BILL ANALYSIS Ó
AB 2
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Date of Hearing: May 6, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
2 (Alejo) - As Amended March 26, 2015
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|Policy |Housing and Community |Vote:|6 - 1 |
|Committee: |Development | | |
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| |Local Government | |7 - 2 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill would allow local governments, excluding schools and
successor agencies, to form a Community Revitalization and
Investment Authority (Authority). Participating entities would
agree to direct property tax increment revenues to the Authority
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to finance a community revitalization plan in project areas that
are characterized by low household income, high unemployment and
crime, and blight. Specifically, this bill:
1)Allows cities and counties to form a Community Revitalization
and Investment Authority and specifies that it is subject to
the provisions of the Community Redevelopment Law (CRL).
Makes a legislative finding of blight, which is a necessary
condition under CRL.
2)Provides for formation of the Authority by an individual local
government entity or through a joint powers agreement.
3)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.
4)Establishes a public process for adopting a plan to receive
tax increment generated in the Authority area and adds
requirements for public hearings and public notice.
5)Requires that if an Authority 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.
6)Requires an Authority to complete an annual independent audit.
FISCAL EFFECT:
1)Negligible state General Fund impact from property tax revenue
redirection because schools are prohibited from participating.
2)Estimated one-time costs to the State Controller's Office
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(SCO) in the range of $50,000 to $100,000 (General Fund) in
2016-17 to establish guidelines for periodic audits. (Staff
assumes 0.5 to 1.0 PY of regulatory staff to establish
guidelines)
3)Estimated ongoing SCO costs of up to $100,000 (General Fund)
on a periodic basis, beginning in 2020-21 for accepting audits
and reviewing and approving secondary compliance plans
submitted by Authorities who fail to comply with initial audit
requirements. (Staff assumes approximately 1PY of audit work
on a periodic basis.)
4)Potentially substantial fiscal impacts to participating local
governments, but all affected local governments volunteer to
participate.
COMMENTS:
1)Purpose. The author states that "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."
AB 2 provides this tool.
Although AB 2 uses tax increment financing for its activities,
the bill avoids the impact to the state General Fund by
explicitly prohibiting school participation.
2)Background. Historically, the Community Redevelopment Law has
allowed a local government to establish redevelopment agencies
(RDAs) and capture all of the increase in property tax
generated within the project area beyond the base year value
(referred to as "tax increment") over a period of decades.
RDAs used tax increment financing to address issues of blight,
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construct affordable housing, rehabilitate existing buildings,
and finance development and infrastructure projects.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and returning
billions of dollars of property tax revenues to schools,
cities, and counties to fund core services. Among the
statutory changes the Legislature adopted to implement the
2011-12 budget, 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 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, but granted CRA's petition with respect to ABX1 27.
As a result, all redevelopment agencies were required to
dissolve as of February 1, 2012, and follow established
procedures for winding down RDA activity.
Existing law requires successor agencies to dispose of former
RDAs' assets and properties, at an oversight board's direction
and to make any payments related to enforceable obligations,
as specified in an adopted recognized obligation payment
schedule (ROPS), Further, successor agencies must remit
unencumbered balances of RDA funds and proceeds from asset
sales to the county auditor-controller for distribution to
local taxing entities in the county. Successor agencies
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cannot enter into new enforceable obligations.
3)Previous Legislation.
a) This bill is substantially similar to AB 2280 (Alejo) of
2014 and AB 1080 (Alejo) of 2013, both of which would have
established an Authority and given it the same rights,
responsibilities and powers as redevelopment agencies. AB
2280 was vetoed by the Governor and AB 1080 was held on the
Senate Appropriation Committee's Suspense File. In his
veto message of last year's AB 2280, the Governor stated
the following:
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 incorporates relevant
redevelopment law into the bill and locates the entire authority
in the Government Code rather than in redevelopment law in the
Health and Safety Code.
b) 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.
c) 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.
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Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081