BILL ANALYSIS �
AB 1320
Page 1
Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1320 (Bloom) - As Amended: April 10, 2013
SUBJECT : Redevelopment: successor agencies
SUMMARY : Allows schools to continue to receive property taxes,
equal to the amount they would have received in passthrough
payments if redevelopment agencies still existed, and does not
count those property taxes toward the Proposition 98 funding
formula. Specifically, this bill :
1)Defines a "local education agency" as a school district, a
community college district, or a county office of education.
2)Permits a local education agency to continue to receive
property taxes, equal to the amount of passthrough payments
they would have received, if a redevelopment agency had not
been dissolved.
3)Allows the amount of the passthrough payment to continue to be
established either by statute or by a contract between a
former redevelopment agency and an education agency.
4)Allows an education agency to continue to receive property
taxes, in the amount of the former passthrough payment, until
the last year that the dissolved redevelopment agency would
have existed as set by statute, including any extensions
allowed.
5)Provides that the property taxes, equal to the amount of the
former passthrough payments, will not be counted toward the
amount that a local education agency receives based on the
funding formula in Proposition 98.
6)Requires the auditor-controller to calculate the amount of the
passthrough payments and provide the county office of
education and the relevant local education agency with the
data underlying the calculations.
EXISTING LAW
1)Dissolves redevelopment agencies and institutes a process for
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winding down their activities (Health and Safety Code Section
34170).
2)Requires that within one year of making the final debt payment
of a former redevelopment agency, a successor agency dispose
of all remaining assets and terminate its existence (Health
and Safety Code Section 34187).
3)Requires that when all of the debts of a redevelopment agency
are paid and a successor agency terminates its existence, then
all passthrough payment obligations of a former redevelopment
agency cease and no property tax will be allocated to the
Redevelopment Property Tax Trust Fund, for the former
redevelopment agency (Health and Safety Code Section 34187).
FISCAL EFFECT : Unknown
COMMENTS :
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 dissolution process, local communities with
redevelopment agencies were required to establish a successor
agency that is responsible for identifying the enforceable
obligations or the debts of the former redevelopment agency that
need to be retired. Successor agencies must submit a list of
enforceable obligations to the Department of Finance (DOF) for
approval. Over time, these obligations will be repaid by
property taxes collected and deposited by the county
auditor-controller into the Redevelopment Property Tax Trust
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Fund. Existing law dictates to the auditor-controller which
debts of the former redevelopment agency should be paid and in
what order. Passthrough payments established by statute or
contract by the former redevelopment agency and taxing entities,
including schools, counties, and special districts are paid
first, followed by enforceable obligations, administrative costs
of the successor agency. Any remaining amounts are distributed
to the taxing entities. Once the debts of the former
redevelopment agency are paid, the successor agency dissolves
and the passthrough payments along with all other enforceable
obligations will no longer be paid. At that point, property tax
will be allocated based on statutory formulas to all taxing
entities as if redevelopment agencies never existed.
History of passthrough payments: To alleviate the fiscal burden
of redevelopment, redevelopment agencies made passthrough
payments to other local taxing entities out of tax increment it
collected. Prior to 1993, redevelopment agencies and other
local taxing entities, including counties, special districts,
and school districts, negotiated passthrough payments. In some
cases, counties, or special districts may have negotiated for a
greater share than school districts. AB 1290 (Isenberg) Chapter
942, Statutes of 1993, replaced this process with a statutory
formula that requires post-1994, passthrough payments to be
distributed to all local agencies and bases the amount each
agency receives on its proportionate share of the one percent
property tax rate in the project area.
According to the Legislative Analyst's Office (LAO), "nearly
two-thirds of all pass-through payments stem from pre-1994
negotiations between RDAs and local agencies. For various
reasons, counties and special districts were particularly active
in this negotiation process. As a result, counties and special
districts receive about two-thirds of all pass-through payments.
This share of pass-through payments is almost double the share
that counties and special districts would receive if passthrough
payments were distributed based on tax shares. Because counties
and special districts get a disproportionately large share of
passthrough payments, they would get less money from trust fund
distributions if these passthrough payments were included in the
trust fund calculations. The K-14 districts and cities, in
contrast, would get a higher share of redevelopment trust fund
distributions."
Last year, AB 1484 (Blumenfield), Chapter 26, made the statutory
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changes needed to achieve a total of $3.3 billion of budget
savings related to the dissolution of redevelopment agencies as
estimated in the Governor's May Revision of the Budget. One of
the clarifications AB 1484 made was to require that once all of
the debts and assets of a former redevelopment agency are
disposed of, then the passthrough payments to counties, special
districts and school districts end. According to the LAO, "over
time, the dissolution of RDAs will increase the amount of
general purpose property tax revenues that schools, community
colleges, cities, counties, and special districts receive by
more than $5 billion annually."
The amount of time it will take to retire the debts of the
redevelopment agency will vary across communities. As a result,
it is impossible to know when the passthrough payments to
schools and other taxing entities will cease. The intent of
redevelopment dissolution was that over time as the debts are
paid, the other taxing agencies, including schools, would
receive more property taxes.
Purpose of this bill: According to the author of this measure,
"a significant portion, or in some cases all passthrough funds
are restricted for facilities use, passthrough payments (or
portions thereof) are not treated as local property taxes for
purposes of determining per-student funding levels that support
school operations. This historic treatment of passthrough
payments as a revenue stream on top of the state's Proposition
98 revenue limit (pre-student funding level) is the mechanism
that provides that fiscal stability on which school districts
and county offices of education rely. Moreover school districts
and county offices of education have reasonably anticipated that
this funding stream would continue through the contemplated life
of the redevelopment project plan."
This bill proposes to allow schools to continue to receive
property taxes, in the amount that they would have received in
passthroughs payments, had redevelopment agencies not been
dissolved. Those payments come out of the AB 8 share of
property taxes, so they will receive the share they would have
under redevelopment without reducing the amount that goes to
other taxing entities. The bill specifies that the property
taxes will not be counted as part of the per-student formula in
determining how much the state must backfill schools to achieve
required funding levels under Proposition 98. As a result, the
state will not be able to count the portion of property taxes
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that continue as passthroughs to schools toward the local's
share of school funding.
AB 1320 would require passthrough payments to continue through
the life of the redevelopment agency project area including any
extensions that have been made through that period. In some
cases project areas had up to 50 years to complete the goal of
eliminating blight.
Staff comments : It is unclear at what point passthrough
payments will cease for schools. Successor agencies are in the
process of submitting their recognized enforceable obligations
to DOF for approval. Many of those obligations will need to be
paid for years in the future. This bill would allow
passthroughs to continue for the life of the redevelopment
project area, which could be decades in the future. It's
difficult to know what the state's financial health will look
like many years from now and how these passthroughs will affect
the state's requirement to backfill schools from the General
Fund.
Double referred : If AB 1320 passes out of this committee, the
bill will be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of School Business Officials
California School Boards Association
Contra Costa County Superintendents' Coalition
Dr. Arturo Delgado, Los Angeles County Superintendent of Schools
Fresno Unified School District
Los Angeles Unified School District
Lucia Mar Unified School District
Riverside County Superintendent of Schools
San Bernardino Community College District
San Diego Unified School District
Small School Districts' Association
Dr. Gary Thomas, San Bernardino County Superintendent of Schools
Opposition
None on file.
AB 1320
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Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085