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sr-061212-3cCity of Santa Monied l s City Council Meeting: June 12, 2012 Agenda Item: To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: State Affordable Housing Legislation Recommended Action Staff recommends that the City Council: 1. Formally support all current State legislation that creates, preserves or re- allocates funds for low- and moderate income housing; 2. Prioritize the City's affordable housing advocacy on the passage of Assembly Bill 1585; and 3. Oppose the latest budget trailer bill language proposed by the Department of Finance relative to redevelopment. Executive Summary This report describes current State housing finance legislation that may impact the provision of affordable housing opportunities in Santa Monica and recommends Council support for legislation that creates, preserves or re- allocates affordable housing funds. It is recommended that the City focus its affordable housing legislative efforts on support of AB 1585 and opposition to the Department of Finance (DOF) redevelopment budget trailer. AB 1585 seeks to clarify the terms of the 2011 redevelopment agency dissolution law (AB 26x1) regarding enforceable obligations, and proposes to retain unencumbered affordable housing funds with local jurisdictions. The report also summarizes a May Revision budget proposal, made by the DOF, to sweep unencumbered housing funds to the state's General Fund and grant the DOF extraordinary and inappropriate authority to withhold sales taxes or property taxes to cities if the DOF, in its sole discretion, determines cities are not following certain subjective steps in the wind down of redevelopment. Background On December 29, 2011, the California Supreme Court issued an opinion to uphold AB 26x1, dissolving redevelopment agencies effective February 1, 2012. The consequences of AB 26x1 are profound as nearly 75 percent of the City's affordable housing production and preservation activities over the last two decades were financed by redevelopment funds. In the absence of redevelopment tax 1 increment, it is likely that State funding will be a critical factor in the financial feasibility of Santa Monica's future affordable housing developments. Discussion Current State legislation under consideration aims to find a permanent State source of funding for affordable housing development, to 'clean -up' the original redevelopment dissolution laws, and to preserve remaining redevelopment agency (RDA) resources locally. Priority Housing Finance Bills for City Action AB 1585 (Perez, et al) — Redevelopment Low /Mod Housing Funds This bill codifies that existing unencumbered Low and Moderate Income Housing Fund balances will transfer to successor housing agencies and will be utilized for affordable housing. It also clarifies the definition of and revises the deadlines associated with enforceable obligations. The Governor has proposed to utilize these funds to fill the State budget gap. Legislators are discussing the possibility saving portions of these funds. Preservation of these funds is critical, especially after the defeat of the Housing Opportunity Trust Act of 2012 (SB 1220), which proposed to establish a State -level permanent source of affordable housing funding. The current amended version of AB 1585 is provided as Attachment A and a summary prepared by the California Redevelopment Association is Attachment B. Other Current Housing Finance Bills SB 1151 (Steinberg) — Sustainable Economic Development and Housing Trust Fund This bill would allow local communities to retain the assets of former redevelopment agencies and to utilize those assets for the purpose of economic development and housing. This bill proposes that existing law regarding asset disposition and transfer provisions will not apply to jurisdictions that form a Community Development and Housing Authority by August 1, 2012. It is running parallel to SB 1156 (below) and was 2 passed by the Senate Appropriations Committee on May 24th. This bill is awaiting a date for action on the Senate Floor. SB 1156 (Steinberg) — Community Development and Housing Joint Powers Authority This bill would allow governing entities of former redevelopment agencies to form Community Development and Housing Joint Powers Authorities to carry out the provisions of Community Redevelopment Law. Powers would include the ability to adopt area or site redevelopment plans, to provide tax increment financing, to retain Low and Moderate Income Housing Funds and to facilitate career technical education pathways. Each Authority would be an alternative to a successor agency and would assume the successor agency responsibility for managing former redevelopment agency assets and property. This bill is running parallel to SB 1151 (above) and was passed by the Senate Appropriations Committee on May 24th. This bill is awaiting action on the Senate Floor. SB 654 (Steinberg) — Redevelopment Low /Mod Housing Funds This bill establishes that any amounts on deposit in the Low and Moderate Income Housing Fund (20 percent set - aside) of a dissolved redevelopment agency can be retained by the successor agency of the sponsoring community and it revises the definition of certain enforceable obligations. This bill was passed by the Senate on January 31, 2012 and is being held