BILL ANALYSIS �
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THIRD READING
Bill No: AB 471
Author: Atkins (D), et al.
Amended: 1/17/14 in Senate
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 1/15/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu
NO VOTE RECORDED: Vacancy
SENATE APPROPRIATIONS COMMITTEE : 6-0, 1/23/14
AYES: De Le�n, Gaines, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters
SUBJECT : Local government: redevelopment: successor
agencies to
redevelopment
SOURCE : Author
DIGEST : This bill allows infrastructure financing districts
to include portions of former redevelopment project areas and
amends several statutes governing redevelopment agencies (RDAs)
dissolution.
ANALYSIS : Until 2011, the Community Redevelopment Law allowed
local officials to set up RDAs, prepare and adopt redevelopment
plans, and finance redevelopment activities. As a redevelopment
project area's assessed valuation grew above its base-year
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value, the resulting property tax revenues - the property tax
increment - went to the RDA instead of going to the underlying
local governments. The RDA kept the property tax increment
revenues generated from increases in property values within a
redevelopment project area.
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
26 X1 (Blumenfield, Chapter 5, Statutes of 2011, First
Extraordinary Session) dissolved all RDAs. The California
Supreme Court's 2011 ruling in California Redevelopment
Association v. Matosantos upheld AB 26 X1, but invalidated AB 27
X1 (Blumenfield, Chapter 6, Statutes of 2011, First
Extraordinary Session), which would have allowed most RDAs to
avoid dissolution.
RDAs' elimination created substantial policy challenges for
local officials who must manage the complex process of
dissolving former RDA and identify new tools for financing local
economic development. Some local officials want the Legislature
to clarify statutes that govern the redevelopment dissolution
process and amend state law to make it easier for local agencies
to support economic development using Infrastructure Financing
Districts (IFDs).
Unwinding former RDAs' affairs . AB 26 X1 established successor
agencies to manage the process of unwinding former RDAs'
affairs. With the exception of seven cities that chose not to
serve as successor agencies, the city or county that created
each former RDA now serves as that RDA's successor agency. Each
successor agency has an oversight board that is responsible for
supervising it and approving its actions. The Department of
Finance (DOF) can review and request reconsideration of an
oversight board's decisions.
One of the successor agencies' primary responsibilities is to
make payments for enforceable obligations entered into by former
RDA. The statutory definition of an enforceable obligation
includes bonds, specified bond-related payments, some loans,
payments required by the federal government, obligations to the
state, obligations imposed by state law, legally required
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payments related to RDA employees, judgments or settlements, and
other legally binding and enforceable agreements or contracts
that are not otherwise void.
Each successor agency must, every six months, draft a list of
enforceable obligations that are payable during a subsequent six
month period. This recognized obligation payment schedule
(ROPS) must be adopted by the oversight board and is subject to
review by the DOF. Obligations listed on a ROPS are payable
from a Redevelopment Property Tax Trust Fund (RPTTF), which
contains the revenues that would have been allocated as tax
increment to a former RDA.
This bill:
1.Allows a successor agency to schedule ROPS payments beyond the
existing six-month ROPS cycle upon a showing that a lender
requires cash on hand beyond the ROPS cycle.
2.Allows a successor agency to utilize reasonable estimates and
projections to support payment amounts for enforceable
obligations if it submits appropriate supporting documentation
of the basis for the estimate or projection to the DOF.
3.Specifies that a ROPS can include appropriation of moneys from
bonds subject to passage during the ROPS cycle when an
enforceable obligation requires the successor agency to issue
the bonds and use the proceeds to pay for project
expenditures.
State law requires a county auditor-controller to make
allocations from the RPTTF to successor agencies to pay for
specified administrative costs. In some communities, an entity
other than the former RDA's successor agency has assumed a
former RDA's housing responsibilities.
This bill:
1. Requires a county auditor-controller, before distributing
residual revenues from the RPTTF to taxing entities, to
allocate a "housing entity administrative cost allowance" to
an entity that has assumed a former RDA's housing duties.
2. Specifies that the housing entity administrative cost
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allowance would be 1%, but not less than $150,000 annually,
of the property tax allocated to the Redevelopment Obligation
Retirement Fund each fiscal year.
3. Requires an auditor-controller to make the housing entity
administrative cost allocations on March 1, 2014, and each
January 2 and June 1, thereafter until June 1, 2018.
If a successor agency complies with state laws that require it
to remit specified RDA property tax allocations and cash assets
identified through a "due diligence review" process, it receives
a "finding of completion" from the DOF (AB 1484, Assembly Budget
Committee, Chapter 26, Statutes of 2012). Close to 300
successor agencies have received a finding of completion.
A successor agency that receives a finding of completion can
repay specified loans made to a former redevelopment agency by
the city or county that created it. State law requires that a
successor agency must repay the loans according to a schedule
that meets specified conditions. One condition requires that
the maximum annual loan repayment amount cannot exceed 50% of
the increase in the amount of money distributed to taxing
entities from the RPTTF in the current fiscal year over the
amount distributed in the 2012-13 base year.
