BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1129 (Steinberg) - Redevelopment: successor agencies.
Amended: April 22, 2014 Policy Vote: G&F 4-2
Urgency: No Mandate: No
Hearing Date: May 23, 2014 Consultant: Mark McKenzie
SUSPENSE FILE. AS AMENDED.
Bill Summary: SB 1129 would make several changes to the statutes
governing the dissolution of redevelopment agencies (RDAs).
Among other things, the bill 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" (SCS).
Deem an agreement entered into by an RDA prior to June 30,
2011 that commits funds to state highway infrastructure
improvements as an enforceable obligation.
Revise the process for disposal of former RDA properties
through a long-range property management plan (LRPMP) by
eliminating a requirement for compensation agreements
governing the distribution of property proceeds.
Fiscal Impact: (As approved May 23, 2014)
Unknown General Fund losses, in the millions or tens of
millions, over several fiscal years, to the extent the bill
allows successor agencies to use the proceeds of bonds
issued in 2011 for redevelopment activities, and prevents
the Department of Finance (DOF) from denying enforceable
obligations without oversight board approval. Both of these
provisions would reduce the amount of residual property tax
revenues directed to schools, the magnitude of which is
unknown. Approximately 50 percent of tax increment revenues
necessary to pay off the debt used for continued
redevelopment activity would be diverted from schools. In
general, any property tax proceeds diverted from schools
results in an equivalent General Fund cost, pursuant to
Proposition 98's minimum funding guarantees.
Unknown General Fund losses, perhaps in the hundreds of
thousands, by specifying that RDA agreements entered into
SB 1129 (Steinberg)
Page 1
prior to June 30, 2011 that include highway improvements are
legitimate enforceable obligations. Former RDA revenues
dedicated to such a project would not be distributed to
local taxing agencies, including schools, pursuant to the
dissolution process. In general, any property tax proceeds
diverted from schools results in an equivalent General Fund
cost, pursuant to Proposition 98's minimum funding
guarantees. The number of projects to which this provision
would apply is unknown, but staff assumes there would be
few.
Revisions to the process for disposing of former RDA
properties through the LRPMP process, particularly the
deletion of requirements for compensation agreements, would
result in benefits for some local governments at the expense
of other local governments that would have otherwise
received a portion of proceeds from the sale of former RDA
properties, potentially including schools. The magnitude of
these revenue shifts among local agencies is unknown, but
likely substantial. As noted above, any losses to schools
would have a corresponding increase in state General Fund
spending pursuant to Proposition 98.
Background: Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property taxes that is
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades.
Prior to their dissolution pursuant to ABx1 26 (Blumenfield)
Chap 5/2011, RDAs used tax increment financing, oftentimes
issuing long-term debt in the form of tax allocation bonds, to
address issues of blight, construct affordable housing,
rehabilitate existing buildings, and finance development and
infrastructure projects. When RDAs were abruptly dissolved
pursuant to ABx1 26, many held balances of unencumbered bond
proceeds that were intended to fund future redevelopment
activities, but were not needed to meet those RDAs' existing
obligations.
Existing law establishes procedures for winding down RDA
activity, including a requirement that successor agencies
dispose of former RDAs' assets under direction of an oversight
board. Successor agencies are required to make any payments
related to enforceable obligations, as specified in an adopted
SB 1129 (Steinberg)
Page 2
biannual recognized obligation payment schedule (ROPS), and
remit unencumbered balances of RDA funds to the county
auditor-controller for distribution to local taxing entities in
the county. The DOF reviews each ROPS to determine if the
listed payments meet the statutory criteria for repayment, and
has the authority to disallow any payments that do not meet
those criteria. Successor agencies must use bond proceeds
derived from bonds issued prior to January 1, 2011 for the
purposes for which the bonds were sold. If those purposes
cannot be achieved, the proceeds can be used to defease the
bonds. Successor agencies cannot enter into new enforceable
obligations.