in the Assembly. AB 1951 (Atkins) — Housing Bonds AB 1951 increases the affordable housing allocations within existing Proposition 1C funds. The 2006 Housing and Emergency Shelter Trust Fund Act authorizes the issuance of bonds to finance transit - oriented development, associated affordable housing and infill development, brownfield cleanup and parks. This act allocates $1.5 billion to the Affordable Housing Account, increases the continuous allocation from $50 million to $100 million, transfers administration to the Department of Housing and Community Development (HCD) and modifies previous allocations. This bill was 41 passed on May 25th by the Assembly Appropriations Committee, and awaits action on the Assembly Floor. AB 2447 (Skinner /Perez) California Neighborhood Stabilization Partnership Act (CNSPA) of 2012 AB 2447 re- allocates $25 million of underutilized Proposition 1C funds (2006 Housing and Emergency Shelter Trust Fund Act) to a newly created California Neighborhood Revitalization Fund. Applicants to the fund would be able to apply for grants or loans to purchase foreclosed homes, establish land banks, demolish blighted structures and redevelop demolished or vacant properties. The California Housing Finance Agency would administer this fund in consultation with the Department of Housing and Community Development. This bill was passed on May 25th by the Assembly Appropriations Committee, and awaits action on the Assembly Floor. Proposed Redevelopment Trailer Bill Language As part of the Governor's May Revision to his January budget proposal for 2012 -13, the Department of Finance recently submitted for legislative consideration and action budget trailer bill language providing clarified and new authorities under the existing AB 26x1 redevelopment law. The League of California Cities notes that while the measure contains several provisions considered helpful, "the thrust of the proposal is extremely negative for state -local relations. It proposes to sweep all remaining redevelopment affordable housing and other funds to the benefit of the state budget, provide DOF and county auditor - controllers with indisputable authority in all matters of dispute involving ROPS and enforceable obligations, limit the ability of successor agencies and oversight boards to defend against DOF decisions that are considered unreasonable, and erode local control." The League notes that the bill's prominent features include: ® Reduction in June 1 property tax payment to Successor Agencies to retroactively pay for December 2011 "underpayment" to taxing agencies ® Empowers DOF with final decision - making authority 4 ® Diversion of unencumbered cash reserves, including housing funds, to implement the Governor's May Budget Revise ® Clawback of "improper" payments to cities or private parties; use of sales or property tax to reimburse improper payments • Clarification on bonds, environmental immunities and housing ® Separate legal status of Successor Agency and governing role of Oversight Board clarification It is staff's view that the DOF legislation grants arbitrary new authorities to the DOF and county auditor - controllers that risk City funds. Any slight improvements made in the language to the RDA dissolution process by this legislation are greatly outweighed by the negative impacts which could include rescission of the City's property tax or sales tax. The League has prepared significant amendments to the DOF legislation and is currently working with legislators on the proposed amendments. Staff recommends that City Council oppose this legislation unless it is significantly altered. Financial Impacts & Budget Actions There are no financial impacts associated with Council support of these affordable housing bills. Prepared by: James Kemper, Housing Administrator Approved: y Andy Ag le Director Housing and Economic Development Forwarded to Council: Rod Gould City Manager Attachment A Text of AB 1585 Attachment B AB 1585 summary prepared by the California Redevelopment Association Attachment C League of California Cities Summary of DOF's Proposed Post -RDA Budget Trailer 5 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 Introduced by Assembly Members John A. Perez,Atldns, Dieldnson, Hill, Mitchell, Perea, and Torres February 2, 2012 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. Perez. 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 AB 1585 —2— This bill would modify the scope of the tern "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. Ae people of the State of California do enact as follows: 1 SECTION 1. Section 34171 of the Health and Safety Code is 2 amended to read: 3 34171. The following terms shall have the following meanings: 4 " (a) "Administrative budget" means the budget for administrative 5 costs of the successor agencies as provided in Section 34177. 