BILL ANALYSIS �
AB 981
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Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 981 (Bloom) - As Introduced: February 22, 2013
Policy Committee: Housing and
Community Development Vote: 7-0
Local Government 9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows successor agencies to use proceeds of bonds
issued by a redevelopment agency between January 1, 2011 and
June 28, 2011 for projects of the former redevelopment agency.
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 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.
FISCAL EFFECT
1)Potential General Fund costs in the hundreds of millions.
2)Property tax revenues are allocated to units of local
government according to existing law on the distribution of
local property tax. Without this bill, most of the bonds
would be paid off in 10 years or sooner, freeing up property
tax to be allocated to local governments, including schools.
Under this bill, there would be ongoing redevelopment project
area tax increment flowing to the redevelopment agency until
all of the bonds are paid off. To the extent this bill
reduces the revenues flowing to school districts, there would
AB 981
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be a corresponding cost to the General Fund as the property
tax would otherwise offset General Fund obligations to
schools, pursuant to the Proposition 98 minimum funding
guarantee.
3)Enactment of this legislation will likely to lead to the
settling or dismissal of a number of lawsuits that have been
brought over the dissolution of redevelopment agencies.
Reduced litigation will result in significant General Fund
savings.
COMMENTS
1)Purpose . The author estimates there are approximately $670
million in non-housing redevelopment bond proceeds and $134
million in housing bond proceeds issued in 2011 that cannot be
spent due to the deadline by which bonds would have needed to
have been sold to be eligible. These bonds were issued to
finance a variety of public works projects such as
infrastructure construction and repair, new public facilities
and affordable housing. The bonds are held by 37 successor
agencies throughout the state. DOF has directed successor
agencies to defease, or pay off, the 2011 bonds. According to
the author, 90% of these bonds cannot be defeased for 10
years, during which time nearly $1 billion would be spent on
debt service payments for the bonds. The author argues, if
these bond proceeds could be used, they could generate between
16,000 and 18,000 jobs statewide, between $2.3 and $2.7
billion in statewide economic activity, and between $117 and
$135 million in new state and local tax revenues.
2)Background . 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, the
League of California Cities and 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, all redevelopment agencies
were required to dissolve as of February 1, 2012 and there was
no authority for any new redevelopment program.
3)Previous legislation . Last year, AB 1484 (Blumenfield),
AB 981
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Chapter 26, made the statutory changes needed to achieve
budget savings related to the dissolution of redevelopment
agencies. AB 1484 clarified the process for dissolving all
redevelopment agencies, 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. AB 1484 specified all proceeds
from bonds issued in 2011 must be defeased, the exception
being if the redevelopment agency has enforceable obligations
with third parties to spend the proceeds.
One of the provisions in AB 1484 allowed successor agencies
that received a finding of completion from DOF 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 required payments to DOF
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081