BILL ANALYSIS �
AB 2493
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CONCURRENCE IN SENATE AMENDMENTS
AB 2493 (Bloom)
As Amended August 22, 2014
Majority vote
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|ASSEMBLY: |75-1 |(May 27, 2014) |SENATE: | | |
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(vote not available)
Original Committee Reference: L. GOV.
SUMMARY : Allows successor agencies greater flexibility for bond
obligation proceeds issued between January 1, 2011, and June 28,
2011, under specified conditions.
The Senate amendments :
1)Clarify that a project must be consistent with the applicable
regional sustainable communities strategy or alternative
planning strategy adopted pursuant to existing law that the
State Air Resources Board (Board) has determined would, if
implemented, achieve the greenhouse gas emission reduction
targets established by the Board, or, if a sustainable
communities strategy is not required for a region by law, a
regional transportation plan that includes programs and
policies to reduce greenhouse gas emissions.
2)Provide, if remaining bond proceeds derived from bonds issued
on or before December 31, 2010, cannot be spent in a manner
consistent with the bond covenants, as specified, or if bond
proceeds derived from bonds issued between January 1, 2011,
and June 28, 2011, cannot be used for projects that meet the
requirements of the bill, as specified, that proceeds shall be
used to defease all or a portion of the bonds or to purchase
all or a portion of those same outstanding bonds on the open
market for cancellation. Require, if only a portion of bonds
proceeds will be used, the successor agency to defease or
purchase bonds for cancellation in a manner that maximizes
fiscal savings.
3)Clarify that the provisions of this bill relating to bond
obligation proceeds additionally apply to a county, or city
and county.
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4)Define the term "housing successor" and replace references to
"the entity assuming the housing functions of the former
redevelopment agency" with that term.
5)Require that any successor agency requesting the use of bond
proceeds derived from bonds issued between January 1, 2011,
and June 28, 2011, in accordance with the bill's provisions,
shall place that request on its Recognized Obligation Payment
Schedule (ROPS). Require the successor agency to place each
project on a separate ROPS line item.
6)Require the successor agency to detail in the resolution
adopting the ROPS how each project will meet the requirements
of the bill, and all documentation showing how the project
meets those criteria shall be attached to the resolution.
7)Require the resolution adopting the ROPS, including the
supporting documentation, to be forwarded to the Department of
Finance (DOF) for review and approval or denial.
8)Require bond proceeds derived from bonds issued on or before
December 31, 2010, in excess of the amounts needed to satisfy
approved enforceable obligations to be expended in a manner
consistent with the original bond covenants. Specify that
enforceable obligations may be satisfied by the creation of
reserves for projects that are the subject of the enforceable
obligation and that are consistent with the contractual
obligations for those projects, or by expending funds to
complete the projects. Provide that an expenditure shall
constitute the creation of excess bond proceeds obligations to
be paid from the excess proceeds, and require that excess bond
proceeds be listed separately on the ROPS submitted by the
successor agency.
9)Include chaptering out amendments to avoid conflicts with SB
1129 (Steinberg) of the current legislative session, and AB
1582 (Mullin) of the current legislative session.
AS PASSED BY THE ASSEMBLY , this bill:
1)Extended, 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.
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2)Required 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
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;
and,
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
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large construction projects.
3)Allowed, upon the issuance of a finding of completion by the
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)Made technical and conforming changes to terminology in the
bill.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill contains 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 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 would prevent
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 (1988) 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. (Senate Appropriations
Committee notes that this does not account for any potential
economic benefits resulting from allowing the completion of
projects funded by the 2011 bonds)
COMMENTS :
1)Background on RDA dissolution. 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, AB 26 X1 (Blumenfield), Chapter
5, Statutes of 2011-12 First Extraordinary Session, and AB 27
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X1 (Blumenfield), Chapter 6, Statutes of 2011-12 First
Extraordinary Session, 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 AB 26
X1. However, the Court did grant CRA's petition with respect
to AB 27 X1. 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,
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
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properties of the former redevelopment agency. The report is
required 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.
2)Purpose of this bill. This bill makes several changes to
dates established in AB 1484 and
AB 26 X1. First, the bill extends, from January 1, 2011, to
June 28, 2011, the date by which an entity that has assumed
the housing functions (housing successor) 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 26 X1), to June 28,
2011, upon issuance of a finding of completion by DOF. June
28, 2011, is the date the dissolution legislation (AB 26 X1)
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 or
redevelopment, and that prevailing wage will be paid by the
contractor, as specified.
This bill is author-sponsored.
3)Author's statement. 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 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.
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"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."
4)Prior legislation. Last year, the author carried a similar
bill, AB 981 (Bloom) of 2013. The bill failed passage in the
Assembly Appropriations Committee.
5)Chaptering out amendments. This bill contains chaptering out
amendments to avoid conflicts with SB 1129 (Steinberg), and AB
1582 (Mullin), of the current legislative session.
6)Arguments in support: Supporters argue that allowing these
funds to be expended will create many prevailing wage jobs,
shelter additional families in affordable housing, and rebuild
critical infrastructure in cities that can serve as a catalyst
for additional private-sector development.
7)Arguments in opposition: The County of Santa Clara argues
that providing successor agencies the ability to use 2011 bond
proceeds improperly awards those very cities whose former RDAs
issued bonds on the eve of dissolution, and supports the funds
being used to retire RDA debt to free up funds for all taxing
entities.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
AB 2493
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