6 (b) "Administrative cost allowance" means an amount that, 7 subject to the approval of the oversight board, is payable from 8 property tax revenues of up to 5 percent of the property tax 9 allocated to the former redevelopment agency and successor agency 10 for the 2011 -12 fiscal year and up to 3 percent of the property tax 11 allocated to the Redevelopment Obligation Retirement Fund money 12 that is allocated.to the successor agency for each fiscal year 96 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— AB 1585 thereafter, except as provided by subdivision (Z) 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 comiection 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 properly tax funds. The obligations to employees specified in this subparagraph shall remain enforceable obligations payable from properly 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 raj 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 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 -5— AB 1585 1 (B) Loan agreements entered into between the redevelopment 2 agency and the city, county, or city and county that created it, 3 within two years of the date of creation of the redevelopment 4 agency, or within two years of the date of the creation of a project 5 area if the loan is specific to that project area, and any obligations 6 imposed by paragraph (1) of subdivision (d) of Section 33691 may 7 be deemed to be enforceable obligations. 8 (C) Other loan agreements entered into between the 9 redevelopment agency and the city, county, or city and county that 10 created it shall be deemed to be enforceable obligations, if the 11 conditions of subdivision (k) of Section 34180 are met. 12 (3) Contracts or agreements between the former redevelopment 13 agency and other public agencies, to perform services or provide 14 funding for governmental or private services or capital projects 15 outside of redevelopment project areas that do not provide benefit 16 to the redevelopment proj ect and thus were not properly authorized 17 under Part 1 (commencing with Section 33000) shall be deemed 18 void on the effective date of this part; provided, however, that such 19 contracts or agreements for the provision of housing properly 20 authorized under Part 1 (commencing with Section 33000) shall 21 not be deemed void. 22 (e) "Indebtedness obligations" means bonds, notes, certificates 23 of participation, or other evidence of indebtedness, issued or 24 delivered by the redevelopment agency, or by a joint exercise of 25 powers authority, created by the redevelopment agency, to 26 third -party investors or bondholders to finance or refinance 27 redevelopment projects undertaken by the redevelopment agency 28 in compliance with the Community Redevelopment Law (Part 1 29 (commencing with Section 33000)). 30 (f) "Oversight board" shall mean each entity established pursuant 31 to Section 34179. 32 (g) "Recognized obligation" means an obligation listed in the 33 Recognized Obligation Payment Schedule. 34 (h) "Recognized Obligation Payment Schedule" means the 35 document setting forth the minimum payment amounts and due 36 dates of payments required by enforceable obligations for each 37 six -month fiscal period or annual period as provided in subdivision 38 (Z) of Section 34177. 39 (i) "School entity" means any entity defined as such in 40 subdivision (f) of Section 95 of the Revenue and Taxation Code. 96 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 —6— 0) "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. (lc) "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 separate body For purposes of this part, a successor agency is a public entity separate from the entity or entities that authorized the creation ofeach 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 I of Division 2 of Title 5 of the Government Code). (b) Except for those provisions of the Cormmunity 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 Cormmmity 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 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 -7— AB 1585 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 fast 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 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 fora 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 obligafiotts 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 Z 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 -9— AB 1585 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) Cormnencing 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 hncome 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 .c,;_ 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— 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, a :s 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 -11— AB 1555 1 shall be the last schedule adopted by the redevelopment agency 2 under Section 34169. However, payments associated with 3 obligations excluded from the definition of enforceable obligations 4 by paragraph (2) of subdivision (e) of Section 34171 shall be 5 excluded from the enforceable obligations payment schedule and 6 be removed from the last schedule adopted by the redevelopment 7 agency under Section 34169 prior to the successor agency adopting 8 it as its enforceable obligations payment schedule pursuant to this 9 subdivision. The enforceable obligation payment schedule may 10 be amended by the successor agency at any public meeting and 11 shall be subject to the approval of the oversight board as soon as 12 the board has sufficient members to form a quorum. 13 (2) The Department of Finance and the Controller shall each 14 have the authority to require any documents associated with the 15 enforceable obligations to be provided to them in a manner of thee. 16 choosing. Any taxing entity, the depailment, and the Controller 17 shall each have standing to file a judicial action to prevent a 18 violation under this part and to obtain injunctive or other 19 appropriate relief. 