BILL ANALYSIS �
AB 2493
Page 1
Date of Hearing: April 30, 2014
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
AB 2493 (Bloom) - As Amended: April 10, 2014
SUBJECT : Redevelopment dissolution: housing projects: bond
proceeds.
SUMMARY : Allows successor agencies greater flexibility for bond
obligation proceeds issued between January 1, 2011 and June 28,
2011, under specified conditions. 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 that were issued for
affordable housing purposes.
2)Requires bond proceeds derived from bonds issued between
January 1, 2011, and June 28, 2011, to only be used for
projects which meet the criteria as determined by a resolution
issued by the oversight board:
a) The project shall be consistent with the sustainable
communities strategy adopted by the appropriate
metropolitan planning organization (MPO);
b) Two or more significant planning or implementation
actions shall have occurred on or before December 31, 2010.
The term significant planning or implementation actions
means any of the following:
i) An action approved by the governing body of the
city, the board of the former redevelopment agency (RDA),
or the planning commission directly related to the
planning or implementation of the project;
ii) The project is included within an approved city or
RDA planning document, including, but not limited to, an
RDA five-year implementation plan, capital improvement
plan, master plan, or other planning document; or,
iii) The expenditure of more than $25,000 on planning
related activities for the project within one fiscal
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year, of $50,000 in total, over multiple years.
c) Documentation dated on or before December 31, 2010,
shall be provided indicating the intention to finance all
or a portion of the project with the future issuance of
long-term debt, or documentation showing that the issuance
of long-term RDA debt was being planned on or before
December 31, 2010;
d) Each construction contract over $100,000 shall include a
provision that prevailing wage will be paid by the
contractor and all of that contractor's subcontractors;
e) For each construction contract over $250,000, the
successor agency shall require prospective contractors to
submit a standardized questionnaire and financial
statements as part of their bid package, to establish the
contractor's financial ability and experience in performing
large construction projects.
3)Allows, upon the issuance of a finding of completion by the
Department of Finance (DOF), that any city that funded an
eligible project, meeting the criteria listed in 2) a) through
2) c), above, inclusive, with funds other than RDA funds,
within the two years prior to the effective date of this act,
shall be eligible to be reimbursed utilizing 2011 bond
proceeds, if the project meets the purpose for which the bonds
were issued.
4)Makes technical and conforming changes to terminology in the
bill.
EXISTING LAW :
1)Dissolves redevelopment agencies and institutes a process for
winding down their activities.
2)Allows a city or county that authorized the creation of an RDA
to elect to retain the housing assets and functions previously
performed by the RDA.
3)Required the entity assuming the housing functions of the
former RDA to submit to DOF by August 1, 2012, a list of all
housing assets, as specified.
4)Allows the entity that assumed the housing functions to
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designate the use of and commit indebtedness obligation
proceeds that remain after the satisfaction of enforceable
obligations that have been approved in a Recognized Obligation
Payment Schedule and that are consistent with the indebtedness
obligation covenants.
5)Requires the proceeds to be derived from indebtedness
obligations that were issued for the purposes of affordable
housing prior to January 1, 2011, and were backed by the Low-
and Moderate-Income Housing Fund.
6)Requires DOF to issue a finding of completion to the successor
agency, within five business days, once the following
conditions have been met and verified:
a) The successor agency has paid the full amount as
determined during the due diligence reviews and the county
auditor-controller has reported those payments to DOF; and,
b) The successor agency has paid the full amount as
determined during the July True-up process; or,
c) The successor agency has paid the full amount upon a
final judicial determination of the amounts due and
confirmation that those amounts have been paid by the
county auditor-controller.
7)Allows the successor agency, upon receiving the finding of
completion, to:
a) Retain dissolved redevelopment agency assets;
b) Place loan agreements between the former redevelopment
agency and sponsoring entity on the Recognized Obligation
Payments Schedule, as an enforceable obligation, provided
the oversight board makes a finding that the loan was for
legitimate redevelopment purposes; and,
c) Utilize proceeds derived from bonds issued prior to
January 1, 2011, in a manner consistent with the original
bond covenants.
