BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1129|
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UNFINISHED BUSINESS
Bill No: SB 1129
Author: Steinberg (D), et al.
Amended: 8/22/14
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-2, 4/9/14
AYES: Wolk, DeSaulnier, Hernandez, Liu
NOES: Knight, Vidak
NO VOTE RECORDED: Beall
SENATE APPROPRIATIONS COMMITTEE : 5-2, 5/23/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NOES: Walters, Gaines
SENATE FLOOR : 27-8, 5/28/14
AYES: Beall, Berryhill, Block, Cannella, Correa, De Le�n,
DeSaulnier, Evans, Galgiani, Hancock, Hernandez, Hill, Hueso,
Huff, Jackson, Lara, Leno, Lieu, Liu, Mitchell, Monning,
Padilla, Pavley, Roth, Steinberg, Torres, Wolk
NOES: Anderson, Fuller, Gaines, Morrell, Nielsen, Vidak,
Walters, Wyland
NO VOTE RECORDED: Calderon, Corbett, Knight, Wright, Yee
ASSEMBLY FLOOR : 58-17, 8/27/14 - See last page for vote
SUBJECT : Redevelopment: successor agencies to redevelopment
agencies
SOURCE : Author
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DIGEST : This bill amends several statutes governing
redevelopment agencies (RDAs) dissolution. This bill makes
several changes to the statutes governing the dissolution of
RDAs. Among other things, this bill (1) authorizes 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); (2) deems an agreement entered into by an RDA
prior to June 30, 2011 that commits funds to state highway
infrastructure improvements as an enforceable obligation; and
(3) revises 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.
Assembly Amendments allows success agencies oversight boards to
appoint an alternate representative to serve on the oversight
board; revise provisions dealing with the Local Agency
Investment Fund (LAIF); add legislative intent; add
double-jointing language with SB 1404 (Leno) and AB 2493
(Bloom); and make clarifying revisions.
ANALYSIS : Until 2011, the Community Redevelopment Law (CRL)
allowed local officials to set up RDAs, prepare and adopt
redevelopment plans, and finance redevelopment activities. As a
redevelopment project area's assessed valuation grew above its
base-year value, the resulting property tax revenues - the
property tax increment - went to the RDA instead of going to the
underlying local governments. The RDA kept the property tax
increment revenues generated from increases in property values
within a redevelopment project area.
Citing a significant state General Fund deficit, Governor
Brown's 2011-12 Budget proposed eliminating RDAs and returning
billions of dollars of property tax revenues to schools, cities,
and counties to fund core services. Among the statutory changes
that the Legislature adopted to implement the 2011-12 Budget, AB
26X1 (Blumenfield, Chapter 5, Statutes of 2011, First
Extraordinary Session) dissolved all RDAs. The California
Supreme Court's 2011 ruling in California Redevelopment
Association v. Matosantos upheld AB 26X1, but invalidated AB
27X1 (Blumenfield, Chapter 6, Statutes of 2011, First
Extraordinary Session), which would have allowed most RDAs to
avoid dissolution.
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AB 26X1 established successor agencies to manage the process of
unwinding former RDAs' affairs. With the exception of seven
cities that chose not to serve as successor agencies, the city
or county that created each former RDA now serves as that RDA's
successor agency. Each successor agency has an oversight board
that is responsible for supervising it and approving its
actions. The Department of Finance (DOF) can review and request
reconsideration of an oversight board's decisions.
Enforceable obligations and finding of completion . One of the
successor agencies' primary responsibilities is to make payments
for enforceable obligations entered into by former RDAs. The
statutory definition of an "enforceable obligation" includes
bonds, specified bond-related payments, some loans, payments
required by the federal government, obligations to the state,
obligations imposed by state law, legally required payments
related to RDA employees, judgments or settlements, and other
legally binding and enforceable agreements or contracts.
Each successor agency must, every six months, draft a list of
enforceable obligations that are payable during a subsequent six
month period. This "Recognized Obligation Payment Schedule"
(ROPS) must be adopted by the oversight board and is subject to
review by DOF. Obligations listed on a ROPS are payable from a
Redevelopment Property Tax Trust Fund, which contains the
revenues that would have been allocated as tax increment to a
former RDA.
If a successor agency complies with state laws that require it
to remit specified RDA property tax allocations and cash assets
identified through a "due diligence review" process, it receives
a "finding of completion" from DOF (AB 1484, Assembly Budget
Committee, Chapter 26, Statutes of 2012). Approximately 300
successor agencies have received a finding of completion.
This bill makes various changes to provisions of law governing
former RDAs. Specifically, this bill:
1. Clarifies that the provision contained in CRL that prohibits
an agency or community officer or employee who in the course
of his/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
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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 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. Allows, for oversight boards, each appointing authority
identified in existing law to appoint an alternate
representative to serve on the oversight board as may be
necessary to attend any meeting of the oversight board in the
event that the appointing authority's primary representative
is unable attend any meeting for any reason.
5. Provides, if the alternate representative attends any
meeting in place of the primary representative, that the
alternative representative shall have the same participatory
and voting rights as all other attending members of the
oversight board.
6. Requires the successor agency to promptly notify the DOF
regarding the appointment of any alternate representative to
the oversight board.
7. Requires DOF, prior to the rejection of an enforceable
obligation from a 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
conclusive without further review by DOF.
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8. 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.
9. 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 LRPMP.
10.Revises provisions in statute that apply to any successor
agency that has been issued a finding of completion by DOF
pertaining to loans made to an RDA by the city, county, or
city and county that created the RDA, as specified.
