BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 2 Page 2 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. AB 2 Page 3 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 AB 2 Page 4 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 AB 2 Page 5 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. AB 2 Page 6 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 AB 2 Page 7 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 AB 2 Page 8 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) AB 2 Page 9 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 AB 2 Page 10 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 **** END ****