BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1260
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: desaulnier
VERSION: 2/21/14
Analysis by: Mark Stivers FISCAL: yes
Hearing date: April 8, 2014
SUBJECT:
Housing provisions of redevelopment law and infrastructure
financing district law
DESCRIPTION:
This bill conforms the housing provisions of Infrastructure
Financing District law with those of the Community Redevelopment
Law as proposed to be amended by SB 1 (Steinberg).
ANALYSIS:
Redevelopment
The Community Redevelopment Law (CRL) allows a local government
to establish a redevelopment area and capture all of the
increase in property taxes generated within the area (referred
to as "tax increment") over a period of decades. To minimize
gentrification and displacement and to ensure that all economic
segments of the community benefit from the public investment of
redevelopment, the CRL includes the following housing
provisions:
Redevelopment agencies must deposit 20% of tax increment into
a Low and Moderate Income Housing Fund (L&M fund) to be used
to increase, improve, and preserve the community's supply of
low- and moderate-income housing available at an affordable
housing cost.
Redevelopment agencies must ensure that 30% of
agency-developed and 15% of privately developed housing units
constructed or substantially rehabilitated within the project
area are affordable to low- and moderate-income households,
with specified percentages of these units being affordable to
very low-income households. This is known as the production
obligation.
Whenever dwelling units housing low- and moderate-income
households are destroyed or removed from the market as a
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result of a written agreement with, or financial assistance
from, the agency, the redevelopment agency within four years
must replace the units with units that have an equal or
greater number of bedrooms. The replacement units must be
affordable to households in the same or a lower income
category as the persons displaced from the destroyed or
removed units. This is known as the replacement obligation.
In 2011, the Legislature enacted two bills, AB 26X (Blumenfield)
and AB 27X (Blumenfield), Chapters 5 and 6, respectively, of the
First Extraordinary Session. AB 26X eliminated redevelopment
agencies and established procedures for winding down the
agencies, paying off enforceable obligations, and disposing of
agency assets. AB 27X allowed redevelopment agencies to avoid
elimination if they made payments to schools in the current
budget year and in future years. In December 2011, the
California Supreme Court in California Redevelopment Association
v. Matosantos upheld AB 26X and overturned AB 27X. As a result,
all of the state's roughly 400 redevelopment agencies dissolved
on February 1, 2012.
SB 1 (Steinberg) of this session proposes to create a new form
of redevelopment. The bill allows a city or couny to establish
a Sustainable Communities Investment Authority and direct its
own tax increment revenues to that authority in order to address
blight by supporting development in transit priority project
areas, small walkable communities, and clean energy
manufacturing sites. The bill provides that an authority in
general must comply with the Community Redevelopment Law,
including its housing provisions. SB 1 also includes the
following new housing provisions:
The authority must deposit 25% of tax increment, as opposed to
20%, into its L&M Fund.
The authority must ensure that the number of housing units
occupied by extremely low-, very low-, and low-income
households, including the number of bedrooms in those units,
in the Sustainable Communities Investment Area at inception is
not reduced during the effective period of the plan.
The authority must replace units housing low- and
moderate-income households within two years rather than four.
Every five years, the authority must contract for an
independent financial and performance audit that shows, among
other things, compliance with the housing provisions of SB 1.
An authority with a finding of non-compliance must obtain the
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State Controller's approval of a plan to achieve compliance
within two years, and the plan must include at least one of
the following remedies until compliance is achieved:
The deposit of an additional 10% of tax increment in the
L&M Fund.
An increase in the production obligation by an
additional 10%, so that 25% of privately developed housing
units constructed or substantially rehabilitated within the
project area are affordable to low- and moderate-income
households.
Limiting the expenditure of L&M funds to rental housing
serving very low- and extremely low-income households.
SB 1 is currently on the Senate Floor for concurrence in
Assembly Amendments.
Infrastructure Financing District Law
Existing law also allows cities and counties to create
Infrastructure Financing Districts (IFDs) and divert their own
share of tax increment revenue to the district to repay bonds
funding community scale public works: highways, transit, water
systems, sewer projects, flood control, child care facilities,
libraries, parks, and solid waste facilities. The formation of
an IFD and the issuance of bonds both require 2/3 approval of
voters within the district. IFD law contains only the following
provisions relating to housing:
The district must ensure that 20% of district-constructed
units are affordable to low- and moderate-income households.
Whenever dwelling units are destroyed or removed from the
market within the district, the district must replace all
units occupied by low- or moderate-income households and 20%
of all units occupied by above-moderate-income households.
This bill creates a uniform set of housing provisions for both
Sustainable Communities Investment Authorities authorized by SB
1 and IFDs. Specifically, the bill deletes the current housing
provisions of IFD law and instead requires IFDs to:
Dedicate at least 25% of tax increment for affordable housing
purposes in accordance with the housing expenditure provisions
of the CRL.
Ensure that the number of housing units occupied by extremely
low-, very low-, and low-income households, including the
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number of bedrooms in those units, within the district at
inception is not reduced during the effective period of the
district.
Whenever dwelling units housing low- and moderate-income
households are destroyed or removed from the district by
public or private action, replace the units within two years
with units that have an equal or greater number of bedrooms.
Ensure that at least 20% of all new and substantially
rehabilitated units developed publicly or privately within the
district are affordable to low- or moderate-income households.
Forty percent of these affordable units must be affordable to
very low-income households.
Record covenants requiring that affordable rental housing
units remain affordable for 55 years and that affordable
ownership units remain affordable for 45 years or be subject
to an equity sharing agreement.
