BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2493|
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THIRD READING
Bill No: AB 2493
Author: Bloom (D), et al.
Amended: 8/18/14 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-1, 6/17/14
AYES: DeSaulnier, Cannella, Galgiani, Hueso, Lara, Liu, Pavley,
Roth, Wyland
NOES: Gaines
NO VOTE RECORDED: Beall
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-1, 6/25/14
AYES: Wolk, Knight, DeSaulnier, Liu
NOES: Walters
NO VOTE RECORDED: Beall, Hernandez
SENATE APPROPRIATIONS COMMITTEE : 5-1, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Gaines
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 75-1, 5/27/14 - See last page for vote
SUBJECT : Redevelopment bond proceeds
SOURCE : Author
DIGEST : This bill allows redevelopment successor agencies and
housing successors to commit remaining proceeds from
redevelopment bonds issued between January 1, 2011 and June 28,
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2011 for previously planned projects that are consistent with a
region's sustainable communities strategy.
ANALYSIS : 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% 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 26 1X
(Blumenfield, Chapter 5, Statutes of 2011-12 First Extraordinary
Session) and AB 27 1X (Blumenfield, Chapter 6, Statutes of
2011-12 First Extraordinary Session). AB 26 1X eliminated
redevelopment agencies and established procedures for winding
down the agencies, paying off enforceable obligations, and
disposing of agency assets. AB 26 1X 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 26 1X also included provisions allowing the host city or
county 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 Department of Housing and Community Development takes on
that responsibility.
AB 27 1X 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 27 1X. As a result, all of the state's
roughly 400 redevelopment agencies dissolved on February 1,
2012, and successor agencies began implementing AB 26 1X's
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provisions to distribute former redevelopment assets and pay the
remaining obligations.
Subsequent legislation, AB 1484 (Budget Committee, Chapter 26,
Statues of 2012) allowed a successor agency to expend remaining
proceeds from non-housing redevelopment bonds issued before
January 1, 2011, for the purposes for which the bonds were sold
or to defease the bonds. AB 1484 also allowed a housing
successor to commit remaining proceeds of bonds backed by the
L&M Fund and issued for the purposes of affordable housing prior
to January 1, 2011.
SB 375 (Steinberg, Chapter 728, Statutes of 2008) requires the
Air Resources Board (ARB) to provide each region that has a
metropolitan planning organization (MPO) with a greenhouse gas
(GHG) emission-reduction target for the automobile and
light-truck sector for 2020 and 2035, respectively. Each MPO,
in turn, is required to include within its regional
transportation plan a sustainable communities strategy (SCS) or
alternative planning scenario (APS) designed to achieve the ARB
targets for GHG emission reduction. Each MPO must submit its
SCS or APS to ARB for review. ARB must accept or reject the
MPO's determination that the SCS or APS submitted would, if
implemented, achieve the GHG emission-reduction targets.
This bill allows both successor agencies and housing successors
to commit remaining proceeds from non-housing and housing
redevelopment bonds, respectively, issued between January 1,
2011 and June 28, 2011, provided that the remaining proceeds are
approved by the oversight board and used for projects that meet
all of the following criteria:
1.The project is consistent with the region's SCS.
2.Two or more of the following "significant planning or
implementation actions" occurred on or before December 31,
2010:
A. The former redevelopment agency, the city, or the
planning commission approved an action directly related to
the planning or implementation of the project.
B. The project is included within an approved city or
redevelopment agency planning document.
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C. The city, county, or project sponsor has expended more
than $25,000 on planning related activities for the project
within one fiscal year or $50,000 in total over multiple
fiscal years.
1.The successor agency or housing successor provides
documentation dated December 31, 2010, or earlier indicating
the intention to finance all or a portion of the project with
the future issuance of long-term debt or indicating that the
issuance of long-term redevelopment agency debt was planned by
December 31, 2010.
2.Each construction contract over $100,000 includes a provision
requiring that the contractor and all of that contractor's
subcontractors pay prevailing wage.
