BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2280
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: alejo
VERSION: 4/7/14
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: June 10, 2014
SUBJECT:
Community Revitalization and Investment Authorities
DESCRIPTION:
This bill allows a local government or local governments jointly
to establish a Community Revitalization and Investment Authority
to use tax increment revenues to invest in disadvantaged
communities.
ANALYSIS:
Historically, the Community Redevelopment Law allowed a local
government to establish a redevelopment area and capture all of
the increase in property taxes generated within the area
(referred to as "tax increment") over a period of decades. The
law requires redevelopment agencies to deposit 20 percent of tax
increment into a Low and Moderate Income Housing Fund (L&M fund)
to be used to increase, improve, and preserve the community's
supply of low- and moderate-income housing available at an
affordable housing cost.
In 2011, the Legislature enacted two bills, AB 26X (Blumenfield)
and AB 27X (Blumenfield), Chapters 5 and 6, respectively, of the
First Extraordinary Session. AB 26X eliminated redevelopment
agencies and established procedures for winding down the
agencies, paying off enforceable obligations, and disposing of
agency assets. AB 26X established successor agencies, typically
the city that established the agency, to take control of all
redevelopment agency assets, properties, and other items of
value. Successor agencies are to dispose of an agency's assets
as directed by an oversight board, made up of representatives of
local taxing entities, with the proceeds transferred to the
county auditor-controller for distribution to taxing agencies
within each county.
AB 26X also included provisions allowing the host city or county
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of a dissolving redevelopment agency to retain the housing
assets and functions previously performed by the agency, except
for funds on deposit in the agency's L&M fund, and thus become a
housing successor. If the host city or county chooses not to
become the housing successor, a local housing authority or the
state's Department of Housing and Community Development (HCD)
takes on that responsibility.
AB 27X allowed redevelopment agencies to avoid elimination if
they made payments to schools in the current budget year and in
future years. In December 2011, the California Supreme Court in
California Redevelopment Association v. Matosantos upheld AB 26X
and overturned
AB 27X. As a result, all of the state's roughly 400
redevelopment agencies dissolved on February 1, 2012, and local
jurisdictions began implementing AB 26X's provisions to
distribute former redevelopment assets and pay the remaining
obligations.
This bill authorizes local governments to create Community
Revitalization and Investment Authorities to use tax increment
revenue to improve the infrastructure, assist businesses, and
support affordable housing in disadvantaged communities.
Specifically, this bill:
1.Permits a city, county, or city and county to create a
Community Revitalization and Investment Authority (authority).
The authority board shall have five members, three of whom
shall be members of the legislative body of the city or county
and two of whom shall be public members who live or work
within the community revitalization and investment area.
2.Permits, as an alternative, any combination of a city, county,
city and county, and a special district, but not a school
district, to enter a joint powers agreement to form an
authority. The board of the authority in this case shall
consist of a majority of members from the legislative bodies
and a minimum of two public members who live or work within
the community revitalization and investment area.
3.Prohibits a city or county that created a redevelopment agency
dissolved pursuant to AB 26X of 2011 from forming an authority
unless the Department of Finance has issued its successor
agency a finding of completion, indicating that the local
government has complied with AB 26X's requirements to
distribute the former agency's assets to the taxing entities.
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4.Allows an authority to carry out a community revitalization
plan within a community revitalization and investment area
(plan area). The bill requires that at least 80% of the land
calculated by census tracts or block groups within the plan
area must be characterized by both of the following
conditions:
An annual median household income that is less than 80%
of the statewide annual median income.
Three of the following four conditions:
Non-seasonal unemployment that is at least 3% higher
than statewide median unemployment rate
Crime rates that are 5% higher than the statewide
median crime rate
Deteriorated or inadequate infrastructure such as
streets, sidewalks, water supply, sewer treatment or
processing, and parks
Deteriorated commercial or residential structures
Alternatively, an authority may carry out a community
revitalization and investment plan within a plan area
established within a former military base that is principally
characterized by deteriorated or inadequate infrastructure and
structures. The board of an authority established within a
former military base must include a member of the military
base closure commission as a public member.
1.Allows any city, county, or special district, other than a
school entity, that receives ad valorem property taxes from
property located in a plan area to adopt a resolution
allocating some or all of its share of tax increment within
the plan area for a number of years it specifies. The city,
county, or special district may also dedicate its tax
increment to specific purposes or programs. In addition, the
city, county, or special district may cease providing tax
increment to an authority, unless its increment is pledged to
repay debt.