This bill requires that calculation of the maximum loan
repayment amount must exclude amounts paid to taxing entities
during the 2012-13 base year from the RPTTF pursuant to the "due
diligence review" process.
Existing law allows a successor agency that receives a finding
of completion to retain a former RDA's real property assets in a
trust and use those assets subject to provisions of a long-range
property management plan approved by the agency's oversight
board and the DOF. State law requires that property must
transfer from a successor agency to a city, county, or city and
county if, under an approved long-range management plan, the
property will be used for a project identified in an approved
redevelopment plan.
This bill:
1. Specifies that the phrase "identified in an approved
redevelopment plan" includes properties listed in a community
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plan or a five-year implementation plan.
2. Requires a successor agency to provide notice to its
oversight board at least 10 days before entering into a
contract or agreement for the use or disposition of
properties pursuant to a long-range property management plan.
During the 10-day period, the oversight board may notify the
successor agency that it intends to conduct a hearing to
determine whether the contract or agreement is consistent
with the successor agency's long-range property management
plan.
3. Requires the board to hold the hearing and issue findings
within 30 days after it notifies the successor agency.
4. Allows a successor agency that has received a finding of
completion to amend an existing contract or agreement related
to long-term enforceable obligations, or enter into a new
contract or agreement in furtherance of any existing contract
or agreement, if:
A. The amendment, new contract, or agreement is for the
purpose of administering projects in connection with
long-term enforceable obligations,
B. The existing contract or agreement has been approved
by the department as an enforceable obligation on a
ROPS, and
C. The existing contract or agreement has received a
final and conclusive determination.
5. Prohibits any amendment of an existing contract or agreement,
or any new contract or agreement, if the amendment, new
contract, or new agreement will adversely affect the flow of
property tax revenues or payments made to taxing entities
pursuant to state law.
IFDs . Cities and counties can create IFDs and issue bonds to
pay for community scale public works: highways, transit, water
systems, sewer projects, flood control, child care facilities,
libraries, parks, and solid waste facilities. To repay the
bonds, IFDs divert property tax increment revenues from
consenting local governments -- but not schools -- for 30 years.
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State law prohibits an IFD's territory from including any
portion of a redevelopment project area.
This bill:
1. Repeals this prohibition, allowing IFDs to use tax increment
revenues to finance public works in former RDA project areas.
2. Prohibits an IFD from financing any project or portion of a
project in a former redevelopment project area unless the
former redevelopment agency's successor agency has received a
finding of completion.
3. Declares that any IFD debt or obligation is subordinate to an
enforceable obligation of a former redevelopment agency and
prohibits tax increment revenues allocated to an IFD from
including any revenues that state law requires a county
auditor-controller to deposit in a RPTTF.
4. Allows a city or county forming an IFD to dedicate any
portion of its "net available revenue" to the IFD. Defines
"net available revenue" as periodic distributions to the city
or county from the RPTTF that are available to the city or
county after all preexisting legal commitments and statutory
obligations funded from that revenue are made pursuant to
state law. Excludes funds payable to school entities
pursuant to a specified statute from the definition of "net
available revenue."
5. Makes additional technical and conforming changes to current
law.
Comments
According to the Senate Governance and Finance Committee
analysis, local officials and developers have identified
ambiguities and obstacles in current law which prevent them from
completing vital economic development projects that began before
RDAs were dissolved. Because state law doesn't provide
successor agencies any flexibility to adjust contracts for
enforceable obligations in ways that don't affect tax increment
or to schedule ROPS payments beyond a single six-month ROPS
period, many successor agencies may be unable to finance or
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complete long-term phased development projects that are already
underway. By eliminating these ambiguities and obstacles, and
eliminating an unnecessary prohibition against an IFD including
any portion of a redevelopment project area for the purposes of
collecting tax increment, AB 471 will support the completion of
numerous development projects that already have received
millions of dollars of public investments, support state policy
goals, and benefit residents throughout California.
Previous Legislation
AB 471 is similar to AB 662 (Atkins, 2013), which Governor Brown
vetoed citing his concern that the bill's "language to authorize
new or amended contracts for existing enforceable obligations
could result in unintended costs to the General Fund." This
bill contains revised language intended to address the concerns
the Governor raised in his veto message.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, unknown
General Fund impact, likely in the range of $750,000 annually
for five years. This figure is based on the assumption that
approximately 10 successor housing agencies will be eligible for
at least $150,000 annually in allocations from the Redevelopment
Property Tax Trust Fund through 2018, prior to distribution of
residual revenues to local agencies and school entities. As
such, this bill reduces the amount of residual property tax
revenues subject to general distribution by at least $1.5
million annually through 2018, about half of which accrues to
K-14 schools. In general, any property tax proceeds diverted
from schools results in an equivalent General Fund cost,
pursuant to Proposition 98's minimum funding guarantees.
SUPPORT : (Verified 1/23/14)
BRIDGE Housing
California Infill Builders Federation
City of West Sacramento
Mission Bay Development Group
Strada Investment Group
AB:d 1/24/14 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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