BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2135 (Ting) - Local agency surplus property sales: affordable
housing.
Amended: August 4, 2014 Policy Vote: T&H 8-1
Urgency: No Mandate: Yes
Hearing Date: August 4, 2014
Consultant: Mark McKenzie
This bill may meet the criteria for referral to the Suspense
File.
Bill Summary: AB 2135 would revise certain requirements that
local agencies must follow when disposing of surplus land.
Under the bill, surplus land offered for sale or lease for the
development of low- and moderate-income housing under a
preference program must provide at least 25 percent of the units
at an affordable housing cost, as specified, and land sold for
development of 10 or more residential units outside the
preference system must provide at least 15 percent of the units
at an affordable housing cost.
Fiscal Impact: Unknown, likely minor, reimbursable mandate
costs. Local agencies would likely incur minor one-time costs to
revise administrative procedures related to the disposal of
surplus property. These costs could be subject to
state-reimbursement to the extent local agencies file a claim
for reimbursement and the Commission on State Mandates
determines specified activities are subject to reimbursement.
(General Fund)
Background: Existing law requires local agencies (cities,
counties, special districts, and school districts) to compile an
inventory of all lands under the agency's control that are in
excess of its foreseeable needs at the end of each calendar
year. Existing law prescribes a process for disposing of
surplus property to certain entities for preferred purposes
prior to offering the land on the open market. Prior to
disposing of surplus property, the local agency must send a
written offer to sell or lease the property to specified
entities, such as housing authorities, affordable housing
developers, specified parks and recreation entities, school
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districts, and transportation entities, depending on the
proposed use of the land. An interested agency must notify the
disposing agency in writing of its intent to purchase the land
within 60 days.
Existing law requires the disposing agency, upon receipt of a
notice of intent to purchase from one of the preferred entities,
to enter into good faith negotiations to determine a mutually
satisfactory sales price or lease terms. If an agreement is not
reached within 60 days, the surplus land may be sold on the open
market. If there are multiple offers, the disposing agency must
give first priority to the entity that agrees to use the site
for low- or moderate-income housing, unless the property is park
land and the buyer agrees to use the site for parks and
recreation purposes. Existing law authorizes a sales contract
with a payment period of up to 20 years if the property is sold
to one of the preferred entities for park or recreation,
open-space, school, or low- and moderate-income housing
purposes. Existing law explicitly states that nothing in the
disposal procedure limits the power of any local agency to sell
or lease surplus land at fair market value or at less than fair
market value, nor does it empower any local agency to sell or
lease surplus land at less than fair market value.
Proposed Law: AB 2135 would revise certain requirements that
local agencies must follow when disposing of surplus property.
Specifically, this bill would:
Extend the good faith negotiation period between a disposing
agency and a preferred purchasing entity from 60 days to 90
days.
Specify that if a local agency receives a response from more
than one interested entity that plans to use the property for
affordable housing purposes, the disposing agency must give
priority to the entity that proposes to provide the greatest
number of affordable units at the deepest level of
affordability.
Place the following requirements on an entity proposing to
purchase surplus local agency property for affordable housing
purposes under the preference program:
o The entity must agree to make at least 25 percent of
the total number of units developed available for
purchase or rent at an affordable housing cost to lower
income households.
o Rental units must be affordable and occupied by
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eligible households for 55 years.
o The initial occupants of all ownership units must be
lower income households, and the units shall be subject
to a specified equity sharing agreement.
o The requirements must be recorded against the
property and are enforceable by the local agency
disposing of the property and specified eligible
residents.
Authorize the payment period for surplus property sold for
affordable housing purposes to exceed 20 years, but not be
longer than the required term for maintaining affordability.
Delete the provision that explicitly specifies that the
disposal procedures do not empower any local agency to sell or
lease surplus land at less than fair market value, and instead
specify that any sale or lease at less than fair market value
shall not be construed as inconsistent with an agency's
purpose.
Place the following requirements on local agency surplus
property sales on the open market (after following procedures
for preferred sales) to an entity that uses the property for
the development of 10 or more residential units:
o The entity must agree to make at least 15 percent of
the total number of units developed available for
purchase or rent at an affordable housing cost to lower
income households.
o Rental units must be affordable and occupied by
eligible households for 55 years.
o The initial occupants of all ownership units must be
lower income households, and the units shall be subject
to a specified equity sharing agreement.
o The requirements must be recorded against the
property and are enforceable by the local agency
disposing of the property and specified eligible
residents.
Staff Comments: Apart from the provision that extends the good
faith negotiation period between a disposing agency and a
preferred purchasing entity by 30 days, the requirements of this
bill would only apply when surplus property is sold for
residential development. Local agencies could incur some
administrative costs to revise procedures to account for the
minimum thresholds of affordable units for sales of property for
affordable housing purposes under the current preference
program, and for sales of property for any residential
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development of ten or more units on that property. These
administrative costs could be subject to a claim for
reimbursement from the Commission on State Mandates, but staff
estimates these costs to be minor. It is unlikely that agencies
selling surplus property for residential development would
expend the time and resources necessary to file a claim with the
Commission for reimbursement of these minor one-time costs.
AB 2135 requires that a certain percentage of units in a
proposed affordable housing project, or in a project that
includes ten or more residential units, must meet specified
affordability standards. If a property deemed surplus by a
local agency is specifically suited for residential development,
these new restrictions could potentially reduce the price that a
buyer is willing to pay for a property, and result in a lower
sales price when compared to market rate residential
development. As such, the bill could result in a reduction in
local revenues. Staff notes that a loss of revenue in itself
does not constitute a state mandate necessitating reimbursement.
The Commission has found in previous cases that there must be
an expenditure of local government proceeds of taxes and not
just a reduction of that revenue in order to qualify for
reimbursement. County of Sonoma v. Commission on State Mandates
(2000) 84 Cal.App.4th 1264 involved statutes that reduced the
local agency's receipt of tax revenues and transferred the
reduced portion to the Educational Revenue Augmentation Fund for
distribution to schools. In that case, the court held that the
amount reduced was not reimbursable since there was no
expenditure of tax proceeds, and that that the statutes did not
result in "increased actual expenditures."
Furthermore, it could be argued that since local agencies are
under no obligation to offer surplus land for sale, any required
activities triggered by that local discretionary decision do not
result in a mandated program because there is no legal
compulsion. With respect to this bill, there is no legal
compulsion to sell surplus property for residential development,
so any costs that a local agency incurs as a result of the
requirements related to minimum percentages of affordable
housing units would not be subject to reimbursement (See City of
Merced v. State of California (1984) 153 Cal.App.3d 777).
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