Contract every five years for an independent financial and
performance audit that shows, among other things, compliance
with these housing provisions. A district with a finding of
non-compliance must obtain the State Controller's approval of
a plan to achieve compliance within two years, and the plan
must include at least one of the following remedies until
compliance is achieved:
The dedication of an additional 10% of tax increment for
affordable housing.
An increase in the production obligation by an
additional 10%, so that 30% of privately developed housing
units constructed or substantially rehabilitated within the
project area are affordable to low- and moderate-income
households.
Limiting the expenditure of affordable housing funds to
rental housing serving very low- and extremely low-income
households.
The bill also amends the provisions of SB 1 to require
Sustainable Communities Investment Authorities to:
Whenever dwelling units housing low- and moderate-income
households are destroyed or removed from the area by public or
private action, replace the units within two years with units
that have an equal or greater number of bedrooms.
Ensure that at least 20% of all new and substantially
rehabilitated units developed publicly or privately within the
district are affordable to low- or moderate-income households.
Forty percent of these affordable units must be affordable to
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very low-income households.
Enactment of this bill is contingent upon enactment of SB 1 and
at least one of the pending bills amending IFD law.
COMMENTS:
1.Purpose of the bill . According to the author, the pending
bills relating to IFDs and Sustainable Communities Investment
Authorities morph the redevelopment and IFD laws into
something very similar to each other. Both allow a city or
county to commit its own share of property tax increment to
community development and allow other local governments in the
area, except for schools, to voluntarily add their share of
the tax increment. One of the only remaining differences
between the two approaches relates to the housing provisions
the entity would be subject to. If the housing provisions of
CRL and IFD laws are not harmonized, many local governments
may well pick whichever available tool has the least housing
obligations.
More importantly, the community development activities that
local governments undertake with the resources of CRL and IFD
laws have the potential to displace many low-income households
through gentrification. Moreover, it is important that all
economic segments of the community benefit from public
investment. This bill harmonizes the housing obligations of
IFD law and SB 1 to ensure that affordable housing is an
integral part of any community development plan.
2.D�j� vu all over again . This committee has approved the
housing provisions that this bill applies to IFD law and
Sustainable Communities Investment Authorities in related or
similar bills, namely SB 1 (Steinberg), SB 628 (Beall)
relating to IFDs, and AB 1080 (Alejo) relating to
redevelopment-like Community Revitalization and Investment
Authorities.
3.Issues with existing IFD housing provisions . In addition to
the fact the IFD law has few housing provisions, the ones it
has are problematic. The law requires that 20% of
district-constructed units are affordable to low- and
moderate-incomes households. While districts may sell land or
provide financing for housing, they almost never construct
housing themselves. So this provision has little value.
Moreover, IFD law does not require any term of affordability.
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Redevelopment law requires that apartments be affordable for
55 years and homeownership units for 45 years. Under IFD law,
affordable units could theoretically convert to market rate
immediately.
4.Barriers to the use of IFD and SB 1 . Some argue that cities
and counties will have little incentive to use either IFD law
or SB 1, if enacted. Unlike the old redevelopment in which
agencies collected property tax increment from their host city
or county as well as school and other local governments, IFD
law and SB 1 only allow the districts or authorities to
collect property tax from their host city or county and other
local governments, except schools, that opt in. These host
cities and counties already can dedicate their general funds
to redevelopment-like activities without having to create a
district or authority. Moreover, the tax increment that comes
from the host city or county may not be enough to warrant
creation of a district or authority or the issuance of bonds.
IFD law, moreover, requires a 2/3 vote of the electorate to
create an IFD or issue bonds, which can be a high barrier. To
the extent that this bill adds additional strings to IFD law
and SB 1, it may be one additional reason for cities and
counties to forego using these tools.
RELATED LEGISLATION:
SB 1 (Steinberg) allows a local government to establish a
Sustainable Communities Investment Authority and direct tax
increment revenues to that authority in order to address blight
by supporting development in transit priority project areas,
small walkable communities, and clean energy manufacturing
sites. This bill is on the Senate Floor for concurrence in
Assembly Amendments.
SB 33 (Wolk) eliminates the voter approval requirement for a
city or county to create an IFD and expands the types of
projects that a district may finance. This bill is on the
Assembly Floor.
SB 628 (Beall) allows a city or county to create an IFD to
implement a transit priority project without having to hold an
election and requires the local entity to use 25% of the
resulting revenues for affordable housing. This bill passed the
Legislature, but is being held at the Senate Desk.
AB 229 (J. P�rez) creates infrastructure and revitalization
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financing districts modeled after IFDs in existing law,
authorizes a military base reuse authority to form a district,
and allows these districts to finance a broader range of
projects and facilities to clean up and develop former military
bases. This bill is on the Assembly Floor for concurrence in
Senate Amendments.
AB 243 (Dickinson) creates infrastructure and revitalization
financing districts modeled after infrastructure financing
districts in existing law, broadens the range of projects and
facilities they can finance, lowers the voter approval threshold
necessary to form and issue bonds, and extends the life of
districts to 40 years. This bill is on the Assembly Floor for
concurrence in Senate Amendments.
AB 2280 (Alejo) allows local governments to establish a
Community Revitalization and Investment Authority in a
disadvantaged community to fund specified activities and allows
the authority to collect tax increment. This bill is in the
Assembly Local Government Committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 2,
2014.)
SUPPORT: California Rural Legal Assistance Foundation
(sponsor)
Western Center on Law and Poverty (sponsor)
Housing California
OPPOSED: None received.