BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1335 (Pavley) - Redevelopment: brownfield sites.
Amended: April 30, 2012 Policy Vote: EQ 6-0, G&F 6-2
Urgency: No Mandate: No
Hearing Date: May 14, 2012 Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1335 would allow successor agencies to retain
former redevelopment agency brownfield properties for the
purpose of remediating or removing hazardous waste.
Fiscal Impact:
Unknown near-term General Fund revenue loss, likely
millions of dollars, to the extent that successor agencies
retain contaminated and nearby related parcels for
remediation purposes instead of selling the properties and
transferring the proceeds of those asset sales to the
auditor-controller for distribution to other local
governments, including schools. The total current value of
brownfield and related parcels is unknown, but likely
exceeds $10 million. Approximately 50 percent of proceeds
from asset sales 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 additional near-term General Fund revenue loss
related to the diversion of former property tax increment
funds to a successor agency that is authorized to enter into
future enforceable obligations to either pay for remediation
activities directly, or to provide local matching funds
necessary for remediation grants or loans. Any amounts that
would otherwise have been distributed to schools as property
tax would represent a General Fund revenue loss.
Unknown future General Fund revenue gains to the extent the
continued remediation activities substantially increase the
value of brownfield and related properties prior to
liquidation of the assets and distribution of proceeds to
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local agencies, including schools.
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.
Prior to their dissolution pursuant to ABx1 26 (Blumenfield)
Chap 5/2011, RDAs used tax increment financing to clean up
contaminated "brownfield" lands within redevelopment project
areas and received immunity from liability pursuant to the
Polanco Redevelopment Act. When RDAs were abruptly dissolved
pursuant to ABx1 26, many held contaminated brownfield
properties.
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 1335 would authorize a successor agency,
subject to an oversight board's approval, to retain brownfields
and related parcels for purposes of remediating contamination
using available financing, funds obtained from a responsible
party, existing state or federal grants, or any other available
funds in order to maximize the value of the property. Upon
completion of remediation, the property would be sold and the
assets would be transferred to the auditor-controller for
distribution to other local agencies.
SB 1335 would also authorize an oversight board to approve a
successor agency's request to solicit federal and state grants
for purposes of remediation of brownfield sites, if the grants
require greater than 5 percent in local matching funds. The
bill would also authorize an oversight board to approve a
request by a successor agency to enter into a new enforceable
obligation for the following purposes:
To provide matching funds for any remediation grants, if
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sufficient funds are not available.
For purposes of directly financing the remediation of
brownfield sites if sufficient funds are not available to
remediate the property and remediation will maximize the
site's value or failure to remediate poses an imminent
threat to public health, safety, or the environment.
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 1151 (Steinberg), which creates an alternative process by
which communities can use their former redevelopment agencies'
assets for economic development and housing purposes.
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.
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: The sudden dissolution of RDAs left many
successor agencies in possession of contaminated parcels that
state law now requires them to dispose of expeditiously and in a
manner aimed at maximizing value. Brownfield sites are unlikely
to sell for a price that maximizes the value of those assets and
some parcels may not sell for any price. A successor agency's
inability to cleanup brownfield properties may also prevent them
from maximizing the value of adjacent parcels. SB 1335 offers
local communities, with approval from an oversight board, the
authority to retain and clean brownfields before eventually
disposing of those properties as required by state law. If a
successor agency and oversight board believe a property could
command some semblance of market value in its current state, the
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asset could be sold as-is, but the bill offers the option to
retain and clean up certain properties if doing so will maximize
value. While authorizing successor agencies to retain
brownfield sites and enter into new enforceable obligations to
remediate contamination would prevent tax increment revenues
from expeditiously flowing to other local agencies, including
schools, the bill would likely result in the sale of those clean
properties at a much higher price. Maximizing the value of the
property prior to sale would increase the amount of resources
allocated to local agencies in the future.
In addition to this bill and the related legislative proposals
noted above, the Governor's proposed budget assumes that ending
redevelopment will provide $1 billion in 2011-12 and $1.1
billion in 2012-13 in increased property taxes for K-14 school
districts and offset a comparable amount of General Fund
education expenses. Staff notes that 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 $16 billion state budget deficit.
SB 1335 allows successor agencies to retain contaminated
properties for the purpose of remediating the contamination, but
it does not provide them with the full statutory powers that
allowed RDAs to clean up brownfields. Without the Polanco Act's
authority to remediate contaminated property and its grant of
specific immunity from liability, successor agencies may not
benefit from SB 1335's flexibility to retain brownfield
properties. AB 1235 (Hernandez, 2011) grants a successor agency
all of the authority, rights, powers, duties, obligations, and
protections that the Polanco Redevelopment Act vested in a
former redevelopment agency for any property that was within a
redevelopment project of the former RDA. AB 1235 has been on
the Senate inactive file since September of last year. The
author of this bill indicates that her intent is to amend the
Polanco provisions into SB 1335 in the future if AB 1235 does
not come up for a vote.