BILL ANALYSIS �
SB 1129
Page 1
Date of Hearing: June 18, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 1129 (Steinberg) - As Amended: May 27, 2014
SENATE VOTE : 27-8
SUBJECT : Redevelopment: successor agencies to redevelopment
agencies.
SUMMARY : Makes various changes to provisions of law governing
former redevelopment agencies (RDAs). Specifically, this bill :
1)Clarifies that the provision contained in community
redevelopment law (CRL) that prohibits an agency or community
officer or employee who in the course of his or her duties is
required to participate in the formulation of, or to approve
plans or policies for, the redevelopment of a project area
from acquiring any interest in any property included within a
project area, does not prohibit any agency or community
officer or employee from acquiring an interest in property
within a former redevelopment project area of a dissolved RDA.
2)Specifies, for the existing requirement that the State
Controller (Controller) review the activities of RDAs in the
state to determine whether an asset transfer has occurred
after January 1, 2012, between the city or county, or city and
county that created an RDA or any other public agency, and the
RDA, that that review shall be completed no later than January
1, 2016.
3)Allows an agreement entered into between an RDA prior to June
30, 2011, to be an enforceable obligation, if the agreement
relates to state highway infrastructure improvements to which
the RDA committed funds pursuant to provisions in CRL related
to property disposition, rehabilitation and development.
4)Requires the Department of Finance (DOF), prior to the
rejection of an enforceable obligation from a Recognized
Obligation Payment Schedule (ROPS) for a successor agency that
has received a finding of completion from DOF, as specified,
to submit the proposed rejection to the oversight board for
review and approval, whose determination shall be final and
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conclusive without further review by DOF.
5)Places a time limit of 45 days for DOF to provide written
confirmation, if an enforceable obligation provides for an
irrevocable commitment of property tax revenue and where
allocation of such revenues is expected to occur over time and
the successor agency has petitioned DOF to provide written
confirmation that its determination of such enforceable
obligation as approved in a ROPS is final and conclusive, as
specified.
6)Specifies, for the existing requirement that the Controller
review the activities of successor agencies in the state to
determine if an asset transfer has occurred after January 31,
2012, between the successor agency and the city, county, or
city and county that created an RDA, or any other public
agency, that was not made pursuant to an enforceable
obligation on an approved and valid ROPS, that that review
shall be completed no later than January 1, 2016.
7)Specifies that provisions of law that require a city, county,
or city and county that wishes to retain any property or other
assets for future redevelopment activities, funded from its
own funds and under its own auspices, to reach a compensation
agreement with the other taxing entities to provide payments
to them in property to their shares of the base property tax,
as specified, for the value of the property retained, shall
not apply to the disposition of properties pursuant to a
long-range property management plan.
8)Deletes the January 1, 2015, date contained in existing law
that requires the property of a former RDA to be disposed of
according to law, if DOF has not approved a long-range
property management by that date.
9)Allows bond proceeds derived from bonds issued during the year
2011 to be used for the purposes for which the bonds were
issued upon approval of the oversight board, if the oversight
board, in consultation with the appropriate metropolitan
planning organization (MPO), determines that the use of the
bond proceeds is consistent with the sustainable communities
strategy adopted by the MPO in accordance with existing law.
10)Allows the successor agency to enter into, or amend existing,
contracts and agreements, or otherwise administer projects in
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connection with enforceable obligations approved pursuant to
existing law related to the ROPS approval process, including
the substitution of private developer capital in a disposition
and development agreement that has been deemed an enforceable
obligation, if the contract, agreement, or project will not
commit new property tax funds, and will not otherwise reduce
property tax revenues or payments made to the taxing agencies,
as specified.
11)Prohibits DOF, as part of the approval of a long-range
property management plan, from requiring a compensation
agreement or agreements as described in existing law that
specifies which actions of the successor agency must first
obtain approval by the oversight board that requires a city,
county, or city and county that wishes to retain any property
or other assets for future redevelopment activities, funded
from its own funds and under its own auspices, to reach a
compensation agreement with the other taxing entities to
provide payments to them in property to their shares of the
base property tax, as part of the approval of a long-range
property management plan.
12)Specifies that DOF shall only consider whether a long-range
property management plan makes a good faith effort to address
the requirements set forth in the existing law that specifies
what the long-range property management plan shall do.
13)Requires DOF to approve a long-range property management plan
as expeditiously as possible.
14)Specifies that actions relating to the disposition or
property after approval of a long-range property management
plan shall not require review by DOF.
EXISTING LAW :
1)Dissolves RDAs 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
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housing assets, as specified.