20 (3) Commencing on the date the Recognized Obligation Payment 21 Schedule is valid pursuant to subdivision (0, only those payments 22 listed in the Recognized Obligation Payment Schedule may be 23 made by the successor agency from the funds specified in the 24 Recognized Obligation Payment Schedule. In addition, 25 commencing on the date the Recognized Obligation Payment 26 Schedule is valid pursuant to subdivision (t), the Recognized 27 Obligation Payment Schedule shall supersede the Statement of 28 Indebtedness, which shall no longer be prepared nor have any 29 effect under the Community Redevelopment Law. 30 (4) Nothing in the act adding this part is to be construed as 31 preventing a successor agency, with the prior approval of the 32 oversight board, as described in Section 34179, from malting 33 payments for enforceable obligations from sources other than those 34 listed in the Recognized Obligation Payment Schedule. 35 (5) From February 1, 2012, to July 1, 2012, a successor agency 36 shall have no authority and is hereby prohibited from accelerating 37 payment or malting any lump -sum payments that are intended to 38 prepay loans unless such accelerated repayments were required 39 prior to the effective date of this part. 96 M`M 1 (b) Maintain reserves in the amount required by indentures, 2 trust indentures, or similar documents governing the issuance of 3 outstanding redevelopment agency bonds. 4 (c) Perform obligations required pursuant to any enforceable 5 obligation. 6 (d) Remit unencumbered balances of redevelopment agency 7 funds to the county auditor - controller for distribution to the taxing 8 entities. In malting the distribution, the county auditor - controller 9 shall utilize the same methodology for allocation and distribution 10 of property tax revenues provided in Section 34188. 11 (e) Dispose of assets and properties of the former redevelopment 12 agency as directed by the oversight board; provided, however, that 13 the oversight board may instead direct the successor agency to 14 transfer ownership of certain assets pursuant to subdivision (a) of 15 Section 34181. The disposal is to be done in an expeditious but 16 orderly manner that preserves the value of the asset. Proceeds from 17 asset sales and related funds that are no longer needed for approved 18 development projects or to otherwise wind down the affairs of the 19 agency, each as determined by the oversight board,. shall be 20 transferred to the county auditor - controller for distribution as 21 property tax proceeds under Section 34188., 22 (f) Enforce all former redevelopment agency rights for the 23 benefit of the taxing entities, including, but not limited to, 24 continuing to collect loans, rents, and other revenues that were due 25 to the redevelopment agency. 26 (g) Effectuate transfer of housing functions and assets to the 27 appropriate entity designated pursuant to Section 34176. 28 (h) Expeditiously wind down the affairs of the redevelopment 29 agency pursuant to the provisions of this part and in accordance 30 with the direction of the oversight board. 31 (i) Continue to oversee development of properties until the 32 contracted work has been completed or the contractual obligations 33 of the former redevelopment agency can be transferred to other 34 parties. Bond proceeds shall be used for the purposes for which 35 bonds were sold unless the purposes can no longer be achieved, 36 in which case, the proceeds may be used to defease the bonds. 37 0) Prepare a proposed administrative budget and submit it to 38 the oversight board for its approval. The proposed administrative 39 budget shall include all of the following: Z 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 -13— AB 1585 (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.. (lc) 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. (Z) (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 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 —14— (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 docurnents. 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 forner redevelopment agency, which is of the type of special district that is eligible to receive property tax revenues pursuant to Section 34188. 96 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 -15— AR 1585 (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 properly 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 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 —16— (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 orrehnbursement 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 maj ority 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. Z 1 2 3 4 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 -17— All 1585 (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. 0) 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 R MRS —18— 1 (2) One member may be appointed by the city selection 2 committee established pursuant to Section 50270 of the 3 Government Code. In a city and county, the mayor may appoint 4 one member. 