BILL ANALYSIS �
SB 1156
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Date of Hearing: August 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1156 (Steinberg) - As Amended: August 13, 2012
Policy Committee: Housing and
Community Development Vote: 5-2
Local Government 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows local governments to establish a Sustainable
Communities Investment Authority to finance specified activities
within a sustainable communities investment area. Specifically,
this bill:
1)Allows cities and counties to form a Sustainable Communities
Investment Authority and specifies that it is subject to the
provisions of the Community Redevelopment Law (CRL). Makes a
legislative finding that inefficient transportation
infrastructure and high economic costs of housing and
transportation are a form of blight, which is a necessary
condition under CRL.
2)Provides for a formation of the authority and that the
governing board shall consist of five members appointed for
four-year terms. Provides that the authority is subject to
existing state laws, including the Political Reform Act, the
California Public Records Act and the Ralph M. Brown Act (open
meetings).
3)States that an SCIA shall only include transit priority areas,
including a high speed rail station and adjacent areas,
walkable communities and sites for clean energy manufacturing.
4)Allows a plan for an SCIA to include a provision for the
receipt of tax increment funds, as specified, and provides
other specific requirements for the plan, in addition to what
is contained in CRL. Allows an Authority to implement local
transaction and use tax.
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5)Requires an authority to contract for an independent financial
and performance audit every five years, consistent with the
guidelines established by the State Controller.
6)Specifies, in the event a tax increment financing provision is
included as part of an SCIA, and for the purposes of
collecting tax increment under Section 16 of Article XVI of
the California Constitution, that the terms "district" and
"affected taxing entity" shall exclude a school district and
special districts.
FISCAL EFFECT
1)The Controller will have increased administrative costs of up
to $200,000 annually. The newly formed authorities must file
specified documents with the Controller, including reports of
financial transactions and financial and performance audits.
2)If an authority was to adopt a local transactions and use tax,
the Board of Equalization (BOE) would administer the tax and
the costs the BOE incurred would be fully reimbursed by the
authority.
COMMENTS
1)Purpose . 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 author states the purpose of
bringing together the cities and the counties as equal
partners in an inclusive governance structure is to correct
the old model of redevelopment that pitted cities against
counties and schools for limited tax revenues. The author
points out 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, which aims to control greenhouse gases through
changing land use planning practices. The author argues this
bill will encourage cooperation, not competition, between
cities and counties in furtherance of sustainable economic
development.
2)Background. Post-World War II, redevelopment was created as a
tool to combat urban decay and eradicate blight.
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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.
In 2011, the Legislature approved and the governor signed two
measures, ABX1 26 and ABX1 27 that together dissolved
redevelopment agencies as they existed and created a voluntary
redevelopment program on a smaller scale. In response, the
California Redevelopment Association, 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 and granted
the petition with respect to ABX1 27. As a result of the
court's decision. As a result, all redevelopment agencies
were required to dissolve as of February 1, 2012 and there was
no authority for any new redevelopment program.
3)Tax increment financing. SB 1156 uses tax increment
financing, in addition to several other potential funding
sources. One of the challenges of using tax increment is
carving out the schools' portion of the tax increment.
Section 16 of Article XVI of the California Constitution
provides 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. This bill excludes school districts and
special districts 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 may be unconstitutional to statutorily exclude schools and
special districts since the Constitution includes them in the
authorizing language for tax increment financing.
4)Transactions and use tax. State law allows counties, cities,
and some other local agencies to levy "transactions and use"
taxes on top of the 7.25% statewide base sales and use tax
rate. Senate Bill 1156 allows an authority to implement a
local transactions and use tax under specified statutes.
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BOE states that a tax within a sustainable communities
investment authority would create significant administrative
problems. BOE states that without a defined city or county
limit to impose the tax, BOE would face significantly higher
costs to identify account and addresses falling within the
boundaries of the authority. Similarly, both retailers and
tax payers would face difficulty in collecting and reporting
the tax as only good sold and delivered within the area would
be subject to a use tax, a tax paid directly by the taxpayer
and not collected by the retailer. If a taxpayer outside of
the area ordered a taxable good, the retailer would not
collect sales tax, but the taxpayer would be required the use
tax to BOE.
5)Vote requirements . Article XIIIA of the California
Constitution is clear that any change in a state statute that
results in taxpayers paying a higher tax must be approved by a
two-thirds vote of the Legislature. The bill only authorizes
the SCIA to levy a tax. Because subsequent approval is
required, legislative counsel has keyed this bill a majority
vote.
A tax is a general tax only when its revenues are placed into
the General Fund and are available for expenditure for any and
all governmental purposes. A general tax must be approved by
a majority vote of the electorate, whereas a special tax may
be imposed only with the approval of two-thirds vote of the
local voters. The taxes authorized in SB 1156 will have to be
placed before the voters and is subject to a two-thirds vote
requirement for approval.
6)Support . The California State Association of Counties (CSAC)
has a "support in concept" position on the bill, but has
raised concerns about the governance structure contained in
the bill. CSAC states the bill is not clear about whether a
county's permission is required before the creation of a
Sustainable Communities Investment Authority. They also note
that for governance options where the county is not a full
equal partner with a city, the required permission should
include specific minimum information about how the tax
increment funds will be used, and for how long, and that any
changes to this information should also require the permission
of any entities whose money is being diverted for those
purposes.
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CSAC notes the new structure for community development and
affordable housing gives counties and cities the power to not
only spur economic development, but at the same time provide
the public infrastructure that would help ensure truly
sustainable communities. CSAC argues this infrastructure
should include transitional housing for people entering or
reentering the workforce after incarceration or a childhood
spent in the foster system, as well as others who need
transitional and supportive housing.
It should include the child care facilities that allow parents
to work, or the clinics that keep those housed locally
healthy, working, and out of emergency rooms.
The League of California Cities (League), in their "notice of
concerns" letter, raises several issues with respect to the
creation of a tool that cities can use. The League notes
there are several issues remaining in the bill that would
benefit from further clarity:
a) How the existing governance options in the bill will
affect its usefulness.
b) A review of the practical effects of incorporating
redevelopment law into this authority.
c) How this tool would interact in former redevelopment
project areas that are likely to remain embroiled in
controversy.
d) An evaluation of the usefulness of this tool given the
other programs, policies and conditions added to the bill
that would apply to the activities of the Authority and
public and private entities that receive financial support
from the Authority.
7)Opposition . Opponents, including the California Taxpayers
Association (CTA), argue against the bill because they contend
it would allow an authority to impose a transactions and use
tax without a vote of the people. They also argue that this
bill requires a two-thirds vote to comply with the California
Constitution. CTA also notes the attempt by the bill to
exclude school districts and special districts for the
purposes of reallocating property tax is in violation of the
California Constitution.
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Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081