BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                          AB 2|
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                                   THIRD READING 


          Bill No:  AB 2
          Author:   Alejo (D) and Eduardo Garcia (D), et al.
          AmendedAmended:7/7/15 in Senate
          Vote:     21  

           SENATE GOVERNANCE & FIN. COMMITTEE:  5-1, 6/10/15
           AYES:  Hertzberg, Beall, Hernandez, Lara, Pavley
           NOES:  Moorlach
           NO VOTE RECORDED:  Nguyen

           SENATE TRANS. & HOUSING COMMITTEE:  9-2, 7/14/15
           AYES:  Beall, Cannella, Allen, Galgiani, Leyva, McGuire,  
            Mendoza, Roth, Wieckowski
           NOES:  Bates, Gaines

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 8/27/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           ASSEMBLY FLOOR:  63-13, 5/11/15 - See last page for vote

           SUBJECT:   Community revitalization authority


          SOURCE:    Author
          
          DIGEST:  This bill allows local governments to form Community  
          Revitalization and Investment Authorities to administer economic  
          development and affordable housing programs.

          ANALYSIS:  Existing law dissolves redevelopment agencies as of  
          February 1, 2012, and 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  








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          redevelopment plan.
          This bill allows local government officials to establish a  
          Community Revitalization and Investment Authority (authority)  
          and use property tax increment revenues to finance the  
          implementation of a community revitalization plan within a  
          community revitalization and investment area.  This bill  
          specifies: the process for creating an authority, criteria for  
          establishing a community revitalization and investment area, the  
          powers and duties that apply to an authority, the process for  
          adopting a community revitalization and investment plan, how tax  
          increment revenues are allocated to, and used by, an authority,  
          an authority's obligations relating to affordable housing, and  
          reporting, accountability, and audit requirements.  

          Specifically, this bill:

           1) Allows local governments to form an authority in two ways:

              a)    A city, county, or city and county can adopt a  
                resolution creating an authority governed by a five-member  
                board that is appointed by the city, county, or city and  
                county's legislative body.  Three board members must be  
                members of the city, county, or city and county's  
                legislative body and two must be public members who live  
                or work within the community revitalization and investment  
                area. 
              b)    A city, county, city and county, and special district,  
                in any combination, may create an authority by entering  
                into a joint powers agreement.  The authority's governing  
                body must be comprised of a majority of members from the  
                legislative bodies of the public agencies that created the  
                authority.  The governing body must include at least two  
                public members who are appointed by a majority of the  
                authority's board and must live or work within the  
                community revitalization and investment area. 

           2) Prohibits:

              a)    School entities from participating in a community  
                revitalization and investment authority.
              b)    Redevelopment successor agencies from participating in  
                a community revitalization and investment authority.








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              c)    A city or county that created a former redevelopment  
                agency from forming a community revitalization and  
                investment authority, unless the former redevelopment  
                agency's successor agency has received a finding of  
                completion from the Department of Finance, and complies  
                with other specified conditions.

           3) Allows an authority to carry out a community revitalization  
             and investment plan within a community revitalization and  
             investment area.  The bill requires that at least 80% of the  
             land calculated by census tracts or census block groups  
             within the area must be characterized by both of the  
             following conditions:

              a)    An annual median household income that is less than  
                80% of the statewide annual median income.
              b)    Three of the following four conditions:

                 i)       Nonseasonal unemployment that is at least 3%  
                   higher than the statewide median, as defined by a  
                   specified labor market report.
                 ii)      Crime rates that are 5% higher than the  
                   statewide median crime rate, as defined by a specified  
                   Department of Justice report.
                 iii)     Deteriorated or inadequate infrastructure such  
                   as streets, sidewalks, water supply, sewer treatment or  
                   processing, and parks.
                 iv)      Deteriorated commercial or residential  
                   structures.

           4) Allows an Authority to carry out a community revitalization  
             and investment plan within a community revitalization and  
             investment area established within a former military base  
             that is principally characterized by deteriorated or  
             inadequate infrastructure and structures.  

           5) Allows the legislative body or bodies of the local  
             government or governments that created the authority to  
             appropriate any amount the legislative body or bodies deem  
             necessary for the administrative expenses and overhead of the  
             authority.  The money appropriated may be paid to the  
             authority as a grant to defray the expenses and overhead, or  








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             as a loan to be repaid upon the terms and conditions as the  
             legislative body may provide.  If appropriated as a loan, the  
             property owners within the plan area must be made third-party  
             beneficiaries of the repayment of the loan.  This bill  
             specifies that the term, "administrative expense" includes  
             expenses of planning and dissemination of information.

           6) Enumerates an authority's powers and allows an authority to  
             dedicate funding to specified infrastructure, low and  
             moderate income housing, brownfield cleanup, seismic  
             retrofits, property acquisition, construction of specified  
             structures for provision of air rights, and direct assistance  
             to businesses for industrial and manufacturing uses.

