BILL ANALYSIS Ó
AB 2
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Date of Hearing: April 15, 2015
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Ed Chau, Chair
AB 2
(Alejo) - As Amended March 26, 2015
SUBJECT: Community revitalization authority
SUMMARY: Allows local governments to establish a Community
Revitalization and Investment Authority (Authority) in a
disadvantaged community to fund specified activities and allows
the Authority to collect tax increment. Specifically, this
bill:
1)Includes legislative findings regarding the intent of the
Legislature to create a planning and financing tool to support
the revitalization of disadvantaged communities.
2)Establishes an Authority as a public body to carry out a
community revitalization plan (plan) within a community
revitalization investment area (area).
3)Provides that a plan has the same meaning as a redevelopment
plan described in Article XVI of Section 16 of the California
Constitution.
4)Provides that for the purposes of receiving tax increment
revenues, pursuant to subdivision (b) of Article XVI of
Section 16 of the California Constitution, an Authority is a
redevelopment agency.
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5)Allows an Authority to be created in either of the following
ways:
a) A city, county, or city and county may adopt a
resolution creating the Authority. The governing board
must include three members of the governing board of the
city, county, or city and county that created the Authority
and two public members who live or work in the area; or
b) A city, county, city and county, and special district
may create an Authority by entering into a joint powers
agreement that establishes the composition of the governing
board, which must include two public members who live or
work in the area.
1)Prohibits a school entity from participating in an Authority.
2)Prohibits a city or county from forming an Authority until the
successor agency or designated local authority of a former
redevelopment agency has received a finding of completion from
the Department of Finance that the former redevelopment agency
is fully dissolved.
3)Prohibits a successor agency to a former redevelopment agency
from participating in an Authority.
4)Allows an Authority to establish an area if at least 80% of
the land, calculated by census tract, is characterized by both
of the following conditions:
a) An annual median income that is less than 80% of the
statewide annual median income; and
b) Three of the following four conditions exist:
i. Unemployment that is at least 3% higher than
the statewide median unemployment rate;
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ii. A crime rate that is 5% higher than the
statewide median crime rate;
iii. Deteriorated or inadequate infrastructure
such as streets, sidewalks, water supply, sewer
treatment or processing, and parks; and
iv. Deteriorated commercial or residential
structures.
1)Allows an Authority to establish an area in a former military
base that is principally characterized by deteriorated or
inadequate infrastructure and structures.
2)Requires a governing board of an Authority established in a
former military base to include, as one of its public members,
a member of the military base closure commission.
3)Subjects an Authority to the Ralph M. Brown Act.
4)Allows an Authority to do any of the following:
a) Provide funding to rehabilitate, repair, upgrade, or
construct infrastructure;
b) Provide funding for low- and moderate-income housing;
c) Remedy or remove hazardous substances pursuant to the
Polanco Redevelopment Act;
d) Provide for seismic retrofits of existing buildings;
e) Acquire and transfer property subject to eminent domain;
f) Prepare and adopt a plan for an area subject to
Community Redevelopment Law;
g) Issue bonds;
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h) Borrow money, receive grants, or accept financial or
other assistance or investment from the state and federal
government or any private lending institution for any
project within its area of operation;
i) Receive funding from the California Environmental
Protection Agency under the Water Security, Clean Drinking
Water, Coastal and Beach Protection Act of 2002;
j) Coordinate with a qualified community development entity
to maximize the benefit of New Markets Tax Credits;
aa) Appropriate funding that the governing body deems
appropriate for administrative expenses;
bb) Make loans or grants for owners or tenants to improve,
rehabilitate, or retrofit buildings or structures in the
area;
cc) Construct foundations, platforms, and other like
structural forms necessary for the provision or utilization
of air rights sites for buildings to be used for
residential and commercial industrial; and
dd) Provide direct assistance to businesses within the plan
in connection with new or existing facilities for
industrial or manufacturing uses.
1)Allows money appropriated to the Authority, from the
legislative body or bodies that created the Authority, for
administrative expenses to be paid as a loan or grant.
2)Provides that if the Authority is loaned funding for
administrative expenses, the property owners within the plan
area will be made third party beneficiaries of the repayment
of the loan.
3)Provides that in addition to the common understanding and
usual interpretation, the term "administrative expenses"
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includes, but is not limited to, expenses for planning and
dissemination of information.
