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SURFHHGVLPSO\LQJWKDWXQHQFXPEHUHGWD[DEOHERQGSURFHHGVPXVWEHUHPLWWHGWRWKHFRXQW\DXGLWRUFRQWUROOHU IRUGLVWULEXWLRQXQGHUWKH'LVVROXWLRQ$FW8QGHUH[LVWLQJODZDJHQFLHVPD\KDYHWKHDELOLW\WRUHWDLQ XQHQFXPEHUHGERQGSURFHHGVIURPWD[DEOHERQGV ',6326,7,213HQGLQJ &200,77((6HQDWH$SSURSULDWLRQV&RPPLWWHH +($5,1*DP%XUWRQ+HDULQJ5RRP /HJLVODWLRQ&RPPLWWHH5HFRPPHQGDWLRQ68332576% &216(48(1&(2)1(*$7,9($&7,21 ,IWKH%RDUGGRHVQRWDGRSWSRVLWLRQVRQELOOVWKHUHZLOOEHQRRIILFLDOSROLF\SRVLWLRQRQZKLFKWRDGYRFDWH &/(5. 6$''(1'80 6SHDNHUV/HH/DZUHQFH/HDJXHRI:RPHQ9RWHUVRI'LDEOR9DOOH\ $77$&+0(176 %LOO7H[WDQG$QDO\VHV AMENDED IN ASSEMBLY MARCH 21, 2012 AMENDED IN ASSEMBLY MARCH 15, 2012 AMENDED IN ASSEMBLY MARCH 8, 2012 california legislature—2011–12 regular session ASSEMBLY BILL No. 1585 1 2 Introduced by Assembly Members John A. Pérez, Atkins, Dickinson, Hill, Mitchell, Perea, and Torres February 2, 2012 1 2 3 4 An act to amend Sections 34171, 34173, 34176, 34177, 34179, 34180, 34181, 34182, 34183, 34187, and 34189 of the Health and Safety Code, relating to redevelopment, and declaring the urgency thereof, to take effect immediately. legislative counsel’s digest AB 1585, as amended, John A. Pérez. Redevelopment. Existing law dissolved redevelopment agencies and community development agencies, as of February 1, 2012, and provides for the designation of successor agencies, as defined. Existing law requires successor agencies to wind down the affairs of the dissolved redevelopment agencies and to, among other things, repay enforceable obligations, as defined, and to remit unencumbered balances of redevelopment agency funds, including housing funds, to the county auditor-controller for distribution to taxing entities. Existing law authorizes the city, county, or city and county that authorized the creation of a redevelopment agency to retain the housing assets, functions, and powers previously performed by the redevelopment agency, excluding amounts on deposit in the Low and Moderate Income Housing Fund. 96 This bill would modify the scope of the term “enforceable obligation” and modify provisions relating to the transfer of housing funds and responsibilities associated with dissolved redevelopment agencies. The bill would provide that any amounts on deposit in the Low and Moderate Income Housing Fund of a dissolved redevelopment agency be transferred to specified entities. The bill would make conforming changes. Existing law provides that, upon a specified date, agreements, contracts, or arrangements between the city or county, or city and county that created the redevelopment agency and the redevelopment agency are invalid. Notwithstanding this provision, an agreement that provided loans or other startup funds for the agency that was entered into within 2 years of the formation of the agency is valid and binds the successor agency. The bill would expand this exception to include an agreement involving a loan specific to a project area and other specified obligations. The bill would provide that other loan agreements entered into between the redevelopment agency and the city, county, or city and county that created it are deemed to be enforceable obligations, except as specified. The bill would further expand upon, and clarify, the scope of the successor agency’s and the oversight board’s responsibilities. This bill would declare that it is to take effect immediately as an urgency statute. Vote: 2⁄3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 2 3 4 5 6 7 8 9 10 11 12 SECTION 1. Section 34171 of the Health and Safety Code is amended to read: 34171. The following terms shall have the following meanings: (a) “Administrative budget” means the budget for administrative costs of the successor agencies as provided in Section 34177. (b) “Administrative cost allowance” means an amount that, subject to the approval of the oversight board, is payable from property tax revenues of up to 5 percent of the property tax allocated to the former redevelopment agency and successor agency for the 2011–12 fiscal year and up to 3 percent of the property tax allocated to the Redevelopment Obligation Retirement Fund money that is allocated to the successor agency for each fiscal year 96 — 2 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 thereafter, except as provided by subdivision (l) of Section 34180; provided, however, that the amount shall not be less than two hundred fifty thousand dollars ($250,000) for any fiscal year or such lesser amount as agreed to by the successor agency. However, the allowance amount shall exclude any administrative costs that can be paid from bond proceeds or from sources other than property tax. Employee costs associated with work on specific project implementation activities, including, but not limited to, construction inspection, project management, or actual construction, shall be considered project-specific costs and are not administrative costs. (c) “Designated local authority” shall mean a public entity formed pursuant to subdivision (d) of Section 34173. (d) (1) “Enforceable obligation” means any of the following: (A) Bonds, as defined by Section 33602 and bonds issued pursuant to Section 5850 of the Government Code, including the required annual debt service, reserve set-asides, and any other payments required under the indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency. (B) Loans of moneys borrowed by the redevelopment agency for a lawful purpose, to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms. (C) Payments required by the federal government, preexisting obligations to the state or obligations imposed by state law, other than passthrough payments that are made by the county auditor-controller pursuant to Section 34183, or legally enforceable payments required in connection with the agencies’ employees, including, but not limited to, pension payments, pension obligation debt service, unemployment payments, or other obligations conferred through a collective bargaining agreement. Costs incurred to fulfill collective bargaining agreements for layoffs or terminations of city employees who performed work directly on behalf of the former redevelopment agency shall be considered enforceable obligations payable from property tax funds. The obligations to employees specified in this subparagraph shall remain enforceable obligations payable from property tax funds for any employee to whom those obligations apply if that employee is transferred to the entity assuming the housing functions of the former redevelopment agency pursuant to Section 34176. The 96 AB 1585 — 3 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 successor agency or designated local authority shall enter into an agreement with the housing entity to reimburse it for any costs of the employee obligations. (D) Judgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency, other than passthrough payments that are made by the county auditor-controller pursuant to Section 34183. Along with the successor agency, the oversight board shall have the authority and standing to appeal any judgment or to set aside any settlement or arbitration decision. (E) Any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy. However, nothing in this act shall prohibit either the successor agency, with the approval or at the direction of the oversight board, or the oversight board itself from terminating any existing agreements or contracts and providing any necessary and required compensation or remediation for such termination. (F) Contracts or agreements necessary for the administration or operation of the successor agency, in accordance with this part, including, but not limited to, agreements to purchase or rent office space, equipment and supplies, and pay-related expenses pursuant to Section 33127 and for carrying insurance pursuant to Section 33134. (G) Amounts borrowed from or payments owing to the Low and Moderate Income Housing Fund of a redevelopment agency, which had been deferred as of the effective date of the act adding this part; provided, however, that the repayment schedule is approved by the oversight board. Repayments shall be made to the Low and Moderate Income Housing Fund maintained by the entity assuming the housing functions formerly performed by the redevelopment agency, as described in Section 34176. (2) (A) Except as specifically provided in this part, “enforceable obligation” does not include any agreements, contracts, or arrangements between the city, county, or city and county that created the redevelopment agency and the former redevelopment agency. However, written agreements entered into (i) at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and (ii) solely for the purpose of securing or repaying those indebtedness obligations may be deemed enforceable obligations for purposes of this part. 96 — 4 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (B) Loan agreements entered into between the redevelopment agency and the city, county, or city and county that created it, within two years of the date of creation of the redevelopment agency, or within two years of the date of the creation of a project area if the loan is specific to that project area, and any obligations imposed by paragraph (1) of subdivision (d) of Section 33691 may be deemed to be enforceable obligations. (C) Other loan agreements entered into between the redevelopment agency and the city, county, or city and county that created it shall be deemed to be enforceable obligations, if the conditions of subdivision (k) of Section 34180 are met. (3) Contracts or agreements between the former redevelopment agency and other public agencies, to perform services or provide funding for governmental or private services or capital projects outside of redevelopment project areas that do not provide benefit to the redevelopment project and thus were not properly authorized under Part 1 (commencing with Section 33000) shall be deemed void on the effective date of this part; provided, however, that such contracts or agreements for the provision of housing properly authorized under Part 1 (commencing with Section 33000) shall not be deemed void. (e) “Indebtedness obligations” means bonds, notes, certificates of participation, or other evidence of indebtedness, issued or delivered by the redevelopment agency, or by a joint exercise of powers authority created by the redevelopment agency, to third-party investors or bondholders to finance or refinance redevelopment projects undertaken by the redevelopment agency in compliance with the Community Redevelopment Law (Part 1 (commencing with Section 33000)). (f) “Oversight board” shall mean each entity established pursuant to Section 34179. (g) “Recognized obligation” means an obligation listed in the Recognized Obligation Payment Schedule. (h) “Recognized Obligation Payment Schedule” means the document setting forth the minimum payment amounts and due dates of payments required by enforceable obligations for each six-month fiscal period or annual period as provided in subdivision (l) of Section 34177. (i) “School entity” means any entity defined as such in subdivision (f) of Section 95 of the Revenue and Taxation Code. 96 AB 1585 — 5 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (j) “Successor agency” means the county, city, or city and county that authorized the creation of each redevelopment agency acting in its separate capacity as a successor agency or another entity as provided in Section 34173. (k) “Taxing entities” means cities, counties, a city and county, special districts, and school entities, as defined in subdivision (f) of Section 95 of the Revenue and Taxation Code, that receive passthrough payments and distributions of property taxes pursuant to the provisions of this part. SEC. 2. Section 34173 of the Health and Safety Code is amended to read: 34173. (a) Successor agencies, as defined in this part, are hereby designated as successor entities to the former redevelopment agencies.A successor agency shall constitute a legally distinct and separate body For purposes of this part, a successor agency is a public entity separate from the entity or entities that authorized the creation of each redevelopment agency that acts, by resolution, on its own behalf and shall have all the powers and duties set forth herein, the power to sue and be sued, and such additional powers as may be conferred upon it. Each successor agency shall be deemed to be a local entity for purposes of the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code). (b) Except for those provisions of the Community Redevelopment Law that are repealed, restricted, or revised pursuant to the act adding this part, all authority, rights, powers, duties, and obligations previously vested with the former redevelopment agencies, under the Community Redevelopment Law, are hereby vested in the successor agencies. (c) (1) Where the redevelopment agency was in the form of a joint powers authority, and where the joint powers agreement governing the formation of the joint powers authority addresses the allocation of assets and liabilities upon dissolution of the joint powers authority, then each of the entities that created the former redevelopment agency may be a successor agency within the meaning of this part and each shall have a share of assets and liabilities based on the provisions of the joint powers agreement. (2) Where the redevelopment agency was in the form of a joint powers authority, and where the joint powers agreement governing the formation of the joint powers authority does not address the 96 — 6 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 allocation of assets and liabilities upon dissolution of the joint powers authority, then each of the entities that created the former redevelopment agency may be a successor agency within the meaning of this part, a proportionate share of the assets and liabilities shall be based on the assessed value in the project areas within each entity’s jurisdiction, as determined by the county assessor, in its jurisdiction as compared to the assessed value of land within the boundaries of the project areas of the former redevelopment agency. (d) (1) A city, county, city and county, or the entities forming the joint powers authority that authorized the creation of each redevelopment agency may elect not to serve as a successor agency under this part. A city, county, city and county, or any member of a joint powers authority that elects not to serve as a successor agency under this part must file a copy of a duly authorized resolution of its governing board to that effect with the county auditor-controller no later than January 13, 2012. (2) The determination of the first local agency that elects to become the successor agency shall be made by the county auditor-controller based on the earliest receipt by the county auditor-controller of a copy of a duly adopted resolution of the local agency’s governing board authorizing such an election. As used in this section, “local agency” means any city, county, city and county, or special district in the county of the former redevelopment agency. (3) If no local agency elects to serve as a successor agency for a dissolved redevelopment agency, a public body, referred to herein as a “designated local authority” shall be immediately formed, pursuant to this part, in the county and shall be vested with all the powers and duties of a successor agency as described in this part. The Governor shall appoint three residents of the county to serve as the governing board of the authority. The designated local authority shall serve as successor agency until a local agency elects to become the successor agency in accordance with this section. (4) A city, county, or city and county, or the entities forming the joint powers authority that authorized the creation of a redevelopment agency and that elected not to serve as the successor agency under this part, may subsequently reverse this decision and agree to serve as the successor agency pursuant to this section. Any reversal of this decision shall not become effective for 60 days 96 AB 1585 — 7 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 after notice has been given to the current successor agency and the oversight board and shall not invalidate any action of the successor agency or oversight board taken prior to the effective date of the transfer of responsibility. (e) The liability of any successor agency, acting pursuant to the powers granted under the act adding this part, shall be limited to the extent of the total sum of property tax revenues it receives pursuant to this part and the value of assets transferred to it as a successor agency for a dissolved redevelopment agency. SEC. 3. Section 34176 of the Health and Safety Code is amended to read: 34176. (a) The city, county, or city and county that authorized the creation of a redevelopment agency may elect to retain the housing assets and functions previously performed by the redevelopment agency. If a city, county, or city and county elects to retain the responsibility for performing housing functions previously performed by a redevelopment agency, all rights, powers, duties, and obligations assets, liabilities, duties, and obligations, excluding enforceable obligations of the successor agency, associated with the housing activities of the agency, including any amounts on deposit in the Low and Moderate Income Housing Fund, shall be transferred to the city, county, or city and county. Any funds transferred to the city, county, or city and county pursuant to this subdivision shall be maintained in a separate Low and Moderate Income Housing Fund and expended pursuant to the provisions of the Community Redevelopment Law relating to the Low and Moderate Income Housing Fund. (b) If a city, county, or city and county does not elect to retain the responsibility for performing housing functions previously performed by a redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations, excluding enforceable obligations of the successor agency, associated with the housing activities of the agency, including any amounts in the Low and Moderate Income Housing Fund, shall be transferred as follows: (1) Where there is one local housing authority in the territorial jurisdiction of the former redevelopment agency, to that local housing authority. (2) Where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the 96 — 8 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 local housing authority selected by the city, county, or city and county that authorized the creation of the redevelopment agency. (3) Where there is no local housing authority in the territorial jurisdiction of the former redevelopment agency or where the local housing authority selected does not accept the responsibility for performing housing functions previously performed by the former redevelopment agency, to the Department of Housing and Community Development. Funds shall be deposited into the State Low and Moderate Income Housing Trust Fund and awarded on a competitive basis to projects within the counties in which the funds were collected. Priority shall be given to eligible projects for extremely low, very low, and low-income projects. (c) Commencing on the operative date of this part, the entity assuming the housing functions formerly performed by the redevelopment agency shall enforce affordability covenants and perform related activities pursuant to applicable provisions of the Community Redevelopment Law (Part 1 (commencing with Section 33000), including, but not limited to, Section 33418. (d) The succeeding housing entity shall contract to expend at least 80 percent of the moneys in the Low and Moderate Income Housing Fund within two years of the date of receipt of those moneys. If within four years of the date of receipt of those moneys the succeeding housing entity has not spent the money in the Low and Moderate Income Housing Fund, then the excess amount, minus the amount necessarily reserved for the ongoing monitoring and maintenance of affordable housing projects, shall be transferred to the State Low and Moderate Income Housing Trust Fund, which is hereby created, for expenditure by the Department of Housing and Community Development for the purpose of increasing the supply of low- and moderate-income housing in the county with priority given to extremely low, very low, and low-income projects. Excess funds shall not be transferred to the department if the succeeding housing entity applies for, and receives, a waiver from the department. If a waiver is granted, funds shall remain with the entity for an additional two years from the date of waiver approval. In approving a waiver, the department shall consider, among other factors, whether the city, county, or city and county, or housing authority has a site specific project plan with local approvals, including the issuance of building permits, whether the project has secured financing, and evidence that some funds have been 96 AB 1585 — 9 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 expended from the Low and Moderate Income Housing Fund. A succeeding housing entity may reapply at the end of the two-year period for a renewal of the previously granted waiver. (e) A succeeding housing entity may transfer all or a portion of the moneys in the Low and Moderate Income Housing Fund to another succeeding housing entity within the county where the moneys were collected, to be spent on affordable housing if all of the following conditions are met: (1) The funds shall be spent on projects that primarily benefit low-income families or families that are below low income. (2) Both succeeding housing entities involved in the transfer adopt a resolution detailing the need for the transfer of funds and the intended use of the funds by the receiving jurisdiction. (3) The funds shall be spent in compliance with subdivision (d). (f) The succeeding housing entity shall, within 45 days of the date the act amending this section takes effect or 45 days from receipt of moneys for the Low and Moderate Income Housing Fund, whichever date is later, notify the department of the amount of moneys on deposit in the Low and Moderate Income Housing Fund and that entity’s plan for spending the funds. Two years from this date, the succeeding housing entity shall report to the department the percentage of funds that it has entered into contract to spend. Within four years of receipt of the funds, the succeeding housing entity shall report to the department if there are remaining moneys in the Low and Moderate Income Housing Fund and if it will apply for a waiver specified in subdivision (d) or whether the excess amount will be transferred to the department. (g) For purposes of this section, “succeeding housing entity” means the entity that assumes responsibility for retaining the housing assets and functions previously performed by a redevelopment agency, as described in subdivisions (a) and (b). SEC. 4. Section 34177 of the Health and Safety Code is amended to read: 34177. Successor agencies are required to do all of the following: (a) Continue to make payments due for enforceable obligations. (1) On and after February 1, 2012, and until a Recognized Obligation Payment Schedule becomes operative, only payments required pursuant to an enforceable obligations payment schedule shall be made. The initial enforceable obligation payment schedule 96 — 10 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 shall be the last schedule adopted by the redevelopment agency under Section 34169. However, payments associated with obligations excluded from the definition of enforceable obligations by paragraph (2) of subdivision (e) of Section 34171 shall be excluded from the enforceable obligations payment schedule and be removed from the last schedule adopted by the redevelopment agency under Section 34169 prior to the successor agency adopting it as its enforceable obligations payment schedule pursuant to this subdivision. The enforceable obligation payment schedule may be amended by the successor agency at any public meeting and shall be subject to the approval of the oversight board as soon as the board has sufficient members to form a quorum. (2) The Department of Finance and the Controller shall each have the authority to require any documents associated with the enforceable obligations to be provided to them in a manner of their choosing. Any taxing entity, the department, and the Controller shall each have standing to file a judicial action to prevent a violation under this part and to obtain injunctive or other appropriate relief. (3) Commencing on the date the Recognized Obligation Payment Schedule is valid pursuant to subdivision (l), only those payments listed in the Recognized Obligation Payment Schedule may be made by the successor agency from the funds specified in the Recognized Obligation Payment Schedule. In addition, commencing on the date the Recognized Obligation Payment Schedule is valid pursuant to subdivision (l), the Recognized Obligation Payment Schedule shall supersede the Statement of Indebtedness, which shall no longer be prepared nor have any effect under the Community Redevelopment Law. (4) Nothing in the act adding this part is to be construed as preventing a successor agency, with the prior approval of the oversight board, as described in Section 34179, from making payments for enforceable obligations from sources other than those listed in the Recognized Obligation Payment Schedule. (5) From February 1, 2012, to July 1, 2012, a successor agency shall have no authority and is hereby prohibited from accelerating payment or making any lump-sum payments that are intended to prepay loans unless such accelerated repayments were required prior to the effective date of this part. 96 AB 1585 — 11 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (b) Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (c) Perform obligations required pursuant to any enforceable obligation. (d) Remit unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to the taxing entities. In making the distribution, the county auditor-controller shall utilize the same methodology for allocation and distribution of property tax revenues provided in Section 34188. (e) Dispose of assets and properties of the former redevelopment agency as directed by the oversight board; provided, however, that the oversight board may instead direct the successor agency to transfer ownership of certain assets pursuant to subdivision (a) of Section 34181. The disposal is to be done in an expeditious but orderly manner that preserves the value of the asset. Proceeds from asset sales and related funds that are no longer needed for approved development projects or to otherwise wind down the affairs of the agency, each as determined by the oversight board, shall be transferred to the county auditor-controller for distribution as property tax proceeds under Section 34188. (f) Enforce all former redevelopment agency rights for the benefit of the taxing entities, including, but not limited to, continuing to collect loans, rents, and other revenues that were due to the redevelopment agency. (g) Effectuate transfer of housing functions and assets to the appropriate entity designated pursuant to Section 34176. (h) Expeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and in accordance with the direction of the oversight board. (i) Continue to oversee development of properties until the contracted work has been completed or the contractual obligations of the former redevelopment agency can be transferred to other parties. Bond proceeds shall be used for the purposes for which bonds were sold unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds. (j) Prepare a proposed administrative budget and submit it to the oversight board for its approval. The proposed administrative budget shall include all of the following: 96 — 12 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (1) Estimated amounts for successor agency administrative costs for the upcoming six-month fiscal period. (2) Proposed sources of payment for the costs identified in paragraph (1). (3) Proposals for arrangements for administrative and operations services provided by a city, county, city and county, or other entity. (k) Provide administrative cost estimates, from its approved administrative budget that are to be paid from property tax revenues deposited in the Redevelopment Property Tax Trust Fund, to the county auditor-controller for each six-month fiscal period. (l) (1) Before each six-month fiscal period, prepare a Recognized Obligation Payment Schedule in accordance with the requirements of this paragraph. For each recognized obligation, the Recognized Obligation Payment Schedule shall identify one or more of the following sources of payment: (A) Low and Moderate Income Housing Fund. (B) Bond proceeds. (C) Reserve balances. (D) Administrative cost allowance. (E) The Redevelopment Property Tax Trust Fund, but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or by the provisions of this part. (F) Other revenue sources, including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board in accordance with this part. (2) A Recognized Obligation Payment Schedule shall not be deemed valid unless all of the following conditions have been met: (A) A draft Recognized Obligation Payment Schedule is prepared by the successor agency for the enforceable obligations of the former redevelopment agency by March 1, 2012. From January 1, 2012, to June 30, 2012, inclusive, the initial draft of that schedule shall project the dates and amounts of scheduled payments for each enforceable obligation, and shall be reviewed and certified, as to its accuracy, by an external auditor designated pursuant to Section 34182. (B) The certified Recognized Obligation Payment Schedule is submitted to and duly approved by the oversight board. 