Bill Text: CA SB409 | 2013-2014 | Regular Session | Amended
Bill Title: Disaster recovery project areas: enforceable obligations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB409 Detail]
Download: California-2013-SB409-Amended.html
BILL NUMBER: SB 409 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 9, 2013
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Emmerson
FEBRUARY 20, 2013
An act to amend Sections 34171, 34178, and 34191.4 of, and to add
Section 34004.2 to, the Health and Safety Code, relating to disaster
recovery project areas.
LEGISLATIVE COUNSEL'S DIGEST
SB 409, as amended, Emmerson. Disaster recovery project areas:
enforceable obligations.
The Community Redevelopment Law authorizes the establishment of
redevelopment agencies in communities to address the effects of
blight, as defined. Existing law dissolved redevelopment agencies and
community development agencies, as of February 1, 2012, and provides
for the designation of successor agencies. Existing law imposes
various requirements on successor agencies and subjects successor
agency actions to the review of oversight boards. Existing law
requires each oversight board to direct the successor agency to,
among other things, cease performance in connection with and
terminate all existing agreements that do not qualify as enforceable
obligations, as defined.
This bill would provide that a loan provided by a city, county, or
city and county to a redevelopment agency that was entered into
prior to January 1, 2011, for the purposes of funding the
installation and construction of roadways, public improvements, and
public utilities in a disaster recovery project area, and for the
provision of residential water system or other utility connection
subsidies to low- and moderate-income residents of that project area
is an enforceable obligation and may be repaid, as specified. The
bill would authorize a city, county, city and county, or housing
authority acting in its capacity as the successor to a former
redevelopment agency to retain and use those loan proceeds pursuant
to the loan agreement and would require the return of any funds
previously deposited into the Low and Moderate Income Housing Fund of
the former redevelopment agency to the entity that assumed the
housing functions of the former redevelopment agency. The bill would
also prohibit the Department of Finance, the State Board of
Equalization, the State Controller, and a county auditor-controller
from imposing any statutory remedies upon a city, county, city and
county, or a successor agency and would require the reversal, within
30 days of the effective date of this bill, of any statutory remedy
previously imposed. The bill would also make conforming changes.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and determines all of the
following:
(a) The redevelopment and revitalization of areas devastated by
flood, fire, hurricane, earthquake, storm, tidal wave, or other
catastrophes is a matter of statewide concern.
(b) In enacting the Community Redevelopment Disaster Project Law,
the Legislature intended to facilitate the physical and economic
recovery of areas devastated by natural disasters and other
catastrophes.
(c) The construction and installation of public improvements,
including roadways, water systems, and other utilities in disaster
recovery project areas is essential to the economic recovery of those
areas and the health, safety, and welfare of persons who reside
within and near those areas.
(d) The construction and installation of public improvements,
including roadways, water systems, and other utilities in disaster
recovery project areas is essential to catalyze the establishment of
business enterprises within and near those areas.
(e) The redevelopment and revitalization of disaster recovery
project areas will result in increased property tax, sales tax, and
other revenues to local communities, local taxing entities including
schools and community college districts, and the State of California.
(f) The failure to permit successor agencies to use the proceeds
of loans originated for the purpose of facilitating the redevelopment
and revitalization of disaster recovery project areas would
significantly delay, and potentially prevent, the revitalization of
those areas and their return to productive economic use.
(g) Public works projects planned for the Cedar Glen Disaster
Recovery Project Area were delayed due to a private water company's
financial problems after a devastating forest fire. As a result,
water system and roadway improvement projects are not complete, and
the proceeds of a loan provided by the County of San Bernardino to
fund those public works and water system connection subsidies remain
available for those purposes.
(h) In 2003, the Old Fire destroyed 324 homes in the Cedar Glen
community. Lack of an adequate water system and roadway access were
determined to be primary causes of the devastation.
(i) The County of San Bernardino established the Cedar Glen
Disaster Recovery Project Area and adopted a plan to assist property
owners, residents residents, and
business owners to recover from the fire damage and eliminate
blighted conditions that preexisted the fire and contributed to the
scale of its damage. To assist in the recovery of the project area,
the county provided a $10,000,000 loan using county general fund
revenue to finance water system and roadway improvements and to fund
water system connection fee subsidies for low- and moderate-income
homeowners.
(j) The Department of Housing and Community Development awarded a
State of California Disaster Recovery Initiative grant to assist in
the recovery. The terms of the grant required it to be spent by April
30, 2009. As a result of this requirement and delays that resulted
from the water company's placement status in receivership, the
expenditure of the county loan proceeds was delayed, and
approximately $9,000,000 of the loan proceeds remain unspent.
(k) The critical need for water system, roadway, and other public
improvements remains unmet.