5 (3) One member may be appointed by the independent special 6 district selection committee established pursuant to Section 56332 7 of the Government Code, for the types of special districts that are 8 eligible to receive property tax revenues pursuant to Section 34188. 9 (4) One member maybe appointed by the county superintendent 10 of education to represent schools if the superintendent is elected. 11 If the county superintendent of education is appointed, then the 12 appointment made pursuant to this paragraph shall be made by the 13 county board of education. 14 (5) One member may be appointed by the Chancellor of the 15 California Community Colleges to represent community college 16 districts in the county. 17 (6) One member of the public may be appointed by the county 18 board of supervisors. 19 (7) One member maybe appointed by the recognized employee 20 organization representing the largest number of successor agency 21 employees in the county. 22 (k) The Governor may appoint individuals to fill any oversight 23 board member position described in subdivision 0) that has not 24 been filled by July 15, 2016, or any member position that remains 25 vacant for more than 60 days. 26 (0 Commencing on and after July 1, 2016, in each county where 27 only one oversight board was created by operation of the act adding 28 this part, then there will be no change to the composition of that 29 oversight board as a result of the operation of subdivision (b). 30 (in) Any oversight board for a given successor agency shall 31 cease to exist when all of the indebtedness of the dissolved 32 redevelopment agency has been repaid. 33 SEC. 6. Section 34180 of the Health and Safety Code is 34 amended to read: 35 34180. All of the following successor agency actions shall first 36 be approved by the oversight board: 37 (a) The establishment of new repayment terms for outstanding 38 loans where the terns have not been specified prior to the date of 39 this part. 'TO 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 -19— AB 1585 (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 shnilar 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 fixture 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. 0) 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 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 —20— (Ic) 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 areasonable term of years at an interest rate not to exceed the interest rate earned by funds deposited into the Local Agency Investment Fund. (0 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 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 -21— AB 1585 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 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 -22- (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 malting such a distribution, the county auditor - controller shall utilize the same methodology for allocation 96 -23— AB 1585 1 and distribution of property tax revenues provided in Section 2 34188. 3 (d) By October 1, 2012, the county auditor - controller shall report 4 the following information to the Controller's office and the Director 5 of Finance: 6 (1). The sums of property tax revenues remitted to the 7 Redevelopment Property Tax Trust Fund related to each former 8 redevelopment agency. 9 (2) The sums of property tax revenues remitted to each agency 10 under paragraph (1) of subdivision (a) of Section 34183. 11 (3) The sums ofproperty tax revenues remitted to each successor 12 agency pursuant to paragraph (2) of subdivision (a) of Section 13 34183. 14 (4) The sums of property tax revenues paid to each successor 15 agency pursuant to paragraph (3) of subdivision (a) of Section 16 34183. 17 (5) The sums paid to each city, county, and special district, and 18 the total amount allocated for schools pursuant to paragraph (4) 19 of subdivision (a) of Section 34183. 20 (6) Any amounts deducted from other distributions pursuant to 21 subdivision (b) of Section34183. 22 (e) A county auditor - controller may charge the Redevelopment 23 Property Tax Trust Fund for the costs of administering the 24 provisions of this part. 25 (f) The Controller may audit and review any county 26 auditor - controller action taken pursuant to the act adding this part. 27 As such, all county auditor - controller actions shall not be effective 28 for duce business days, pending a request for review by the 29 Controller. In the event that the Controller requests a review of a 30 given county auditor - controller action, he or she shall have 10 days 31 from the date of his or her request to approve the county 32 auditor - controller's action or return it to the county 33 auditor - controller for reconsideration and such county 34 auditor - controller action shall not be effective until approved by 35 the Controller. In the event that the Controller returns the county 36 auditor - controller's action to the county auditor - controller for 37 reconsideration, the county auditor - controller must resubmit the 38 modified action for Controller approval and such modified county 39 auditor - controller action shall not become effective until approved 40 by the Controller. re AB 1585 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 —24— 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 fiom 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 