96 AB 1585 — 13 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (C) A copy of the approved Recognized Obligation Payment Schedule is submitted to the county auditor-controller and both the Controller’s office and the Department of Finance and be posted on the successor agency’s Internet Web site. (3) The Recognized Obligation Payment Schedule shall be forward looking to the next six months. The first Recognized Obligation Payment Schedule shall be submitted to the Controller’s office and the Department of Finance by April 15, 2012, for the period of January 1, 2012, to June 30, 2012, inclusive. However, the first Recognized Obligation Payment Schedule submitted for the year may, if necessary, include the total amount of payments required for an enforceable obligation for the next two six-month periods and, in the case of debt obligations, may include, if necessary, the amount of the annual debt service, reserve set-asides, and any other amounts required under indenture or similar documents. Former redevelopment agency enforceable obligation payments due, and reasonable or necessary administrative costs due or incurred, prior to January 1, 2012, shall be made from property tax revenues received in the spring of 2011 property tax distribution, and from other revenues and balances transferred to the successor agency. (m) Cause a postaudit of the ﬁnancial transactions and records of the successor agency to be made at least annually by a certiﬁed public accountant. SEC. 5. Section 34179 of the Health and Safety Code is amended to read: 34179. (a) Each successor agency shall have an oversight board composed of seven members. The members shall elect one of their members as the chairperson and shall report the name of the chairperson and other members to the Department of Finance on or before May 1, 2012. Members shall be selected as follows: (1) One member appointed by the county board of supervisors. (2) One member appointed by the mayor for the city that formed the redevelopment agency. (3) One member appointed by the special district having the largest property tax share within the redevelopment project areas of the former redevelopment agency, which is of the type of special district that is eligible to receive property tax revenues pursuant to Section 34188. 96 — 14 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (4) One member appointed by the county superintendent of education to represent schools if the superintendent is elected. If the county superintendent of education is appointed, then the appointment made pursuant to this paragraph shall be made by the county board of education. (5) One member appointed by the Chancellor of the California Community Colleges to represent community college districts in the county. (6) One member of the public appointed by the county board of supervisors. (7) One member representing the employees of the former redevelopment agency appointed by the mayor or chair of the board of supervisors, as the case may be, from the recognized employee organization representing the largest number of former redevelopment agency employees employed by the successor agency at that time. In the case where city or county employees performed administrative duties of the former redevelopment agency, the appointment shall be made from the recognized employee organization representing those employees. If a recognized employee organization does not exist for either the employees of the former redevelopment agency or the city or county employees performing administrative duties of the former redevelopment agency, the appointment shall be made from among the employees of the successor agency. In voting to approve a contract as an enforceable obligation, a member appointed pursuant to this paragraph shall not be deemed to be interested in the contract by virtue of being an employee of the successor agency or community for purposes of Section 1090 of the Government Code. (8) If the county or a joint powers agency formed the redevelopment agency, then the largest city by acreage in the territorial jurisdiction of the former redevelopment agency may select one member. If there are no cities with territory in a project area of the redevelopment agency, the county superintendent of education may appoint an additional member to represent the public. (9) If there are no special districts of the type that are eligible to receive property tax pursuant to Section 34188, within the territorial jurisdiction of the former redevelopment agency, then the county may appoint one member to represent the public. 96 AB 1585 — 15 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (10) Where a redevelopment agency was formed by an entity that is both a charter city and a county, the oversight board shall be composed of seven members selected as follows: three members appointed by the mayor of the city, where such appointment is subject to confirmation by the county board of supervisors, one member appointed by the largest special district, by property tax share, with territory in the territorial jurisdiction of the former redevelopment agency, which is the type of special district that is eligible to receive property tax revenues pursuant to Section 34188, one member appointed by the county superintendent of education to represent schools, one member appointed by the Chancellor of the California Community Colleges to represent community college districts, and one member representing employees of the former redevelopment agency appointed by the mayor of the city where such an appointment is subject to confirmation by the county board of supervisors, to represent the largest number of former redevelopment agency employees employed by the successor agency at that time. (b) The Governor may appoint individuals to fill any oversight board member position described in subdivision (a) that has not been filled by May 15, 2012, or any member position that remains vacant for more than 60 days. (c) The oversight board may direct the staff of the successor agency to perform work in furtherance of the oversight board’s duties and responsibilities under this part. The successor agency shall pay for all of the costs of meetings of the oversight board and may include such costs in its administrative budget. Oversight board members shall serve without compensation or reimbursement for expenses. (d) Oversight board members shall have personal immunity from suit for their actions taken within the scope of their responsibilities as oversight board members. (e) A majority of the total membership of the oversight board shall constitute a quorum for the transaction of business. A majority vote of the total membership of the oversight board is required for the oversight board to take action. The oversight board shall be deemed to be a local entity for purposes of the Ralph M. Brown Act, the California Public Records Act, and the Political Reform Act of 1974. All actions taken by the oversight board shall be adopted by resolution. 96 — 16 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (f) All notices required by law for proposed oversight board actions shall also be posted on the successor agency’s Internet Web site or the oversight board’s Internet Web site. (g) Each member of an oversight board shall serve at the pleasure of the entity that appointed such member. (h) The Department of Finance may review an oversight board action taken pursuant to this part. As such, all oversight board actions shall not be effective for three business days, pending a request for review by the department. Each oversight board shall designate an official to whom the department may make such requests and who shall provide the department with the telephone number and email contact information for the purpose of communicating with the department pursuant to this subdivision. In the event that the department requests a review of a given oversight board action, it shall have 10 days from the date of its request to approve the oversight board action or return it to the oversight board for reconsideration and such oversight board action shall not be effective until approved by the department. In the event that the department returns the oversight board action to the oversight board for reconsideration, the oversight board shall resubmit the modified action for department approval and the modified oversight board action shall not become effective until approved by the department. (i) Oversight boards shall have fiduciary responsibilities to holders of enforceable obligations and the taxing entities that benefit from distributions of property tax and other revenues pursuant to Section 34188. Further, the provisions of Division 4 (commencing with Section 1000) of the Government Code shall apply to oversight boards. Notwithstanding Section 1099 of the Government Code, or any other law, any individual may simultaneously be appointed to up to five oversight boards and may hold an office in a city, county, city and county, special district, school district, or community college district. (j) Commencing on and after July 1, 2016, in each county where more than one oversight board was created by operation of the act adding this part, there shall be only one oversight board appointed as follows: (1) One member may be appointed by the county board of supervisors. 96 AB 1585 — 17 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (2) One member may be appointed by the city selection committee established pursuant to Section 50270 of the Government Code. In a city and county, the mayor may appoint one member. (3) One member may be appointed by the independent special district selection committee established pursuant to Section 56332 of the Government Code, for the types of special districts that are eligible to receive property tax revenues pursuant to Section 34188. (4) One member may be appointed by the county superintendent of education to represent schools if the superintendent is elected. If the county superintendent of education is appointed, then the appointment made pursuant to this paragraph shall be made by the county board of education. (5) One member may be appointed by the Chancellor of the California Community Colleges to represent community college districts in the county. (6) One member of the public may be appointed by the county board of supervisors. (7) One member may be appointed by the recognized employee organization representing the largest number of successor agency employees in the county. (k) The Governor may appoint individuals to fill any oversight board member position described in subdivision (j) that has not been filled by July 15, 2016, or any member position that remains vacant for more than 60 days. (l) Commencing on and after July 1, 2016, in each county where only one oversight board was created by operation of the act adding this part, then there will be no change to the composition of that oversight board as a result of the operation of subdivision (b). (m) Any oversight board for a given successor agency shall cease to exist when all of the indebtedness of the dissolved redevelopment agency has been repaid. SEC. 6. Section 34180 of the Health and Safety Code is amended to read: 34180. All of the following successor agency actions shall first be approved by the oversight board: (a) The establishment of new repayment terms for outstanding loans where the terms have not been specified prior to the date of this part. 96 — 18 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (b) Refunding of outstanding bonds or other debt of the former redevelopment agency by successor agencies in order to provide for savings or to finance debt service spikes; provided, however, that no additional debt is created and debt service is not accelerated. (c) Entering into a financing agreement, including the issuance of bonds, to fund required payments under an enforceable obligation that exceed the amount of property tax revenue available to the successor agency during the payment period. This subdivision shall not be deemed to authorize a successor agency to create an additional enforceable obligation, as defined by this part, other than for necessary financing costs. (d) Setting aside of amounts in reserves as required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (e) Merging of project areas. (f) Continuing the acceptance of federal or state grants, or other forms of financial assistance from either public or private sources, where assistance is conditioned upon the provision of matching funds, by the successor entity as successor to the former redevelopment agency, in an amount greater than 5 percent of the total grant amount. (g) (1) If a city, county, or city and county wishes to retain any properties or other assets for future redevelopment activities, funded from its own funds and under its own auspices, it must reach 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 Section 34188, for the value of the property retained. (2) If no other agreement is reached on valuation of the retained assets, the value will be the fair market value as of the 2011 property tax lien date as determined by the county assessor. (h) Establishment of the Recognized Obligation Payment Schedule. (i) A request by the successor agency to enter into an agreement with the city, county, or city and county that formed the redevelopment agency that it is succeeding. (j) A request by a successor agency or taxing entity to pledge, or to enter into an agreement for the pledge of, property tax revenues pursuant to subdivision (b) of Section 34178. 96 AB 1585 — 19 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (k) A loan between a city, county, or city and county and a redevelopment agency as an enforceable obligation pursuant to subparagraph (C) of paragraph (2) of subdivision (d) of Section 34171, provided that the oversight board makes a finding that the loan was for legitimate redevelopment purposes and conditions its approval on the loan being 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 into the Local Agency Investment Fund. (l) The approval of temporary increases in the administrative cost allowance to carry out the requirements of an enforceable obligation, to cover litigation costs, or to maintain and preserve the value of assets while in the possession of the successor agency. SEC. 7. Section 34181 of the Health and Safety Code is amended to read: 34181. The oversight board shall direct the successor agency to do all of the following: (a) Compile a complete inventory of existing real property assets of the former redevelopment agency, by project area. The inventory shall include general categories of real property assets, the purpose for which they were originally acquired, the original purchase price of each asset and the estimated current market value. Prior to the disposal of any real property asset, the oversight board shall receive and review the inventory compiled by the successor agency, and adopt a policy or strategy for the disposal or transfer of such assets consistent with the requirements of subdivision (b). (b) Dispose of all assets and properties of the former redevelopment agency that were funded by tax increment revenues of the dissolved redevelopment agency, other than those transferred pursuant to subdivision (d); provided, however, that the oversight board may instead direct the successor agency to transfer ownership of those assets that were constructed and used for a governmental purpose, such as roads, school buildings, parks, and fire stations, or are integral to the operation of a governmental purpose asset, such as a parking facility, to the appropriate public jurisdiction pursuant to existing agreements, if any, relating to the construction or use of such an asset. Any compensation to be provided to the successor agency for the transfer of the asset shall be governed by agreements, if any, relating to the construction or 96 — 20 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 use of that asset. Disposal shall be done in an expeditious but orderly manner that preserves the value of the asset. (c) Cease performance in connection with and terminate all existing agreements that do not qualify as enforceable obligations. (d) Transfer housing responsibilities and all rights, powers, assets, liabilities, duties, and obligations, excluding enforceable obligations of the successor agency, but including any amounts on deposit in the Low and Moderate Income Housing Fund to the appropriate entity pursuant to Section 34176. (e) Terminate any agreement, between the dissolved redevelopment agency and any public entity located in the same county, obligating the redevelopment agency to provide funding for any debt service obligations of the public entity or for the construction or operation of facilities owned or operated by such public entity, in any instance where the oversight board has found that early termination would be in the best interests of the taxing entities. (f) Determine whether any contracts, agreements, or other arrangements between the dissolved redevelopment agency and any private parties should be terminated or renegotiated to reduce liabilities and increase net revenues to the taxing entities, and present proposed termination or amendment agreements to the oversight board for its approval. The board may approve any amendments to or early termination of such agreements where it finds that amendments or early termination would be in the best interests of the taxing entities. SEC. 8. Section 34182 of the Health and Safety Code is amended to read: 34182. (a) (1) The county auditor-controller shall conduct or cause to be conducted an agreed-upon procedures audit of each redevelopment agency in the county that is subject to this part, to be completed by July 1, 2012. (2) The purpose of the audits shall be to establish each redevelopment agency’s assets and liabilities, to document and determine each redevelopment agency’s passthrough payment obligations to other taxing agencies, and to document and determine both the amount and the terms of any indebtedness incurred by the redevelopment agency and certify the initial Recognized Obligation Payment Schedule. 96 AB 1585 — 21 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (3) The county auditor-controller may charge the Redevelopment Property Tax Trust Fund for any costs incurred by the county auditor-controller pursuant to this part. (b) By July 15, 2012, the county auditor-controller shall provide the Controller’s office a copy of all audits performed pursuant to this section. The county auditor-controller shall maintain a copy of all documentation and working papers for use by the Controller. (c) (1) The county auditor-controller shall determine the amount of property taxes that would have been allocated to each redevelopment agency in the county had the redevelopment agency not been dissolved pursuant to the operation of the act adding this part. These amounts are deemed property tax revenues within the meaning of subdivision (a) of Section 1 of Article XIIIA of the California Constitution and are available for allocation and distribution in accordance with the provisions of the act adding this part. The county auditor-controller shall calculate the property tax revenues using current assessed values on the last equalized roll on August 20, pursuant to Section 2052 of the Revenue and Taxation Code, and pursuant to statutory formulas or contractual agreements with other taxing agencies, as of the effective date of this section, and shall deposit that amount along with unitary and supplemental tax increment due to the former redevelopment agency in the Redevelopment Property Tax Trust Fund. (2) Each county auditor-controller shall administer the Redevelopment Property Tax Trust Fund for the benefit of the holders of former redevelopment agency enforceable obligations and the taxing entities that receive passthrough payments and distributions of property taxes pursuant to this part. (3) In connection with the allocation and distribution by the county auditor-controller of property tax revenues deposited in the Redevelopment Property Tax Trust Fund, in compliance with this part, the county auditor-controller shall prepare estimates of amounts to be allocated and distributed, and provide those estimates to both the entities receiving the distributions and the Department of Finance, no later than November 1 and May 1 of each year. (4) Each county auditor-controller shall disburse proceeds of asset sales or reserve balances, which have been received from the successor entities pursuant to Sections 34177 and 34187, to the taxing entities. In making such a distribution, the county auditor-controller shall utilize the same methodology for allocation 96 — 22 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 and distribution of property tax revenues provided in Section 34188. (d) By October 1, 2012, the county auditor-controller shall report the following information to the Controller’s office and the Director of Finance: (1) The sums of property tax revenues remitted to the Redevelopment Property Tax Trust Fund related to each former redevelopment agency. (2) The sums of property tax revenues remitted to each agency under paragraph (1) of subdivision (a) of Section 34183. (3) The sums of property tax revenues remitted to each successor agency pursuant to paragraph (2) of subdivision (a) of Section 34183. (4) The sums of property tax revenues paid to each successor agency pursuant to paragraph (3) of subdivision (a) of Section 34183. (5) The sums paid to each city, county, and special district, and the total amount allocated for schools pursuant to paragraph (4) of subdivision (a) of Section 34183. (6) Any amounts deducted from other distributions pursuant to subdivision (b) of Section 34183. (e) A county auditor-controller may charge the Redevelopment Property Tax Trust Fund for the costs of administering the provisions of this part. (f) The Controller may audit and review any county auditor-controller action taken pursuant to the act adding this part. As such, all county auditor-controller actions shall not be effective for three business days, pending a request for review by the Controller. In the event that the Controller requests a review of a given county auditor-controller action, he or she shall have 10 days from the date of his or her request to approve the county auditor-controller’s action or return it to the county auditor-controller for reconsideration and such county auditor-controller action shall not be effective until approved by the Controller. In the event that the Controller returns the county auditor-controller’s action to the county auditor-controller for reconsideration, the county auditor-controller must resubmit the modified action for Controller approval and such modified county auditor-controller action shall not become effective until approved by the Controller. 