(l) In connection with the wind-down of the affairs of the
successor agencies, the Department of Finance has determined that the
remaining proceeds loans made to redevelopment agencies operating in
disaster recovery project areas may not be spent to fund the public
improvements and related activities for which the loans were
originated, and may not be returned to the public entities that
originated those loans, but instead must be remitted to the county
auditor-controller and distributed to affected taxing entities.
(m) It is in the public interest and the interest of the health,
safety, and welfare of persons residing in and near disaster recovery
project areas to permit successor agencies to spend the remaining
proceeds of loans originated to fund public improvements in those
areas for the purposes for which the loans were originated, and to
permit the loans to be repaid to the public entities that originated
those loans.
SEC. 2. Section 34004.2 is added to the Health and Safety Code, to
read:
34004.2. (a) Notwithstanding subdivision (b) of Section 34191.4,
or any other law, a loan provided by a city, county, or city and
county to a redevelopment agency pursuant to a written agreement
entered into prior to January 1, 2011, for the purpose of funding the
installation and construction of roadways, public improvements, and
public utilities in a disaster recovery project area, and for the
provision of residential water system or other utility connection
subsidies to low- and moderate-income residents of a disaster
recovery project area, shall be deemed to be an enforceable
obligation within the meaning of paragraph (1) of subdivision (d) of
Section 34171, and may be repaid pursuant to the terms set forth in
the written agreement notwithstanding any contrary provision of law.
(b) Notwithstanding subdivision (d) of Section 34177 and Section
34179.6, or any other law, the proceeds of loans described in
subdivision (a) shall be used for the purposes for which the loans
were made, and the successor agency may retain the proceeds of those
loans and enter into agreements for the expenditure of the loan
proceeds for those purposes, including, but not limited to,
agreements with the city, county, or city and county, that formed the
redevelopment agency to which the successor agency has succeeded.
These actions shall not be subject to review by the successor agency'
s oversight board or by the Department of Finance.
(c) Notwithstanding subdivision (d) of Section 34177 and Section
34179.6, or any other law, a city, county, city and county, or
housing authority acting in its capacity as the successor to the
housing functions of a former redevelopment agency, may receive and
use that portion of the proceeds of loans described in subdivision
(a) that had been deposited into the Low and Moderate Income Housing
Fund of the former redevelopment agency to provide residential water
system or other utility connection subsidies to low- and
moderate-income residents of a disaster recovery project area, and
the successor agency shall transfer those funds to the entity that
assumed the housing functions of the former redevelopment agency for
that purpose. These actions shall not be subject to review by the
successor agency's oversight board or by the Department of Finance.
(d) Notwithstanding any other law, the Department of Finance, the
State Board of Equalization, the Controller, or the county
auditor-controller shall not have the authority to impose any of the
remedies described in subdivision (h) of Section 34179.6 in
connection with any failure of a city, county, city and county, or
successor agency to remit any portion of the proceeds of a loan
described in subdivision (a) to the county auditor-controller. If the
Department of Finance, the State Board of Equalization, the
Controller, or the county auditor-controller have imposed any of the
remedies described in subdivision (h) of Section 34179.6 in
connection with any failure of a city, county, or city and county or
the successor agency to remit any portion of the proceeds of a loan
described in subdivision (a) to the county auditor-controller, then
any remedy imposed, including, but not limited to, any reduction in,
or offset of, sales and use tax or property tax allocations, any fine
or penalty, and any reduction in the allocation of property tax to
the successor agency shall be rescinded, and all reductions in or
offsets to, any revenue, tax, or fund shall be returned to the city,
county, or city and county or to the successor agency, as applicable,
within 30 days following the effective date of the act adding this
section.
(e) Notwithstanding any other law, the Department of Finance shall
not withhold the issuance of a finding of completion to a successor
agency pursuant to Section 34179.7 on the basis of any failure of the
city, county, or city and county or the successor agency to remit
any portion of the proceeds of a loan described in subdivision (a) to
the county auditor-controller.
(f) For the purposes of this section, "disaster recovery project
area" means a project area created pursuant to Part 1.5 (commencing
with Section 34000).
SEC. 3. Section 34171 of the Health and Safety Code is amended to
read:
34171. The following terms shall have the following meanings:
(a) "Administrative budget" means the budget for administrative
costs of the successor agencies as provided in Section 34177.
