BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2280 HEARING: 6/25/14
AUTHOR: Alejo FISCAL: Yes
VERSION: 4/7/14 TAX LEVY: No
CONSULTANT: Weinberger
COMMUNITY REVITALIZATION AND INVESTMENT AUTHORITIES
Allows local governments to form Community Revitalization
and Investment Authorities to administer economic
development and affordable housing programs.
Background and Existing Law
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (RDAs), prepare
and adopt redevelopment plans, and finance redevelopment
activities. Citing a significant State General Fund
deficit, Governor Brown's 2011-12 budget proposed
eliminating RDAs and returning billions of dollars of
property tax revenues to schools, cities, and counties to
fund core services. Among the statutory changes that the
Legislature adopted to implement the 2011-12 budget, AB X1
26 (Blumenfield, 2011) dissolved all RDAs. The California
Supreme Court's 2011 ruling in California Redevelopment
Association v. Matosantos upheld AB X1 26, but invalidated
AB X1 27 (Blumenfield, 2011), which would have allowed most
RDAs to avoid dissolution.
RDAs used property tax revenues generated by growth in the
assessed value of properties in a project area - commonly
known as tax increment revenues - to finance their
redevelopment activities. RDAs' dissolution deprived many
local governments of the primary tool they used to
eliminate physical and economic blight, finance new
construction, improve public infrastructure, rehabilitate
existing buildings, and increase the supply of affordable
housing. Legislators, local government officials,
affordable housing advocates, and others want to develop
alternative tools to promote local economic development.
Proposed Law
AB 2280 -- 4/7/14 -- Page 2
Assembly Bill 2280 allows local government officials to
establish a Community Revitalization and Investment
Authority (authority) and use property tax increment
revenues to finance the implementation of a community
revitalization plan within a community revitalization and
investment area. AB 2280 specifies:
I. The process for creating an authority.
II. Criteria for establishing a community
revitalization and investment area.
III. The powers and duties that apply to an authority.
IV. The process for adopting a community
revitalization and investment plan.
V. How tax increment revenues are allocated to, and
used by, an authority.
VI. Reporting, accountability, and audit requirements.
I. Formation process . Assembly Bill 2280 allows local
governments to form an authority in two ways:
A city, county, or city and county can adopt a
resolution creating an authority governed by a
five-member board that is appointed by the city,
county, or city and county's legislative body. Three
board members must be members of the city, county, or
city and county's legislative body and two must be
public members who live or work within the community
revitalization and investment area.
A city, county, city and county, and special
district, in any combination, may create an authority
by entering into a joint powers agreement. The
authority's governing body must be comprised of a
majority of members from the legislative bodies of the
public agencies that created the authority. The
governing body must include at least two public
members who are appointed by a majority of the
authority's board and must live or work within the
community revitalization and investment area.
Assembly Bill 2280 prohibits:
School entities from participating in a community
revitalization and investment authority.
Redevelopment successor agencies from participating
in a community revitalization and investment
authority.
A city or county that created a former
redevelopment agency from forming a community
AB 2280 -- 4/7/14 -- Page 3
revitalization and investment authority, unless the
former redevelopment agency's successor agency has
received a finding of completion from the Department
of Finance.
II. Community revitalization and investment areas . Before
redevelopment officials could wield their extraordinary
powers of property tax increment funding and property
management (including eminent domain), the Community
Redevelopment Law (CRL) required them to determine if an
area was blighted. Assembly Bill 2280 deems specified
conditions within a community revitalization and investment
area to constitute blight within the meaning of the CRL.
The bill allows an authority to rely on a legislative
determination of blight and frees an authority from having
to make a separate finding of blight or conduct a survey of
blight within a community revitalization and investment
area.
Assembly Bill 2280 allows an authority to carry out a
community revitalization plan within a community
revitalization and investment area. The bill requires that
at least 80% of the land calculated by census tracts or
census block groups within the 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:
o Nonseasonal unemployment that is at least
3% higher than the statewide median, as defined
by a specified labor market report.
o Crime rates that are 5% higher than the
statewide median crime rate, as defined by a
specified Department of Justice report.
o Deteriorated or inadequate infrastructure
such as streets, sidewalks, water supply, sewer
treatment or processing, and parks.
o Deteriorated commercial or residential
structures.
Assembly Bill 2280 also allows an Authority to carry out a
community revitalization plan within a community
revitalization and investment area established within a
former military base that is principally characterized by
deteriorated or inadequate infrastructure and structures.
The governing board of an Authority established within a
AB 2280 -- 4/7/14 -- Page 4
former military base must include a member of the military
base closure commission as a public member.