96 AB 1585 — 23 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 SEC. 9. Section 34183 of the Health and Safety Code is amended to read: 34183. (a) Notwithstanding any other law, from February 1, 2012, to July 1, 2012, and for each fiscal year thereafter, the county auditor-controller shall, after deducting administrative costs allowed under Section 34182 and Section 95.3 of the Revenue and Taxation Code, allocate moneys in each Redevelopment Property Tax Trust Fund as follows: (1) Subject to any prior deductions required by subdivision (b), first, the county auditor-controller shall remit from the Redevelopment Property Tax Trust Fund to each local agency and school entity an amount of property tax revenues in an amount equal to that which would have been received under Section 33401, 33492.140, 33607, 33607.5, 33607.7, or 33676, as those sections read on January 1, 2011, or pursuant to any passthrough agreement between a redevelopment agency and a taxing jurisdiction that was entered into prior to January 1, 1994, that would be in force during that fiscal year, had the redevelopment agency existed at that time. The amount of the payments made pursuant to this paragraph shall be calculated solely on the basis of passthrough payment obligations, existing prior to the effective date of this part and continuing as obligations of successor entities, shall occur no later than May 16, 2012, and no later than June 1, 2012, and each January 16 and June 1 thereafter. Notwithstanding subdivision (e) of Section 33670, that portion of the taxes in excess of the amount identified in subdivision (a) of Section 33670, which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness for the acquisition or improvement of real property shall be allocated to, and when collected shall be paid into, the fund of that taxing agency. (2) (A) Second, on May 16, 2012, and June 1, 2012, and each January 16 and June 1 thereafter, to each successor agency for payments listed in its Recognized Obligation Payment Schedule for the six-month fiscal period beginning January 1, 2012, or July 1, 2012, and each January 16 and June 1 thereafter, in the following order of priority: (i) Debt service payments scheduled to be made for tax allocation bonds. 96 — 24 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (ii) Payments scheduled to be made on revenue bonds, but only to the extent the revenues pledged for them are insufficient to make the payments and only where the agency’s tax increment revenues were also pledged for the repayment of the bonds. (iii) Payments scheduled for other debts and obligations listed in the Recognized Obligation Payment Schedule that are required to be paid from former tax increment revenue. (B) For purposes of allocations made pursuant to this paragraph, the auditor-controller shall reserve additional funds in the Redevelopment Property Tax Trust Fund at the time of the January 16 allocation, if necessary, to cover payments made in the second half of the calendar year, as described in the Recognized Obligation Payment Schedule, that are in excess of the amounts anticipated to be deposited in the Redevelopment Property Tax Trust Fund from the allocation that is received in May or June. (3) Third, on May 16, 2012, and June 1, 2012, and each January 16 and June 1 thereafter, to each successor agency for the administrative cost allowance, as defined in Section 34171, for administrative costs set forth in an approved administrative budget for those payments required to be paid from former tax increment revenues. (4) Fourth, on May 16, 2012, and June 1, 2012, and each January 16 and June 1 thereafter, any moneys remaining in the Redevelopment Property Tax Trust Fund after the payments and transfers authorized by paragraphs (1) to (3), inclusive, shall be distributed to local agencies and school entities in accordance with Section 34188. (b) If the successor agency reports, no later than April 1, 2012, and May 1, 2012, and each December 1 and May 1 thereafter, to the county auditor-controller that the total amount available to the successor agency from the Redevelopment Property Tax Trust Fund allocation to that successor agency’s Redevelopment Obligation Retirement Fund, from other funds transferred from each redevelopment agency, and from funds that have or will become available through asset sales and all redevelopment operations, are insufficient to fund the payments required by paragraphs (1) to (3), inclusive, of subdivision (a) in the next six-month fiscal period, the county auditor-controller shall notify the Controller and the Department of Finance no later than 10 days from the date of that notification. The county auditor-controller 96 AB 1585 — 25 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 shall verify whether the successor agency will have sufficient funds from which to service debts according to the Recognized Obligation Payment Schedule and shall report the findings to the Controller. If the Controller concurs that there are insufficient funds to pay required debt service, the amount of the deficiency shall be deducted first from the amount remaining to be distributed to taxing entities pursuant to paragraph (4), and if that amount is exhausted, from amounts available for distribution for administrative costs in paragraph (3). If an agency, pursuant to the provisions of Section 33492.15, 33492.72, 33607.5, 33671.5, 33681.15, or 33688, made passthrough payment obligations subordinate to debt service payments required for enforceable obligations, funds for servicing bond debt may be deducted from the amounts for passthrough payments under paragraph (1), as provided in those sections, but only to the extent that the amounts remaining to be distributed to taxing entities pursuant to paragraph (4) and the amounts available for distribution for administrative costs in paragraph (3) have all been exhausted. (c) The county treasurer may loan any funds from the county treasury that are necessary to ensure prompt payments of redevelopment agency debts. (d) The Controller may recover the costs of audit and oversight required under this part from the Redevelopment Property Tax Trust Fund by presenting an invoice therefor to the county auditor-controller who shall set aside sufficient funds for and disburse the claimed amounts prior to making the next distributions to the taxing jurisdictions pursuant to Section 34188. Subject to the approval of the Director of Finance, the budget of the Controller may be augmented to reflect the reimbursement, pursuant to Section 28.00 of the Budget Act. SEC. 10. Section 34187 of the Health and Safety Code is amended to read: 34187. Commencing May 1, 2012, whenever a recognized obligation that had been identified in the Recognized Payment Obligation Schedule is paid off or retired, either through early payment or payment at maturity, the county auditor-controller shall distribute to the taxing entities, in accordance with the provisions of the Revenue and Taxation Code, all property tax revenues that were associated with the payment of the recognized 96 — 26 —AB 1585 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 obligation to the extent not currently required for the payment of other recognized obligations. SEC. 11. Section 34189 of the Health and Safety Code is amended to read: 34189. (a) Commencing on the effective date of this part, all provisions of the Community Redevelopment Law that depend on the allocation of tax increment to redevelopment agencies, including, but not limited to, Sections 33445, 33640, 33641, 33645, and subdivision (b) of Section 33670, shall be inoperative. (b) To the extent that a provision of Part 1 (commencing with Section 33000), Part 1.5 (commencing with Section 34000), Part 1.6 (commencing with Section 34050), and Part 1.7 (commencing with Section 34100) conflicts with this part, the provisions of this part shall control. Further, if a provision of Part 1 (commencing with Section 33000), Part 1.5 (commencing with Section 34000), Part 1.6 (commencing with Section 34050), or Part 1.7 (commencing with Section 34100) provides an authority that the act adding this part is restricting or eliminating, the restriction and elimination provisions of the act adding this part shall control. (c) It is intended that the provisions of this part shall be read in a manner as to avoid duplication of payments. SEC. 12. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to effectuate the orderly implementation of responsibilities associated with dissolved redevelopment agencies, it is necessary that this act take immediate effect. O 96 AB 1585 — 27 — State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 BILL ANALYSIS (Without Reference to File) ASSEMBLY THIRD READING AB 1585 (John A. Perez, et al.) As Amended March 21, 2012 2/3 vote. Urgency HOUSING 5-0 LOCAL GOVERNMENT 7-1 Ayes: Torres, Atkins , Ayes: Smyth, Alejo, Bradford, Bradford, Cedillo, Hueso Campos, Davis, Gordon, Hueso Nays: Norby APPROPRIATIONS 11-3 Ayes: Fuentes, Blumenfield, Bradford, Charles Calderon, Campos, Davis, Gatto, Hill, Lara, Mitchell, Solorio Nays: Donnelly, Nielsen, Norby SUMMARY: Makes changes to the process of dissolving redevelopment agencies (RDAs), including requiring the funds on deposit in the Low-and Moderate-Income Housing Fund (L&M Fund) of the former RDA to remain with the entity that assumes the housing functions rather than being distributed as property tax revenue. Specifically,this bill: 1)Clarifies that the "administrative cost allowance" is 5% of the property tax, including property tax that was allocated to the former RDA and the successor agency for the 2011- 2012 fiscal year. 2)Specifies that employee costs associated with work on specific project implementation activities, including, but not limited to, construction inspection, project management, or actual construction, are not subject to the administrative cost allowance cap. 3)Specifies that costs incurred to fulfill collective bargaining agreements for layoffs or terminations of city employees who performed work for the former RDA are enforceable obligations payable from property tax funds. 4)Provides that obligations to employees that are transferred from the former RDA or successor agency to the entity assuming the housing functions are enforceable obligations payable from property tax funds. 5)Requires the successor agency or designated local authority to enter into an agreement with the entity assuming the housing functions and to reimburse it for any costs of the employee obligations if an employee is transferred to the housing successor entity. 6)Adds the following categories of enforceable obligations and requires their approval by the http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (1 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 oversight board: a) Loans made by the former city, county, or city and county that created the RDA to the RDA if the loan was made within two years of the date of the creation of a project area, if the loan was for the project area; and, b) Loans made from the city or county to the former RDA to make a payment to the state's Supplemental Educational Revenue Augmentation Fund (SERAF). 1)Clarifies that repayment of SERAF loans made from the L&M Fund to the former RDA must be deposited into the L&M Fund maintained by the entity that assumes the housing functions. 2)Requires the oversight board to do the following in order to deem other loan agreements from the city, county, or city and county to the former RDA an enforceable obligation: a) Make a finding that the loan was for legitimate redevelopment purposes; and, b) Condition its approval on the loan being repaid to the city, county, or city and county based on a defined schedule over a reasonable term, at an interest rate not to exceed the interest rate earned by funds deposited into the Local Agency Investment Fund. 1)Provides that when listing the payment dates for enforceable obligations on the Recognized Obligation Payment Schedule (ROPS), the successor agency may list payments on an annual basis. 2)Specifies that the successor agency is a public entity that is separate from the entity or entities that authorized the creation of the redevelopment agency, that acts by resolution, can sue and be sued, and can have additional powers that may be conferred upon it. 3)Clarifies that successor agencies are subject to the Ralph M. Brown Act. 4)Allows a city, county, or city and county, or joint powers authority that authorized the creation of the former RDA and elected not to be the successor agency to subsequently reverse that decision and serve as the successor agency. 5)Provides the reversal of decision does not take effect until 60 days after the notice is given to the current successor agency and oversight board. 6)Provides that the city, county, or city and county or joint powers authority that reverses its decision and elects to become the successor agency cannot invalidate any actions of the current successor agency or oversight board prior to the transfer of responsibility. 7)Requires any amounts on deposit in the L&M Fund of a former RDA to be transferred to the city, county, or city and county that elected to retain the responsibility for performing the housing functions of the former agency. 8)Requires any amounts on deposit in the L&M Fund that are transferred to the L&M Fund of the succeeding housing entity must be maintained in a separate account and used for the purposes defined in the Community Redevelopment Law relating to authorized uses of the L&M Fund. 9)Requires the entity that assumes the housing functions of the former RDA to enforce http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (2 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 affordability covenants and other related activities as defined in Community Redevelopment Law. 10)Requires, where there is no local housing authority that elected to accept authority for performing the housing functions, that any amounts on deposit in the L&M Fund be deposited in the State Low-and Moderate Income Housing Trust Fund (State Trust Fund), created by this measure, administered by the Department of Housing and Community Development (HCD), to be awarded on a competitive basis to projects within the counties in which it was collected. 11)Requires, when awarding funds out of the State Trust Fund, that priority must be given to eligible projects that serve extremely low-, very low-, and low-income families and individuals. 12)Defines "succeeding housing entity" as the entity that assumes responsibility for retaining the housing assets and functions previously performed by the RDA. 13)Requires the succeeding housing entity to contract to expend at least 80% of the monies in the L&M Fund within two years of the date of receipt of those monies. 14)Specifies that if within four years of the date of receipt of the L&M Fund monies the succeeding housing entity has not spent the monies, then the excess amount, minus the amount necessarily reserved for the ongoing monitoring and maintenance of affordable housing projects shall be transferred to the State Trust Fund for expenditure by HCD. 15)Prohibits excess funds from being transferred to HCD if the succeeding housing entity applies for, and receives, a time extension waiver from HCD. 16)Specifies if the waiver is granted the funds shall remain with the succeeding housing entity for an additional two years. 17)Requires HCD in approving a waiver to consider, among other factors, all of the following: a) Whether the succeeding housing entity has a site specific project plan with local approvals, including the issuance of building permits; b) Whether the project has secured financing; and, c) Evidence that some funds have been expended from the L&M Fund. 18)Authorizes a succeeding housing entity to reapply at the end of the two-year period for a renewal of the previously granted waiver. 19)Authorizes a succeeding housing entity to transfer all or a portion of the monies in the L&M Fund to another succeeding housing entity within the same county, to be spent on affordable housing if all of the following conditions are met: a) The funds will be spent on projects that primarily benefit low-income families or families that are below low income; b) Both succeeding housing entities involved in the transfer adopt a resolution detailing the need for the transfer of funds and the intended use of the funds by the receiving jurisdiction; and, http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (3 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 c) The funds will be spent in compliance with the requirements outlined in 18) through 21) above. 1)Requires the succeeding housing entity, within 45 days of the date this measure is enacted, or 45 days from the receipt of moneys from the L&M Fund, whichever is later, to notify HCD of the amount of money on deposit in the L&M Fund and the entity's plan for spending it. 2)Requires, within two years from the date of notification to HCD, the succeeding housing entity to report to HCD the percentage of funds that it has entered into contract to spend. 3)Requires at the end of four years the succeeding housing entity to report to HCD if there are any remaining moneys in the L&M Fund and to notify HCD if it will be applying for a waiver or transferring the excess funds to HCD. 4)Requires that assets and properties of the former RDA, under the direction of the oversight board, be disposed of in an expeditious but orderly manner that preserves the value of the assets. 5)Provides that the first ROPS for the period of January 1, 2012, through June 20, 2012, may, if necessary, include the following: a) The total amount of payments required for enforceable obligations over the next two six- month periods; and, b) In the case of debt obligations, the amount of the annual debt service reserve set-asides and any other amounts required under indenture or similar documents. 1)Clarifies that the member of the oversight board representing special districts should represent the special district having the largest property tax share within the redevelopment project areas of the former RDA. 2)Provides that when appointing a member of the oversight board from the employees of the former RDA, if the majority of the employees were city or county employees, then the appointment should be made from the organization that represents those employees. 3)Provides that if there is no employee organization that represents the employees of the former RDA, city, or county, then the appointment should be made from among the employees of the successor agency. 4)Provides that an employee that is appointed to the oversight board is deemed not to have a conflict of interest, solely due to his or her employment, in voting to approve a contract as an enforceable obligation. 5)Requires all actions taken by an oversight board to be adopted by resolution. 6)Allows the successor agency, subject to approval of the oversight board, to enter into a financing agreement, including issuing bonds, to fund required payments under an enforceable obligation that exceed the property tax revenue available to the successor agency when the payment is due. 7)Provides that a successor agency is not permitted to create additional enforceable http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (4 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 obligations except when necessary to pay the financing costs of existing enforceable obligations. 8)Allows the successor agency, subject to oversight board approval, to temporarily increase the administrative cost allowance to carry out the requirements of an enforceable obligation, to cover litigation costs, or to maintain and preserve the value of assets while in the possession of the successor agency. 9)Requires the oversight board to direct the successor agency to do the following: a) Compile a complete inventory of existing real property assets of the former RDA by project area; and, b) Include in the inventory the general categories of real property assets, the purpose for which the assets were originally acquired, the original purchase price of each asset, and the estimated current market value. 1)Requires the oversight board, prior to disposing of any assets, to receive and review the inventory of assets prepared by the successor agency and adopt a policy or strategy for disposal or transfer of such assets that ensures it is done in an expeditious but orderly manner that preserves the value of the asset. 2)Provides that in disposing of assets and properties, the oversight board may direct the successor agency to transfer ownership of assets that were constructed or used for a purpose integral to the operation of a governmental purpose, like parking facilities, to the appropriate public jurisdiction. 3)Requires the auditor-controller to deposit the unitary and supplemental tax increment due to the former RDA into the Redevelopment Property Tax Trust Fund (Property Tax Trust Fund). 4)Requires the auditor-controller, in making the first annual distribution from the Property Tax Trust Fund, to reserve any funds necessary to cover payments made in the second half of the calendar year, as described in the ROPS, that are in excess of the amount that is anticipated to be deposited in the Property Tax Trust Fund from the May or June allocation. 5)Provides that in distributing property tax revenues associated with the payment of a retired recognized obligation, the auditor-controller should only distribute property tax to the extent that it is not currently required for the payments of other recognized obligations. 6)Requires the successor agency to cause to be completed an audit of its financial transactions and records, annually, by a certified accountant. 7)Clarifies that enforceable obligations of the successor agency do not become obligations of the succeeding housing entity. 8)Deletes the requirement that the California Law Revision Commission draft a Community Redevelopment Law clean-up bill by January 1, 2013. 9)Includes an urgency clause. FISCAL EFFECT: According to the Assembly Appropriations Committee: 1)In the absence of this bill, approximately $1.4 billion would be allocated to other units of local government according to existing law on the distribution of local property tax. To the http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (5 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 extent this bill prevents these revenues from flowing to school districts, there would be a corresponding cost to the General Fund as the property tax would otherwise offset General Fund obligations to schools, pursuant to the Proposition 98 minimum funding guarantee. The actual impact to the General Fund is unknown because it will depend on the number of school districts that are basic aid and the amount of unreserved housing funds that would otherwise be allocated to K-14 schools, absent this bill. The $1.4 billion is based on information that RDAs reported to the State Controller for the fiscal year 2009-2010 and that number counts assets which would have to be sold and are valued at the actual cost of acquisition, not market value. However, using the reported $1.4 billion and assuming approximately 50% of local property tax revenues are allocated to schools, this bill would result in a one-time loss to the General Fund of as much as $700 million. 2)The Governor's 2012-2013 Budget does not assume that these funds would flow to schools, so enactment of this legislation would not result in a widening of the estimated budget deficit. However, enactment would prevent the state from gaining additional budget savings from property tax payments to schools. 3)This bill changes the definitions of allowable costs for administrative purposes and of enforceable obligations, which are commitments that RDAs legitimately made prior to their elimination. Because of these amendments, there are likely to be greater local costs associated with the affairs of the dissolved redevelopment agencies, costs that can be reimbursed or paid for out of assets or funds that would otherwise be redistributed to other local agencies, including schools. These costs are unknown and of significantly smaller magnitude than the retained L&M housing funds, but could reach millions of dollars. COMMENTS: In 2011, the Legislature approved and the Governor signed two measures, AB 26 X1 (Blumenfield), Chapter 5, Statutes of 2011-12 First Extraordinary Session and AB 27 X1 (Blumenfield), Chapter 6, Statutes of 2011-12 First Extraordinary Session, that would together dissolve redevelopment agencies as they existed at the time and create 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 AB 26 X1. However, the Court did grant CRA's petition with respect to AB 27 X1. As a result, all redevelopment agencies were required to dissolve as of February 1, 2012. When the Legislature voted on AB 26 X1 and AB 27 X1, it envisioned that a majority of redevelopment agencies would likely choose to opt-in to the voluntary program leaving the state to oversee the dissolution of only a handful of agencies. Because of the subsequent lawsuits and the Court's ruling, over 400 RDAs are now required to dissolve. The dissolution process has raised some questions and concerns regarding the implementation of AB 26 X1. AB 1585 (John A. Perez, et al.) is a response to those concerns and attempts to facilitate a smooth wind-down of redevelopment agencies. This bill makes a variety of technical changes that are intended to ease the process of dissolution and provide greater direction to the successor agencies, oversight boards, and successor housing entities that are integral to the dissolution process. It also requires that the L&M funds that have been deposited by former RDAs continue to be used for affordable housing in the county in which they were collected. Low-and Moderate-Income Housing Funds: RDAs were required to set aside 20% of the tax increment collected in a project area to fund the creation, preservation, or rehabilitation of affordable housing. In spending these funds, RDAs were required to meet the housing needs http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (6 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 as outlined in their housing element. The extent to which RDAs spent the L&M funds varied across redevelopment agencies. Based on 2009-10 reports made to the State Controller's Office, RDAs reported having in excess of $1.4 billion in their L&M Funds. The Controller's Community Redevelopment Agencies Annual Report for the fiscal year ending June 30, 2010, shows a statewide aggregate "unreserved designated" balance of $967 million and an "unreserved undesignated" balance of $391 million in agencies L&M Funds. The State Controller's Office is in the process of auditing the redevelopment agencies for the 2010-11 fiscal year and is required to submit the audit to the Legislature at the end of April. AB 1585 makes several significant changes to the provisions in AB 26 X1 regarding L&M funds: 1)Keeps the money on deposit in an L&M Fund with the succeeding housing entity to be spent on activities allowed under the housing provisions in the Community Redevelopment Law or, if there is no succeeding housing entity, requires the funds to be transferred to HCD. 2)Requires the succeeding housing entity to expend or encumber 80% of the funds within four years but gives it the option to petition HCD for more time to spend the funds. 