8)Requires, after DOF issues a finding of completion, the
successor agency to prepare a long-range property management
plan that addresses the disposition and use of the real
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properties of the former redevelopment agency, and requires
the report to be submitted to the oversight board and DOF for
approval no later than six months following the issuance to
the successor agency of the finding of completion.
FISCAL EFFECT : This bill is keyed fiscal.
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
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 winding down of redevelopment agencies, AB 1484
(Blumenfield), Chapter 26, Statutes of 2012, 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.
One of the provisions in AB 1484 allowed successor agencies that
have received a "finding of completion" from DOF to have
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 requirement payments to DOF.
Once the successor agency receives the finding of completion,
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the agency gains access to three specific benefits listed in
statute - first, the ability to transfer former redevelopment
agency-owned properties to the city or county for redevelopment
upon completion of a
long-term management plan approved by DOF; second, the ability
to repay city loans made to the redevelopment agency; and,
third, the ability to use unspent bond proceeds issued by
redevelopment agencies prior to December 31, 2010. However, the
repayment of city-agency loans and the expenditure of unspent
bond proceeds would become an "enforceable obligation." Once a
finding of completion is issued, the successor agency must
prepare a long-range property management plan that addresses the
disposition and use of the real properties of the former
redevelopment agency. The report is required to be submitted to
the oversight board and DOF or approval no later than six months
following the issuance to the successor agency of the finding of
completion.
This bill makes several changes to dates established in AB 1484
and AB 1X 26. First, the bill 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 that were issued for affordable housing purposes.
Second, the bill expands the cutoff date for the use of
redevelopment bond proceeds from December 31, 2010 (as
established by AB 1X 26) to June 28, 2011, upon issuance of a
finding of completion by DOF. June 28, 2011 is the date the
dissolution legislation (AB 1X 26) was signed.
The bill also requires that certain criteria be met - that the
project must be consistent with the sustainable communities
strategy adopted by the appropriate MPO, that two or more
significant planning or implementation actions occurred on or
before December 31, 2010, to ensure that the project was being
contemplated by the local agency prior to the dissolution of
redevelopment, and that prevailing wage will be paid by the
contractor, as specified.
Purpose of this bill: According to the author, "During the
first half of 2011, prior to the dissolution of all
redevelopment agencies, approximately 50 agencies legally issued
bonds. Of those cities, 37 have outstanding bond proceeds that
they are not allowed to use. The State has asserted that the
vast majority of the 2011 redevelopment bonds must be defeased
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and their proceeds not spent on projects, however, over 90% of
these bonds cannot be defeased for 10 years. During this
ten-year period, nearly $1 billion will be spent on the debt
service payments for these bonds, and the bond proceeds will
continue to go unused. If the proceeds were used for their
intended purposes, the construction of these projects would
generate over $1.2 billion in statewide economic activity, more
than the debt service payments during the ten-year period.
"The vast majority of these bonds were issued for public works
projects such as infrastructure construction and repair, new
public facilities and affordable housing. Bondholders who
purchased tax-exempt bonds (approximately 70% of the bonds in
question) for specific public works projects were promised
tax-free returns. Per federal tax law, tax-exempt bond proceeds
must be used for their intended purpose, or the bonds could be
subject to losing their tax-exempt status."
The author also notes that "various amendments have been added
to provide assurance that successor agencies would only be able
to use 2011 redevelopment bond proceeds for projects which were
actively being planned prior to January 1, 2011, and that the
bill would "assure that cities who rushed to issue bonds, in
order to "lock up" funds for future projects that they were not
currently working on would not be able to use their 2011 bond."
Related legislation : Last year, the author carried a similar
bill, AB 981 (Bloom, 2013). The bill failed passage in the
Assembly Appropriations Committee.
Double-referral . This bill is passed out of Local Government
Committee 8 to 1.
REGISTERED SUPPORT / OPPOSITION :
Support
Cities of La Quinta, Lynwood, Riverbank, Santa Cruz, Santa
Monica, Ukiah, and West
Hollywood
City of Glendale and Glendale Successor Agency
National City Chamber of Commerce
Southwest California Legislative Council
West Hollywood Chamber of Commerce
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Opposition
County of Santa Clara
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085