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 -25— AB 1585 (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 fiords 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) Thud, 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 I 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 2 3 4 5 6 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 —26— 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 malting the next distributions to the taxing jurisdictions pursuant to Section 34188. Subject to the approval of the Director ofFinance, 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. Cormnencing May 1, 2012, whenever a recognized obligation that had been identified in the Recognized Payment Obligation Schedule is paid off or refired, 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 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -27— AB 1585 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. ( commmencing 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 . effeefaate the orderly implementation of responsibilities associated with dissolved redevelopment agencies, it is necessary that this act take immediate effect. 0 96 AB 1585 (Perez) as Amended March 21 Major Policy and Technical Clean -up to AB X126 Bill Summary AB 1585, as amended March 21, includes many technical and substantive fixes to AB Xl 26, last year's redevelopment dissolution bill. The Assembly passed the bill, 58 -7, and was sent to the Senate. AB 1585 contains an urgency clause so that it would go into effect upon passage through both houses and signing by the Governor. CRA and the League of California Cities have worked with the bill's author and legislative staff to ensure it includes changes critical to resolving numerous problems resulting from the dissolution of redevelopment agencies. AB 1585's important provisions: Ensure Preservation of Funding for Affordable Housing • Funds in the Low- and Moderate - Income Housing Fund (L &M) would be retained for use by the successor housing agency. The funds can only be spent on specified affordable housing functions. If there is no entity, requires the funds to be transferred to the State Department of Housing and Community Development (HCD). • The successor housing agency must contract to expend 80% of the funds within two years and spend these funds within four years. The agency can petition HCD for an extension of that time, or the unspent finds will be transferred to HCD for use on low- income housing programs within the same county. • Other helpful clarifications governing the administration of affordable housing funding and related programs are included. Ensure Loan Repayments to help provide Local Services • Oversight boards are granted flexibility to allow local governments to retain redevelopment assets that serve a governmental purpose, such as police stations and parks, and to approve repayment, subject to an interest rate cap, of legitimate loans that cities or counties made to their redevelopment agencies. o The following types of outstanding loans between a city or county and a redevelopment agency can be considered as an "enforceable obligation ": • 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; • 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); and • Any other loan, provided the oversight board snakes a finding that the loan was for legitimate redevelopment purposes; the oversight board may also condition its approval on a the loan being repaid 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. Preserve Asset Value and Avoid Potential "Fire Sale" Phenomenon • A complete inventory of existing real property assets, by project area, is required and would include the general categories of such assets, the purpose for which they were originally acquired the original purchase price and the estimate current market value. • The oversight board would be authorized to direct the transfer of assets integral for a govermnental purpose, such as a parking facility, to an appropriate governmental jurisdiction. • The oversight board would be required to adopt a strategy for disposal or transfer of assets in an expeditious but orderly manner that preserves the assets' value. • The oversight board is required to receive and review the inventory and adopt the strategy for disposal or transfer of assets prior to disposing of any assets. Improves Process to Avoid Possible Bond Defaults • A successor agency would be able to use the initial estimated obligation repayment schedule (FOPS) until a final recognized obligation payment schedule (BOPS) is adopted. • A full year of bond debt service requirements and other obligations may be provided on the first six -month enforceable obligation list, and requires the auditor - controller to ensure that sufficient funds are reserved to make necessary payments. • Successor agencies can refinance outstanding debt when obligations exceed available revenue, with the approval of an oversight board. Other Important Procedural and Technical Changes • Clarification provides that a successor agency is a legally distinct and separate body that acts by resolution, can sue and be sued, and can have additional powers that may be conferred upon it. • Provides clarification that employee costs associated with specific project implementation activities are not subject