4)Allows the entity that assumed the housing functions to
designate the use of and commit indebtedness obligation
proceeds that remain after the satisfaction of enforceable
obligations that have been approved in a ROPS 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 RDA assets;
b) Place loan agreements between the former RDA and
sponsoring entity on the ROPS, 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
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successor agency to prepare a long-range property management
plan that addresses the disposition and use of the real
properties of the former RDA, 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 : According to the Senate Appropriations
Committee:
1)Unknown General Fund (GF) losses, in the millions or tens of
millions, over several fiscal years, to the extent this bill
allows successor agencies to use the proceeds of bonds issued
in 2011 for redevelopment activities, and prevents DOF from
denying enforceable obligations without oversight board
approval. Both of these provisions will reduce the amount of
residual property tax revenues directed to schools, the
magnitude of which is unknown. Approximately 50% of tax
increment revenues necessary to pay off the debt used for
continued redevelopment activity will be diverted from
schools. In general, any property tax proceeds diverted from
schools results in an equivalent GF cost, pursuant to
Proposition 98's minimum funding guarantees.
2)Unknown GF losses, perhaps in the hundreds of thousands, by
specifying that RDA agreements entered into prior to June 30,
2011, that include highway improvements are legitimate
enforceable obligations. Former RDA revenues dedicated to
such a project will 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 GF cost, pursuant to
Proposition 98's minimum funding guarantees. The number of
projects to which this provision will apply is unknown, but
staff assumes there will be few.
3)Revisions to the process for disposing of former RDA
properties through the long-range property management process,
particularly the deletion of requirements for compensation
agreements, will result in benefits for some local governments
at the expense of other local governments that will have
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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 will have a corresponding increase in state GF
spending pursuant to Proposition 98.
COMMENTS :
1)Background on RDA dissolution . In 2011, facing a severe
budget shortfall, the Governor proposed eliminating RDAs 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 RDAs as they
existed at the time and created a voluntary redevelopment
program on a smaller scale. In response, the California
Redevelopment Association (CRA) 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 RDAs were required to dissolve as of February
1, 2012.
As part of the winding down of RDAs, AB 1484 (Blumenfield),
Chapter 26, Statutes of 2012, made various statutory changes
associated with the dissolution of RDAs 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 RDA 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 RDA real property
assets, loan repayments to the local government community that
formed the agency, and use of proceeds from bonds issued by
the former RDA. 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 plan 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, and must
include an inventory of all properties in the trust, the date
of the acquisition of the property and previous and current
value, the purpose for which the property was acquired,
specified parcel data, among other requirements.
To date, DOF has approved more than 90 plans submitted by
successor agencies. A city, county, or city and county that
wishes to retain any properties or other assets for future
redevelopment activities, funded from its own funds and under
its own auspices, must read a compensation agreement with the
other taxing entities to provide payments to them in
proportion to their shares of the base property tax, as
determined pursuant to state law, for the value of the
property retained.
2)Author's statement . According to the author, "This bill was
introduced in response to a number of complaints from local
governments throughout the state concerning their frustrations
in dealing with DOF on the redevelopment dissolution process.
First, this bill clarifies that successor agencies do not have
to pay compensation to the other taxing entities for the real
property assets they elect to retain, once they have received
a finding of completion from DOF. Second, this bill requires
DOF to get Oversight Board approval for the removal of items
from a successor agency's Recognized Obligation Payment
Schedule after DOF has issued a finding of completion to the
successor agency. Third, this bill would allow successor
agencies to amend contracts in connection with enforceable
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obligations if the amendment does not commit new tax funds.
Fourth, the bill allows a successor agency to use 2011 bond
proceeds if the Oversight Board, in consultation with the
relevant Metropolitan Planning Organization, determines that
the use of bond proceeds is consistent with the agency's
Sustainable Communities Strategy developed pursuant to SB
375."
This bill is author-sponsored.
3)Arguments in support . Supporters of the bill note the
following benefits for cities:
a) 2011 bonds . The bill will allow local agencies
receiving a finding of completion to access funds from
former RDAs derived from bonds issued in 2011 provided they
are approved by the oversight board and used for the
purposes for which they were sold consistent with the
sustainable communities strategy adopted by the MPO.
b) Long-range property management plans . The bill
addresses several key concerns voiced by local agencies
with long-range property management plans and will expedite
the approval of these plans, reduce the potential for
delays and disputes and allow affected agencies to get to
work on projects that improve their communities.
c) New benefits for agencies with a finding of completion .