Assembly Bill 2280 allows the legislative body or bodies of
the local government or governments that created the
authority to appropriate the amounts the legislative body
or bodies deem necessary for the administrative expenses
and overhead of the authority. The money appropriated may
be paid to the authority as a grant to defray the expenses
and overhead, or as a loan to be repaid upon the terms and
conditions as the legislative body may provide. If
appropriated as a loan, the property owners within the plan
area must be made third-party beneficiaries of the
repayment of the loan. The bill specifies that the term,
"administrative expense" includes expenses of planning and
dissemination of information.
III. Powers and duties . Assembly Bill 2280 directs that
an Authority has the following powers and duties:
Provide funding to rehabilitate, repair, upgrade,
or construct infrastructure.
Provide for low- and moderate-income housing.
Remedy or remove a release of hazardous substances
pursuant to the Polanco Redevelopment Act.
Provide for seismic retrofits of existing buildings
pursuant to a specified section of the CRL.
Acquire and transfer real property in accordance
with specified provisions of the CRL, including by use
of eminent domain. An authority must retain controls
and establish restrictions or covenants running with
the land sold or leased for private use for such
periods of time and under such conditions as are
provided in the community revitalization and
investment plan. The bill declares the establishment
of such controls to be a public purpose.
Issue bonds pursuant to specified provisions of the
CRL.
Borrow money, receive grants, or accept financial
or other assistance or investment from the state or
the federal government or any other public agency or
private lending institution for any project within its
area of operation, and comply with any conditions of
the loan or grant.
Adopt a community revitalization plan.
Make loans or grants for owners or tenants to
improve, rehabilitate, or retrofit buildings or
AB 2280 -- 4/7/14 -- Page 5
structures within the plan area.
With specified exceptions, provide direct
assistance to businesses within the plan area in
connection with new or existing facilities for
industrial or manufacturing uses.
Assembly Bill 2280 deems an Authority to be a local public
agency subject to the Ralph M. Brown Act, the Public
Records Act, and the Political Reform Act.
IV. Community revitalization and investment plans .
Assembly Bill 2280 requires an Authority to adopt a
community revitalization and investment plan that may
include a provision for the receipt of tax increment funds
generated within the area according to the CRL, provided
the plan includes:
A statement of the plan's principal goals and
objectives.
A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction of adequate infrastructure or repair or
upgrading of existing infrastructure.
A program to remedy or remove a release of
hazardous substances, if applicable.
A program to provide funding for or otherwise
facilitate the economic revitalization of the area.
A fiscal analysis setting forth the projected
receipt of revenue and projected expenses over a
five-year planning horizon.
The time limits, specified in the CRL, designating
the maximum length of time an Authority can establish
debt, act pursuant to a plan, repay debt, and commence
eminent domain proceedings.
A program that complies with the CRL's requirement
that a specified percentage of tax increment revenues
must be used to increase, improve, and preserve the
community's supply of low- and moderate-income
housing. An authority that includes a provision for
the receipt of tax increment revenues in its plan must
dedicate at least 25% of allocated tax increment
revenues for affordable housing purposes and comply
with other specified requirements that apply to an
authority's use of affordable housing funds.
A program that does both of the following:
o Prohibits the number of housing units
occupied by extremely low, very low, and
AB 2280 -- 4/7/14 -- Page 6
low-income households, including the number of
bedrooms in those units, at the time the plan is
adopted, from being reduced in the plan area
during the effective period of the plan.
o Requires the replacement of dwelling
units that house extremely low, very low, or
low-income households pursuant to state law
within two years of their displacement.
Assembly Bill 2280 specifies the manner in which an
authority must consider adoption of the plan at two public
hearings that must take place at least 30 days apart.
Assembly Bill 2280 specifies the manner in which the
Authority must provide public notice of the two public
hearings. The bill allows the Authority to adopt the plan
at the conclusion of the second public hearing by
ordinance, which must be subject to referendum as
prescribed by law for the ordinances of the local
jurisdiction that created the Authority.
Assembly Bill 2280 directs that an authority must consider
and adopt a plan amendment in accordance with the
procedures that applied to the consideration and adoption
of the original plan.
V. Tax increment financing . The California Constitution
and the CRL allow local officials to use property tax
increment revenues to repay bonds, debts, and loans needed
to finance a redevelopment project. Assembly Bill 2280
deems a community revitalization and investment authority
to be an "agency" as defined in the CRL for purposes of
receiving tax increment revenues pursuant to Article XVI of
Section 16 of the California Constitution.
Assembly Bill 2280 specifies that a "redevelopment plan"
referred to in the CRL is equivalent to the community
revitalization and investment plan adopted pursuant to the
bill's provisions. The bill allows a community
revitalization and investment plan to include a provision
for the receipt of tax increment funds.