           7) Deems an Authority to be a local public agency subject to  
             the Ralph M. Brown Act, the Public Records Act, and the  
             Political Reform Act.

           8) Requires an Authority to adopt a community revitalization  
             and investment plan that may include a provision for the  
             receipt of tax increment funds generated within the area,  
             provided the plan includes seven specified elements.

           9) Specifies the manner in which an authority must consider  
             adoption of the plan, including requiring public hearing, a  
             protest process and, in some cases, voter approval of the  
             plan through a specified election process. 

           10)Directs that an authority must consider and adopt a plan  
             amendment in accordance with the procedures that applied to  
             the consideration and adoption of the original plan.

           11)Deems a community revitalization and investment authority to  
             be the "agency" described in Article XVI, Section 16 for  
             purposes of receiving tax increment revenues.

           12)Allows a community revitalization and investment plan to  
             include a provision for the receipt of tax increment funds.

           13)Allows any city, county, or special district that receives  
             ad valorem property taxes from property located within an  
             area to adopt a resolution directing the county  








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             auditor-controller to allocate some or all of its share of  
             tax increment funds within the area covered by the plan to  
             the authority.  A resolution may be repealed by giving the  
             county auditor-controller 60 days' notice.  However, the  
             county auditor-controller must continue to allocate the  
             taxing entity's taxes that have been pledged to repay debt  
             issued by the authority until the debt has been fully repaid.

           14)Requires that, before adopting a resolution allocating a  
             share of its tax increment funds to an authority, a city,  
             county, or special district must approve a memorandum of  
             understanding with the authority governing the authority's  
             use of tax increment funds for administrative and overhead  
             expenses.  

           15)Requires that a provision for the receipt of tax increment  
             funds must become effective in the tax year that begins after  
             the December 1 following the adoption of the plan.

           16)Specifies the manner in which a county auditor-controller  
             must allocate tax revenue to an authority upon adoption of a  
             plan that includes a provision for the receipt of tax  
             increment funds.

           17)Requires that an authority's plan for an area that includes  
             land formerly or currently designated as part of a  
             redevelopment area must subordinate tax increment amounts  
             received by the authority to any preexisting enforceable  
             obligation, as defined in statute.

           18)Requires that at least 25% of all tax increment revenues  
             that are allocated to the authority must be deposited into a  
             separate Low and Moderate Income Housing Fund and used by the  
             authority for the purposes of increasing, improving, and  
             preserving the community's supply of low- and moderate-income  
             housing available at affordable housing cost, as defined in  
             state law.

           19)Allows an authority to exercise any or all of its powers for  
             the construction, rehabilitation, or preservation of  
             affordable housing for extremely low, very low, low- and  
             moderate-income persons or families.








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           20)Enumerates detailed requirements governing the manner in  
             which an authority may manage and expend tax increment  
             revenues deposited into a Low and Moderate Income Housing  
             Fund.

           21)Requires every community revitalization and investment plan  
             to contain a provision that whenever dwelling units housing  
             persons and families of low or moderate income are destroyed  
             or removed from the low- and moderate-income housing market  
             as part of a revitalization project the authority must,  
             within two years of such destruction or removal,  
             rehabilitate, develop, or construct, or cause to be  
             rehabilitated, developed, or constructed, for rental or sale  
             to persons and families of low or moderate income an equal  
             number of replacement dwelling units at affordable housing  
             costs, as defined by state law, within the territorial  
             jurisdiction of the authority.

           22)Requires an authority to prepare a feasible method or plan  
             for relocating:

              a)    Families and persons to be temporarily or permanently  
                displaced from housing facilities in the plan area.
              b)    Nonprofit local community institutions to be  
                temporarily or permanently displaced from facilities used  
                for institutional purposes in the project area.

           23)Requires an authority to annually review the community  
             revitalization and investment plan, prepare an independent  
             financial audit, and adopt an annual report in a public  
             hearing.

           24)Require an authority to conduct a protest proceeding every  
             10 years.  If between 25% and 50% of residents and property  
             owners file protest, the authority must not initiate any new  
             projects until an election of property owners and residents  
             is held.  If a majority of the electorate votes against the  
             authority, it must not take any further action to implement  
             the plan.

           25)Requires an authority to contract every five years for an  








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             independent audit to determine compliance with affordable  
             housing maintenance and replacement requirements, which must  
             be conducted according to guidelines established by the  
             Controller.  An authority must provide a copy of the  
             completed audit to the Controller. 

           26)Requires, if an audit demonstrates a failure to comply with  
             the statutory requirements, that an authority must adopt and  
             submit to the Controller, as part of the audit, a plan to  
             achieve compliance with those provisions.  The plan must  
             contain specified means of achieving compliance. 

           27)Requires the Controller to review and approve the compliance  
             plan, and require the plan to stay in effect until compliance  
             is achieved. 

