BILL ANALYSIS �
AB 2493
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Date of Hearing: May 14, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 2493 (Bloom) - As Amended: April 10, 2014
Policy Committee: Local
GovernmentVote:8 - 0
Housing and Community Development
7 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows successor agencies greater flexibility for bond
obligation proceeds issued between January 1, 2011 and June 28,
2011. 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, upon the issuance of a finding of completion by the
Department of Finance (DOF),
a successor agency to use redevelopment bond proceeds issued
between January 1, 2011 and June 28, 2011, only for projects
which meet the criteria as determined by a resolution issued
by the oversight board.
FISCAL EFFECT
1)Unknown General Fund losses, in the millions or tens of
millions, over several fiscal years.
Property tax revenues are allocated to units of local
government according to existing law regarding distribution of
local property tax. Without this bill, most of the bonds
would be paid off in 10 years or sooner, freeing up property
tax to be allocated to local governments, including schools.
Under this bill, there would be ongoing redevelopment project
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area tax increment flowing to the redevelopment agency until
all of the bonds are paid off. To the extent this bill
reduces the revenues flowing to school districts, there would
be a corresponding cost to the General Fund as the property
tax would otherwise offset General Fund obligations to
schools, pursuant to the Proposition 98 minimum funding
guarantee.
2)Enactment of this legislation will likely lead to settling or
dismissing lawsuits brought over the dissolution of
redevelopment agencies. Reduced litigation will result in
significant General Fund savings.
COMMENTS
1)Purpose . The author estimates there is approximately $670
million in non-housing redevelopment bond proceeds and $134
million in housing bond proceeds issued in 2011 that cannot be
spent due to the deadline by which bonds would have needed to
have been sold to be eligible. These bonds were issued to
finance a variety of public works projects such as
infrastructure construction and repair, new public facilities
and affordable housing. The bonds are held by 37 successor
agencies throughout the state.
DOF has directed successor agencies to defease, or pay off,
the 2011 bonds. According to the author, 90% of these bonds
cannot be defeased for 10 years, during which time nearly $1
billion would be spent on debt service payments for the bonds.
The author argues, if these bond proceeds could be used, the
construction of these projects would generate over $1.2
billion in statewide economic activity.
2)Background . In 2011, the Legislature approved and the
governor signed two measures, ABX1 26 and ABX1 27 that
together dissolved redevelopment agencies as they existed and
created a voluntary redevelopment program on a smaller scale.
In response, the California Redevelopment Association, the
League of California Cities and other parties, filed suit
challenging the two measures. The Supreme Court denied the
petition for peremptory writ of mandate with respect to ABX1
26 and granted the petition with respect to ABX1 27. As a
result of the court's decision, all redevelopment agencies
were required to dissolve as of February 1, 2012 and there was
no authority for any new redevelopment program.
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In 2012, AB 1484 (Blumenfield), Chapter 26, made the statutory
changes needed to achieve budget savings related to the
dissolution of redevelopment agencies. AB 1484 clarified the
process for dissolving all redevelopment agencies, 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. AB 1484 specified all
proceeds from bonds issued in 2011 must be defeased, the
exception being if the redevelopment agency has enforceable
obligations with third parties to spend the proceeds.
One of the provisions in AB 1484 allowed successor agencies
that received a finding of completion from DOF 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 required payments to DOF
3)Related legislation .
a) SB 1129 (Steinberg, 2014), would authorize an RDA
successor agency to use the proceeds of bonds issued in
2011 for the purposes for which the bonds were sold, if
those purposes are consistent with a specified "sustainable
communities strategy." This bill is on the Senate
Appropriations Committee Suspense File.
b) Last year, the author carried a similar bill, AB 981
(Bloom, 2013). The bill was held on this committee's
Suspense File.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081
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