The bill provides additional benefits to local agencies
receiving a finding of completion by (1) requiring DOF to
receive oversight board approval prior to DOF's rejection
of an enforceable obligation from a ROPS; (2) authorizing a
successor agency to enter into or amend existing contracts
and agreements, and administer projects in connection with
an approved enforceable obligation, if the contract
agreement, or project will not commit new property tax
funds, and will not otherwise reduce property tax payment
to taxing entities; and,
(3) requiring DOF to respond in writing within 45 days on
determinations that enforceable obligations listed on a
ROPS are final and conclusive.
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4)Arguments in opposition . Opponents of the bill argue that the
bill does not advance the dissolution process, and note that
its proposals represent a step backward. Concerns by
opponents include:
a) Compensation agreements . This bill proposes to
eliminate compensation agreements from the long-range
property management plan process. Opponents of the bill
note that compensation agreements provide necessary
flexibility for addressing the use and disposition of
former RDA property through collaboration and partnerships
among local governments, and protect the collective
investment of the local governments that directly or
indirectly funded the acquisition of former RDA property.
b) DOF authority . Opponents argue the bill reduces DOF
oversight authority in several areas, including the review
of the long-range property management plans, removal of
enforceable obligations and approval of certain loan
agreements, and that reducing DOF's successor agency
oversight authority and relying predominantly on oversight
boards will be to the detriment of a thorough oversight
process.
c) 2011 bond proceeds . Opponents argue that some
redevelopment officials responded to the Governor's 2011
proposal to eliminate RDAs by accelerating their tax
allocation bond sales, and point to the $1.5 billion in tax
allocation bonds that were collectively issued in the first
six months of 2011. Opponents note that it does not make
sense to allow a successor agency to utilize bond proceeds
instead of defeasing the bonds, as these obligations would
require property tax increment revenues well into the
future at a high cost.
5)Related legislation and chaptering conflicts . This Committee
has heard several bills this year that amend the statutes
governing redevelopment dissolution, including the following
bills:
a) AB 1582 (Mullin) allows successor agencies' ROPS to
cover a 12-month period and allows oversight boards to
amend ROPS. AB 1582 is currently pending on the Senate
Floor.
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Section 4 of this bill conflicts with provisions of AB
1582.
b) AB 1963 (Atkins) extends, until January 1, 2016, the
date by which DOF must approve a redevelopment successor
agency's long-range property management plan. AB 1963 is
currently pending on the Senate Floor.
Sections 6 and 8 of this bill conflict with provisions of
AB 1963.
c) SB 1404 (Leno) allows San Francisco's successor agency
to receive former tax increment revenues and issue debt to
pay for specified replacement housing obligations. SB 1404
is set for hearing in the Assembly Housing and Community
Development Committee on Wednesday, June 18th.
Section 7 of this bill conflicts with SB 1404.
d) AB 2493 (Bloom) allows bond proceeds from bonds issued
between January 1, 2011, and June 28, 2011, to only be used
for projects that meet specified criteria, as determined by
a resolution issued by the oversight board. Those criteria
include that the project must be consistent with the
applicable regional sustainable communities strategy or
alternative planning strategy, as specified, and that two
or more significant planning or implementation actions have
occurred on or before December 31, 2010. The bill places
several other requirements on construction contracts. AB
2493 is pending in the Senate Transportation and Housing
Committee.
Section 9 of this bill conflicts with AB 2493.
Because the related bills mentioned above also conflict with
provisions contained in this bill, the Committee may wish to
ask the author how he plans to address these conflicts.
6)Double-referral . This bill is double-referred to the Housing
and Community Development Committee.
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REGISTERED SUPPORT / OPPOSITION :
Support
California Infill Builders Federation
California Rural Legal Assistance Foundation
Cities of Buena Park, Camarillo, Culver City, Folsom, Fountain
Valley, Fremont, Garden
Grove,
Glendale, Highland, Huntington Beach, La Mirada, Lemoore,
Pasadena, Rancho
Cucamonga, Redding, Redwood City, Ridgecrest, Santa Cruz,
Santa Monica, Selma,
Sonoma, Tulare, Vista, Westminster, and West Hollywood
Fremont Successor Agency
Glendale City Employees Association
Glendale Successor Agency
Housing California
Honorable Lynn Robinson, Mayor, City of Santa Cruz
Honorable Carol Dutra Vernaci, Mayor, City of Union City
Independent Cities Association
Inland Action
League of California Cities
Non-Profit Housing Association of Northern California
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Western Center on Law & Poverty
Opposition
California Special Districts Association
California State Association of Counties
Los Angeles County Board of Supervisors (unless amended)
Santa Clara County Board of Supervisors
Urban Counties Caucus (unless amended)
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Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958