BILL ANALYSIS �
AB 981
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Date of Hearing: April 24, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 981 (Bloom) - As Introduced: February 22, 2013
SUBJECT : Redevelopment dissolution.
SUMMARY : Allows successor agencies greater flexibility for bond
obligation proceeds issued between January 1, 2011 and June 28,
2011. Specifically, this bill :
1)Extends, from January 1, 2011 to June 28, 2011, the date by
which an entity that has assumed the housing functions in the
winding down of redevelopment can designate the use of, and
commit, indebtedness obligation proceeds that were issued for
affordable housing purposes.
2)Allows, upon the issuance of a finding of completion by the
Department of Finance (DOF),
a successor agency to use redevelopment bond proceeds issued
between January 1, 2011 and June 28, 2011 (current law
contains a cutoff date of December 31, 2010).
EXISTING LAW :
1)Dissolves redevelopment agencies and institutes a process for
winding down their activities.
2)Allows a city or county that authorized the creation of a
Redevelopment Agency (RDA) to elect to retain the housing
assets and functions previously performed by the RDA.
3)Required the entity assuming the housing functions of the
former RDA to submit to DOF by August 1, 2012, a list of all
housing assets, as specified.
4)Allows the entity that assumed the housing functions to
designate the use of and commit indebtedness obligation
proceeds that remain after the satisfaction of enforceable
obligations that have been approved in a Recognized Obligation
Payment Schedule and that are consistent with the indebtedness
obligation covenants.
5)Requires the proceeds to be derived from indebtedness
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obligations that were issued for the purposes of affordable
housing prior January 1, 2011 and were backed by the Low- and
Moderate-Income Housing Fund.
6)Requires DOF to issue a finding of completion to the successor
agency, within five business days, once the following
conditions have been met and verified:
a) The successor agency has paid the full amount as
determined during the due diligence reviews and the county
auditor-controller has reported those payments to DOF; and,
b) The successor agency has paid the full amount as
determined during the July True-up process; or,
c) The successor agency has paid the full amount upon a
final judicial determination of the amounts due and
confirmation that those amounts have been paid by the
county auditor-controller.
7)Allows the successor agency, upon receiving the finding of
completion, to:
a) Retain dissolved redevelopment agency assets;
b) Place loan agreements between the former redevelopment
agency and sponsoring entity on the Recognized Obligation
Payments Schedule (ROPS), as an enforceable obligation,
provided the oversight board makes a finding that the loan
was for legitimate redevelopment purposes; and,
c) Utilize proceeds derived from bonds issued prior to
January 1, 2011 in a manner consistent with the original
bond covenants.
8)Requires, after DOF issues a finding of completion, the
successor agency to prepare a long-range property management
plan that addresses the disposition and use of the real
properties of the former redevelopment agency, and requires
the report to be submitted to the oversight board and DOF for
approval no later than six months following the issuance to
the successor agency of the finding of completion.
FISCAL EFFECT : Unknown
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COMMENTS :
1)In 2011, facing a severe budget shortfall, the Governor
proposed eliminating redevelopment agencies in order to
deliver more property taxes to other local agencies.
Redevelopment redirected 12% of property taxes statewide away
from schools and other local taxing entities and into
community development and affordable housing. Ultimately, 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), and the 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.
As part of the winding down of redevelopment agencies, AB 1484
(Blumenfield), Chapter 26, Statutes of 2012, made various
statutory changes associated with the dissolution of
redevelopment agencies and addressed a number of substantive
issues related to administrative processes, affordable housing
activities, repayment of loans from communities, use of
existing bond proceeds and the disposition or retention of
former redevelopment agency assets.
One of the provisions in AB 1484 allowed successor agencies
that have received a "finding of completion" from DOF to have
additional discretion regarding former agency real property
assets, loan repayments to the local government community that
formed the agency, and use of proceeds from bonds issued by
the former redevelopment agency. In order to receive the
finding of completion, the successor agency must undergo
specified due diligence reviews and make the requirement
payments to DOF.
