governing body of an Authority may be
created.
Make clear an Authority is required to comply with
Community Redevelopment Law and the provisions of this
bill.
Require Authority to set aside 30% of tax increment for
affordable housing for low and moderate income families and
individuals.
Double referred : If SB 1156 passes this committee, the bill
will be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
BRIDGE Housing
California Labor Federation
California Special Districts Association
California State Association of Counties
California Teamsters Public Affairs Council
City of Burbank
DMB Pacific Ventures
Los Angeles Alliance for a New Economy
Mission Bay Development Group
Natural Resources Defense Council
State Building and Construction Trades Council of California
Opposition
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Associated Builders and Contractors of California
California Taxpayers Association
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085