Existing law, AB 1484 (Budget Committee), Chap 26/2012, requires
DOF to provide a successor agency with a "finding of completion"
after the agency remits specified RDA property tax allocations
and unencumbered cash assets to the county auditor-controller
through a due diligence process. Once the successor agency
receives a finding of completion, the agency is authorized to:
Transfer former RDA properties to the city or county, or
otherwise dispose of the property in accordance with a
DOF-approved long-range property management plan. Prior to
disposal of property pursuant to an LRPMP, an agency must
enter into compensation agreements with other local entities
for equitable distribution of property proceeds.
Repay loans made by the city or county to the RDA, if the loan
is deemed to have been made for legitimate redevelopment
purposes, as specified.
Expend bond proceeds in excess of the amounts needed to
satisfy approved enforceable obligations in a manner
consistent with the original bond covenants.
SB 375 (Steinberg) Chap 728/2008, requires the Air Resources
Board (ARB) to provide each region that has a metropolitan
planning organization (MPO) with a greenhouse gas 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) designed to achieve the ARB targets
for greenhouse gas emission reduction. Each MPO must submit its
SCS to ARB for review. ARB must accept or reject the MPO's
determination that the implementation of a submitted SCS
submitted would achieve the greenhouse gas emission reduction
targets.
SB 1129 (Steinberg)
Page 3
Proposed Law: SB 1129 would make several changes to the statutes
governing the dissolution of RDAs. Specifically, this bill
would:
Deem an agreement entered into by an RDA prior to June 30,
2011 that commits funds to state highway infrastructure
improvements as an enforceable obligation.
Authorize an RDA successor agency to use the proceeds of
bonds issued during 2011, upon approval of an oversight
board, if it determines that the use of bond proceeds is
consistent with an SCS.
Require a successor agency's oversight board to review and
approve any action to remove an enforceable obligation from
a ROPS for a successor agency that has received a finding of
completion from DOF.
Authorize a successor agency that has received a finding of
completion to enter into or amend contracts and agreements
or otherwise administer projects in connection with a
long-term enforceable obligation, if the contract, project,
or agreement will not commit new tax funds, or otherwise
impact the distribution of tax increment to taxing agencies.
Revise the process for disposal of former RDA properties
through a long-range property management plan (LRPMP) by
doing the following:
o Eliminating a requirement to reach a compensation
agreement with other taxing entities for disposing of
properties pursuant to an LRPMP.
o Prohibiting DOF from requiring a compensation
agreement as part of the approval of an LRPMP.
o Limit the conditions under which DOF can approve an
LRPMP to whether the successor agency made a "good faith
effort" to address the statutory requirements of an
LRPMP, rather than requiring those components.
o Requiring DOF to approve an LRPMP as expeditiously
as possible.
o Deleting a requirement that successor agencies
dispose of former RDA properties if DOF does not approve
an LRPMP by January 1, 2015.
Staff Comments: By allowing successor agencies to spend
additional bond proceeds on projects rather than on retiring
outstanding debts, and allowing specified agreements to be
deemed enforceable obligations, SB 1129 grants a larger share of
former RDA assets to successor agencies and a smaller share to
SB 1129 (Steinberg)
Page 4
other local governments, including school districts, than they
would receive under current law. The Governor's 2014-15 Budget
estimates that K-14 schools will receive residual property tax
revenues of approximately $1.1 billion in 2013-14 and $748.7
million in 2014-15, providing a comparable amount of Proposition
98 General Fund savings. By reserving a portion of former RDA
assets for other purposes, this bill would reduce the amount of
funding available to offset General Fund education spending.
Author's amendments would do the following:
Require DOF to provide written confirmation within 45
days that an enforceable obligation as approved in a ROPS
is final and conclusive.
Explicitly state that DOF is not required to review any
actions relating to the disposition of property after a
LRPMP has been approved.
Set a deadline of January 1, 2016 for the SCO to review
RDA activities to determine whether an asset transfer
between an RDA and a city or county occurred after January
1, 2011, or after January 31, 2012, if the transfer was
made pursuant to an enforceable obligation on a valid ROPS,
as specified.
Make other technical and clarifying changes.