BILL ANALYSIS �
SB 1156
Page 1
SENATE THIRD READING
SB 1156 (Steinberg)
As Amended August 13, 2012
Majority vote
SENATE VOTE :21-15
HOUSING 5-2 LOCAL GOVERNMENT 6-3
-----------------------------------------------------------------
|Ayes:|Torres, Atkins, Bradford, |Ayes:|Alejo, Bradford, Campos, |
| |Cedillo, Hueso | |Davis, Gordon, Hueso |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Beth Gaines, Jeffries |Nays:|Smyth, Knight, Norby |
| | | | |
-----------------------------------------------------------------
APPROPRIATIONS 12-5
-----------------------------------------------------------------
|Ayes:|Gatto, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Fuentes, Hall, Hill, | | |
| |Cedillo, Mitchell, | | |
| |Solorio | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Donnelly, | | |
| |Nielsen, Norby, Wagner | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Allows local governments to establish a Sustainable
Communities Investment Authority (Authority) to finance
specified activities within a sustainable communities investment
area (Area). Specifically, this bill :
1)Allows the city council, board of supervisors, or a special
district representing an Area to form a joint powers authority
to establish an Authority governing board and to designate an
Area.
2)Allows a city, with county's approval, to create an Authority,
SB 1156
Page 2
designate an Area and Authority governing board, establish the
parameters of the proposed economic development within the
Area and amend the Plan within the city's incorporated area.
3)Allows a city and a county to create an Authority and to
appoint the Authority board, made up of two members appointed
by the city and two by the county, and a fifth member
appointed by the two city and two county members.
4)Allows a city and county to create an Authority governing
body, to designate an Area to include an incorporated and
unincorporated area and a Plan, and to amend a plan with the
approval of both the city and the county.
5)Allows a board of supervisors to create an Authority and
appoint the Authority board within an unincorporated area.
6)Allows a city to create an Authority, appoint a governing
board and designate an Area that includes only the
incorporated area of the city.
7)Provides for an Authority that is created by an entity that is
a city and county the governing board shall be made up of five
members appointed by the mayor of the city, if that
appointment is subject to the confirmation by the board of
supervisors.
8)Requires that approval of the creation of an Authority, Plan,
or amendment to a Plan to be made by a resolution of the city
or county.
9)Provides that any taxing agency that participates in or
approves the formation of an Authority or appoints a governing
board member of the Authority may authorize an allocation to
the Authority of all or part of the tax increment revenue that
would otherwise be paid to the taxing agency.
10)Makes and Authority subject to the Brown Act, Public Records
Act, and Political Reform Act.
11)Provides that members of any governing board formed for an
Area serve for four year terms and can only be removed by the
appointing Authority for cause.
SB 1156
Page 3
12)Requires an Authority to comply with the Community
Redevelopment Law (CRL) as specified except where it is
inconsistent with the provisions of this bill.
13)Defines a redevelopment project area in the CRL as a
Sustainable Communities Investment Area (Area) and a
redevelopment plan as a Sustainable Communities Investment
Plan (Plan).
14)Allows an Authority to rely upon the legislative
determination of blight and exempts the Authority from making
a separate finding of blight or conducting a survey of blight
in a project area.
15)Provides that a plan for an Area will terminate 40 years from
the date of the first issuance of bond indebtedness by the
Authority.
16)Provides that an Area shall include 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;
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; and
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.
17)Provides the following apply to transit priority areas
eligible for funding by an Authority:
SB 1156
Page 4
a) Where an Area includes a high-speed rail station, the
raidus of the area may be up to one mile from a high-speed
rail station. And if it is greater than one-half of one
mile, at least 50% of the tax increment revenue derived
from the Area shall be used to support construction of the
high-speed rail station;
b) An Area may include all or part of a transit project
area and multiple transit project areas;
c) Requires transit priority areas to be 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.
18)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;
c) Public transit vehicles or components parts of public
transit vehicles; and
d) Alternative fuel vehicles or component parts of
alternative fuel vehicles.