2.Deems an authority an "agency" pursuant to Community
Redevelopment Law (CRL) for purposes of receiving tax
increment revenue, but limits an agency's powers and duties to
those prescribed in this bill. These powers include:
Provide funding to rehabilitate, repair, upgrade, or
construct infrastructure;
Provide funding for low- and moderate-income housing;
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Remedy or remove a release of hazardous substances,
pursuant to provisions of the CRL known as the Polanco Act;
Provide for seismic retrofits of existing buildings
pursuant to the CRL;
Acquire and transfer real property in accordance with
specified provisions of the CRL, including by use of
eminent domain;
Issue bonds;
Borrow money, receive grants, or accept financial or
other assistance from the state or federal government;
Adopt a community revitalization and investment plan;
Make loans and grants for owners or tenants to improve,
rehabilitate, or retrofit buildings or structures within
the plan area; and
Provide direct assistance to businesses within the plan
area in connection with new or existing facilities for
industrial or manufacturing uses.
1.Requires an authority following a specified public notice and
hearing process to adopt a community revitalization and
investment plan. The plan may include a provision for the
receipt of tax increment funds generated within the area,
provided the plan includes these elements:
A statement of its principal goals and objectives;
A description of deteriorated or inadequate
infrastructure within the plan area and a program to
upgrade that infrastructure;
A program to remedy or remove a release of hazardous
substances;
A program to provide funding or otherwise facilitate the
economic revitalization of the plan area;
Time limits as provided in the CRL, which prescribe the
maximum time an authority may establish debt, act pursuant
to an area plan, and repay debt;
A fiscal analysis setting forth the receipt of revenue
and projected expenses over a five-year planning horizon;
A program to use 25 percent of the tax increment revenue
to increase, improve, and preserve the supply of low- and
moderate-income housing available at an affordable housing
cost in compliance with the CRL's housing provisions; and
A program that builds on the housing requirements in the
CRL by doing both of the following:
Prohibits the number of housing units occupied by
extremely low-, very low-, and low-income households,
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including the number of bedrooms in those units, from
being reduced within the area during the effective period
of the plan; and
Requires the replacement of dwelling units that house
extremely low-, very low-, or low-income households when
removed from an area within two years, rather than the
four years under existing provisions of the CRL.
An authority shall follow the same process when making plan
amendments. In addition, each year the authority must review
its plan and make modifications as appropriate.
1.Allows an authority to transfer funding for affordable housing
to a housing authority or the entity that received the housing
assets of the former redevelopment agency within the
territorial jurisdiction of the local jurisdiction of the
authority, if it makes a finding that the transfer will reduce
administrative costs or expedite the construction of
affordable housing.
2.Requires that an authority adopt an annual report each year by
June 30 after holding a public hearing on the draft report and
complying with specified notification requirements. The
annual report must detail projects undertaken, revenues and
expenses, housing activities, and assistance provided to
private businesses. If an authority fails to provide its
annual report, then it cannot spend any tax increment funds
received.
3.Requires that every 10 years an authority shall conduct at its
annual report-adoption hearing, a protest hearing at which
property owners and residents within the plan area may present
protests against the authority pursuant to a process specified
in the bill. Under this process, if more than 50 percent of
the combined number of property owners and residents over age
18 protest, then the authority must call an election within 90
days and, in the meantime, take no actions on any new
projects. If a majority of property owners and residents vote
against the authority at the protest election, then the
authority shall take no further action to implement its plan,
except that it may finish those projects for which it had
begun making expenditures of any kind.
4.Requires an authority to contract every five years for an
independent financial and performance audit to determine
compliance with the affordable housing requirements of the
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bill. The State Controller shall establish guidelines for
ensuring that an authority is meeting the housing requirements
of the bill (described in the final bullet under #7 above)
over each five-year period covered by the audit. Each
authority shall provide its completed audit to the controller.
If its audit shows that an authority is failing to comply
with these housing requirements, then it shall submit to the
controller with its audit a plan to achieve compliance in not
less than two years. The plan must include one of the
following means of achieving compliance:
Expenditure of an additional 10 percent of the authority's
tax increment revenues on providing low-income housing;
A 10 percent increase in the production of housing for
very low-income households, as required under the CRL's
housing production requirements; or
The targeting of expenditures from its L&M fund
exclusively to rental housing affordable to, and occupied
by, persons of very low and extremely low income.
The bill prescribes financial penalties that an authority must
pay if it fails to provide this audit to the State Controller
within 20 days of receiving written notice from the controller
of the failure. These penalties vary from as little as $2,500
to as much $10,000 depending on the revenue of the authority.