3.For each construction contract over $250,000, the successor
agency requires 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.
In addition, the bill allows a successor agency or housing
successor to reimburse, with 2011 redevelopment non-housing or
housing bonds, respectively, any city that funded a project
meeting the first three criteria listed above with funds other
than redevelopment funds between June 28, 2011 and the effective
date of the bill, if the project meets the purpose for which the
bonds were issued. Requires request for expenditures of 2011
bond proceeds be included on a Recognized Obligation Payment
Schedule, and shall be forwarded to the Department of Finance
for review and approval or denial.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, significant
General Fund impacts, most of which would occur beginning in
2021 and through 2041, as a result of allowing for continued
debt repayment on bonds issued in 2011 from tax increment that
would otherwise be redistributed to taxing entities if the bonds
were defeased. Absent the bill, estimated bond debt service
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savings after defeasement would escalate to as high as $99
million in 2026, and decline to approximately $42 million by
2041 (the typical 30 year term of most of these bonds). This
bill prevents these amounts from being distributed to local
agencies that receive a portion of the property tax, including
schools. Since the General Fund must backfill any amounts that
would otherwise go to schools under Proposition 98's minimum
funding guarantees, this bill would result in future General
Fund impacts that could reach the tens of millions, reaching a
peak in 2026 and declining thereafter.
SUPPORT : (per Senate Transportation and Housing Committee
analysis; unable to reverify at time of writing)
California Building Industry Association
City of Calexico
City of Culver City
City of Folsom
City of Galt
City of Glendale
City of La Quinta
City of Lynwood
City of National City
City of Oakdale
City of Riverbank
City of Santa Cruz
City of Santa Monica
City of Signal Hill
City of Sonoma
City of Stanton
City of Ukiah
City of Union City
City of West Hollywood
City of Yorba Lina
Glendale Successor Agency
Housing California
League of California Cities
MuniServices
National City Chamber of Commerce
Northern California Carpenters Regional Council
Southwest California Legislative Council
Stanton Housing Authority
West Hollywood Chamber of Commerce
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OPPOSITION : (per Senate Transportation and Housing Committee
analysis; unable to reverify at time of writing)
California Special Districts Association
California State Association of Counties
County of Santa Clara
ARGUMENTS IN SUPPORT : According to the author, during the
first half of 2011, prior to the enactment of AB 26 1X,
approximately 50 redevelopment agencies legally issued bonds to
support public works projects such as infrastructure
construction and repair, new public facilities, and affordable
housing. Thirty-seven successor agencies and housing successors
have remaining bond proceeds that they are not allowed to use.
The Department of Finance has asserted that these successors
must defease the vast majority of the 2011 redevelopment bonds;
however, over 90% of these bonds cannot be defeased for 10
years. During this 10-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 10-year period.
With respect to tax-exempt bonds (approximately 70% of the bonds
in question), using these bond proceeds for their intended
purpose will also ensure the continued tax-exempt status that
bondholders expect.
ARGUMENTS IN OPPOSITION : Opponents argue that allowing
successor agencies to use proceeds from bonds issued after the
governor announced his proposal to dissolve redevelopment
agencies improperly rewards agencies that deliberately acted to
circumvent the dissolution process, often by rushing to sell
bonds at above-market interest rates. $750 million in bond
proceeds is at stake, but the ultimate cost to schools,
counties, cities, and special districts is $2 billion when the
additional interest payments are included. Opponents prefer to
see the bond proceeds used to retire redevelopment debt so that
tax increment is more quickly available to all taxing entities,
including schools which otherwise the state's General Fund must
support. In other words, this bill requires the whole state to
pay for these 39 "Mardi Gras" agencies.
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ASSEMBLY FLOOR : 75-1, 5/27/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Harkey, Roger Hern�ndez, Holden,
Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Perea, John A. P�rez, V. Manuel P�rez,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
NOES: Donnelly
NO VOTE RECORDED: Mansoor, Patterson, Quirk-Silva, Vacancy
JA:nl 8/17/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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