(b) "Administrative cost allowance" means an amount that, subject
to the approval of the oversight board, is payable from property tax
revenues of up to 5 percent of the property tax allocated to the
successor agency on the Recognized Obligation Payment Schedule
covering the period January 1, 2012, through June 30, 2012, and up to
3 percent of the property tax allocated to the Redevelopment
Obligation Retirement Fund money that is allocated to the successor
agency for each fiscal year thereafter; provided, however, that the
amount shall not be less than two hundred fifty thousand dollars
($250,000), unless the oversight board reduces this amount, for any
fiscal year or such lesser amount as agreed to by the successor
agency. However, the allowance amount shall exclude, and shall not
apply to, any administrative costs that can be paid from bond
proceeds or from sources other than property tax. Administrative cost
allowances shall exclude any litigation expenses related to assets
or obligations, settlements and judgments, and the costs of
maintaining assets prior to disposition. 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
shall not constitute 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 Chapter 10.5 (commencing with Section 5850) of Division 6 of Title
1 of the Government Code, including the required 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. A reserve may
be held when required by the bond indenture or when the next property
tax allocation will be insufficient to pay all obligations due under
the provisions of the bond for the next payment due in the following
half of the calendar year.
(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 connection 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 property tax funds. The obligations to employees
specified in this subparagraph shall remain enforceable obligations
payable from property 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 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. Titles of or
headings used on or in a document shall not be relevant in
determining the existence of an enforceable obligation.
(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 concerning litigation
expenses related to assets or obligations, settlements and judgments,
and the costs of maintaining assets prior to disposition, and
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 transferred to the Low and
Moderate Income Housing Asset Fund established pursuant to
subdivision (d) of Section 34176 as a housing asset and shall be used
in a manner consistent with the affordable housing requirements of
the Community Redevelopment Law (Part 1 (commencing with Section
33000)).
(H) Loan agreements described in subdivision (a) of Section
34004.2.
(2) For purposes of 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 (A) at the time of issuance, but in no event later than December
31, 2010, of indebtedness obligations, and (B) solely for the
purpose of securing or repaying those indebtedness obligations may be
deemed enforceable obligations for purposes of this part.
Notwithstanding this paragraph, loan agreements entered into between
the redevelopment agency and the city, county, or city and county
that created it, within two years of the date of creation of the
redevelopment agency, may be deemed to be enforceable obligations,
and loan agreements described in subdivision (a) of Section 34004.2
shall be deemed to be enforceable obligations.
(3) Contracts or agreements between the former redevelopment
agency and other public agencies, to perform services or provide
funding for governmental or private services or capital projects
outside of redevelopment project areas that do not provide benefit to
the redevelopment project and thus were not properly authorized
under Part 1 (commencing with Section 33000) shall be deemed void on
the effective date of this part; provided, however, that such
contracts or agreements for the provision of housing properly
authorized under Part 1 (commencing with Section 33000) shall not be
deemed void.
(e) "Indebtedness obligations" means bonds, notes, certificates of
participation, or other evidence of indebtedness, issued or
delivered by the redevelopment agency, or by a joint exercise of
powers authority created by the redevelopment agency, to third-party
investors or bondholders to finance or refinance redevelopment
projects undertaken by the redevelopment agency in compliance with
the Community Redevelopment Law (Part 1 (commencing with Section
33000)).
(f) "Oversight board" shall mean each entity established pursuant
to Section 34179.
(g) "Recognized obligation" means an obligation listed in the
Recognized Obligation Payment Schedule.
(h) "Recognized Obligation Payment Schedule" means the document
setting forth the minimum payment amounts and due dates of payments
required by enforceable obligations for each six-month fiscal period
as provided in subdivision (m) of Section 34177.
(i) "School entity" means any entity defined as such in
subdivision (f) of Section 95 of the Revenue and Taxation Code.
(j) "Successor agency" means the successor entity to the former
redevelopment agency as described in Section 34173.
(k) "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.
(l) "Property taxes" include all property tax revenues, including
those from unitary and supplemental and roll corrections applicable
to tax increment.
(m) "Department" means the Department of Finance unless the
context clearly refers to another state agency.
(n) "Sponsoring entity" means the city, county, or city and
county, or other entity that authorized the creation of each
redevelopment agency.
(o) "Final judicial determination" means a final judicial
determination made by any state court that is not appealed, or by a
court of appellate jurisdiction that is not further appealed, in an
action by any party.
SEC. 4. Section 34178 of the Health and Safety Code is amended to
read:
34178. (a) Commencing on the operative date of this part,
agreements, contracts, or arrangements between the city or county, or
city and county that created the redevelopment agency and the
redevelopment agency are invalid and shall not be binding on the
successor agency; provided, however, that a successor entity wishing
to enter or reenter into agreements with the city, county, or city
and county that formed the redevelopment agency that it is succeeding
may do so upon obtaining the approval of its oversight board. A
successor agency or an oversight board shall not exercise the powers
granted by this subdivision to restore funding for an enforceable
obligation that was deleted or reduced by the Department of Finance
pursuant to subdivision (h) of Section 34179 unless it reflects the
decisions made during the meet and confer process with the Department
of Finance or pursuant to a court order.
(b) Notwithstanding subdivision (a), any of the following
agreements are not invalid and may bind the successor agency:
(1) A duly authorized written agreement entered into at the time
of issuance, but in no event later than December 31, 2010, of
indebtedness obligations, and solely for the purpose of securing or
repaying those indebtedness obligations.