4)Allows an Authority to adopt a plan to receive tax increment
generated in an area. The plan must include the following:
a) A statement of the principal goals and objectives;
b) A description of the deteriorated or inadequate
infrastructure within the area and a program for
construction, repair, or upgrade of existing
infrastructure;
c) A program to spend 25% of the tax increment collected to
increase, improve, and preserve the community's supply of
low- and moderate-income housing;
d) A program to remedy and remove a release of hazardous
substances;
e) A program to fund or facilitate economic revitalization
of the area; and
f) A fiscal analysis of the projected receipt of revenue
and projected expenses over a five year planning period.
1)Requires the Authority to adopt a program that prohibits the
number of housing units for extremely low-, very low- and
low-income households in the sustainable communities
investment area from being reduced during the effective period
of the sustainable communities investment plan, and requires
the replacement of these housing units within two years of
their displacement.
2)Allows an Authority to transfer funding for affordable housing
to a housing authority or the entity that received the housing
assets of the former redevelopment agency within the project
area, if it makes a finding that the transfer will reduce
administrative costs or expedite the construction of
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affordable housing.
3)Incorporates into the Act the provisions of Community
Redevelopment Law (CRL) that required an redevelopment agecny
to set set-aside funds for affordable housing and the
provisions for administering those funds.
4)Requires an Authority to contract for an independent and
financial audit every five years, conducted by guidelines
established by the Controller, and submit it to the
Controller, the Director of Department of Finance, and the
Joint Legislative Budget Committee.
5)Requires the audit to determine compliance with the affordable
housing maintenance and replacement requirement including
provisions to ensure that the replacement requirements are met
within the five year period covered by the audit.
6)Provides that if the Authority fails to meet the maintenance
and replacement requirement for affordable housing it must
adopt and submit to a plan with its yearly financial audit to
show how it will comply with those provisions within two
years.
7)Requires the controller to review and approve an Authority's
plan to meet the replacement housing requirements and ensure
that the plan includes one or more of the following means of
achieving compliance:
a) Expenditure of an additional 10% of gross tax increment
revenue on increasing, preserving, or improving the supply
of low-income housing;
b) An increase in the production by an additional 10% of
housing for very low-income households as required under
the CRL housing production requirements; and/or
c) The targeting of expenditures from the Low- and Moderate
-Income Housing Fund toward rental housing affordable to
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and occupied by person of very low and extremely low
income.
1)Establishes a public process for adopting a plan or amending a
plan to receive tax increment generated in an area that must
include the following:
a) The Authority must hold two public hearings at least 30
days apart;
b) The plan must be made available to the public and to
each property owner within the area at a meeting held at
least 30 days prior to notice of the first public hearing;
c) Notice of the first public hearing must be given at
least once a week for four weeks prior to the hearing in a
newspaper of general circulation and mailed to each
property owner in the proposed area of the plan; and
d) Notice of the second public hearing must be given not
less than 10 days prior to the date of the second hearing
in a newspaper of general circulation and mailed to each
property owner in the area of the plan.
1)Requires a notice informing the public and property owners in
the area of a public hearing to discuss the plan to receive
tax increment to include:
a) The specific boundaries of the proposed area;
b) The purpose of the plan; and
c) The time and place of the public hearing.
27) Requires that notice of the second hearing must include a
summary of the changes made to the plan from the first
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hearing.
28) Allows the Authority to inform tenants of properties in the
area of the plan to receive tax increment in a manner of its
choosing.
29) Allows an Authority to adopt a plan by ordinance at the
conclusion of the second public hearing.
29)Allows an Authority to begin receiving tax increment funds
beginning on the December 1 after the plan is adopted.
30)Allows any taxing entity other than a school entity that
receives property taxes in an area to adopt a resolution,
prior to the adoption of the plan, to direct the county
auditor-controller to allocate its share of tax increment
funds to the Authority.
31)Allows the resolution adopted by a taxing entity directing
its share of tax increment to the Authority to allocate less
than the full amount of tax increment, establish a maximum
amount of time in years, or limit the use of funds to specific
purposes or programs.
32)Allows a taxing entity to repeal a resolution directing a
portion of its tax increment to the Authority by giving the
county auditor-controller 60 days' notice, except that the
auditor-controller will continue to allocate to the Authority
the portion of tax increment necessary to repay any debt
issued by the Authority that has not been fully repaid.
33)Requires that if an area overlaps with a former redevelopment
agency the plan must specify that any tax increment collected
is subject to and subordinate to any preexisting enforceable
obligations of the former redevelopment agency.
34)Requires an Authority to complete an annual independent
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audit.
