BILL ANALYSIS �
SB 1129
Page 1
Date of Hearing: June 25, 2014
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
SB 1129 (Steinberg) - As Amended: May 27, 2014
SENATE VOTE : 27-8
SUBJECT : Redevelopment: successor agencies to redevelopment
agencies.
SUMMARY : Makes changes to the process of dissolving
redevelopment agencies (RDAs) and disposing of their assets.
Specifically, this bill :
1)Allows an agency, community officer, or employee of a former
RDA to acquire an interest in a property within a former
redevelopment project area.
2)Requires the State Controller to complete the audits of former
RDAs to determine if there were any asset transfers between
the city, county, or city and county that created a RDA or any
other public agency and the RDA by January 1, 2016.
3)Makes agreements that a former RDA entered into prior to June
30, 2011 to fund state highway infrastructure improvements to
which the RDA committed funds enforceable obligations,
4)Requires Department of Finance (DOF), prior to rejecting an
enforceable obligation submitted by a successor agency, that
has received a notice of completion from DOF, on a recognized
obligation payment schedule (ROPS), to submit the proposed
rejection to the oversight board of the successor agency for
review and approval and the oversight board's determination on
the enforceable obligation shall be final and cannot be
further reviewed by DOF.
5)Requires DOF to respond within 45 days of receiving the
request from a successor agency for a finding that an
enforceable obligation, that requires an irrevocable
commitment of property tax revenue and will require allocation
of those property tax revenues over time, is final and
conclusive.
6)Exempts properties that are disposed of through the long-range
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property management plan (LRPMP) that the city, county or city
and county retain from being part of a compensation agreement
with other taxing entities to provide payments to them in
proportion to their shares of the base property tax for the
value of the property.
7)Deletes the January 1, 2015 date in existing law by which DOF
must have approved the LRPMP, or the successor agency must
dispose of all the assets of a former RDA.
8)Allows for, upon approval of the oversight board in
consultation with the appropriate MPO, the use of bond
proceeds, from bonds issued during 2011, for activities that
are consistent with the sustainable communities strategy
adopted by the metropolitan planning organization (MPO).
9)Allows a successor agency to amend existing contracts and
agreements in connection with enforceable obligations that are
approved as part of the ROPS including substituting 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 reduce property tax revenues and payments to
other taxing entities.
10)Provides that DOF shall only consider whether the LRPMP makes
a good faith effort to address all the requirements for what
should be included in the plan.
11)Requires DOF to approve a LRPMP as expeditiously as possible.
12)Provides that any action relating to disposing of a property
after approval of the LRPMP 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 analysis:
1) 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.
2) Unknown General Fund 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 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.
3) 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
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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.
COMMENTS :
In 2011, facing a severe budget shortfall, the Governor proposed
eliminating redevelopment agencies in order to deliver more
property taxes to other local agencies. Statewide, redevelopment
redirected 12% of property taxes 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 (Blumenfield), Chapter 5
and
ABX1 27 (Blumenfield), Chapter 6 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 (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 redevelopment agencies were required to
dissolve as of February 1, 2012.
Subsequent legislation was necessary to clarify the dissolution
process. 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. AB 1484 limited successor housing
agencies to using housing bond proceeds that were issued prior
to January 1, 2011. All proceeds issued in 2011 must be
defeased.
AB 1484 also 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
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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. Once the successor
agency receives the finding of completion, the agency gains
access to three specific benefits listed in statute: 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, the ability to repay city loans
made to the redevelopment agency, and the ability to use unspent
bond proceeds issued by redevelopment agency prior to December
31, 2010.
Purpose of this bill: 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 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."
Use of 2011 bond proceeds: After the passage of ABX1 26 and
ABX1 27 and pending the legislations' review by the California
Supreme Court, cities and counties issued bonds for
redevelopment projects. Cities and counties have argued that
they issued the bonds for legitimate redevelopment projects and
defeasing the bonds is more expensive over time then using the
bond proceeds for the projects they were intended for. This
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bill would allow successor agencies to use bond proceeds from
bonds issued in 2011 for activities that are consistent with the
sustainable communities' strategy (SCS) adopted by the
metropolitan planning organization (MPO). These projects could
be infrastructure, infill, affordable housing and other projects
that are consistent with an SCS. In order to use the proceeds,
a successor agency would need to meet the requirements of
existing law including have gotten a finding of complete from
DOF, the bond proceeds would have to be used for which they were
sold, and the successor agency's oversight board approves the
bond proceeds usage. This change would result in a loss of
property taxes to other taxing entities including schools.
Compensation agreements for properties retained by cities and
counties : Once a finding of completion is issued, the successor
agency must prepare a LRPMP 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. This bill would make several changes
to expedite the approval of the LRPMP reduce the potential for
delays and disputes. Successor agencies would no longer be
required to reach a compensation agreement with the other taxing
entities for properties they plan to continue to own. The bill
specifies that DOF must only consider whether a LRPMP makes a
good faith effort to address the requirements set out in law and
would require DOF to approve LRPMPs as expeditiously as
possible. And the bill would delete a requirement that
successor agencies dispose of properties if DOF does not approve
the agency's LRPMP by January 1, 2015.
Other provisions: This bill would give successor agencies
authority to enter into or amend existing contracts and
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agreements and administer projects in connection with an
approved enforceable obligation if the contract, agreement or
project will not commit new property tax funds wand will not
otherwise reduce property tax payments to taxing entities. Once
a successor agency receives a finding of completion, DOF can
continue to reject an enforceable obligation on a ROPS. This
bill would require DOF to receive oversight board approval
before rejecting an enforceable obligation from a ROPS.
Arguments in opposition : 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. 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. 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.
Related legislation:
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.
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.
SB 1404 (Leno) allows San Francisco's successor agency to
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receive former tax increment revenues and issue debt to pay for
specified replacement housing obligations. SB 1404 is pending
on the Assembly Floor.
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
Governance and Finance Committee.
Double-referral . This bill passed out of Assembly Local
Government Committee 9 to 0.
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
City of Commerce
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
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
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Western Center on Law & Poverty
Opposition
California Special District Association
California State Association of Counties
Los Angeles County Board of Supervisors (unless amended)
Orange County Board of Supervisors (unless amended)
Santa Clara County Board of Supervisors
Urban Counties Caucus (unless amended)