11.Requires, if the oversight board finds that a loan is an
enforceable obligation, that the accumulated interest on the
remaining principal balance of the loan shall be calculated
using the interest rate earned by funds deposited into the
LAIF in effect on the date of loan origination, and as
adjusted quarterly thereafter. Requires the remaining
balance of the loan and the accumulated interest to be repaid
to the city, county, or city and county in accordance with a
defined schedule over a reasonable term of years at an
interest rate not to exceed the interest rate earned by funds
deposited in the LAIF as the rate is adjusted on a quarterly
basis.
12.Provides that it is the intent of the Legislature that the
amendments specified in #10 and #11 above, made by this bill,
are clarifying.
13.Allows, if the successor agency has received a finding of
completion, as specified, the successor agency to enter into,
or amend existing, contracts and agreements, or otherwise
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administer projects in 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.
14.Prohibits DOF, as part of the approval of a LRPMP, 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 LRPMP.
15.Specifies that DOF shall only consider whether a LRPMP makes
a good faith effort to address the requirements set forth in
the existing law that specifies what the LRPMP shall do.
16.Requires DOF to approve a LRPMP as expeditiously as
possible.
17.Specifies that actions relating to the disposition or
property after approval of a LRPMP shall not require review
by DOF.
18.Contains chaptering out amendments to deal with conflicts
between this bill and SB 1404 (Leno) of the current
legislative session and AB 2493 (Bloom) of the current
legislative session.
Comments
Purpose of the bill . Local officials have identified
ambiguities and obstacles in current law which prevent them from
completing vital economic development projects that began before
RDAs were dissolved. Because state law does not provide
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successor agencies any flexibility to adjust contracts for
enforceable obligations in ways that do not affect tax
increment, successor agencies may be unable to finance or
complete long-term phased development projects that are already
underway. State law offers successor agencies no good options
for disposing of billions of dollars of unspent RDA bond
proceeds. If the interest rates that a successor agency earns
on securities it buys to defease bonds are significantly lower
than the interest payments on the bonds, the agency will lose
money on the transaction. As a result, successor agencies may
choose to retain hundreds of millions of dollars of bond
proceeds for extended periods of time, while paying debt
service, without producing any new infrastructure or economic
development. Some local officials see the requirement to enter
into compensation agreements with other taxing entities for real
property retained by a successor agency as an impediment to
their ability to use these publicly owned properties for
economic development purposes. By eliminating these types of
ambiguities and obstacles, this bill will support the completion
of numerous development projects that have already received
millions of dollars of public investments, support state policy
goals, and benefit residents throughout California.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
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 the 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.
Unknown GF losses, perhaps in the hundreds of thousands, by
specifying that RDA agreements entered into prior to June 30,
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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.
Revisions to the process for disposing of former RDA
properties through the LRPMP 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 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.
SUPPORT : (Verified 8/27/14)
California Infill Builders Federation
California Rural Legal Assistance Foundation
Cities of Buena Park, Camarillo, Compton, Culver City, Folsom,
Fountain Valley, Fremont, Garden Grove, Glendale, Highland,
Huntington Beach, La Mirada, Lemoore, Pasadena, Redding,
Redwood City, Ridgecrest, Santa Cruz, Santa Monica, Selma,
Sonoma, Tulare, Vista, West Hollywood, and Westminster
Fremont Successor Agency
Glendale City Employees Association
Glendale Successor Agency
Housing California
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 and Poverty
OPPOSITION : (Verified 8/27/14)
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California Professional Firefighters
California Special Districts Association
California State Association of Counties
County of Los Angeles Board of Supervisors
Santa Clara County Board of Supervisors
Urban Counties Caucus
ARGUMENTS IN SUPPORT : The City of Ridgecrest states this bill
"will free-up available funding to produce quality projects with
high-paying construction jobs, expedite the approval and
implementation of LRPMPs enabling affected communities to
complete local projects, and provide additional certainty for
agencies receiving a finding of completion."
ARGUMENTS IN OPPOSITION : The California State Association of
Counties states this bill "seeks to make changes to three
components of the dissolution process: enforceable obligations,
long range property management plans and compensation
agreements, and use of bond proceeds for debt issued in 2011.
Because each of these directly affects the allocation of
property tax revenues and we know that the allocation of
property tax revenues is a zero-sum game, SB 1129 will have
fiscal consequences for affected taxing entities, including
counties."
ASSEMBLY FLOOR : 58-17, 8/27/14
AYES: Achadjian, Alejo, Ammiano, Bloom, Bocanegra, Bonilla,
Bonta, Bradford, Brown, Buchanan, Ian Calderon, Chau, Chesbro,
Cooley, Dababneh, Daly, Dickinson, Eggman, Fong, Frazier,
Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall, Roger
Hern�ndez, Holden, Jones-Sawyer, Levine, Lowenthal, Medina,
Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen,
Perea, John A. P�rez, V. Manuel P�rez, Quirk, Quirk-Silva,
Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NOES: Allen, Bigelow, Ch�vez, Conway, Dahle, Donnelly, Fox,
Beth Gaines, Grove, Hagman, Jones, Linder, Logue, Maienschein,
Mansoor, Patterson,
Wagner
NO VOTE RECORDED: Campos, Gorell, Harkey, Pan, Vacancy
AB:k 8/27/14 Senate Floor Analyses
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SUPPORT/OPPOSITION: SEE ABOVE
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