to the existing 5% administrative cap. • Clarification regarding selection of oversight board members from special districts and former employees of the redevelopment agency is provided. Proposed Post -RDA Budget Trailer Bill Raises Major Concerns Further Limits Local Control, Reduces Payments for Enforceable Obligations and Shifts Housing and Other Reserves to Benefit State As the League and successor agencies await further clarification of how the approaching log jam over approval of local ROPS will be resolved by the Department of Finance (DOF) before the June 1 property tax distribution, DOF has distributed a proposed budget trailer bill that further erodes local control by successor agencies and oversight boards, requires payment of unencumbered cash and appears to reduce the June 1 payment to successor agencies for approved purposes to compensate for "underpayments" to local taxing agencies last December. In contrast to AB 1585 (Perez), which was the subject of extensive work by a special post -RDA task force appointed by Speaker John Perez and deliberation by multiple Assembly committees, the proposed DOF budget trailer bill was developed without input from the League (or perhaps other stakeholders). While the proposal addresses some important problems caused by AB x1 26, it diverts any remaining unencumbered cash from the successor agencies (including housing funds), limits the authority of oversight boards to approve contracts, and gives the final approval of all matters to DOF. The bill's prominent features include: 1. Reduction in June 1 Property Tax Payment to Successor Agencies to Retroactively Pay for December 2011 "Underpayment" to Taxing Agencies. Directs county auditor - controllers to reduce June 1 payments to successor agencies to retroactively compensate local taxing agencies for alleged "underpayment" in December 2011 while AB x1 26 was not in effect due to the California Supreme Court's stay in California Redevelopment Association v. Matosantos. While DOF estimated for the May Revise that approximately $1.5 billion in tax increment will be paid to local taxing agencies in FY 2011 -12, of which $880 million (58 percent) will go to schools /state. This provision could result in a dramatic reduction in payments to successor agencies statewide for approved enforceable obligations on June 1 by up to $750 million. Empowers DOF with Final Decision Making Authority. Codifies DOF's interpretation of its broad and final powers in all matters concerning enforceable obligations and the distribution of unencumbered cash assets not needed for such obligations. The bill specifically removes the powers of local oversight boards to approve contracts authorized by current law (e.g., contracts between a city and the successor agency) without DOF approval. Sets new deadline for submission of future ROPS by successor agencies (45 days in advance of property tax distribution date), and gives DOF up until five days before that date to remove an item from a ROPS before approval. 3. Diversion of Unencumbered Cash Reserves, Including Housing Funds, to Implement Governor's May Revise. Requires successor agencies to transfer all accumulated unencumbered cash reserves (estimated at $1.6 billion in FY 2012 -13 by DOF), including affordable housing set -aside funds, to county auditor - controllers by dates certain in the upcoming fiscal year. Does not apply to bond reserves, grant funds, funds needed to pay approved enforceable obligations or real estate assets. 4. Clawback of "Improper" Payments to Cities or Private Parties; Use of Sales or Property Tax to Reimburse Improper Payments. Provides clear authorization to DOF, State Controller or county auditor - controllers to claw -back payments that it deems to have been made "improperly" by redevelopment agencies or successor agencies. Includes the ability to off -set any amounts owed through deduction of a city's sales tax or property tax payments (arguably unconstitutional provisions). 5. Clarification on Bonds, Environmental Immunities and Housing Bond Refunding and Spending Bond Proceeds. Authorizes successor agencies, with oversight board approval, to refund redevelopment tax allocation bonds and contract to expend funds (including bond proceeds) in compliance with an enforceable obligation (e.g., bonds). Environmental Immunities. Transfers immunities under the Polanco Redevelopment Act formerly held by redevelopment agency to the successor agency with responsibility for brownfield assets. Housing Provisions. Contains new definition of "housing assets" that allows successor housing agency to retain rents, loan repayments and payment from developers. 6. Legal Status of Successor Agency and Oversight Board Clarified. Clarifies that successor agency is a separate legal entity with separate legal name and power to sue and be sued. Provides that oversight boards are not separate entities, but that as the "second governing body" of the work of the successor agency that it has the right to control city employees that are assigned to work on the affairs of the successor agency. The full bill can be viewed at this website: http:/Iwww.dof.ca.gov/budgeting/trailer bill language /business transportation and housing /documents/ %5b210 %5d %20ABx1 %2026%20Redevelopment%20CIean- Up%20and%20RDA%20Asset%20Disposition%20 pdf