BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 1260 (DeSaulnier) - Local government: affordable housing.
Amended: As Introduced Policy Vote: T&H 8-2
Urgency: No Mandate: No
Hearing Date: April 28, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1260 would conform the housing requirements in
the Infrastructure Financing District (IFD) Law with those of
the Community Redevelopment Law, as proposed to be amended by SB
1 (Steinberg).
Fiscal Impact:
Estimated one-time costs to the State Controller's Office
(SCO) of up to $217,000 (General Fund) to establish
guidelines for periodic financial and performance audits
that include provisions for determining compliance with
affordable housing requirements as well as secondary review
and compliance measures for failure to achieve initial
compliance on the regular audit schedule. (Staff assumes up
to 2 PY of audit staff to establish guidelines)
Estimated periodic SCO costs in the range of $50,000 to
$100,000 (General Fund) on a periodic basis for accepting
audits and reviewing and approving secondary compliance
plans submitted by agencies that fail to comply with initial
audit requirements. (Staff assumes up to 1PY of audit work
on a periodic basis)
Estimated ongoing costs in the range of $150,000 to
$200,000 (General Fund) to the Department of Finance (DOF)
to review and approve completed audits on a periodic basis.
The bill requires audits to be submitted to the SCO,
Department of Finance (DOF), and Joint Legislative Budget
Committee (JLBC) by each district every five years, and
specifies that the SCO is not required to review and approve
completed audits. (Staff assumes 1.5 to 2 PY of DOF staff
would be required to handle workload to determine compliance
with guidelines)
SB 1260 (DeSaulnier)
Page 1
Background: Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property taxes that is
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades. RDAs
used tax increment financing to address issues of blight,
construct affordable housing, rehabilitate existing buildings,
and finance development and infrastructure projects.
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
X1 26 (Blumenfield) Chap 5/2011 dissolved all RDAs and
established procedures for winding down RDA activity. With the
dissolution of RDAs, local agencies lost one of the most
important tools for financing affordable housing.
Existing law authorizes cities and counties to form IFDs and
divert property tax increment revenues from participating local
agencies to finance "public capital facilities of communitywide
significance." The types of projects financed through an IFD
include: transportation facilities; water, sewer, and flood
control infrastructure; child care facilities; libraries; parks,
recreational facilities, and open space; and solid waste
transfer and disposal facilities. The formation of the IFD and
the issuance of IFD bonds must be approved by 2/3 of the voters
in the district. IFDs retain property tax increment revenues
from participating local taxing agencies for up to 30 years for
financing projects, either directly or through bond issuances.
School district property tax revenues may not be diverted for
IFD purposes. With respect to housing, IFD law requires a
district to ensure that 20% of district-constructed units are
affordable to low- and moderate-income households. In addition,
when dwelling units are destroyed or removed the district, all
units occupied by low- or moderate-income households and 20% of
all units occupied by above-moderate-income households must be
replaced by the district.
SB 1 (Steinberg), introduced in 2013 and pending final action in
the Senate, proposes to create a new form of redevelopment that
doesn't include tax increment contributions from the school
SB 1260 (DeSaulnier)
Page 2
share of the property tax. The bill allows a city or county to
establish a Sustainable Communities Investment Authority (SCIA)
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, as specified. The bill provides
that an authority in general must comply with the Community
Redevelopment Law, including its housing provisions, with the
following adjustments:
25% of tax increment must be deposited into a SCIA's L&M Fund
(rather than 20%).
The number of housing units occupied by extremely low-, very
low-, and low-income households at the time the SCIA is
established must not be 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.
A SCIA must contract for an independent financial and
performance audit every five years that shows, among other
things, compliance with the housing requirements. If the
audit finds a failure to comply with the housing requirements,
the SCIA must submit a plan to the SCO for achieving
compliance within two years. The plan must include at least
one of the following means of achieving compliance:
The deposit of an additional 10% of tax increment in the
L&M Fund.
An increase in the production obligation by an
additional 10% for very-low income households, as
specified.
Limiting the expenditure of L&M funds to rental housing
serving very low- and extremely low-income households.
Proposed Law: SB 1260 would create a uniform set of housing
provisions for both IFDs and SCIAs authorized by SB 1.
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 at the time the IFD
is established are not reduced during the effective period of
the district.
SB 1260 (DeSaulnier)
Page 3
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 for an independent financial and performance audit
every five years that shows, among other things, compliance
with the housing requirements. If the audit finds a failure
to comply with the housing requirements, the SCIA must submit
a plan to the SCO for achieving compliance within two years.
The plan must include at least one of the following means of
achieving compliance:
The deposit of an additional 10% of tax increment in the
L&M Fund.
An increase in the production obligation by an
additional 10% for very-low income households, as
specified.
Limiting the expenditure of L&M funds to rental housing
serving very low- and extremely low-income households.
The bill also amends the provisions of SB 1 to require SCIAs to:
Replace dwelling units housing low- and moderate-income
households that are destroyed or removed from the area by
public or private action 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.
Enactment of this bill is contingent upon enactment of SB 1 and
at least one of the pending bills noted below that would amend
provisions of the IFD law.
Related Legislation:
SB 1260 (DeSaulnier)
Page 4
SB 1(Steinberg), currently on the inactive file on the Senate
Floor pending a concurrence vote, would authorize local
entities, excluding schools, to form a Sustainable Communities
Investment Authority (SCIA). Participating entities agree to
direct property tax increment revenues to the SCIA to invest in
improvements that relieve blight in transit priority project
areas, small walkable communities, and sites designated for
clean energy manufacturing, as specified.
SB 33 (Wolk), currently pending a vote on the Assembly Floor,
would eliminate voter approval requirements for formation of an
IFD, issuance of bonds, and establishing an appropriations
limit, as well as expand the types of public works that may be
financed through an IFD and impose increased public
accountability measures.
SB 628 (Beall), currently held at the Senate Desk after passing
both houses of the Legislature, would allow a city or county to
create an IFD to implement a transit priority project without
holding an election and require a local entity forming an IFD to
use 25% of tax increment revenues for affordable housing.
AB 299 (J.Perez), currently on the Assembly Floor pending a
concurrence vote, would authorize the establishment of
Infrastructure and Revitalization Financing Districts, modeled
on IFD law, and authorizes its use for a military base reuse
authority.
AB 243 (Dickinson), currently on the Assembly Floor pending a
concurrence vote, would authorize local agencies to form
Infrastructure and Revitalization Financing Districts, which are
similar to IFDs, but with a broader range of projects and
facilities that may be financed, a lower voter approval
threshold necessary to form and issue bonds, and an extended
life of 40 years.
Staff Comments: SB 1260 and SB1 both require periodic financial
and performance audits to be submitted to DOF, the SCO, and
JLBC, according to guidelines established by the SCO, but
explicitly specify that the SCO would not be required to review
and approve completed audits. Staff assumes this duty would
fall to DOF, since the SCO is relieved of this obligation.
However, if an SCIA or IFD audit is deemed out of compliance,
the SCO is required to review and approve plans submitted by an
SB 1260 (DeSaulnier)
Page 5
SCIA or IFD to achieve compliance. As part of this secondary
review, the SCO must ensure that the plan meets specified
compliance measures. It is unclear why the SCO is relieved from
the first-level review and certification of SCIA audits, but is
required to ensure compliance with the secondary review of
compliance plans.