3)Designates the types of affordable housing projects that HCD can fund from monies that are transferred to the department from jurisdictions that decide not to keep the housing functions of the former RDA. 4)Authorizes the transfer of the L&M Funds between jurisdictions within the county if certain conditions are met. AB 26 X1 specifies that, except for loan agreements made within the first two years of the life of the agency, or loans that relate to issued securities, it does not recognize other inter agency loans to be enforceable obligations. Instead, it effectively treats them as contributions of funds. AB 1585 adds the following to what can be considered an enforceable obligation: 1) loan agreements between the former RDA and the city, county, or city and county that created it, made within two years of the date of the creation of a project area, if the loan was for the project area; 2) loans made from the city or county to the former RDA to make a payment to SERAF; and, 3) other loans subject to oversight board finding. AB 26 X1 provides that the liability of the successor agency only extends as far as the money available from tax increment and former assets of the agency will fund. AB 1585 further clarifies that the successor agency is a public entity that is separate from the entity or entities that authorized the creation of the redevelopment agency, that acts by resolution, can sue and be sued, and can have additional powers that may be conferred upon it. Related legislation: SB 654 (Steinberg) would revise the definition of enforceable obligation to include amounts on deposit in the Low-and Moderate-Income Housing Fund of former RDAs. This bill is currently in the Assembly Rules Committee. Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0003173 Copyright (c) 2012 State Net. All rights reserved. http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (7 of 8) [5/2/2012 3:43:09 PM] State Net | 2011 CA A 1585: Bill Analysis - Assembly Floor - 03/27/2012 http://client2.statenet.com/secure/pe/resources....ANALYSIS_comAF_vrd20120327_seq00&no_text_utils=1 (8 of 8) [5/2/2012 3:43:09 PM] AMENDED IN SENATE JANUARY 31, 2012 AMENDED IN SENATE JANUARY 11, 2012 AMENDED IN SENATE JANUARY 4, 2012 SENATE BILL No. 654 1 Introduced by Senator Steinberg February 18, 2011 1 2 3 An act to amend Sections 34171, 34176,34177, and 34178 of the Health and Safety Code, relating to redevelopment, and declaring the urgency thereof, to take effect immediately. legislative counsel’s digest SB 654, as amended, Steinberg. Redevelopment. Existing law suspends various activities of redevelopment agencies and prohibits the agencies from incurring indebtedness for a specified period. Existing law also dissolves redevelopment agencies and community development agencies, as of October 1, 2011, and designates successor agencies, as defined. Existing law requires successor agencies to wind down the affairs of the dissolved redevelopment agencies and to, among other things, repay enforceable obligations, as defined, and to remit unencumbered balances of redevelopment agency funds, including housing funds, to the county auditor-controller for distribution to taxing entities. Existing law authorizes the city, county, or city and county that authorized the creation of a redevelopment agency to retain the housing assets, functions, and powers previously performed by the redevelopment agency, excluding amounts on deposit in the Low and Moderate Income Housing Fund. 96 This bill would revise the definition of the term “enforceable obligation” and modify provisions relating to the transfer of housing funds and responsibilities associated with dissolved redevelopment agencies. The bill would provide that any amounts on deposit in the Low and Moderate Income Housing Fund of a dissolved redevelopment agency be transferred to specified entities. The bill would make conforming changes. Existing law provides that upon a specified date, agreements, contracts, or arrangements between the city or county, or city and county that created the redevelopment agency and the redevelopment agency are invalid. Notwithstanding this provision, an agreement that provided loans or other startup funds for the agency that was entered into within 2 years of the formation of the agency is valid and binds the successor agency. The bill would expand this exception to include an agreement involving a loan specific to a project area and other specified obligations. This bill would declare that it is to take effect immediately as an urgency statute. Vote: 2⁄3 majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 SECTION 1. Section 34171 of the Health and Safety Code is amended to read: 34171. The following terms shall have the following meanings: (a) “Administrative budget” means the budget for administrative costs of the successor agencies as provided in Section 34177. (b) “Administrative cost allowance” means an amount that, subject to the approval of the oversight board, is payable from property tax revenues of up to 5 percent of the property tax allocated to the successor agency for the 2011–12 fiscal year and up to 3 percent of the property tax allocated to the Redevelopment Obligation Retirement Fund money that is allocated to the successor agency for each fiscal year thereafter; provided, however, that the amount shall not be less than two hundred fifty thousand dollars ($250,000) for any fiscal year or such lesser amount as agreed to by the successor agency. However, the allowance amount shall exclude any administrative costs that can be paid from bond proceeds or from sources other than property tax. 96 — 2 —SB 654 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (c) “Designated local authority” shall mean a public entity formed pursuant to subdivision (d) of Section 34173. (d) (1) “Enforceable obligation” means any of the following: (A) Bonds, as defined by Section 33602 and bonds issued pursuant to Section 58383 of the Government Code, including the required debt service, reserve set-asides, and any other payments required under the indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency. (B) Loans of moneys borrowed by the redevelopment agency for a lawful purpose, to the extent they are legally required to be repaid pursuant to a required repayment schedule or other mandatory loan terms. (C) Payments required by the federal government, preexisting obligations to the state or obligations imposed by state law, other than passthrough payments that are made by the county auditor-controller pursuant to Section 34183, or legally enforceable payments required in connection with the agencies’ employees, including, but not limited to, pension payments, pension obligation debt service, unemployment payments, or other obligations conferred through a collective bargaining agreement. (D) Judgments or settlements entered by a competent court of law or binding arbitration decisions against the former redevelopment agency, other than passthrough payments that are made by the county auditor-controller pursuant to Section 34183. Along with the successor agency, the oversight board shall have the authority and standing to appeal any judgment or to set aside any settlement or arbitration decision. (E) Any legally binding and enforceable agreement or contract that is not otherwise void as violating the debt limit or public policy. However, nothing in this act shall prohibit either the successor agency, with the approval or at the direction of the oversight board, or the oversight board itself from terminating any existing agreements or contracts and providing any necessary and required compensation or remediation for such termination. (F) Contracts or agreements necessary for the administration or operation of the successor agency, in accordance with this part, including, but not limited to, agreements to purchase or rent office space, equipment and supplies, and pay-related expenses pursuant 96 SB 654 — 3 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 to Section 33127 and for carrying insurance pursuant to Section 33134. (G) Amounts borrowed from or payments owing to the Low and Moderate Income Housing Fund of a redevelopment agency, which had been deferred as of the effective date of the act adding this part; provided, however, that the repayment schedule is approved by the oversight board. (2) For purposes of this part, “enforceable obligation” does not include any agreements, contracts, or arrangements between the city, county, or city and county that created the redevelopment agency and the former redevelopment agency. However, written agreements entered into (A) at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and (B) solely for the purpose of securing or repaying those indebtedness obligations may be deemed enforceable obligations for purposes of this part. Notwithstanding this paragraph, loan agreements entered into between the redevelopment agency and the city, county, or city and county that created it, within two years of the date of creation of the redevelopment agency, or within two years of the date of the creation of a project area if the loan is specific to that project area, and any obligations imposed by paragraph (1) of subdivision (d) of Section 33691 may be deemed to be enforceable obligations. (3) Contracts or agreements between the former redevelopment agency and other public agencies, to perform services or provide funding for governmental or private services or capital projects outside of redevelopment project areas that do not provide benefit to the redevelopment project and thus were not properly authorized under Part 1 (commencing with Section 33000) shall be deemed void on the effective date of this part; provided, however, that such contracts or agreements for the provision of housing properly authorized under Part 1 (commencing with Section 33000) shall not be deemed void. (e) “Indebtedness obligations” means bonds, notes, certificates of participation, or other evidence of indebtedness, issued or delivered by the redevelopment agency, or by a joint exercise of powers authority created by the redevelopment agency, to third-party investors or bondholders to finance or refinance redevelopment projects undertaken by the redevelopment agency 96 — 4 —SB 654 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 in compliance with the Community Redevelopment Law (Part 1 (commencing with Section 33000)). (f) “Oversight board” shall mean each entity established pursuant to Section 34179. (g) “Recognized obligation” means an obligation listed in the Recognized Obligation Payment Schedule. (h) “Recognized Obligation Payment Schedule” means the document setting forth the minimum payment amounts and due dates of payments required by enforceable obligations for each six-month fiscal period as provided in subdivision (m) of Section 34177. (i) “School entity” means any entity defined as such in subdivision (f) of Section 95 of the Revenue and Taxation Code. (j) “Successor agency” means the county, city, or city and county that authorized the creation of each redevelopment agency or another entity as provided in Section 34173. (k) “Taxing entities” means cities, counties, a city and county, special districts, and school entities, as defined in subdivision (f) of Section 95 of the Revenue and Taxation Code, that receive passthrough payments and distributions of property taxes pursuant to the provisions of this part. SEC. 2. Section 34176 of the Health and Safety Code is amended to read: 34176. (a) The city, county, or city and county that authorized the creation of a redevelopment agency may elect to retain the housing assets and functions previously performed by the redevelopment agency. If a city, county, or city and county elects to retain the responsibility for performing housing functions previously performed by a redevelopment agency, all rights, powers, duties, and obligations associated with the housing activities of the agency, including any amounts on deposit in the Low and Moderate Income Housing Fund, shall be transferred to the city, county, or city and county. Any funds transferred to the city, county, or city and county pursuant to this subdivision shall be maintained in a separate Low and Moderate Income Housing Fund and expended pursuant to the provisions of the Community Redevelopment Law relating to the Low and Moderate Income Housing Fund. (b) If a city, county, or city and county does not elect to retain the responsibility for performing housing functions previously 96 SB 654 — 5 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 performed by a redevelopment agency, all rights, powers, assets, liabilities, duties, and obligations associated with the housing activities of the agency, including any amounts in the Low and Moderate Income Housing Fund, shall be transferred as follows: (1) Where there is one local housing authority in the territorial jurisdiction of the former redevelopment agency, to that local housing authority. (2) Where there is more than one local housing authority in the territorial jurisdiction of the former redevelopment agency, to the local housing authority selected by the city, county, or city and county that authorized the creation of the redevelopment agency. (3) Where there is no local housing authority in the territorial jurisdiction of the former redevelopment agency or where the local housing authority selected does not accept the responsibility for performing housing functions previously performed by the former redevelopment agency, to the Department of Housing and Community Development. (c) Commencing on the operative date of this part, the entity assuming the housing functions formerly performed by the redevelopment agency shall enforce affordability covenants and perform related activities pursuant to applicable provisions of the Community Redevelopment Law (Part 1 (commencing with Section 33000)), including, but not limited to, Section 33418. SEC. 3. Section 34177 of the Health and Safety Code is amended to read: 34177. Successor agencies are required to do all of the following: (a) Continue to make payments due for enforceable obligations. (1) On and after October 1, 2011, and until a Recognized Obligation Payment Schedule becomes operative, only payments required pursuant to an enforceable obligations payment schedule shall be made. The initial enforceable obligation payment schedule shall be the last schedule adopted by the redevelopment agency under Section 34169. However, payments associated with obligations excluded from the definition of enforceable obligations by paragraph (2) of subdivision (d) of Section 34171 shall be excluded from the enforceable obligations payment schedule and be removed from the last schedule adopted by the redevelopment agency under Section 34169 prior to the successor agency adopting it as its enforceable obligations payment schedule pursuant to this 96 — 6 —SB 654 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 subdivision. The enforceable obligation payment schedule may be amended by the successor agency at any public meeting and shall be subject to the approval of the oversight board as soon as the board has sufficient members to form a quorum. (2) The Department of Finance and the Controller shall each have the authority to require any documents associated with the enforceable obligations to be provided to them in a manner of their choosing. Any taxing entity, the department, and the Controller shall each have standing to file a judicial action to prevent a violation under this part and to obtain injunctive or other appropriate relief. (3) Commencing on January 1, 2012, only those payments listed in the Recognized Obligation Payment Schedule may be made by the successor agency from the funds specified in the Recognized Obligation Payment Schedule. In addition, commencing January 1, 2012, the Recognized Obligation Payment Schedule shall supersede the Statement of Indebtedness, which shall no longer be prepared nor have any effect under the Community Redevelopment Law. (4) Nothing in the act adding this part is to be construed as preventing a successor agency, with the prior approval of the oversight board, as described in Section 34179, from making payments for enforceable obligations from sources other than those listed in the Recognized Obligation Payment Schedule. (5) From October 1, 2011, to July 1, 2012, a successor agency shall have no authority and is hereby prohibited from accelerating payment or making any lump-sum payments that are intended to prepay loans unless such accelerated repayments were required prior to the effective date of this part. (b) Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (c) Perform obligations required pursuant to any enforceable obligation. (d) Remit unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to the taxing entities. In making the distribution, the county auditor-controller shall utilize the same methodology for allocation and distribution of property tax revenues provided in Section 34188. 96 SB 654 — 7 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 (e) Dispose of assets and properties of the former redevelopment agency as directed by the oversight board; provided, however, that the oversight board may instead direct the successor agency to transfer ownership of certain assets pursuant to subdivision (a) of Section 34181. The disposal is to be done expeditiously and in a manner aimed at maximizing value. Proceeds from asset sales and related funds that are no longer needed for approved development projects or to otherwise wind down the affairs of the agency, each as determined by the oversight board, shall be transferred to the county auditor-controller for distribution as property tax proceeds under Section 34188. (f) Enforce all former redevelopment agency rights for the benefit of the taxing entities, including, but not limited to, continuing to collect loans, rents, and other revenues that were due to the redevelopment agency. (g) Effectuate transfer of housing functions and assets to the appropriate entity designated pursuant to Section 34176. (h) Expeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and in accordance with the direction of the oversight board. (i) Continue to oversee development of properties until the contracted work has been completed or the contractual obligations of the former redevelopment agency can be transferred to other parties. Bond proceeds shall be used for the purposes for which bonds were sold unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds. (j) Prepare a proposed administrative budget and submit it to the oversight board for its approval. The proposed administrative budget shall include all of the following: (1) Estimated amounts for successor agency administrative costs for the upcoming six-month fiscal period. (2) Proposed sources of payment for the costs identified in paragraph (1). (3) Proposals for arrangements for administrative and operations services provided by a city, county, city and county, or other entity. (k) Provide administrative cost estimates, from its approved administrative budget that are to be paid from property tax revenues deposited in the Redevelopment Property Tax Trust Fund, to the county auditor-controller for each six-month fiscal period. 96 — 8 —SB 654 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (l) (1) Before each six-month fiscal period, prepare a Recognized Obligation Payment Schedule in accordance with the requirements of this paragraph. For each recognized obligation, the Recognized Obligation Payment Schedule shall identify one or more of the following sources of payment: (A) Low and Moderate Income Housing Fund. (B) Bond proceeds. (C) Reserve balances. (D) Administrative cost allowance. (E) The Redevelopment Property Tax Trust Fund, but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or by the provisions of this part. (F) Other revenue sources, including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board in accordance with this part. (2) A Recognized Obligation Payment Schedule shall not be deemed valid unless all of the following conditions have been met: (A) A draft Recognized Obligation Payment Schedule is prepared by the successor agency for the enforceable obligations of the former redevelopment agency by November 1, 2011. From October 1, 2011, to July 1, 2012, the initial draft of that schedule shall project the dates and amounts of scheduled payments for each enforceable obligation for the remainder of the time period during which the redevelopment agency would have been authorized to obligate property tax increment had such a redevelopment agency not been dissolved, and shall be reviewed and certified, as to its accuracy, by an external auditor designated pursuant to Section 34182. (B) The certified Recognized Obligation Payment Schedule is submitted to and duly approved by the oversight board. (C) A copy of the approved Recognized Obligation Payment Schedule is submitted to the county auditor-controller and both the Controller’s office and the Department of Finance and be posted on the successor agency’s Internet Web site. (3) The Recognized Obligation Payment Schedule shall be forward looking to the next six months. The first Recognized Obligation Payment Schedule shall be submitted to the Controller’s office and the Department of Finance by December 15, 2011, for 96 SB 654 — 9 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 the period of January 1, 2012, to June 30, 2012, inclusive. Former redevelopment agency enforceable obligation payments due, and reasonable or necessary administrative costs due or incurred, prior to January 1, 2012, shall be made from property tax revenues received in the spring of 2011 property tax distribution, and from other revenues and balances transferred to the successor agency. SEC. 4. Section 34178 of the Health and Safety Code is amended to read: 34178. (a) Commencing on the operative date of this part, agreements, contracts, or arrangements between the city or county, or city and county that created the redevelopment agency and the redevelopment agency are invalid and shall not be binding on the successor agency; provided, however, that a successor entity wishing to enter or reenter into agreements with the city, county, or city and county that formed the redevelopment agency that it is succeeding may do so upon obtaining the approval of its oversight board. (b) Notwithstanding subdivision (a), any of the following agreements are not invalid and may bind the successor agency: (1) A duly authorized written agreement entered into at the time of issuance, but in no event later than December 31, 2010, of indebtedness obligations, and solely for the purpose of securing or repaying those indebtedness obligations. (2) A written agreement between a redevelopment agency and the city, county, or city and county that created it that provided loans or other startup funds for the redevelopment agency that were entered into within two years of the formation of the redevelopment agency, or within two years of the date of the creation of a project area if the loan is specific to that project area, and any obligations imposed by paragraph (1) of subdivision (d) of Section 33691. (3) A joint exercise of powers agreement in which the redevelopment agency is a member of the joint powers authority. However, upon assignment to the successor agency by operation of the act adding this part, the successor agency’s rights, duties, and performance obligations under that joint exercise of powers agreement shall be limited by the constraints imposed on successor agencies by the act adding this part. SEC. 5.This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within 96 — 10 —SB 654 1 2 3 4 5 the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to effectuate the transfer of housing funds and responsibilities associated with dissolved redevelopment agencies, it is necessary that this act take immediate effect. O 96 SB 654 — 11 — State Net | 2011 CA S 654: Bill Analysis - Senate Floor - 02/01/2012 2011 CA S 654: Bill Analysis - Senate Floor - 02/01/2012 BILL ANALYSIS SENATE RULES COMMITTEE SB 654 Office of Senate Floor Analyses 1020 N Street, Suite 524 (916) 651-1520 Fax: (916) 327-4478 THIRD READING Bill No: SB 654 Author: Steinberg (D) Amended: 1/31/12 Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE: 9-0, 1/10/12 AYES: DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal, Pavley, Rubio, Simitian SENATE APPROPRIATIONS COMMITTEE: 8-0, 1/19/12 AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley, Price, Steinberg NO VOTE RECORDED: Runner SUBJECT: Redevelopment housing funds SOURCE: Author DIGEST: This bill allows the host city or county of a dissolving redevelopment agency to retain the funds on deposit in the agencys housing fund and expands the types of agency loans from the host city or county that are considered enforceable obligations. Senate Floor Amendmentsof 1/31/12 delete the urgency clause. ANALYSIS: Historically, the Community Redevelopment Law has allowed a local government to establish a redevelopment area and capture all of the increase in property taxes that is generated within the area (referred to as "tax increment") over a period of decades. The Law requires redevelopment agencies to deposit 20 percent 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. 