Assembly Bill 2280 allows any city, county, or special
district that receives ad valorem property taxes from
property located within an area to adopt a resolution
directing the county auditor-controller to allocate its
AB 2280 -- 4/7/14 -- Page 7
share of tax increment funds within the area covered by the
plan to the authority. The resolution may direct the
county auditor-controller to allocate less than the full
amount of the tax increment, establish a maximum amount of
time in years that the allocation takes place, or limit the
use of the funds by the authority for specific purposes or
programs. A resolution may be repealed by giving the county
auditor-controller 60 days' notice; provided, however, that
the county auditor-controller must continue to allocate the
taxing entity's taxes that have been pledged to repay debt
issued by the authority until the debt has been fully
repaid.
Assembly Bill 2280 requires that, before adopting a
resolution allocating a share of its tax increment funds to
an authority, a city, county, or special district must
approve a memorandum of understanding with the authority
governing the authority's use of tax increment funds for
administrative and overhead expenses.
Assembly Bill 2280 requires that a provision for the
receipt of tax increment funds must become effective in the
tax year that begins after the December 1 following the
adoption of the plan.
Assembly Bill 2280 specifies the manner in which a county
auditor-controller must allocate tax revenue to an
authority upon adoption of a plan that includes a provision
for the receipt of tax increment funds.
Assembly Bill 2280 requires that an authority's plan for an
area that includes land formerly or currently designated as
part of a redevelopment area must subordinate tax increment
amounts received by the authority to any preexisting
enforceable obligation, as defined in statute.
VI. Reporting, Accountability, and Audits . Assembly Bill
2280 requires an Authority to review a community
revitalization and investment plan at least annually and
make any amendments that are necessary and appropriate in
accordance with specified statutory provisions. An
authority must require the preparation of an annual
independent financial audit paid for from its revenues.
Assembly Bill 2280 requires an authority, after holding a
public hearing, to adopt an annual report on or before June
AB 2280 -- 4/7/14 -- Page 8
30 of each year and specifies the manner in which the
authority must make the report available to the public.
Assembly Bill 2280 requires the annual report to contain
specified information and prohibits an authority from
spending specified tax increment revenues if it fails to
provide the annual report.
Assembly Bill 2280 requires an authority, every 10 years,
to conduct a protest proceeding at a public hearing to
consider whether the property owners and residents within
the plan area wish to present oral or written protests
against the authority. The authority must consider all
written and oral protests received before the close of the
public hearing. A majority protest exists if protests have
been filed representing over 50% of the combined number of
property owners and residents, at least 18 years of age or
older, in the area.
If there is a majority protest, Assembly Bill 2280 requires
the authority to call an election of the property owners
and residents in the area covered by the plan, and
prohibits the authority from initiating or authorizing any
new projects until the election is held. The election must
be held within 90 days of the public hearing and may be
held by mail-in ballot. The authority must adopt, at a
duly noticed public hearing, procedures for holding the
election. If a majority of the property owners and
residents vote against the authority, then it must not take
any further action to implement the plan on and after the
date of the election. This prohibition does not prevent
the authority from taking any and all actions and
appropriating and expending funds, including any and all
payments on bonded or contractual indebtedness, to carry
out and complete projects for which expenditures of any
kind had been made prior to the election's effective date.
Assembly Bill 2280 requires an authority to contract every
five years for an independent audit to determine compliance
with affordable housing maintenance and replacement
requirements, including provisions to ensure that the
requirements are met within each five-year period covered
by the audit. The audit must be conducted according to
guidelines established by the Controller. An authority
must provide a copy of the completed audit to the
Controller.
AB 2280 -- 4/7/14 -- Page 9
If an audit demonstrates a failure to comply with the
statutory requirements, an authority must adopt and submit
to the Controller, as part of the audit, a plan to achieve
compliance with those provisions as soon as feasible, but
in not less than two years following the findings. The
Controller must review and approve the plan, and require
the plan to stay in effect until compliance is achieved.
The plan must include one or more of the following means of
achieving compliance:
The expenditure of an additional 10% of gross tax
increment revenue on increasing, preserving, and
improving the supply of low-income housing.
An increase in the production, by an additional
10%, of housing for very low income households.
The targeting of specified expenditures exclusively
to rental housing affordable to, and occupied by,
persons of very low and extremely low income.
Assembly Bill 2280 specifies penalties that apply to an
authority that fails to provide a copy of a completed audit
to the Controller after receiving a written notice from the
Controller. Penalty amounts can be $2,500 to as much
$10,000, depending on an authority's revenues. The
penalties are doubled for a second consecutive year of
failure and tripled for a third or more consecutive year.