Once the successor agency receives the finding of completion,
the agency gains access to three specific benefits listed in
statute - first, the ability to transfer former redevelopment
agency-owned properties to the city or county for
redevelopment upon completion of a
long-term management plan approved by DOF; second, the ability
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to repay city loans made to the redevelopment agency; and
third, the ability to use unspent bond proceeds issued by
redevelopment agencies prior to December 31, 2010. However,
the repayment of city-agency loans and the expenditure of
unspent bond proceeds would become an "enforceable
obligation." Once a finding of completion is issued, the
successor agency must prepare a long-range property management
plan that addresses the disposition and use of the real
properties of the former redevelopment agency. The report is
required to be submitted to the oversight board and DOF or
approval no later than six months following the issuance to
the successor agency of the finding of completion.
2)This bill makes several changes to dates established in AB
1484 and AB 1X 26. First, the bill extends, from January 1,
2011 to June 28, 2011, the date by which an entity that has
assumed the housing functions in the winding down of
redevelopment can designate the use of, and commit,
indebtedness obligation proceeds that were issued for
affordable housing purposes. Second, the bill expands the
cutoff date for the use of redevelopment bond proceeds from
December 31, 2010 (as established by AB 1X 26) to June 28,
2011, upon issuance of a finding of completion by DOF. June
28, 2011 is the date the dissolution legislation (AB 1X 26)
was signed.
This bill is author-sponsored.
3)According to the author, "During the first half of 2011, prior
to the dissolution of all redevelopment agencies,
approximately 50 agencies legally issued bonds. Of those
cities, 37 have outstanding bond proceeds that they are not
allowed to use. The State has asserted that the vast majority
of the 2011 redevelopment bonds must be defeased and their
proceeds not spent on projects, however, over 90% of these
bonds cannot be defeased for 10 years. During this ten-year
period, nearly $1 billion will be spent on the debt service
payments for these bonds, and the bond proceeds will continue
to go unused. If the proceeds were used for their intended
purposes, the construction of these projects would generate
over $1.2 billion in statewide economic activity, more than
the debt service payments during the ten-year period.
"The vast majority of these bonds were issued for public works
projects such as infrastructure construction and repair, new
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public facilities and affordable housing. Bondholders who
purchased tax-exempt bonds (approximately 70% of the bonds in
question) for specific public works projects were promised
tax-free returns. Per federal tax law, tax-exempt bond
proceeds must be used for their intended purpose, or the bonds
could be subject to losing their tax-exempt status."
4)According to the author, the following agencies are currently
unable to use 2011 bond funds: Blythe, Brea, Calexico,
Cudahy, Culver City, Davis, Fairfield, Folsom, Galt, Glendale,
Goleta, Grand Terrace, Inland Valley Development Agency
(former Norton AFB), La Quinta, Lemoore, Lynwood, Monrovia,
National City, Oakdale, Oakland, Reedley, Riverside County,
City of San Bernardino, Santa Ana, Santa Clara, Santa Monica,
Signal Hill, City of Sonoma, Stanton, Temecula, Twentynine
Palms, Ukiah, Union City, Vernon, West Hollywood, Westminster,
and Yorba Linda.
5)Support arguments : Supporters argue that it is estimated that
approximately $650 million in 2011 redevelopment bond proceeds
are currently sitting idle and cannot be used, and if these
proceeds were spent on their intended projects, it is
estimated that approximately 9,300 high wage construction and
related jobs would be generated.
Opposition arguments : The Committee may wish to consider
where the line should be drawn on bond issuance by
redevelopment agencies and whether this bill makes a
compelling case to expand the dates from what was contained in
AB 1484.
6)This bill is double-referred to the Committee on Housing and
Community Development.
REGISTERED SUPPORT / OPPOSITION :
Support
California Teamsters Public Affairs Council
Cities of Culver City, Grand Terrace, Lynwood, Santa Monica,
Vista, West Hollywood
League of California Cities
Palm Communities
Opposition
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None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958