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. In defining "enforceable obligations," AB 26X included a loan agreement between an agency and its host city or county that was executed within two years of the date of creation of the redevelopment agency. AB 26X also included provisions allowing the host city or county of a dissolving redevelopment agency to http://client2.statenet.com/secure/pe/resources....ANALYSIS_comSF_vrd20120201_seq00&no_text_utils=1 (1 of 3) [5/2/2012 3:44:36 PM] State Net | 2011 CA S 654: Bill Analysis - Senate Floor - 02/01/2012 retain the housing assets and functions previously performed by the agency, except for funds on deposit in the agency's L&M fund. If the host city or county chooses not to retain these assets and functions, a local housing authority or the state's Department of Housing and Community Development (HCD) may assume them. 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, the California Supreme Court inCalifornia Redevelopment Association v. Matosantos upheld AB 26X and overturned AB 27X. As a result, all of the state's roughly 400 redevelopment agencies will dissolve on February 1, 2012. This bill makes the following changes to AB 26X, the redevelopment agency elimination bill: 1. Allows a host city or county of a dissolving agency to retain the funds on deposit in the agency's L&M fund and requires the city or county to expend those funds in compliance with the housing provisions of the Community Redevelopment Law. If the city or county chooses not to retain these funds, the local housing authority or HCD may do so. 2. Requires, rather than permits, an entity assuming the housing functions of an agency to enforce affordability covenants on affordable housing properties. 3. Expands the definition of an "enforceable obligation" to include two additional types of loan agreements between an agency and its host city or county: (a) a loan that was executed within two years of the date of creation of a project area, if the loan is specific to that project area; and (b) a loan to fund the agency's 2009-10 SERAF (Supplemental Educational Revenue Augmentation Fund) payment to schools. Comments Undoing a last minute change. The State Controller's "Community Redevelopment Agencies Annual Report" for the fiscal year ended June 30, 2010 shows a statewide aggregate "unreserved designated" balance of $967 million and an "unreserved undesignated" balance of $391 million in agency L&M funds. The language of Governor Brown's initial proposal to eliminate redevelopment agencies would have allowed host cities and counties to retain the L&M fund balances of a dissolving agency. The bill that the Legislature ultimately enacted, however, reversed this authority. At the time, staff stated that the change was made out of a concern that allowing retention of L&M fund balances potentially could be viewed as a reallocation of property tax and thus trigger a two-thirds vote requirement for all of AB 26X. Legislative Counsel has since settled on the view that L&M funds are assets of the redevelopment agencies under Article XVI, Section 16 of the State Constitution and not property taxes under Section 1 of Article XIII A. This view is reflected in the majority vote key for this bill. This bill restores the governor's original proposal to allow cities and counties to keep L&M fund balances and continue to use them to develop affordable housing. Start-up loans. Because it often takes years after the adoption of a project area for a redevelopment agency to begin receiving sufficient tax increment to issue bonds, most host cities and counties jump-start work in project areas by making loans to the agency to be repaid with future tax increment. AB 26X only recognizes as "enforceable obligations" loans made within two years of the creation of the agency, which practically only affects an agency's first project area. Many agencies have multiple project areas. This bill adds to the definition of "enforceable obligations" loans made within the first two years of the adoption of a project area, provided that the loan is specific to that project area. The bill does not recognize loans http://client2.statenet.com/secure/pe/resources....ANALYSIS_comSF_vrd20120201_seq00&no_text_utils=1 (2 of 3) [5/2/2012 3:44:36 PM] State Net | 2011 CA S 654: Bill Analysis - Senate Floor - 02/01/2012 made at a later date, in which case the host city or county may not receive repayment of those later loans. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2012-13 2013-14 2014-15 Fund Local retention of One-time loss of up to $700,000 General RDA housing funds in savings SUPPORT: (Verified 1/19/12) Abode Communities Affirmed Housing Group Aging Services of California Angelus Plaza Bay Area Local Initiatives Support Corporation BONNEWIT development services Boston Financial Investment Management, L.P. Building Futures with Women and Children Cabrillo Economic Development Corporation California Housing Consortium California Housing Partnership Corporation California Infill Builders Association Charities Housing Cities of Brea, Buena Park, Chico, Citrus Heights, Hanford, La Palma, Oakland, Palm Springs, Riverside, and San Mateo CLIFFORD BEERS HOUSING Community Housing Improvement Systems and Planning Association, Inc. Community Housing Partnership EAH Housing East Bay Developmental Disabilities Legislative Coalition EDEN Housing Enterprise Community Partners, Inc Equity Community Builders LLC EveryOne Home Housing Authority of the city of Riverbank Housing Consortium of the East Bay Housing Leadership Council of San Mateo County Housing Now Human Investment Project (HIP) Housing Jamboree Housing Corporation John Stewart Company Las Palmas Foundation LINC Housing Mercy Housing California MidPen Housing Napa Valley Community Housing North Bay Housing Coalition, Inc. Peoples' Self-Help Housing Corporation Petaluma Ecumenical Properties (PEP Housing) Resources for Community Development Sacramento Yolo Mutual Housing Association San Diego Housing Federation SHELTER, Inc. of Contra Costa County Silicon Valley Bank Skid Row Housing Trust South County Housing Corporation Step Up on Second SWJ Housing Tenderloin Neighborhood Development Corporation The Housing Trust of Santa Clara County The Non-Profit Housing Association of Northern California ARGUMENTS IN SUPPORT: According to the author's office, this bill is intended to preserve for affordable housing the roughly $2 billion in outstanding balances in the L&M funds maintained by redevelopment agencies throughout the state. In the absence of this legislation, those funds will be liquidated and distributed as property tax revenues to local agencies, as prescribed in AB 26X. Late last year, the Legislature supported these same changes in SB 8X (Senate Budget and Fiscal Review Committee), but Governor Brown vetoed that bill, stating that it was "premature" in light of the then-pending litigation. Copyright (c) 2012 State Net. All rights reserved. http://client2.statenet.com/secure/pe/resources....ANALYSIS_comSF_vrd20120201_seq00&no_text_utils=1 (3 of 3) [5/2/2012 3:44:36 PM] AMENDED IN SENATE MARCH 29, 2012 SENATE BILL No. 1151 1 Introduced by Senator Steinberg February 21, 2012 1 2 3 An act to amend Section 34177 of, and to add Section Sections 34177.1 and 34177.2 to, the Health and Safety Code, relating to redevelopment economic development. legislative counsel’s digest SB 1151, as amended, Steinberg. Redevelopment: long range Sustainable Economic Development and Housing Trust Fund: long-range asset management plan. Existing law dissolved redevelopment agencies and community development agencies, as of February 1, 2012, and provides for the designation of successor agencies, as defined. Existing law imposes various requirements on successor agencies and subjects successor agency actions to the review of oversight boards. Existing law requires successor agencies to wind down the affairs of the dissolved redevelopment agencies and to, among other things, dispose of assets and properties of the former redevelopment agencies, as directed by the oversight board. Proceeds from the sale of assets are transferred to the county auditor-controller for distribution as property tax proceeds to taxing entities, as prescribed. This bill would provide that the asset disposition and transfer provisions do not apply to a jurisdiction in which a Community Development and Housing Authority (authority) has been formed by August 1, 2012. The bill would establish a Sustainable Economic Development and Housing Trust Fund, to be administered by an authority, to serve as a repository of the unencumbered balances and 98 assets of the former redevelopment agency. The bill would authorize moneys from the fund to be expended for speciﬁed purposes relating to economic development and affordable housing. The bill would require the successor agency an authority to prepare a long range long-range asset management plan that outlines a strategy for maximizing the long-term value of the real property and assets of the former redevelopment agency for ongoing economic development and housing functions governs the disposition and ongoing use of the fund. The bill would require the successor agency an authority to submit the plan to the Department of Finance and the oversight board by December 1, 2012, and would require the approval of the plan by the department and oversight board by December 31, 2012 department to approve or return the plan for revision to the authority prior to ﬁnal approval by December 31, 2012. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 SECTION 1. The Legislature finds and declares that the assets, properties, contracts, leases, books and records, buildings, and equipment of former redevelopment agencies constitute a valuable resource that should be maintained for the purpose of economic development and housing within the communities served by the former redevelopment agency. SEC. 2. Section 34177 of the Health and Safety Code is amended to read: 34177. Successor agencies are required to do all of the following: (a) Continue to make payments due for enforceable obligations. (1) On and after February 1, 2012, and until a Recognized Obligation Payment Schedule becomes operative, only payments required pursuant to an enforceable obligations payment schedule shall be made. The initial enforceable obligation payment schedule shall be the last schedule adopted by the redevelopment agency under Section 34169. However, payments associated with obligations excluded from the definition of enforceable obligations by paragraph (2) of subdivision (e) of Section 34171 shall be excluded from the enforceable obligations payment schedule and be removed from the last schedule adopted by the redevelopment 98 — 2 —SB 1151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 agency under Section 34169 prior to the successor agency adopting it as its enforceable obligations payment schedule pursuant to this subdivision. The enforceable obligation payment schedule may be amended by the successor agency at any public meeting and shall be subject to the approval of the oversight board as soon as the board has sufficient members to form a quorum. (2) The Department of Finance and the Controller shall each have the authority to require any documents associated with the enforceable obligations to be provided to them in a manner of their choosing. Any taxing entity, the department, and the Controller shall each have standing to file a judicial action to prevent a violation under this part and to obtain injunctive or other appropriate relief. (3) Commencing on May 1, 2012, only those payments listed in the Recognized Obligation Payment Schedule may be made by the successor agency from the funds specified in the Recognized Obligation Payment Schedule. In addition, commencing May 1, 2012, the Recognized Obligation Payment Schedule shall supersede the Statement of Indebtedness, which shall no longer be prepared nor have any effect under the Community Redevelopment Law. (4) Nothing in the act adding this part is to be construed as preventing a successor agency, with the prior approval of the oversight board, as described in Section 34179, from making payments for enforceable obligations from sources other than those listed in the Recognized Obligation Payment Schedule. (5) From February 1, 2012, to July 1, 2012, a successor agency shall have no authority and is hereby prohibited from accelerating payment or making any lump-sum payments that are intended to prepay loans unless such accelerated repayments were required prior to the effective date of this part. (b) Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (c) Perform obligations required pursuant to any enforceable obligation. (d) (1) Remit unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to the taxing entities, including, but not limited to, the unencumbered balance of the Low and Moderate Income Housing Fund of a former redevelopment agency. In making the distribution, the county 98 SB 1151 — 3 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 auditor-controller shall utilize the same methodology for allocation and distribution of property tax revenues provided in Section 34188. (2) This subdivision shall not apply to a jurisdiction where a Community Development and Housing Joint Powers Authority has been formed pursuant to Part 1.86 (commencing with Section 34191.1) by August 1, 2012. (e) (1) Dispose of assets and properties of the former redevelopment agency as directed by the oversight board, provided, however, that the oversight board may instead direct the successor agency to transfer ownership of certain assets pursuant to subdivision (a) of Section 34181, and in accordance with the long range asset management plan specified in Section 34177.1. The disposal shall be done expeditiously, in a manner aimed at maximizing value, but shall not be done until the long range asset management plan is approved. Proceeds from asset sales and related funds that are no longer needed for approved development projects or to otherwise wind down the affairs of the agency, each as determined by the oversight board, shall be transferred to the county auditor-controller for distribution as property tax proceeds under Section 34188. (2) Prior to the disposal of any real property pursuant to this subdivision, the successor agency shall comply with all relevant provisions of the Government Code, Public Contract Code, and other codes, relating to the rules and disclosure requirements for the fair market valuation of assets, competitive bidding, and conflicts of interest. (2) This subdivision shall not apply to a jurisdiction where a Community Development and Housing Joint Powers Authority has been formed pursuant to Part 1.86 (commencing with Section 34191.1) by August 1, 2012. (f) Enforce all former redevelopment agency rights for the benefit of the taxing entities, including, but not limited to, continuing to collect loans, rents, and other revenues that were due to the redevelopment agency. (g) Effectuate transfer of housing functions and assets to the appropriate entity designated pursuant to Section 34176. (h) Expeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and in accordance with the direction of the oversight board. 98 — 4 —SB 1151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (i) Continue to oversee development of properties until the contracted work has been completed or the contractual obligations of the former redevelopment agency can be transferred to other parties. Bond proceeds shall be used for the purposes for which bonds were sold unless the purposes can no longer be achieved, in which case, the proceeds may be used to defease the bonds. (j) Prepare a proposed administrative budget and submit it to the oversight board for its approval. The proposed administrative budget shall include all of the following: (1) Estimated amounts for successor agency administrative costs for the upcoming six-month fiscal period. (2) Proposed sources of payment for the costs identified in paragraph (1). (3) Proposals for arrangements for administrative and operations services provided by a city, county, city and county, or other entity. (k) Provide administrative cost estimates, from its approved administrative budget that are to be paid from property tax revenues deposited in the Redevelopment Property Tax Trust Fund, to the county auditor-controller for each six-month fiscal period. (l) (1) Before each six-month fiscal period, prepare a Recognized Obligation Payment Schedule in accordance with the requirements of this paragraph. For each recognized obligation, the Recognized Obligation Payment Schedule shall identify one or more of the following sources of payment: (A) Low and Moderate Income Housing Fund. (B) Bond proceeds. (C) Reserve balances. (D) Administrative cost allowance. (E) The Redevelopment Property Tax Trust Fund, but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or by the provisions of this part. (F) Other revenue sources, including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board in accordance with this part. (2) A Recognized Obligation Payment Schedule shall not be deemed valid unless all of the following conditions have been met: (A) A draft Recognized Obligation Payment Schedule is prepared by the successor agency for the enforceable obligations 98 SB 1151 — 5 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 of the former redevelopment agency by March 1, 2012. From October 1, 2011, to July 1, 2012, the initial draft of that schedule shall project the dates and amounts of scheduled payments for each enforceable obligation for the remainder of the time period during which the redevelopment agency would have been authorized to obligate property tax increment had such a redevelopment agency not been dissolved, and shall be reviewed and certified, as to its accuracy, by an external auditor designated pursuant to Section 34182. (B) The certified Recognized Obligation Payment Schedule is submitted to and duly approved by the oversight board. (C) A copy of the approved Recognized Obligation Payment Schedule is submitted to the county auditor-controller and both the Controller’s office and the Department of Finance and be posted on the successor agency’s Internet Web site. (3) The Recognized Obligation Payment Schedule shall be forward looking to the next six months. The first Recognized Obligation Payment Schedule shall be submitted to the Controller’s office and the Department of Finance by April 15, 2012, for the period of January 1, 2012, to June 30, 2012, inclusive. Former redevelopment agency enforceable obligation payments due, and reasonable or necessary administrative costs due or incurred, prior to January 1, 2012, shall be made from property tax revenues received in the spring of 2011 property tax distribution, and from other revenues and balances transferred to the successor agency. SEC. 3. Section 34177.1 is added to the Health and Safety Code, to read: 34177.1.(a) The successor agency shall prepare a long range asset management plan that outlines a strategy for maximizing the long-term value of the real property and assets of the former redevelopment agency for ongoing economic development and housing functions. (b) The plan shall do all of the following: (1) Address the use or disposition of all of the assets of the former redevelopment agency identified by the county auditor-controller in the audit conducted pursuant to subdivision (a) of Section 34182. (2) Include an inventory of all assets identified by the auditor-controller consisting of an estimate of the market value of the asset and a description of the highest and best use of the asset 98 — 6 —SB 1151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 for the community. Permissible uses include the retention of the asset for governmental use pursuant to subdivision (a) of Section 34181, the sale of the asset, and the retention of the asset in a governmental trust for the purpose of maximizing the value of the asset for ongoing economic development activity. (c) The successor agency shall submit the plan to the department and the oversight board by December 1, 2012. The plan shall be approved by both the oversight board and the department by December 31, 2012. The department, in consultation with the oversight board, may object to and modify any provision of the plan. 34177.1. (a) A Community Development and Housing Authority established pursuant to Part 1.86 (commencing with Section 34191.1) shall prepare a long-range asset management plan that shall govern the disposition and ongoing use of the Sustainable Economic Development and Housing Trust Fund. (b) (1) The long-range asset management plan shall be submitted to the Department of Finance for approval by December 1, 2012. The department shall approve the plan or return the plan to the authority for revisions prior to ﬁnal approval, by December 31, 2012. The plan shall be updated annually and submitted to the department for approval by December 1 of each year. (2) The department, as a condition of granting approval to the long-range asset management plan submitted by the authority, may choose to establish a minimum asset distribution requirement, to ensure that K–14 schools and local agencies receive a minimal amount of funding from the dissolution of assets of the trust pursuant to Section 34188. (c) The long-range asset management plan shall outline a strategy for maximizing the long-term social and monetary value of the real property and assets in the trust for the purpose of sustainable economic development consistent with Part 1.86 (commencing with Section 34191.1) and creating high wage, high skill jobs, and affordable housing. (d) The long-range asset management plan shall do both of the following: (1) Include an inventory of all assets in the trust, including, but not limited to, all assets identiﬁed by the auditor-controller in the audit conducted pursuant to subdivision (a) of Section 34182. The inventory shall consist of the following: 98 SB 1151 — 7 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (A) The date of the acquisition of the asset and the value of the asset at that time, and an estimate of the current value of the asset. (B) The purpose for which the asset was acquired. (C) For real property assets: (i) Parcel data, including address, lot size, and current zoning in the former agency redevelopment plan or speciﬁc, community, or general plan. (ii) An estimate of the current value of the parcel, including, if available, any appraisal information. (iii) A history of environmental contamination, including designation as a brownﬁeld, and any related environmental studies and history of any remediation efforts. (iv) A description of the strategic value of the property with respect to its potential for transit-oriented development and advancing the planning objectives of the member agencies of the Community Development and Housing Authority. (v) A brief history of previous development proposals and activity, including rental or lease of property. (2) Address the use or disposition of all of the assets in the trust. Permissible uses include the retention of the asset for governmental use pursuant to subdivision (a) of Section 34181, the sale of the asset, and the retention of the asset in the trust for future use. It shall not be necessary to maximize the monetary value of the asset if an alternative deployment of the asset furthers social and community objectives determined by the authority and consistent with this article. Property disposed of by the authority shall not be the subject of real estate speculation. (e) All entities receiving ﬁnancial support from or authorized by this article shall incorporate into any and all agreements a jobs plan, which shall describe how the project will create construction careers that pay prevailing wages, living wage permanent jobs, and a program for community outreach, local hire, and job training. This plan shall also describe the project developer’s commitment to offer jobs to disadvantaged California residents, including veterans of the Iraq and Afghanistan wars, people with a history in the criminal justice system, and single parent families. SEC. 4. Section 34177.2 is added to the Health and Safety Code, to read: 34177.2. (a) The Sustainable Economic Development and Housing Trust Fund is hereby established to serve as the repository 98 — 8 —SB 1151 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 of the unencumbered balances for each former redevelopment agency’s funds, assets, and properties. For purposes of this section, “assets” shall include, but are not limited to, real and personal property holdings, tax revenues, former redevelopment project revenues, other revenues, and investment accounts, deeds of trust and mortgages held by the former agency, rents, fees, charges, moneys, accounts receivable, contracts rights, and other rights to payment of whatever kind or other real or personal property. (b) In addition to the assets of the former redevelopment agencies, the trust fund may accept revenues from any source, including tax revenues, grants, and loans. Notwithstanding paragraph (1) of subdivision (e) of Section 34177, the proceeds of asset sales may be retained for ongoing sustainable economic development and affordable housing activities of the joint powers authority speciﬁed in and consistent with Part 1.86 (commencing with Section 34191.1), and shall not be distributed as property tax pursuant to Section 34188. (c) The Sustainable Economic Development and Housing Trust Fund shall be administered by the Community Development and Housing Joint Powers Authority established pursuant to Part 1.86 (commencing with Section 34191.1). (d) Moneys in the Sustainable Economic Development and Housing Trust Fund may be used for any of the following purposes: (1) The purchase, acquisition, ﬁnancing, or maintenance of public or private infrastructure needed for inﬁll development consistent with Chapter 728 of the Statutes of 2008. (2) Affordable housing. (3) Transitional housing needed for former inmate populations transferred to the jurisdiction of the counties pursuant to the 2011 criminal justice realignment. (4) Loans to public or private entities for development activities deﬁned in Section 34191.2. (5) Environmental mitigation, including, but not limited to, brownﬁeld site remediation. (6) Payment of liabilities of the former redevelopment agency. (7) Land acquisition. (8) Clean energy and energy efﬁciency investments. (9) Educational, labor-management, and job training programs leading to careers in high-need, high-growth, or emerging regional economic sectors. 