After three or more consecutive years, the Controller must
conduct its own financial audit report for which the
authority must pay. The Attorney General may, at the
Controller's request, take action to collect the fines.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Eliminating redevelopment
agencies did not eliminate the need for California
communities to build more affordable housing, eliminate
blight, foster business activity, clean up contaminated
brownfields, and create jobs. AB 2280 establishes a new
approach to local economic development and housing policy
that is focused on the state's disadvantaged communities.
AB 2280 -- 4/7/14 -- Page 10
AB 2280 fosters collaboration between cities and counties
on local economic development efforts and mitigates the
zero-sum competition for scarce property tax revenues among
cities, counties, and school districts. To ensure public
accountability, the bill requires a community
revitalization and investment authority to conduct an
annual review and reporting process and periodically allows
local residents to prohibit an Authority from taking
further actions. While it is unrealistic to expect that a
single economic development tool will work in all
California communities, AB 2280 is a viable option for
bringing vital investments to communities that most need
employment opportunities, crime reduction, upgraded
infrastructure, brownfield remediation, and affordable
housing.
2. Too soon ? AB 2280 restores local governments' ability
to use controversial powers granted by the Community
Redevelopment Law, including tax increment financing,
eminent domain, and debt issuance without voter approval.
Some taxpayer advocates argue that tax increment financing
robs local governments of revenue needed to provide
essential services, creating a funding gap between new
growth financed by tax increment and the revenues that are
needed to provide services in growing areas. Property
owners object that eminent domain used to take private
property to support other private development is wrong.
Some stakeholders would prefer that local agencies use
existing financing tools, which are subject to voter
approval, rather than restoring many of the Community
Redevelopment Law's provisions only a few years into the
process of winding down former RDAs.
3. Legislative history . AB 2280 is nearly identical to AB
1080 (Alejo, 2013), which the Senate Governanc e& Finance
Committee approved 4-1, but which later died in the Senate
Appropriations Committee. AB 2280 is also similar to SB
1156 (Steinberg, 2012), which the Governor vetoed, and SB 1
(Steinberg, 2013), which the Senate Governance & Finance
Committee passed on a 4-2 vote and is now awaiting a
hearing in the Assembly.
4. Double referral . The Senate Rules Committee has
ordered a double-referral of AB 2280, first to the Senate
Transportation & Housing Committee, which has jurisdiction
over the bill's housing-related provisions, and then to the
AB 2280 -- 4/7/14 -- Page 11
Senate Governance & Finance Committee which has policy
jurisdiction over the statutes governing local governments'
finances.
5. Related bills . The Senate Governance & Finance
Committee has heard several other bills that seek to
provide local governments with alternative financing
mechanisms to replace redevelopment:
SB 33 (Wolk) expands local officials' authority to
create Infrastructure Financing Districts (IFDs).
SB 628 (Beall) removes the voter-approval
requirements to create IFDs and issue bonds for
transit priority projects.
AB 229 (J. P�rez) allows local government to create
Infrastructure and Revitalization Financing Districts.
AB 243 (Dickinson) allows local governments to
create Infrastructure and Revitalization Financing
Districts.
AB 294 (Holden) authorizes IFDs to use the county's
Educational Revenue Augmentation Fund portion of tax
increment revenues.
AB 471 (Atkins) repeals the prohibition against
forming an IFD within a former redevelopment area.
Assembly Actions
Assembly Housing and Community Development Committee:
6-1
Assembly Local Government Committee: 8-1
Assembly Appropriations Committee: 12-4
Assembly Floor: 57-12
Support and Opposition (6/19/14)
Support : American Planning Association; Building Owners
and Managers Association of California; California
Association for Local Economic Development; California
Apartment Association; California Business Properties
Association; California Building Industries Association;
California Chamber of Commerce; California Coalition for
Rural Housing; California Rural Legal Assistance
Foundation; California Special Districts Association;
Cities of Adelanto, Antioch, Artesia, Blue Lake, Camarillo,
Citrus Heights, Fort Bragg, Greenfield, Healdsburg,
AB 2280 -- 4/7/14 -- Page 12
Humphreys, Indio, La Puente, La Quinta, Lakeport, Los
Angeles, National City, Plymouth, Rosemead, Sacramento,
Salinas, Thousand Oaks, Ventura, and Vista; Coachella
Valley Economic Partnership; Glendale City Employees
Association; Housing California; International Council of
Shopping Centers; League of California Cities; League of
California Cities-African American Caucus; League of
California Cities-Latino Caucus; NAIOP of California;
Organization of SMUD Employees; San Bernardino Public
Employees Association; San Luis Obispo County Employees
Association; San Jose Silicon Valley Chamber; Ventura
Council of Governments; Western Center on Law & Poverty.
Opposition : California Taxpayers Association; Fieldstead
and Company.