           28)Enumerates penalties, including specified fines, which apply  
             to an authority that fails to provide a copy of a completed  
             audit to the Controller after receiving a written notice from  
             the Controller.  The Attorney General may, at the  
             Controller's request, take action to collect the fines.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

           Potentially major redirection of local property tax revenues  
            from participating local agencies, excluding schools, to a  
            CRIA over a period of decades.  Since the bill prohibits  
            schools from participating, there is no state fiscal impact  
            related to the redirection of local property tax revenues.
           Estimated one-time costs to the State Controller's Office  
            (SCO) of up to $100,000 before the end of 2021 (General Fund)  
            to establish guidelines for periodic financial and performance  
            audits that include provisions for determining compliance with  
            affordable housing requirements as well as secondary review  
            and compliance measures for failure to achieve initial  
            compliance on the regular audit schedule. (Staff assumes up to  
            1 PY of audit staff time)
           Estimated periodic SCO costs in the range of $50,000 to  
            $100,000 (General Fund) on a periodic basis for accepting  








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            audits and reviewing and approving secondary compliance plans  
            submitted by agencies that fail to comply with initial audit  
            requirements. (Staff assumes up to 1PY of audit work on a  
            periodic basis).  These costs would only be incurred to the  
            extent an agency is out of compliance.


          SUPPORT:   (Verified8/28/15)


          African American Caucus, League of California Cities
          American Planning Association, California Chapter
          The ARC California
          Asian and Pacific Islander Caucus, League of California Cities
          Building Owners and Managers Association of California
          California Apartment Association
          California Asian Pacific Chamber of Commerce
          California Association for Local Economic Development
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Coalition for Rural Housing
          California Special Districts Association
          Cities of Hesperia, Indian Wells, Lakewood, Mendota, Rosemead,  
          Sacramento,       Salinas, Thousand Oaks
          Glendale City Employees Association
          Housing California
          International Council of Shopping Centers
          Latino Caucus, League of California Cities
          Leading Age California
          League of California Cities
          NAIOP of California, the Commercial Real Estate Development  
          Association
          Organization of SMUD Employees
          San Bernardino Public Employees Association
          San Luis Obispo County Employees Association
          Transportation Agency of Monterey County
          United Cerebral Palsy California Collaboration


          OPPOSITION:   (Verified8/28/15)









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          California Alliance to Protect Private Property Rights
          Fieldstead and Company


          ARGUMENTS IN SUPPORT:     Eliminating redevelopment agencies did  
          not eliminate the need for California communities to build more  
          affordable housing, eliminate blight, foster business activity,  
          clean up contaminated brownfields, and create jobs.  This bill  
          establishes a new approach to local economic development and  
          housing policy that is focused on the state's disadvantaged  
          communities.  This bill fosters collaboration between cities and  
          counties on local economic development efforts and mitigates the  
          zero-sum competition for scarce property tax revenues among  
          cities, counties, and school districts.  To ensure public  
          accountability, the bill requires a community revitalization and  
          investment authority to conduct an annual review and reporting  
          process, and periodically allows local residents to prohibit an  
          Authority from taking further actions.  While it is unrealistic  
          to expect that a single economic development tool will work in  
          all California communities, this bill is a viable option for  
          bringing vital investments to communities that most need  
          employment opportunities, crime reduction, upgraded  
          infrastructure, brownfield remediation, and affordable housing.


          ARGUMENTS IN OPPOSITION:     Last year, the Legislature enacted  
          SB 628 (Beall, Chapter 785, Statutes of 2014) to provide local  
          governments with new tax increment financing tools to pay for  
          local economic development by forming an enhanced infrastructure  
          financing district (EIFD).  It is too early judge how well the  
          new EIFD structure will work for most local governments and this  
          bill's proponents assert that it would be unrealistic to expect  
          that a single approach to tax increment financing will meet the  
          needs of every local community.  However, in light of SB 628's  
          recent enactment, it may be premature to enact another complex  
          set of statutes granting new tax increment financing powers to  
          local governments.  One tool that this bill grants to local  
          governments that is not available through an EIFD is the power  
          to take private property through the power of eminent domain and  
          to pay for it using tax increment revenues.  Some property  
          owners object to the way in which former RDAs used their eminent  








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          domain authority, arguing that RDAs' use of eminent domain hurt  
          businesses and depressed property values in some communities.   
          They oppose provisions in this bill which allow community  
          revitalization and investment authorities to use land  
          acquisition and management powers that largely replicate powers  
          exercised by former RDAs. 

          ASSEMBLY FLOOR:  63-13, 5/11/15
          AYES:  Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brown,  
            Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley,  
            Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin,  
            Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, Maienschein,  
            Mathis, Mayes, McCarty, Medina, Mullin, Nazarian, O'Donnell,  
            Olsen, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Waldron,  
            Weber, Williams, Wood
          NOES:  Travis Allen, Bigelow, Brough, Chávez, Beth Gaines,  
            Harper, Jones, Linder, Melendez, Obernolte, Patterson, Wagner,  
            Wilk
          NO VOTE RECORDED:  Dahle, Gallagher, Grove, Atkins

          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          8/31/15 12:47:43


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