98 SB 1151 — 9 — 1 2 3 (e) This section shall apply to a jurisdiction where a Community Development and Housing Authority has been formed pursuant to Part 1.86 (commencing with Section 34191.1) by August 1, 2012. O 98 — 10 —SB 1151 State Net | 2011 CA S 1151: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 2011 CA S 1151: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 BILL ANALYSIS SENATE TRANSPORTATION & HOUSING COMMITTEE SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: steinberg VERSION: 3/29/12 Analysis by: Carrie Cornwell FISCAL: yes Hearing date: April 24, 2012 SUBJECT: Sustainable Economic Development and Housing Trust Fund DESCRIPTION: This bill permits local jurisdictions to use an alternative process to administer the assets of their former redevelopment agencies for economic development and housing purposes. To do so, the bill authorizes a Community Development and Housing Joint Powers Authority to place redevelopment assets in a Sustainable Economic Development and Housing Trust Fund and requires a long-range asset management plan to govern that trust fund. ANALYSIS: Historically, the Community Redevelopment Law allowed 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. The law requires redevelopment agencies to deposit 20 percent 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. 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 26X established successor agencies, typically the city or county that established the agency, to take control of all redevelopment agency assets, properties, and other items of value. Successor agencies are to dispose of an agency's assets as directed by an oversight board, made up of representatives of local taxing entities, with the proceeds transferred to the county auditor-controller for distribution to taxing agencies within each county. AB 26X also included provisions allowing the host city or county of a dissolving redevelopment agency to retain the housing assets and functions previously performed by the agency, except for funds on deposit in the agency's L&M fund, and thus become a successor http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (1 of 4) [5/2/2012 3:42:04 PM] State Net | 2011 CA S 1151: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 housing agency. If the host city or county chooses not to become the successor housing agency, a local housing authority or the state's Department of Housing and Community Development (HCD) may do so. 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, and local jurisdictions are in the process of implementing AB 26X's provisions to distribute former redevelopment assets. This bill: 1. Provides that the AB 26X process for disposing of redevelopment agency assets and remitting unencumbered balances funds for distribution to the taxing entities does not apply to a jurisdiction that has by August 1, 2012 formed a Community Development and Housing Joint Powers Authority (authority) pursuant to SB 1156 (Steinberg), which is also on today's agenda. 2. Requires each authority to administer a Sustainable Economic Development and Housing Trust Fund to receive and hold the former redevelopment agency's unencumbered funds, assets, and properties. The trust fund may also accept revenues from any source and may include the proceeds from selling redevelopment agency assets. 3. Allows an authority to use the trust fund for public or private infrastructure needed for infill development, affordable housing, land acquisitions, clean energy, education, job training, transitional housing for former inmates transferred to a county pursuant to the 2011 realignment, loans for development activities, and environmental mitigation, including cleaning up brownfield sites. 4. Directs an authority to prepare a long-range asset management plan to govern the disposition and ongoing use of the Sustainable Economic Development and Housing Trust Fund. The plan must: Inventory all assets, assess the value and purpose of acquisition of these assets, and determine the current value of real property assets. Address the use or disposition of all of the assets in the trust. Outline a strategy for maximizing the long-term social and monetary value of the real property and assets in the trust consistent with the provisions of SB 1156 and so as to create high wage and high skill jobs, plus affordable housing. 1. Requires the authority to submit this long-range asset management plan to the Department of Finance (DOF) for approval by December 1, 2012. DOF may approve the plan or return it for revisions by December 31, 2012. An authority must update and resubmit its plan annually to DOF by each December 1 thereafter. DOF, as a condition of granting its approval, may require that K-14 schools and local agencies receive a minimal amount of funding from the dissolution of assets. 2. Requires any entity receiving financial support under this bill or SB 1156 to incorporate into any and all agreements a jobs plan, which shall describe how the project will create http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (2 of 4) [5/2/2012 3:42:04 PM] State Net | 2011 CA S 1151: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 construction careers that pay prevailing wages and a program for community outreach, local hire, and job training. COMMENTS: 1. Purpose. AB 26X requires successor agencies, at the direction of their oversight boards, to dispose of the former RDA assets "expeditiously and in a manner aimed at maximizing value" but offers no guidance on how to achieve this objective. Absent such guidance, the author is concerned that the result may be the "fire sale" of real property assets of the former redevelopment agencies and a transfer of wealth from the public to private sectors. To address this concern, this bill establishes Sustainable Economic Development and Housing Trust Funds to serve as repositories for the assets of the former redevelopment agencies, including cash, liquid investments, and real and personal property expected to be valued in the billions of dollars. City and county joint powers authorities would manage these trusts for future economic development and housing activities. The bill requires joint powers authorities to develop Long Range Asset Management Plans to maximize the social and economic value of the former redevelopment agency assets for the public sector. The plans would include detailed valuation and environmental contamination information on a parcel-by-parcel basis and facilitate the integration of properties into local land use plans. The bill authorizes the use of the trust funds to finance public and private infrastructure needed for infill development, affordable housing, environmental mitigation, former military bases, clean energy and energy efficiency, as well as educational, labor- management, and job training programs leading to high skill, high wage jobs. 2. Definitions needed. This bill directs that these trust funds receive and hold redevelopment assets and then use those assets for public or private infrastructure needed for infill development, affordable housing, land acquisitions, clean energy, education, job training, transitional housing for former inmates transferred to a county pursuant to the 2011 realignment, loans for development activities, and environmental mitigation, including cleaning up brownfield sites. The bill, however, does not provide definitions of these terms. Definitions are necessary to ensure that the use of these funds comports with state goals and polices. In particular, existing redevelopment law provides extensive definitions and rules on the provision of affordable housing to ensure that it is provided to income-qualified individuals in proportion to their population in the community. 3. Two housing agencies. It is unclear how the affordable housing functions of the authority will interact with the work of the successor housing agencies established by AB 26X. The committee may wish to amend this bill to ensure that all of the housing assets, including the L&M balances, are located in one entity by allowing the authority to contribute its resources to the housing successor entity. 4. Who is in charge ? AB 26X gives oversight boards broad discretion to approve or disapprove successor agencies' actions. Each successor agency must, every six months, draft a list of enforceable obligations that are payable during a subsequent six-month period, to which the oversight board must agree. This bill does allow a Community Development and Housing Joint Powers Authority to use funds in the Sustainable Economic Development and Housing Trust Fund to pay a former redevelopment agency's liabilities and does not limit this authority to paying for liabilities that are recognized by an oversight board as enforceable obligations. One could see how this bill could undermine the oversight board process by allowing an authority to use proceeds from former redevelopment assets to pay for redevelopment http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (3 of 4) [5/2/2012 3:42:04 PM] State Net | 2011 CA S 1151: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 liabilities that an oversight board would not recognize as an enforceable obligation. The committee may wish to amend this bill to clarify the role of the oversight board when a community forms an authority under this bill. 5. Urgency needed. This bill offers communities an alternative approach to managing former redevelopment agency assets if they establish an authority before August 1, 2012. This timing is necessary because successor agencies are working now to distribute those assets. But because this bill does not include an urgency clause, its provisions will not take effect until January 1, 2013. The author or committee may wish to consider amending the bill to include an urgency clause. 6. Technical amendments. On page 8, line 25, after the "and" insert "is" On page 8, line 29, delete "article" and insert "this part or Part 1.86 (commencing with Section 34191.1)" On page 9, lines 14-15, delete "joint powers authority specified in and consistent with" and insert "Community Development and Housing Joint Powers Authority established pursuant to" On page 9, line 32, delete "34191.2" and insert "34191.15" 1. Committee of second referral. The Rules Committee referred this bill to the Governance and Finance Committee and to the Transportation and Housing Committee. This bill passed that committee on April 18 by a 6 to 3 vote. The Governance and Finance Committee's analysis and hearing of the bill dealt primarily with the provisions of the bill related to the local government finance provisions, leaving the housing provisions for review in this committee. POSITIONS: (Communicated to the committee before noon on Wednesday, April 18, 2012) SUPPORT: BRIDGE Housing California Infill Builders Association California Labor Federation California State Association of Counties DMB Pacific Ventures Los Angeles Alliance for a New Economy Mission Bay Development Group OPPOSED: None received. Copyright (c) 2012 State Net. All rights reserved. http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (4 of 4) [5/2/2012 3:42:04 PM] AMENDED IN SENATE APRIL 30, 2012 AMENDED IN SENATE MARCH 29, 2012 SENATE BILL No. 1156 1 Introduced by Senator Steinberg February 22, 2012 1 2 3 4 An act to add Part 1.86 (commencing with Section 34191.1) to Division 24 of the Health and Safety Code, and to amend Section 21094.5 of the Public Resources Code, relating to economic development. legislative counsel’s digest SB 1156, as amended, Steinberg. Community Development and Housing Joint Powers Authority. The Community Redevelopment Law authorizes the establishment of redevelopment agencies in communities to address the effects of blight, as defined. Existing law dissolved redevelopment agencies and community development agencies, as of February 1, 2012, and provides for the designation of successor agencies. Existing law requires that the successor agency, among other things, wind down the affairs of the former redevelopment agency and dispose of assets and properties of the former redevelopment agency, as directed by an oversight board. Existing law provides for various economic development programs that foster community sustainability and community and economic development initiatives throughout the state. This bill would authorize the legislative body of the city and county representing the geographic territory covering the area served by a former redevelopment agency to elect to form a Community Development and Housing Joint Powers Authority (authority) after July 1, 2012, and to carry out the provisions of the Community 97 Redevelopment Law. The bill would authorize the authority to adopt a redevelopment plan for a project area covering specified areas and sites and to include a provision in the plan to provide for tax increment financing, provided that certain mitigation and land use plans have been adopted. The bill would retain the Low and Moderate Income Housing Fund of a former redevelopment agency in another fund and authorize the authority to enter into agreements to facilitate articulated career technical education pathways. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 SECTION 1. Part 1.86 (commencing with Section 34191.1) is added to Division 24 of the Health and Safety Code, to read: PART 1.86. ECONOMIC DEVELOPMENT AND HOUSING PROGRAM Chapter 1. General Provisions 34191.1. (a) The Legislature finds and declares that better economic development patterns in California can contribute to greater economic growth by reducing commuter times for employees, reducing the costs of public infrastructure, and reducing energy consumption. Better development patterns may also result in increased options in the type of housing available, more affordable housing, and a reduction in a household’s combined housing and transportation costs. (b) The construction industry has been one of the sectors hardest hit by the economic downturn of recent years. Creating incentives for construction can help restore construction jobs, which are essential for a restoration of prosperity. (c) Economic development patterns can also help California attain some of its long-term strategic environmental objectives including reduced air pollution, greater water conservation, reduced energy consumption, and increased farmland and habitat preservation. (d) Implementation of the growth plans identified by the metropolitan planning organizations in their sustainable 97 — 2 —SB 1156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 communities strategies, and in particular the development of areas identified for transit priority projects, is essential if California is to achieve the multiple benefits that would result from economic development. (e) In addition to the economic problems of the current recession, development of transit priority projects remains challenging. Infrastructure is often old and inadequate. Sites may suffer from contamination that is expensive to remediate. The high construction costs in urban areas, particularly for multifamily dwellings, create an additional challenge. For these reasons, it is critical to restructure and refocus redevelopment in California to assist in achievement of these multiple benefits. (f) At the same time, California cannot afford a redevelopment program that causes schools to lose revenue at a time when investing in education is also key to the state’s economic prosperity. A growth plan for the state consistent with regional sustainable communities strategies must also provide that schools are able to play their full role in achieving the future of California. (g) The elimination of redevelopment agencies has resulted in the loss of approximately $1 billion one billion dollars ($1,000,000,000) annually in low- and moderate-income housing funds for communities throughout the state. Communities need alternative, permanent sources of revenue to support the continued production of affordable housing units. (h) The Legislature finds that a comprehensive strategy for the long-term economic development of the state must encourage the creation of workforce skills needed to attract and retain a high-wage workforce, in addition to public infrastructure requirements. Public investments in human capital are as vital to the long-term growth of the state’s economy as investments in physical capital. 34191.2. For purposes of this part, “authority” or “Community Development and Housing Joint Powers Authority” means the joint exercise of powers agency formed under Chapter 5 (commencing with Section 6500) of Division 7 of Title 1 of the Government Code. Chapter 2. Community Development and Housing Joint Powers Authority 97 SB 1156 — 3 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 34191.10. (a) The legislative body bodies of the city and county representing the geographic territory covering the area served by a former redevelopment agency may elect to form a Community Development and Housing Joint Powers Authority pursuant to this part after July 1, 2012, to carry out the provisions of the Community Redevelopment Law (Part 1.8 (commencing with Section 33000)). If the former redevelopment agency was formed solely by a county, the county may exercise the powers authorized by this part. (b) The authority may enter into financial and other agreements with community colleges, K-12 school districts, and private businesses to facilitate the development and operation of articulated career technical education pathways, as specified in Section 88532 of the Education Code. Chapter 3. Financing 34191.15. An authority formed pursuant to this part may adopt a redevelopment plan for a project area pursuant to this section. Notwithstanding any other provision of this division, a determination shall not be required to be made regarding blight within the project area, and an action shall not be required to be taken for the elimination of blight in connection with the creation of a redevelopment plan for a project area. The redevelopment plan shall terminate on a specified date not to exceed 30 years from the date of the first issuance of bond indebtedness by the agency authority. A project area shall include only the following areas: (a) For areas within the geographic boundaries of a metropolitan planning organization where a sustainable communities strategy has been adopted by the metropolitan planning organization, and the State Air Resources Board, pursuant to subparagraph (H) of paragraph (2) of subdivision (b) of Section 65080 of the Government Code, has accepted the metropolitan planning organization’s determination that the sustainable communities strategy would, if implemented, achieve the greenhouse gas emission reduction targets: (1) Transit priority areas where a transit priority project, as defined in Section 21155 of the Public Resources Code, may be constructed, provided that if the project area is based on proximity 97 — 4 —SB 1156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 to a planned major transit stop or a high-quality transit corridor, the stop or the corridor must be scheduled to be completed within the planning horizon established by Section 450.322 of Title 23 of the Code of Federal Regulations. For purposes of this paragraph, a transit priority area may include a military base reuse plan that meets the definition of a transit priority area and a contaminated site within a transit priority area. (2) Areas that are small walkable communities, as defined in paragraph (4) of subdivision (e) of Section 21094.5 of the Public Resources Code. No more than one small walkable community project area shall be designated within a city. (b) Sites that have land use approvals, covenants, conditions and restrictions, or other effective controls restricting the sites to clean energy manufacturing, and sites that are consistent with the sustainable communities strategy, if those sites are within the geographic boundaries of a metropolitan planning organization. Clean energy manufacturing consists of the manufacture of components, parts, or materials for the generation of renewable energy resources or for alternative fuel vehicles. 34191.16. Solely for purposes of Section 16 of Article XVI of the California Constitution, a redevelopment plan adopted pursuant to Section 34191.11 34191.15 may include a provision for the receipt of tax increment funds according to Section 33670, provided that the local government with land use jurisdiction has adopted all of the following: (a) A school mitigation plan to offset losses of property tax revenue to schools serving the project area as a result of the imposition of a provision for the receipt of tax increment funds. The plan may include assessment districts, provisions of covenants, conditions and restrictions, or other mechanisms. Except as otherwise specified, the plan shall be approved by the fiscally affected school districts. If the plan is not approved by the school districts, it may be submitted by the authority established under this part to the Department of Finance for approval. The department shall approve the plan if there is no impact on the state budget because of the provisions of subdivision (b) of Section 8 of Article XVI of the California Constitution or if the impacts on the state budget are not unacceptable. (b) An analysis of the public service costs and revenue-generating impact of new development with respect to 97 SB 1156 — 5 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 the provision of basic public services, including police, fire, and rescue services. The plan shall include a strategy for mitigating unfunded service impacts. (c) A sustainable parking standards ordinance that restricts parking in transit priority project areas. (d) A provision requiring that 20 percent of the housing in the project area be affordable to persons of low and moderate income. (e) For transit priority areas and small walkable communities within a metropolitan planning organization, a plan consistent with the use designation, density, building intensity, and applicable policies specified for the project area in the sustainable communities strategy and that, for new residential construction, provides a density of at least 20 dwelling units per net acre and for nonresidential uses, provides a minimum floor area ratio of 0.75. (f) Within small walkable communities outside a metropolitan planning organization, a plan for new residential construction that provides a density of at least 20 dwelling units per net acre and, for nonresidential uses, provides a minimum floor area ratio of 0.75. (g) For areas referred to in subdivision (e), the authority shall obtain the metropolitan planning organization’s concurrence that the plan is consistent with the use designation, density, building intensity, and applicable policies for the project area in the sustainable communities strategy. 34191.17. The authority shall approve any bond financing under this division. 34191.18. The Low and Moderate Income Fund shall be retained in the Sustainable Economic Development and Housing Trust Fund for uses authorized under Section 33334.2. If the funds are not contracted for use within 60 months from the effective date of this section, the balance shall be transferred to an agency designated by the Governor for use as grants to the authority for the provision of affordable housing to low- and moderate-income households. Any funds expended by the authority for affordable housing from any of the granted funds shall be credited against the 20-percent set-aside requirement under Section 33334.2. 34191.19. A state or local public pension fund system authorized by state law or local charter, respectively, including, but not limited to, the Public Employees’ Retirement System, the 97 — 6 —SB 1156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 State Teachers’ Retirement System, a system established under the County Employees Retirement Law of 1937, Chapter 3 (commencing with Section 31450) of Part 3 of Division 4 of Title 3 of the Government Code, or an independent system, may invest capital in the public infrastructure projects and private commercial and residential developments undertaken by an authority. 34191.20. (a) An authority may exercise the full powers granted under Chapter 2.8 (commencing with Section 53395) of Part 1 of Division 2 of Title 5 of the Government Code and the Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code). (b) An authority may implement a local transactions and use tax under Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code, except that the resolution authorizing the tax may designate the use of the proceed proceeds of the tax. (c) An authority may issue bonds paid for with authority proceeds, which shall be deemed to be special funds to be expended by the authority for the purposes of carrying out this part. SEC. 2. Section 21094.5 of the Public Resources Code is amended to read: 21094.5. (a) (1) If an environmental impact report was certified for a planning level decision of a city or county, the application of this division to the approval of an infill project shall be limited to the effects on the environment that (A) are specific to the project or to the project site and were not addressed as significant effects in the prior environmental impact report or (B) substantial new information shows the effects will be more significant than described in the prior environmental impact report. A lead agency’s determination pursuant to this section shall be supported by substantial evidence. (2) An effect of a project upon the environment shall not be considered a specific effect of the project or a significant effect that was not considered significant in a prior environmental impact report, or an effect that is more significant than was described in the prior environmental impact report if uniformly applicable development policies or standards adopted by the city, county, or the lead agency, would apply to the project and the lead agency makes a finding, based upon substantial evidence, that the 97 SB 1156 — 7 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 development policies or standards will substantially mitigate that effect. (b) If an infill project would result in significant effects that are specific to the project or the project site, or if the significant effects of the infill project were not addressed in the prior environmental impact report, or are more significant than the effects addressed in the prior environmental impact report, and if a mitigated negative declaration or a sustainable communities environmental assessment could not be otherwise adopted, an environmental impact report prepared for the project analyzing those effects shall be limited as follows: (1) Alternative locations, densities, and building intensities to the project need not be considered. (2) Growth inducing impacts of the project need not be considered. (c) This section applies to an infill project that satisfies both of the following: (1) The project satisfies any of the following: (A) Is consistent with the general use designation, density, building intensity, and applicable policies specified for the project area in either a sustainable communities strategy or an alternative planning strategy for which the State Air Resources Board, pursuant to subparagraph (H) of paragraph (2) of subdivision (b) of Section 65080 of the Government Code, has accepted a metropolitan planning organization’s determination that the sustainable communities strategy or the alternative planning strategy would, if implemented, achieve the greenhouse gas emission reduction targets. (B) Consists of a small walkable community project located in an area designated by a city for that purpose. (C) Is located within the boundaries of a metropolitan planning organization that has not yet adopted a sustainable communities strategy or alternative planning strategy, and the project has a residential density of at least 20 units per net acre or a floor area ratio of at least 0.75. (2) Satisfies all applicable statewide performance standards contained in the guidelines adopted pursuant to Section 21094.5.5. (d) This section applies after the Secretary of the Natural Resources Agency adopts and certifies the guidelines establishing statewide standards pursuant to Section 21094.5.5. 