35)Requires an Authority to post a draft of the audit on their
Web site and mail it to the each of the taxing entities that
are contributing tax increment to the area.
36)Requires the annual audit to include:
a) A description of the projects undertaken in the fiscal
year and a comparison of the progress expected on those
projects compared to the actual progress;
b) A chart comparing the actual revenues and expenses
including administrative costs of the Authority to the
budgeted revenues and expenses;
c) Amount of tax increment revenues received;
d) Amount of revenues received and expended for low-and
moderate-income housing;
e) Assessment of the level of completion of the projects in
the plan; and
f) Amount of revenues expended to assist private
businesses.
1)Provides that if an Authority fails to provide a copy of a
completed financial audit to the Controller within 20 days of
receiving a written notice of failure to comply, the Authority
shall forfeit the following to the state:
a) $2,500 where the Authority has total revenue of less
than $100,000;
b) $5,000 where the Authority has total revenue of at least
$100,000 but less than $200,000; and
c) $10,000 where the Authority has total revenue of at
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least $250,000.
1)Provides that if an Authority fails to provide an audit for
two years in a row, after receiving a notice of failure to
comply, it must forfeit double the amount required above based
on its revenue size.
2)Provides that if an Authority fails to provide an audit for
three or more years in a row, after receiving a notice of
failure to comply, it must forfeit triple the amount required
above based on its revenue size.
3)Provides that if an Authority fails to provide an audit for
three or more years in a row the Controller shall conduct or
contract to conduct an independent financial audit report paid
for by the Authority.
4)Provides that the Controller may request the Attorney General
(AG) bring an action for the forfeiture of penalties in the
name of the people of the state of California.
5)Provides that the Controller may waive the forfeiture request
upon a satisfactory showing of good cause of why the Authority
did not provide the audit.
6)Provides that if an Authority does not complete an annual
report then it cannot expend any tax increment funds it
receives.
7)Requires an Authority, every 10 years, to hold a protest
proceeding at the public hearing to review an annual report,
to give property owners an opportunity to provide oral or
written protests against an Authority.
8)Requires an Authority to hold an election of the property
owners in the areas covered by the plan if between 25% and 50%
of the owners protest, and not initiate any new projects until
the election is held.
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9)Provides that a majority protest exists if protests have been
filed representing 50% of the assessed value of the area.
10)Requires the election to be held 90 days after the public
hearing and permits it to be held by mail-in ballot.
11)Prevents an Authority from taking any further action to
implement a plan if a majority of the property owners,
weighted proportional to the assessed value of their property,
vote against the Authority.
12)Allows the Authority to continue to appropriate and expend
funds for contractual indebtedness and complete projects for
which expenditures of any kind have been made prior to the
effective date of the election.
EXISTING LAW:
1)Dissolves redevelopment agencies as of February 1, 2012
(Health and Safety Code Section 34170).
2)Establishes the Community Redevelopment Law (CRL), which
governs the authority to establish a redevelopment agency and
the authority for a redevelopment agency to function as an
agency and to adopt and implement a redevelopment plan (Health
and Safety Code Section 33000 et seq.).
FISCAL EFFECT: Unknown.
COMMENTS:
Background: In 2011, the Legislature approved and the Governor
signed two measures, ABX1 26 and ABX1 27 that together dissolved
redevelopment agencies as they existed at the time and created a
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voluntary redevelopment program on a smaller scale. In
response, the California Redevelopment Association (CRA), 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 ABX1 26.
However, the Court did grant CRA's petition with respect to ABX1
27. As a result, all redevelopment agencies were required to
dissolve as of February 1, 2012.
Over the last sixty years, redevelopment agencies used tax
increment to finance affordable housing, community development,
and economic development projects. The dissolution of
redevelopment agencies has created a void and an effort to
create new tools that would support community and economic
development activities. This bill would allow local government
entities, excluding schools, to form an Authority to collect tax
increment and issue debt. The Authority could use its powers to
invest in disadvantaged communities with a high crime rate, high
unemployment, and deteriorated and inadequate infrastructure,
commercial, and residential buildings. Three of these four
conditions would constitute blight. The area where the
Authority could invest would also be required to have an annual
median household income that is less than 80% of the statewide
annual median income. This is different from redevelopment
agencies that were required to conduct a study and make a
finding that blight existed in a project area before they could
use their extraordinary powers, like eminent domain, to
eradicate blight.
Like redevelopment agencies, this bill would allow Authorities
to freeze the property taxes at the time the plan for
revitalizing the area is approved. The Authority will collect
all the tax increment or the increase in property taxes that is
generated after that point and use it on specified activities.