In addition, the penalties are double for a second consecutive
year of failure and triple for a third or more consecutive
year. Also, after three or more consecutive years, the
controller shall conduct its own financial audit report for
which the authority shall pay. Finally, upon request of the
controller, the Attorney General may take action to collect
the fines.
COMMENTS:
1.Purpose . The author introduced this bill to allow certain
"disadvantaged" areas of California to create a new entity
called a Community Revitalization and Investment Authority
through which the local community would invest the property
tax increments of consenting local agencies, except schools,
and other available funding to improve conditions leading to
increased employment opportunities, to reduce high crime
rates, to repair deteriorating and inadequate infrastructure,
to clean up brownfields, and to promote affordable housing.
He notes that redevelopment focused over $6 billion per year
toward repairing and redeveloping urban cores and building
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affordable housing, especially those areas most economically
and physically disadvantaged. Since the dissolution of
redevelopment agencies, communities across California are
seeking an economic development tool to use.
While legislators introduced multiple measures in 2012 to
provide local governments options for sustainable community
economic development and the Legislature approved four of
them, none became law as Governor Brown vetoed those four.
Still the author believes that as the dissolution of former
redevelopment agencies continues, the pervasive question is
"what economic development tool can local governments use?"
It is unrealistic to expect that a single solution could work
successfully in all California cities. The author states that
this bill provides a viable option targeting the state's
disadvantaged poorer areas and neighborhoods.
2.Reintroduction . This bill is a reintroduction of AB 1080
(Alejo) of 2013, which the Senate Appropriations Committee
held on its suspense file last August. The only difference
between this bill and AB 1080 is that this bill establishes
penalties that an authority is subject to, if it fails to
provide the State Controller with a financial audit each year.
3.Housing provisions . The bill adds to the affordable housing
provisions of existing CRL in three ways. First, it increases
from 20 to 25 percent the amount of tax increment revenue that
an authority must deposit into its L&M fund. Because tax
increment accruing to an authority under this bill would be
less (e.g., it would not include the schools' share), this
would be 25 percent of a smaller number. Second, the bill
requires a community revitalization and investment plan to
ensure that housing affordable to and occupied by extremely
low-, very low-, and low-income households within an area does
not decrease during the life of the area plan. Third, the
bill requires the authority to provide replacement housing in
two rather than four years.
4.Opposition . Opponents object to the bill's authorization of
the use of tax increment, eminent domain, and issuance of debt
absent a vote of the people. They argue tax increment robs
local governments of revenue needed to provide essential
services; that eminent domain used to take private property to
support other private development is wrong; and that
sidestepping the voters on debt means that local voters will
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not have a say on how their property tax revenue is spent.
5.Double-referral . The Rules Committee referred this bill to
both the Transportation and Housing Committee and to the
Governance and Finance Committee. Therefore, if this bill
passes this committee, it will be referred to the Committee on
Governance and Finance.
RELATED LEGISLATION:
AB 1080 (Alejo) is nearly identical to this bill and allows a
local government or local governments jointly to establish a
Community Revitalization and Investment Authority to use tax
increment revenues to invest in disadvantaged communities. Held
on the Senate Appropriations Committee suspense file in August
of last year.
SB 1 (Steinberg) allows a local government to establish a
Sustainable Communities Investment Authority and direct tax
increment revenues to that authority in order to address blight
by supporting development in transit priority project areas,
small walkable communities, and clean energy manufacturing
sites. SB 1 passed the Transportation and Housing Committee on
April 23, 2013, by an 8 to 3 vote. This bill is on the Senate
Floor for concurrence in Assembly amendments.
Assembly Votes:
Floor: 57-12
Appr: 12-4
L Gov: 8-1
H&CD: 6-1
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 4,
2014.)
SUPPORT: Building Owners and Managers Association of
California
California Association for Local Economic
Development
California Business Properties Association
California Building Industries Association
California Chamber of Commerce
California Coalition for Rural Housing
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California Rural Legal Assistance Foundation
California Special Districts Association
City of Adelanto
City of Antioch
City of Blue Lake
City of Camarillo
City of Fort Bragg
City of Healdsburg
City of Indio
City of La Puente
City of La Quinta
City of Lakeport
City of National City
City of Plymouth
City of Rosemead
City of Sacramento
City of Salinas
City of Thousand Oaks
City of Vista
Coachella Valley Economic Partnership
Glendale City Employees Association
Housing California
International Council of Shopping Centers
League of California Cities
League of California Cities-Latino Caucus
NAIOP of California
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Ventura Council of Governments
Western Center on Law & Poverty
OPPOSED: California Taxpayers Association
Fieldstead and Company
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