97 — 8 —SB 1156 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (e) For the purposes of this section, the following terms mean the following: (1) “Infill project” means a project that meets the following conditions: (A) Consists of any one, or combination, of the following uses: (i) Residential. (ii) Retail or commercial, where no more than one-half of the project area is used for parking. (iii) A transit station. (iv) A school. (v) A public office building. (B) Is located within an urban area on a site that has been previously developed, or on a vacant site where at least 75 percent of the perimeter of the site adjoins, or is separated only by an improved public right-of-way from, parcels that are developed with qualified urban uses. (2) “Planning level decision” means the enactment or amendment of a general plan, community plan, specific plan, or zoning code. (3) “Prior environmental impact report” means the environmental impact report certified for a planning level decision, as supplemented by any subsequent or supplemental environmental impact reports, negative declarations, or addenda to those documents. (4) “Small walkable community project” means a project that is located in a small walkable community project area. A small walkable community project area means an area within an incorporated city that is not within the boundary of a metropolitan planning organization and meets all the following requirements: (A) Has a project area of approximately one-quarter-mile diameter of contiguous land completely within the existing incorporated boundaries of the city. (B) Has a project area that includes a residential area adjacent to a retail downtown area. (C) The project area has an average net density of at least eight dwelling units per net acre or a floor area ratio for retail or commercial use of not less than 0.50. For purposes of this subparagraph: (i) “Floor area ratio” means the ratio of gross building area (GBA) of development, exclusive of structured parking areas, proposed for the project divided by the total net lot 97 SB 1156 — 9 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 area (NLA); (ii) “gross building area” means the sum of all finished areas of all floors of a building included within the outside faces of its exterior walls; and (iii) “net lot area” means the area of a lot excluding publicly dedicated land, private streets that meet local standards, and other public use areas as determined by the local land use authority. (5) “Urban area” includes either an incorporated city or an unincorporated area that is completely surrounded by one or more incorporated cities that meets both of the following criteria: (A) The population of the unincorporated area and the population of the surrounding incorporated cities equal a population of 100,000 or more. (B) The population density of the unincorporated area is equal to, or greater than, the population density of the surrounding cities. O 97 — 10 —SB 1156 State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 BILL ANALYSIS SENATE TRANSPORTATION & HOUSING COMMITTEE SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: steinberg VERSION: 3/29/12 Analysis by: Carrie Cornwell FISCAL: yes Hearing date: April 24, 2012 SUBJECT: Community Development and Housing Joint Powers Authority DESCRIPTION: This bill authorizes a city and county that included the territory of a redevelopment agency to form a Community Development and Housing Joint Powers Authority to carry out Community Redevelopment Law, using the assets of a former redevelopment agency as well as new revenues that the bill authorizes. ANALYSIS: Historically, the Community Redevelopment Law allowed 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. The law requires redevelopment agencies to deposit 20 percent 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. 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 26X established successor agencies, typically the city that established the agency, to take control of all redevelopment agency assets, properties, and other items of value. Successor agencies are to dispose of an agency's assets as directed by an oversight board, made up of representatives of local taxing entities, with the proceeds transferred to the county auditor-controller for distribution to taxing agencies within each county. AB 26X also included provisions allowing the host city or county of a dissolving redevelopment agency to retain the housing assets and functions previously performed by the agency, except for funds on deposit in the agency's L&M fund, and thus become a successor housing agency. If the host city or county chooses not to become the successor housing http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (1 of 6) [5/2/2012 3:56:30 PM] State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 agency, a local housing authority or the state's Department of Housing and Community Development (HCD) may do so. 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 and local jurisdictions are in the process of implementing AB 26X's provisions to distribute former redevelopment assets and pay its remaining obligations. SB 375 (Steinberg), Chapter 728, Statutes of 2008, required the Air Resources Board (ARB), by September 30, 2010, to provide each region that has a metropolitan planning organization (MPO) with a greenhouse gas emission reduction target for the automobile and light truck sector for 2020 and 2035, respectively. Each MPO, in turn, is required to include within its regional transportation plan a sustainable communities strategy (SCS) designed to achieve the ARB targets for greenhouse gas emission reduction. Each MPO must submit its SCS to ARB for review. ARB must accept or reject the MPO's determination that the SCS submitted would, if implemented, achieve the greenhouse gas emission reduction targets. This bill: 1. Permits a city and county representing the geographic territory covering the area served by a former redevelopment agency to form a Community Development and Housing Joint Powers Authority (authority) after July 1, 2012 to carry out the Community Redevelopment Law. If a county formed a redevelopment agency, then the county may form an authority. An authority so formed may adopt a redevelopment plan for a project area. This plan must terminate on a specified date not more than 30 years after the first issuance of bond indebtedness by the authority. 2. Limits possible project areas to only the following: a. Within an MPO. For regions with an adopted SCS that ARB has accepted, possible project areas may include transit priority areas identified in a SCS and for each jurisdiction, one small walkable community, as defined. b. Within or outside of an MPO. Sites that have land use approvals or other controls that restrict the sites to clean energy manufacturing and are consistent with the SCS strategy, where applicable. The bill defines clean energy manufacturing as the manufacture of components, parts, or materials for the generation of renewal energy resources for alternative fuel vehicles. If the project area is based on proximity to a planned major transit stop or a high-quality transit corridor, the stop or the corridor must be scheduled to be completed within the planning horizon established by specified federal regulations governing the metropolitan transportation planning process. The bill specifies that a transit priority area can include a military base reuse plan that meets the definition of a transit priority area and a contaminated site within a transit priority area. 3. Retains in the Sustainable Economic Development and Housing Trust Fund, which can be http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (2 of 6) [5/2/2012 3:56:30 PM] State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 created under SB 1151, also on today's agenda, the existing L&M fund of the former redevelopment agency for use in accordance with existing redevelopment law. If the L&M funds are not contracted for use within 60 months from the effective date of this bill, then the local agency shall transfer the L&M fund monies to an agency designated by the governor for use as grants to the authority for the provision of affordable housing. 4. Allows a redevelopment plan adopted pursuant to this bill to include a provision for the receipt of tax increment funds provided that the local government with land use jurisdiction has adopted all of the following: a. A school mitigation plan, which fiscally affected school districts must approve, to offset the loss of property tax revenue to schools that serve the project area. If the fiscally affected school districts do not approve this plan, then the Department of Finance may approve it and must do so if there is no impact on the state budget. b. An analysis of public service costs and the revenue-generating impact of new development with respect to the provision of basic public services, including police and fire services. c. A sustainable parking standards ordinance that restricts parking in transit priority project areas. d. A requirement that 20 percent of the housing in the project area be affordable to persons of low and moderate income. e. Within an MPO for transit priority areas and small walkable communities, a plan must be consistent with the land use policies in the SCS, and the MPO must concur in this finding. In addition, the plan must require a density of at least 20 dwelling units per net acre, and for nonresidential uses set a minimum floor area ration of 0.75. f. Outside of an MPO, a plan for new residential construction shall provide a density of at least 20 dwelling units per acre, and for nonresidential uses set a minimum floor area ration of 0.75. 5. Permits an authority to enter into financial agreements with community colleges, school districts, and private businesses to facilitate the development and operation of articulated career educational pathways. 6. Permits a state or local public pension fund to invest in public infrastructure projects and private commercial and residential development that an authority undertakes. 7. Authorizes an authority to implement a local transactions and use tax, above the state's base 7.25 percent sales and use tax, provided that the resolution authorizing the tax designates the use of the proceeds of the tax. 8. Authorizes an authority to issue bonds paid for with authority proceeds in order to carry out the provisions of this bill. 9. Authorizes an authority to exercise the powers of an infrastructure financing district to divert property tax increment revenues and issue bonds to pay for public works. 10. Allows an authority to finance infrastructure by issuing bonds and lending the proceeds for public works, working capital, and insurance programs as provided in the Marks-Roos Local http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (3 of 6) [5/2/2012 3:56:30 PM] State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 Bond Pooling Act. COMMENTS: 1. Purpose. The author introduced this bill to set forth a new vision of local economic development and housing policy for the 21st century, focused on building sustainable communities and creating the high skill, high wage jobs that are the key to our future prosperity. The purpose of bringing together the cities and the counties as equal partners in an inclusive governance structure is to correct the old model of redevelopment that pitted cities against counties and schools for limited tax revenues. Both cities and counties have land use authority, and both share responsibility for directing growth toward infill and transit-oriented development consistent with SB 375 of 2008. The author asserts that this bill will encourage cooperation, not competition, between cities and counties in furtherance of sustainable economic development. This bill recognizes that economic development requires investments both in the physical capital of our infrastructure and the human capital of our workforce, and therefore authorizes financial agreements with community colleges, K-12 school districts, and industry to advance career education and credentialing programs. 2. How much area does the bill cover ? This bill provides for the creation of new Community Development and Housing Joint Powers Authorities to take over the assets of the former redevelopment agencies, to set up a new system of tax increment financing with less impact to the state's finances, to confer new revenue authority, and to retain all the other powers that redevelopment agencies possessed under state law, except it significantly limits the areas that would qualify as project areas. This bill explicitly states that these project areas need not be blighted, but limits project areas to clean energy manufacturing sites and, for cities and counties within a MPO, to just a single small walkable community in each jurisdiction plus transit priority areas. It is unclear how much area within the state would actually meet these qualifications, because: The bill defines a clean energy manufacturing site as one with existing land use controls to restrict the site to clean energy manufacturing, which the bill deems to consist of "components, parts, or materials for the generation of renewable energy resources for alternative fuel vehicles." This definition provides no assurance that the clean energy subsidized through this bill would indeed further or even comport with existing state policy and laws on greenhouse gas emissions, air pollution emissions, or renewal energy. The committee may wish to define better what would qualify as "clean energy" manufacturing for purposes of this bill. The referenced definition of small walkable community that the bill uses states that a small walkable community cannot be in the area of a MPO, but the bill's provisions describing possible project areas specifically allow small walkable communities within MPOs. The committee may wish to amend this bill to clarify whether small walkable communities may be included in a project area. http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (4 of 6) [5/2/2012 3:56:30 PM] State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 SB 375 provided for the creation of transit priority areas, but the financial incentives in this bill could lead over time to a proliferation of these as a means to access the many powers conferred to an authority created under this bill. 1. Housing provisions raise many questions. This bill retains with the new authorities and trust fund, created in SB 1151, also on today's agenda, the existing L&M fund of the former redevelopment agency for use in accordance with existing redevelopment law. The bill further provides that if the authority does not contract for use of the L&M funds within 60 months from the effective date of this bill, then the local agency shall transfer the L&M fund monies to an agency designated by the governor for use as grants to the authority for the provision of affordable housing. These housing provisions raise numerous questions, including: Existing law prescribes a process for ensuring that redevelopment agencies spend their L&M funds appropriately and in a timely process over four-year periods (known as the excess surplus law). Why does this bill provide five years from the effective date of this bill for contracting to expend these funds, and is this meant to replace existing law for existing L&M balances? Does the bill mean for these provisions to govern new L&M revenues accruing from new tax increment financing or just the remaining, unencumbered L&M fund balance? Given that the tax increment generated from this bill would be much less than that generated from redevelopment project areas, because at least the school share of the property tax would be excluded, is a 20% set aside for the L&M fund sufficient to support an affordable housing program? To what agency would the governor transfer unexpended L&M balances? Why does the bill return L&M funds back as grants to the very entities that did not spend the money on affordable housing in the first place? Finally, this bill also requires that 20 percent of the housing in the project area be affordable to persons of low and moderate income. To whom will these units be affordable and how will this requirement mesh with existing inclusionary and production requirements in the Community Redevelopment Law? 1. Where are the SB 450 fixes ? Last year the Legislature passed SB 450 (Lowenthal), which substantively reformed how redevelopment agencies spend their L&M funds. That bill passed this committee on April 5, 2011 by a 9-0 vote, but the governor vetoed SB 450, deeming it premature in light of the then pending Supreme Court decision on AB 26X and AB 27X in California Redevelopment Association v. Matosantos. This bill, however, proposes restoring the use of the redevelopment law, including its housing provisions, but without the changes that SB 450 would have made. The committee or the author may therefore wish to amend this bill to include the reforms SB 450 proposed to how redevelopment agencies spend their housing dollars. 2. Urgency clause needed. This bill lets cities and counties form Community Development and Housing Joint Powers Authorities to administer economic development and housing programs after July 1, 2012. This timing is necessary because successor agencies are working now to distribute those assets. http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (5 of 6) [5/2/2012 3:56:30 PM] State Net | 2011 CA S 1156: Bill Analysis - Senate Trans & Housing Committee - 04/24/2012 But because this bill does not include an urgency clause, its provisions will not take effect until January 1, 2013. The committee may wish to consider amending the bill to include an urgency clause. 3. Technical Amendments. On page 4, line 26, delete "body" and insert "bodies" On page 5, line 23, delete "agency" and insert "authority" On page 6, line 17, delete "34191.11" and insert "34191.15" On page 7, line 13, after "per" insert "net" On page 8, line 13, delete "proceed" and insert "proceeds" On page 9, line 32, after "per" insert "net" On page 11, line 7, after "per" insert "net" 1. Committee of second referral. The Rules Committee referred this bill to the Governance and Finance Committee and to the Transportation and Housing Committee. This bill passed that committee on April 18 by a 6 to 3 vote. The Governance and Finance Committee's analysis and hearing of the bill dealt primarily with the provisions of the bill related to the local government finance provisions, leaving the housing provisions for review in this committee. POSITIONS: (Communicated to the committee before noon on Wednesday, April 18, 2012) SUPPORT: BRIDGE Housing California Infill Builders Association California State Association of Counties DMB Pacific Ventures Los Angeles Alliance for a New Economy Mission Bay Development Group OPPOSED: California Special Districts Association Howard Jarvis Taxpayers Association Copyright (c) 2012 State Net. All rights reserved. http://client2.statenet.com/secure/pe/resources....ALYSIS_comSTRH_vrd20120424_seq00&no_text_utils=1 (6 of 6) [5/2/2012 3:56:30 PM] AMENDED IN SENATE APRIL 24, 2012 AMENDED IN SENATE APRIL 11, 2012 SENATE BILL No. 986 1 2 Introduced by Senator Dutton (Coauthor: Senator Cannella) January 31, 2012 1 2 3 An act to amend Sections 34177 and 34180 of the Health and Safety Code, relating to redevelopment, and declaring the urgency thereof, to take effect immediately. legislative counsel’s digest SB 986, as amended, Dutton. Redevelopment: bond proceeds. Existing law dissolved redevelopment agencies and community development agencies, as of February 1, 2012, and provides for the designation of successor agencies, as defined. Existing law requires that successor entities perform certain duties, including, among others, remitting unencumbered funds of that agency to the county auditor-controller, and overseeing the use of bond proceeds. Existing law requires each successor agency to have an oversight board that is composed of 7 members who meet certain qualifications. Existing law requires the oversight board to approve certain actions of the successor agency. This bill would require that unencumbered balances of funds that are derived from tax exempt bond proceeds be used in accordance with the requirements of this bill. This bill would also require that the proceeds of bonds issued by a former redevelopment agency on or before December 31, 2010, be used by the successor agency for the purposes for which the bonds were sold pursuant to an enforceable obligation, as defined, that was entered into either by the former redevelopment 97 agency prior to its dissolution, or is entered into by the successor agency by December 31, 2014. This bill would also provide that if the bond proceeds are not subject to an enforceable obligation, or if the purpose for which the bonds were sold can no longer be achieved, then the bond proceeds shall be used to defease the bonds or to purchase outstanding bonds on the open market for cancellation. This bill would also authorize the oversight board to approve of the establishment of an enforceable obligation with respect to bond proceeds if certain requirements are met, including, among others, if that obligation is reasonably in furtherance of the purposes for which the bonds were sold. This bill would declare that it is to take effect immediately as an urgency statute. Vote: 2⁄3. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 SECTION 1. Section 34177 of the Health and Safety Code is amended to read: 34177. Successor agencies are required to do all of the following: (a) Continue to make payments due for enforceable obligations. (1) On and after February 1, 2012, and until a Recognized Obligation Payment Schedule becomes operative, only payments required pursuant to an enforceable obligations payment schedule shall be made. The initial enforceable obligation payment schedule shall be the last schedule adopted by the redevelopment agency under Section 34169. However, payments associated with obligations excluded from the definition of enforceable obligations by paragraph (2) of subdivision (e) of Section 34171 shall be excluded from the enforceable obligations payment schedule and be removed from the last schedule adopted by the redevelopment agency under Section 34169 prior to the successor agency adopting it as its enforceable obligations payment schedule pursuant to this subdivision. The enforceable obligation payment schedule may be amended by the successor agency at any public meeting and shall be subject to the approval of the oversight board as soon as the board has sufficient members to form a quorum. 97 — 2 —SB 986 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (2) The Department of Finance and the Controller shall each have the authority to require any documents associated with the enforceable obligations to be provided to them in a manner of their choosing. Any taxing entity, the department, and the Controller shall each have standing to file a judicial action to prevent a violation under this part and to obtain injunctive or other appropriate relief. (3) Commencing on May 1, 2012, only those payments listed in the Recognized Obligation Payment Schedule may be made by the successor agency from the funds specified in the Recognized Obligation Payment Schedule. In addition, commencing May 1, 2012, the Recognized Obligation Payment Schedule shall supersede the Statement of Indebtedness, which shall no longer be prepared nor have any effect under the Community Redevelopment Law. (4) Nothing in the act adding this part is to be construed as preventing a successor agency, with the prior approval of the oversight board, as described in Section 34179, from making payments for enforceable obligations from sources other than those listed in the Recognized Obligation Payment Schedule. (5) From February 1, 2012, to July 1, 2012, a successor agency shall have no authority and is hereby prohibited from accelerating payment or making any lump-sum payments that are intended to prepay loans unless such accelerated repayments were required prior to the effective date of this part. (b) Maintain reserves in the amount required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (c) Perform obligations required pursuant to any enforceable obligation. (d) Remit unencumbered balances of redevelopment agency funds to the county auditor-controller for distribution to the taxing entities, including, but not limited to, the unencumbered balance of the Low and Moderate Income Housing Fund of a former redevelopment agency. In making the distribution, the county auditor-controller shall utilize the same methodology for allocation and distribution of property tax revenues provided in Section 34188. Notwithstanding the requirements of this subdivision, if the unencumbered balance of funds is derived from tax exempt bond proceeds, those balances shall be used in accordance with the requirements of subdivision (i). 