BILL ANALYSIS �
SB 1129
Page 1
Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1129 (Steinberg) - As Amended: May 27, 2014
Policy Committee: Local
GovernmentVote:9 - 0
Housing and Community Development 5 - 1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill makes various changes to the process of dissolving
redevelopment agencies (RDAs) and disposing of their assets.
Specifically, this bill:
1)Requires the State Controller to complete certain audits of
former RDAs by January 1, 2016.
2)Makes agreements that a former RDA entered into prior to June
30, 2011 to fund state highway infrastructure improvements
enforceable obligations.
3)Requires the Department of Finance (DOF), prior to rejecting
an enforceable obligation, to submit the proposed rejection to
the appropriate oversight board for review and approval. The
oversight board's determination is final and cannot be further
reviewed by DOF.
4)Requires DOF to respond within 45 days of receiving the
request from a successor agency for a finding that an
enforceable obligation, which requires an irrevocable
commitment of property tax revenue allocation over time, is
final and conclusive.
5)Exempts a city or county with property that is disposed of
through the long-range property management plan (LRPMP) from
the requirement that it reach a compensation agreement with
other taxing entities to provide payments to them for their
property tax share.
6)Deletes the January 1, 2015 date by which DOF must have
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approved the LRPMP, or the successor agency must dispose of
all the assets of a former RDA.
7)Allows for 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).
8)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 and requires DOF to approve a
LRPMP as expeditiously as possible. Additionally, any action
relating to disposing of a property after approval of the
LRPMP shall not require review by DOF.
FISCAL EFFECT
1)Unknown General Fund losses, in the millions or tens of
millions of dollars, 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% 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 of dollars, 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. The number of projects
affected 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
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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.
COMMENTS
1)Purpose . 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.
2)Background . In 2011, the Legislature approved and the
governor signed two measures, ABX1 26 and ABX1 27 that
together dissolved redevelopment agencies as they existed and
created a voluntary redevelopment program on a smaller scale.
In response, the California Redevelopment Association, the
League of California Cities and other parties, filed suit
challenging the two measures. The Supreme Court denied the
petition for peremptory writ of mandate with respect to ABX1
26 and granted the petition with respect to ABX1 27. As a
result of the court's decision, all redevelopment agencies
were required to dissolve as of February 1, 2012 and there was
no authority for any new redevelopment program.
In 2012, AB 1484 (Blumenfield), Chapter 26, made the statutory
changes needed to achieve budget savings related to the
dissolution of redevelopment agencies. AB 1484 clarified the
process for dissolving all redevelopment agencies, 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 specified all
proceeds from bonds issued in 2011 must be defeased, the
exception being if the redevelopment agency has enforceable
obligations with third parties to spend the proceeds.
One of the provisions in AB 1484 allowed successor agencies
that received a finding of completion from DOF 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
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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.
3)Arguments in support . Supporters of the bill, primarily
cities and public employees, note the following benefits for
cities:
a) 2011 bonds . The bill allows 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.
1)Arguments in opposition . Opponents of the bill, counties and
special districts, 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 eliminates
compensation agreements from the long-range property
management plan process. Opponents of the bill note that
compensation agreements provide necessary flexibility for
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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 will
require property tax increment revenues well into the
future at a high cost.
1)Related legislation and Chaptering Conflicts . The following
bills amend the statutes governing redevelopment dissolution.
This bill conflicts with provisions contained in each of these
bills. The author has indicated a willingness to amend this
bill to remove or otherwise address the conflicting sections.
a) AB 1582 (Mullin) allows successor agencies' ROPS to
cover a 12-month period and allows oversight boards to
amend ROPS. AB 1582 is pending on the Senate Floor.
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 was
signed by the Governor on July 18th (Chapter 146, Statutes
of 2014).
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 pending on the Assembly Floor.
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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 Appropriations Committee.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081