19)Provides 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;
SB 1156
Page 5
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;
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.
20)Requires that for small walkable communities, transit
projects, and clean energy manufacturing sites within an MPO,
an Authority must consult with the MPO to obtain its opinion
about whether or not the plan for the Area is consistent with
the use designation, density, building intensity, and
applicable policies of the SCS.
21)Requires the county assessor to allocate to an Authority the
tax increment as specified in a Plan in proportion to the
levied taxes for the city and or county in excess of the
amount specified in Health and Safety Code Section 33670 (a).
22)Provides that if an Area includes in whole or in part a
former redevelopment area and the Plan includes a provision
for receipt of tax increment revenues then it shall include a
provision that tax increment amounts collected and received by
the Authority are subordinate to existing enforceable
obligations.
23)Defines "net available revenue" as periodic distributions to
the city or county from the Redevelopment Property Tax Trust
Fund once all enforceable obligations are paid.
24)Allows a city or county forming the Authority to dedicate any
portion of its net available revenue to the Authority through
the Plan which shall include the date upon which the
Authority will cease to receive the net available revenue.
25)Requires a Plan to include the following, in addition to what
is required for a redevelopment plan in the CRL:
a) A fiscal analysis of the projected receipt of tax
SB 1156
Page 6
increment and other revenue and the projected expenses over
five-year planning horizons for the life of the authority;
b) A statement of the principal goals and objectives of the
plan with findings of the public purposes and uses that
will be achieved;
c) A statement of how the plan with relieve blight as
follows:
i) How it will implement the goals of a SCS if the Area
is within an MPO;
ii) How it will contribute to a more efficient
transportation infrastructure;
iii) How it will contribute to and reduce cost for the
combined costs of housing and transportation;
iv) How it will contribute to improved public health;
v) How it will promote more efficient water
consumption;
vi) How it will avoid loss of prime farmland; and,
vii) How it will reduce air pollution, energy consumption
and greenhouse gas emissions by reducing vehicle miles
traveled;
d) A statement of how the plan will implement the
sustainable parking standards;
e) A statement of how the plan will implement the jobs
plan;
26)Provides a Plan may include, to the extent applicable to the
Area, the following:
a) Affordable and farmworker housing;
b) Transitional and supportive housing
c) Health and safety related infrastructure investments in
SB 1156
Page 7
disadvantaged rural communities; and,
d) Infrastructure to support country wide services.
27)Requires and Authority to contract for an independent and
financial audit every five years conducted by guidelines
established by the Controller and submitted to the Controller,
Direct or Department of Finance and the Joint Legislative
Budget Committee.
28)Requires the Authority to approve any bond financing.
29)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.
30)Grants an Authority the ability to exercise the powers of the
Marks-Roos Local Bond Pooling Act of 1985.
31)Allows an Authority to implement local transaction and use
tax, except that the resolution authorizing the tax may
designate the use of the tax.
32)Establishes a process to prequalify developers for
construction contracts in excess of $1,000,000.
33)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.
34)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
SB 1156
Page 8
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.
35)Makes legislative findings.
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 : 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
SB 1156
Page 9
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
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
SB 1156
Page 10
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. 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 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. It is unclear
SB 1156
Page 11
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.
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. SB 1156
does not incorporate the changes the CRL made by SB 450. The SB
450 reforms were made to address abuses of the CRL and 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.
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 and significant
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 blight based on a "legislative determination of
blight" without making a finding of blight or conducting a
survey of blight. Over the last ten years, the standard that
RDAs had to meet in order to establish blight was narrowed
considerably. SB 1156 would permit an Authority to establish an
Area blighted without making a finding, but would require the
Plan to include a statement of how blight would be relieved
based on a broad list of requirements.
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
SB 1156
Page 12
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
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.
1)Redevelopment agencies were required to set aside 20% of tax
SB 1156
Page 13
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.
2)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 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.
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085
FN: 0005181