97 SB 986 — 3 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 (e) Dispose of assets and properties of the former redevelopment agency as directed by the oversight board; provided, however, that the oversight board may instead direct the successor agency to transfer ownership of certain assets pursuant to subdivision (a) of Section 34181. The disposal is to be done expeditiously and in a manner aimed at maximizing value. Proceeds from asset sales and related funds that are no longer needed for approved development projects or to otherwise wind down the affairs of the agency, each as determined by the oversight board, shall be transferred to the county auditor-controller for distribution as property tax proceeds under Section 34188. (f) Enforce all former redevelopment agency rights for the benefit of the taxing entities, including, but not limited to, continuing to collect loans, rents, and other revenues that were due to the redevelopment agency. (g) Effectuate transfer of housing functions and assets to the appropriate entity designated pursuant to Section 34176. (h) Expeditiously wind down the affairs of the redevelopment agency pursuant to the provisions of this part and in accordance with the direction of the oversight board. (i) Continue to oversee development of properties until the contracted work has been completed or the contractual obligations of the former redevelopment agency can be transferred to other parties. Bond proceeds derived from bonds sold on or before December 31, 2010, shall be used for the purposes for which the bonds were sold, if and to the extent that the successor agency is either performing an obligation required pursuant to any enforceable obligation entered into by the former redevelopment agency, or is performing an enforceable obligation entered into by the successor agency on or before December 31, 2014, to fulfill the purposes for which the bonds were sold by the dissolved redevelopment agency; provided, however, that this section shall not be interpreted to grant to a successor agency the power of eminent domain. Any amount of bond proceeds derived from bonds sold on or before December 31, 2010, not subject to an enforceable obligation shall be used to defease the bonds or to purchase outstanding bonds on the open market for cancellation. If the purposes for which bonds that were sold by the dissolved redevelopment agency on or before December 31, 2010, can no longer be achieved, then the proceeds shall be used to defease the 97 — 4 —SB 986 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 bonds or to purchase outstanding bonds on the open market for cancellation. (j) Prepare a proposed administrative budget and submit it to the oversight board for its approval. The proposed administrative budget shall include all of the following: (1) Estimated amounts for successor agency administrative costs for the upcoming six-month fiscal period. (2) Proposed sources of payment for the costs identified in paragraph (1). (3) Proposals for arrangements for administrative and operations services provided by a city, county, city and county, or other entity. (k) Provide administrative cost estimates, from its approved administrative budget that are to be paid from property tax revenues deposited in the Redevelopment Property Tax Trust Fund, to the county auditor-controller for each six-month fiscal period. (l) (1) Before each six-month fiscal period, prepare a Recognized Obligation Payment Schedule in accordance with the requirements of this paragraph. For each recognized obligation, the Recognized Obligation Payment Schedule shall identify one or more of the following sources of payment: (A) Low and Moderate Income Housing Fund. (B) Bond proceeds. (C) Reserve balances. (D) Administrative cost allowance. (E) The Redevelopment Property Tax Trust Fund, but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or by the provisions of this part. (F) Other revenue sources, including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board in accordance with this part. (2) A Recognized Obligation Payment Schedule shall not be deemed valid unless all of the following conditions have been met: (A) A draft Recognized Obligation Payment Schedule is prepared by the successor agency for the enforceable obligations of the former redevelopment agency by March 1, 2012. From October 1, 2011, to July 1, 2012, the initial draft of that schedule shall project the dates and amounts of scheduled payments for each enforceable obligation for the remainder of the time period 97 SB 986 — 5 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 during which the redevelopment agency would have been authorized to obligate property tax increment had that redevelopment agency not been dissolved, and shall be reviewed and certified, as to its accuracy, by an external auditor designated pursuant to Section 34182. (B) The certified Recognized Obligation Payment Schedule is submitted to and duly approved by the oversight board. (C) A copy of the approved Recognized Obligation Payment Schedule is submitted to the county auditor-controller and both the Controller’s office and the Department of Finance and be posted on the successor agency’s Internet Web site. (3) The Recognized Obligation Payment Schedule shall be forward looking to the next six months. The first Recognized Obligation Payment Schedule shall be submitted to the Controller’s office and the Department of Finance by April 15, 2012, for the period of January 1, 2012, to June 30, 2012, inclusive. Former redevelopment agency enforceable obligation payments due, and reasonable or necessary administrative costs due or incurred, prior to January 1, 2012, shall be made from property tax revenues received in the spring of 2011 property tax distribution, and from other revenues and balances transferred to the successor agency. SEC. 2. Section 34180 of the Health and Safety Code is amended to read: 34180. All of the following successor agency actions shall first be approved by the oversight board: (a) The establishment of new repayment terms for outstanding loans where the terms have not been specified prior to the date of this part. (b) Refunding of outstanding bonds or other debt of the former redevelopment agency by successor agencies in order to provide for savings or to finance debt service spikes; provided, however, that no additional debt is created and debt service is not accelerated. (c) Setting aside of amounts in reserves as required by indentures, trust indentures, or similar documents governing the issuance of outstanding redevelopment agency bonds. (d) Merging of project areas. (e) Continuing the acceptance of federal or state grants, or other forms of financial assistance from either public or private sources, where assistance is conditioned upon the provision of matching 97 — 6 —SB 986 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 funds, by the successor entity as successor to the former redevelopment agency, in an amount greater than 5 percent. (f) (1) If a city, county, or city and county wishes to retain any properties or other assets for future redevelopment activities, funded from its own funds and under its own auspices, it must reach 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 Section 34188, for the value of the property retained. (2) If no other agreement is reached on valuation of the retained assets, the value will be the fair market value as of the 2011 property tax lien date as determined by the county assessor. (g) Establishment of the Recognized Obligation Payment Schedule. (h) A request by the successor agency to enter into an agreement with the city, county, or city and county that formed the redevelopment agency that it is succeeding. (i) A request by a successor agency or taxing entity to pledge, or to enter into an agreement for the pledge of, property tax revenues pursuant to subdivision (b) of Section 34178. (j) The establishment of an enforceable obligation with respect to bond proceeds from bonds sold on or before December 31, 2010, pursuant to subdivision (i) of Section 34177. The oversight board may approve the establishment of an enforceable obligation with respect to bond proceeds if both of the following conditions are met: (1) The obligation is reasonably in furtherance of the purposes for which the bonds were sold. (2) The obligation is consistent with one or more of the following: (A) The obligation is required in order to meet a federal or state matching funds requirement in which federal or state funds have already been committed, and is specific to the project requiring the obligation. (B) The obligation is required in order to meet the requirements for the expenditure of a local general obligation bond approved by the voters. (C) (i) The obligation is required to complete a project specific to critical public infrastructure that is in, or provides benefit to, the project area of the former redevelopment agency and the 97 SB 986 — 7 — 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 evidence of the benefit to the community in proceeding with the obligation substantially outweighs the resulting delay in the distribution of tax increment to the impacted taxing entities. (ii) For purposes of this subparagraph, “critical public infrastructure” does not include any of the following: (I) An automobile dealership that will be or is on a parcel of land that has not previously been developed for urban use. (II) A development project or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for a golf course or for a racetrack, speedway or other racing venue. (III) A development project or business that acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for a stadium, coliseum, arena, ballpark or other sports facility that is intended for use by a professional sports franchise. (IV) A development project or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for gambling or gaming of any kind whatsoever, including, but not limited to, casinos, gaming clubs, bingo operations, or any facility in which banked or percentage games, any form of gambling device, or lotteries, other than the California State Lottery, are or will be played. (V) A development project or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for retail, entertainment, or other private purpose unrelated to public works, such as bridges, parks, roads, municipal buildings, dams, railroads, schools, hospitals, and other long-term, public physical assets and facilities. SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to provide guidance to the successor agencies on the use of bond proceeds, it is necessary for this act to take effect immediately. O 97 — 8 —SB 986 State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 BILL ANALYSIS SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 986 HEARING: 4/18/12 AUTHOR: Dutton FISCAL: Yes VERSION: 4/11/12 TAX LEVY: No CONSULTANT: Weinberger SUCCESSOR AGENCIES AND BOND PROCEEDS (URGENCY) Allows successor agencies to keep former redevelopment agencies' bond proceeds and enter into new enforceable obligations funded by bond proceeds. Background and Existing Law Until 2011, the Community Redevelopment Law allowed local officials to set up redevelopment agencies (RDAs), prepare and adopt redevelopment plans, and finance redevelopment activities. A redevelopment agency kept the property tax increment revenues generated from increases in property values within a redevelopment project area. 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. When a redevelopment agency diverted property tax revenues from a school district, the State General Fund paid the difference. 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, 2011) dissolved all RDAs. AB X1 26 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. Oversight boards are comprised of seven members, including city, county, special district, and school district representatives, appointed by local governments that serve the area. The Department of Finance can review and request reconsideration of an oversight board's decisions. One of the successor agencies' primary responsibilities is to make payments for enforceable obligations entered into by former RDAs. 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 the county auditor-controller and the Department of Finance. Obligations listed on a ROPS are payable from a Redevelopment Property Tax Trust Fund, http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (1 of 6) [5/2/2012 4:00:04 PM] State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 which contains the revenues that would have been allocated as tax increment to a former RDA. Successor agencies cannot enter into new enforceable obligations. RDAs issued bonds to pay for acquiring and developing property and building public infrastructure to redevelop blighted areas. Former RDAs' long-term debt is mostly in the form of tax allocation bonds, which are payable from property tax increment revenues. Many former RDAs held balances of unencumbered bond proceeds that were intended to fund future redevelopment activities, but were not needed to meet those RDAs' existing obligations. Successor agencies must dispose of former RDAs' assets, at an oversight board's direction, pursuant to specific statutory requirements. Successor agencies must remit unencumbered balances of RDA funds to the county auditor-controller for distribution to local taxing entities in the county. Agencies must use bond proceeds for the purposes for which the bonds were sold unless those purposes cannot be achieved, in which case the proceeds can be used to defease the bonds. Defeasing bonds is a method of retiring bond debt by buying and holding risk-free U.S. Treasury securities in an amount that is sufficient to cover all principal and interest payments on the outstanding bonds. Local government officials worry that remitting unencumbered bond proceeds to county auditor-controllers for allocation to local taxing entities may violate federal tax-exempt bond requirements and restrictions on the use of bond proceeds imposed by the terms of individual bond agreements. They also argue that low interest rates make defeasing former RDAs' bonds prohibitively expensive. They want legislators to give successor agencies more flexibility in disposing of former RDAs' unencumbered bond proceeds. Proposed Law Senate Bill 986 imposes requirements on a successor agency's use of the unencumbered balance of funds derived from tax exempt bond proceeds. SB 986 requires successor agencies to use bond proceeds derived from bonds sold on or before December 31, 2010 for the purposes for which the bonds were sold if the successor agency is either: Performing an obligation required pursuant to any enforceable obligation entered into by the former redevelopment agency, or Performing an enforceable obligation the successor agency entered into on or before December 31, 2014, to fulfill the purposes for which the bonds were sold by the dissolved redevelopment agency. SB 986 prohibits a specified statute from being interpreted to grant the power of eminent domain to a successor agency. With respect to bond proceeds from bonds sold on or before December 31, 2010, if the purposes for which bonds that were sold by a former redevelopment agency cannot be achieved, SB 986 requires a successor agency to use the bond proceeds to either defease the bonds or purchase outstanding bonds on the open market for cancellation. SB 986 requires that a successor agency must use any amount of bond proceeds from bonds sold after December 31, 2010 that are not subject to an enforceable obligation to either defease the bonds or purchase outstanding bonds on the open market for cancellation. SB 986 requires a successor agency's oversight board, on or before December 31, 2014, to http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (2 of 6) [5/2/2012 4:00:04 PM] State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 approve the agency's establishment of an enforceable obligation with respect to bond proceeds from bonds sold on or before December 31, 2010, to fulfill the purposes for which bonds were sold by a dissolved redevelopment agency. The bill allows an oversight board to approve an enforceable obligation with respect to bond proceeds from bonds sold by a former RDA on or before December 31, 2010 if: The obligation is reasonably in furtherance of the purposes for which the bonds were sold; and The obligation is consistent with one or more of the following: o The obligation is required in order to meet a federal or state matching funds requirement in which federal or state funds have already been committed and is specific to the project requiring the obligation; or o The obligation is required in order to meet the requirements for the expenditure of a local general obligation bond approved by the voters; or o The obligation is required to complete a project specific to critical public infrastructure that is in, or provides benefit to, the project area of the former redevelopment agency and the evidence of the benefit to the community in proceeding with the obligation substantially outweighs the resulting delay in the distribution of tax increment to the impacted taxing entities. SB 986 specifies that critical public infrastructure does not include: An automobile dealership which will be or is on a parcel of land which has not previously been developed for urban use. A development or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for a golf course or for a racetrack, speedway or other racing venue. A development or business that acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for a stadium, coliseum, arena, ballpark or other sports facility that is intended for use by a professional sports franchise. A development or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for gambling or gaming of any kind, including casinos, gaming clubs, bingo operations, or any facility wherein banked or percentage games, any form of gambling device, or lotteries, other than the California State Lottery, are or will be played. A development or business that, either directly or indirectly, acquires, constructs, improves, rehabilitates, or replaces property that is or would be used for retail, entertainment or other private purpose unrelated to public works such as bridges, parks, roads, municipal buildings, dams, railroads, schools, hospitals, and other, long-term, public physical assets and facilities. State Revenue Impact No estimate. Comments http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (3 of 6) [5/2/2012 4:00:04 PM] State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 1. Purpose of the bill. 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 a large amount of money on the transaction. If a successor agency cannot spend unencumbered bond proceeds and chooses not to use the funds to defease bonds, it must remit the proceeds to the county auditor-controller for distribution to other taxing entities. Redistributing bond proceeds to other local governments would likely violate federal law governing tax-exempt bonds and the terms of many specific bond agreements. SB 986 prohibits unspent proceeds derived from tax exempt bonds from being redistributed and provides successor agencies with alternative ways to use the funds. By letting successor agencies enter into new enforceable obligations through 2014, SB 986 allows bond proceeds to finance former RDA projects that would not otherwise be completed. By letting successor agencies use bond proceeds to purchase outstanding bonds on the open market, SB 986 offers them a potentially less costly method to retire bonds issued by former RDAs. SB 986 eliminates the cloud of uncertainty that hangs over former RDAs' unspent bond proceeds, avoids costly litigation over reallocated bond proceeds, reduces the cost of retiring former RDA bonds, and provides financing for projects that were stranded by RDAs' dissolution. 2. Zero-sum game. Allocating former RDAs' assets is a zero-sum game; every reallocation creates winners and losers. By allowing successor agencies to spend additional bond proceeds on projects rather than on retiring outstanding debts, SB 986 grants a larger share of former RDA assets to successor agencies and a smaller share to other local governments - including school districts - than they would receive under current law. One fiscal loser will be the State General Fund, which must backfill the revenues that the schools won't get. School districts in which local property taxes equal or exceed the districts' revenue limits (the so-called "basic aid" districts) also could be fiscal losers because the State General Fund won't fully backfill their lower allocations. Other local taxing entities that will receive smaller allocations under SB 986 include counties and special districts that include former RDA project areas within their jurisdictions. 3. Retirement incentives. To make it easier for successor agencies to retire former RDAs' bonds, SB 986 lets successor agencies use unencumbered bond proceeds to buy bonds on the open market. Allowing successor agencies to explore a wider range of options for retiring RDA bonds could benefit local taxing entities and the State General Fund by expediting the debt retirement process. For example, refunding former RDA bonds could make sense if the refunding doesn't extend the term of the debt, saves debt service in each payment year, and allocates the savings to local taxing entities. The Committee may wish to consider amending SB 986 to allow successor agencies to use additional methods for retiring RDA bonds, subject to oversight boards' approval. 4. Taxable vs. tax-exempt. SB 986's provisions govern a successor agency's use of unencumbered proceeds from former RDAs' tax-exempt bonds. However, not all bonds issued by former RDAs were tax-exempt. It is not clear what proportion of former RDAs' unencumbered bond proceeds come from taxable bonds. However, based on data from earlier this year, taxable bonds accounted for approximately 17% of RDAs' total outstanding bond indebtedness. Under SB 986, unencumbered proceeds from taxable bonds could be reallocated to taxing entities by a county auditor-controller. Some stakeholders remain concerned that reallocating bond proceeds to taxing entities may violate the terms of specific bond agreements. The Committee may wish to consider whether SB 986's requirements should also http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (4 of 6) [5/2/2012 4:00:04 PM] State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 apply to successor agencies' use of unencumbered bond proceeds from taxable bonds. 5. Technical amendment. To clarify SB 986's provisions, the Committee may wish to consider making the following technical amendment: On page 8, line 33, strike out "business," and insert: "business that," 6. Before and after. After Governor Brown proposed ending redevelopment, some RDA officials tried to encumber as much future tax increment revenue as possible before any changes to redevelopment law took effect. During the first six months of 2011, RDAs issued about $1.5 billion in tax allocation bonds, a level of debt issuance greater than the $1.3 billion that they issued during all 12 months of 2010. Many bonds issued in 2011 required RDAs to pay interest rates than were significantly higher than those on bonds issued in previous years. To avoid rewarding some RDAs' rush to issue unnecessary and expensive debt, SB 986 makes a distinction between unspent proceeds from RDA bonds sold before December 31, 2010 and unspent proceeds from bonds sold after that date. 7. Urgency. Regular statutes take effect on the January following their enactment; bills passed in 2012 take effect on January 1, 2013. The California Constitution allows bills with urgency clauses to take effect immediately if they're needed for the public peace, health, and safety. SB 986 contains an urgency clause declaring the need for the bill to take effect immediately. 8. Related bills. At its April 18 hearing, the Committee also will hear: SB 1056 (Hancock), which expands the definition of "enforceable obligation" to include financial obligations related to a project funded with both tax increment and federal school construction bonds. SB 1151 (Steinberg), which creates an alternative process by which communities can use their former redevelopment agencies' assets for economic development and housing purposes. SB 1156 (Steinberg), which allows a Community Development and Housing Joint Powers Authority, and some counties, to use tax increment financing and other local revenues to finance specified local economic development activities. Other bills that amend the statutes governing the disposition and use of former RDAs' assets include: SB 1337 (Pavley), which allows a successor agency to retain former RDA land that is a brownfield site for the purpose of hazardous substance remediation or removal. AB 1585 (Perez), which makes numerous amendments to the statutes governing the redevelopment dissolution process. Support and Opposition (4/12/12) Support: Counties of Riverside and San Bernardino, Cities of Adelanto, Atascadero, Bellflower, Blythe, Brea, Buena Park, Camarillo, Cerritos, Colton, Fairfield, Folsom, Glendora, Grand Terrace, La Mirada, La Quinta, Lakewood, Lawndale, Lynnwood, Moorpark, Norwalk, Ontario, Palm Desert, Paramount, Placentia, Pomona, Rancho Cucamonga, Rialto, Rosemead, Santa Cruz, Signal Hill, Simi Valley, South El Monte, Temecula, Thousand Oaks, Victorville, Vista, and Whittier, California Contract Cities Association, California Redevelopment http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (5 of 6) [5/2/2012 4:00:04 PM] State Net | 2011 CA S 986: Bill Analysis - Senate Governance and Finance Committee - 04/18/2012 Association, League of California Cities. Opposition: California Alliance to Protect Private Property Rights, Counties of Los Angeles and Santa Clara. Copyright (c) 2012 State Net. All rights reserved. http://client2.statenet.com/secure/pe/resources....ALYSIS_comSGOF_vrd20120418_seq00&no_text_utils=1 (6 of 6) [5/2/2012 4:00:04 PM]