Unlike redevelopment agencies, this bill would require the
taxing entities in the area including the county, city, special
districts, or a military base to agree to divert tax increment
to the Authority. Local government entities that initially
participate can opt out by giving the auditor-controller sixty
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days' notice; however, the auditor controller will continue to
collect the local government entities' portions of tax increment
until any debts issued up until then have been repaid. No
portion of the local schools' share of tax increment may go to
the Authority.
Addressing Governor's Veto of Previous Bill : This bill is
largely similar to AB 2280 which was vetoed by the Governor. The
Governor's veto message stated the following:
"I am returning Assembly Bill 2280 without my signature.
This bill allows local governments to establish a Community
Revitalization and Investment Authority to use tax increment
revenues to invest in disadvantaged communities.
I applaud the author's efforts to create an economic
development program, with voter approval, that focuses on
disadvantaged communities and communities with high
unemployment. The bill, however, unnecessarily vests this new
program in redevelopment law. I look forward to working with
the author to craft an appropriate legislative solution."
To address the Governor's concerns, AB 2 takes portions of the
Community Redevelopment Law (CRL) and incorporates it into the
bill rather than cross referencing the CRL.
Purpose of this bill : According to the author, "redevelopment
was a multi-purpose tool that focused over $6 billion per year
toward repairing and redeveloping urban cores, and building
affordable housing, especially in those areas most economically
and physically disadvantaged. Since the dissolution of
redevelopment agencies, communities across California are
seeking an economic development tool to use. Multiple
legislative measures were introduced after the dissolution of
redevelopment agencies in an effort to provide local governments
options for sustainable community economic development. Several
measures were approved by the Legislature, however, all were
vetoed by Governor Brown. While the dissolution of former
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redevelopment agencies continues, the pervasive question is,
what economic development tool can local governments use? This
proposal provides a viable option targeting the state's
disadvantaged poorer areas and neighborhoods."
Affordable housing provisions : Prior to their dissolution,
redevelopment generated up to $1 billion a year for affordable
housing in the state. Redevelopment agencies were required to
set- a-side 20% of tax increment generated in a project area to
increase, improve, or rehabilitate affordable housing for low,
very-low, and moderate income families and individuals. AB 2
changes the requirements of RDAs in three ways. It increases the
amount an Authority must set aside for affordable housing from
20% to 25%. Second, the bill requires a community
revitalization and investment plan to ensure that housing
affordable to and occupied by extremely low-, very low-, and
low-income households within an area does not decrease during
the life of the area plan. Third, the bill requires the
authority to provide replacement housing in two rather than four
years.
The Authority would be allowed to transfer the funds collected
for affordable housing to a housing authority within the project
area or to the successor agency to a former redevelopment
agency. An Authority would have to make a finding that
transferring the funds and combining them with other funding for
housing would reduce administrative costs or expedite the
construction of affordable housing.
Related legislation :
AB 2280 (Alejo) of 2014 would have established an Authority and
gave it the same rights, responsibilities and powers as
redevelopment agencies. It was vetoed by the Governor.
AB 1080 (Alejo) of 2013 would have established an Authority and
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given it the same rights, responsibilities and powers as
redevelopment agencies. It was held on suspense in the Senate
Appropriations Committee.
SB 1 (Steinberg) of 2013 would have allowed local governments to
establish a Sustainable Communities Investment Authority to
finance specified activities within a sustainable communities
investment area using tax increment financing. This bill died on
the Inactive File on the Senate Floor.
SB 1156 (Steinberg) of 2012 would have allowed local governments
to establish a Sustainable Communities Investment Authority
after July 1, 2012, to finance specified activities within a
sustainable communities investment area using tax increment
financing. This bill was vetoed by the Governor.
Double referred : If AB 2 passes out of this committee, the bill
will be referred to the Committee on Local Government.
REGISTERED SUPPORT / OPPOSITION:
Support
African American Caucus of the League of California Cities
American Planning Association
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Building Owners and Managers Association of California
California Association for Local Economic Development
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Coalition for Rural Housing
City of Mendota
Glendale City Employees Association
Housing California
International Council of Shopping Centers
Latino Caucus of the League of California Cities
Leading Age California
League of California Cities
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NAIOP of California, the Commercial Real Estate Development
Association
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Opposition
California Alliance to Protect Private Property Rights
Fieldstead and Company
Analysis Prepared by:Lisa Engel / H. & C.D. / (916) 319-2085
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