(2) A written agreement between a redevelopment agency and the
city, county, or city and county that created it that provided loans
or other startup funds for the redevelopment agency that were entered
into within two years of the formation of the redevelopment agency.
(3) A joint exercise of powers agreement in which the
redevelopment agency is a member of the joint powers authority.
However, upon assignment to the successor agency by operation of the
act adding this part, the successor agency's rights, duties, and
performance obligations under that joint exercise of powers agreement
shall be limited by the constraints imposed on successor agencies by
the act adding this part.
(4) A written loan agreement between a redevelopment agency and
the city, county, or city and county that created it as described in
subdivision (a) of Section 34004.2.
SEC. 5. Section 34191.4 of the Health and Safety Code is amended
to read:
34191.4. The following provisions shall apply to any successor
agency that has been issued a finding of completion by the Department
of Finance:
(a) All real property and interests in real property identified in
subparagraph (C) of paragraph (5) of subdivision (c) of Section
34179.5 shall be transferred to the Community Redevelopment Property
Trust Fund of the successor agency upon approval by the Department of
Finance of the long-range property management plan submitted by the
successor agency pursuant to subdivision (b) of Section 34191.7
unless that property is subject to the requirements of any existing
enforceable obligation.
(b) (1) Notwithstanding subdivision (d) of Section 34171, upon
application by the successor agency and approval by the oversight
board, loan agreements entered into between the redevelopment agency
and the city, county, or city and county that created by
the redevelopment agency shall be deemed to be enforceable
obligations provided that the oversight board makes a finding that
the loan was for legitimate redevelopment purposes.
(2) If the oversight board finds that the loan is an enforceable
obligation, the accumulated interest on the remaining principal
amount of the loan shall be recalculated from origination at the
interest rate earned by funds deposited into the Local Agency
Investment Fund. The loan shall be repaid to the city, county, or
city and county in accordance with a defined schedule over a
reasonable term of years at an interest rate not to exceed the
interest rate earned by funds deposited into the Local Agency
Investment Fund. The annual loan repayments provided for in the
recognized obligations payment schedules shall be subject to all of
the following limitations:
(A) Loan repayments shall not be made prior to the 2013-14 fiscal
year. Beginning in the 2013-14 fiscal year, the maximum repayment
amount authorized each fiscal year for repayments made pursuant to
this subdivision and paragraph (7) of subdivision (e) of Section
34176 combined shall be equal to one-half of the increase between the
amount distributed to the taxing entities pursuant to paragraph (4)
of subdivision (a) of Section 34183 in that fiscal year and the
amount distributed to taxing entities pursuant to that paragraph in
the 2012-13 base year. Loan or deferral repayments made pursuant to
this subdivision shall be second in priority to amounts to be repaid
pursuant to paragraph (7) of subdivision (e) of Section 34176.
(B) Repayments received by the city, county
county, or city and county that formed the redevelopment
agency shall first be used to retire any outstanding amounts borrowed
and owed to the Low and Moderate Income Housing Fund of the former
redevelopment agency for purposes of the Supplemental Educational
Revenue Augmentation Fund and shall be distributed to the Low and
Moderate Income Housing Asset Fund established by subdivision (d) of
Section 34176.
(C) Twenty percent of any loan repayment shall be deducted from
the loan repayment amount and shall be transferred to the Low and
Moderate Income Housing Asset Fund, after all outstanding loans from
the Low and Moderate Income Housing Fund for purposes of the
Supplemental Educational Revenue Augmentation Fund have been paid.
(3) Notwithstanding subdivision (b) or any other law, loan
agreements described in subdivision (a) of Section 34004.2 shall be
repaid pursuant to the terms set forth in the loan agreement.
(c) (1) Bond proceeds derived from bonds issued on or before
December 31, 2010, shall be used for the purposes for which the bonds
were sold.
(2) (A) Notwithstanding Section 34177.3 or any other conflicting
provision of law, bond proceeds in excess of the amounts needed to
satisfy approved enforceable obligations shall thereafter be expended
in a manner consistent with the original bond covenants. Enforceable
obligations may be satisfied by the creation of reserves for
projects that are the subject of the enforceable obligation and that
are consistent with the contractual obligations for those projects,
or by expending funds to complete the projects. An expenditure made
pursuant to this paragraph shall constitute the creation of excess
bond proceeds obligations to be paid from the excess proceeds. Excess
bond proceeds obligations shall be listed separately on the
Recognized Obligation Payment Schedule submitted by the successor
agency.
(B) If remaining bond proceeds cannot be spent in a manner
consistent with the bond covenants pursuant to subparagraph (A), the
proceeds shall be used to defease the bonds or to purchase those same
outstanding bonds on the open market for cancellation.
