Redevelopment

SB 286 (Wright) – Request for Comment
As Amended on April 27, 2011

SB 286, by Senator Rod Wright, would redesign certain aspects of redevelopment law. It underwent substantial amendments this week, and is now introduced as an alternative to the Governor’s proposal to eliminate redevelopment agencies. The bill is sponsored by the California Redevelopment Association and the League of California Cities.

CSAC is very interested to hear your own or your county’s thoughts on SB 286. Please send comments to either Jean Hurst or Geoffrey Neill.

The bill would make a number of major changes. To wit:

Education fund exclusion: SB 286 would exclude all educational entities’ property tax revenues from the tax increment for newly established project areas. The definition of “educational entities” is unclear.

Project area limits: SB 286 would limit the size of most new and amended redevelopment projects, so that project areas total no more than 25% of a city’s total land or 10% of a county’s unincorporated land. It would require empirical, quantifiable evidence of blight when establishing project areas. 

Adhering to goals: It would require implementation plans adopted in 2012 and after to specify goals on which the agency will spend at least half of its unencumbered revenue within five years. Those goals must be from among the following: development resulting in significant job retention or creation, cleaning up contaminated property, infill and transit-oriented development, military base conversion, public infrastructure other than buildings, and very low and extremely low affordable housing.

Prohibited activities: It would prohibit direct assistance to (1) develop undeveloped parcels greater than twenty acres, (2) golf courses, racetracks, speedways, and other racing venues, and (3) stadiums and other sports facilities for a professional team unless voters approve it.

Energy efficiency: It would allow redevelopment agencies to provide money for energy efficiency and greenhouse gas reductions. They could also provide direct assistance to businesses for industrial and manufacturing facilities to retain or add at least twenty-five jobs.

Passthrough payments: SB 286 would require the State Controller to develop a consistent method for calculating and reporting passthrough payments, and would require that method to be consistent with both published case law and Attorney General opinions.

Administrative expenses: It would allow redevelopment agencies to reimburse their sponsoring agency for administrative expenses and overhead, though not for services or materials that do not directly benefit the redevelopment project.

Oversight: It would require agencies to deposit 0.025% of their post-low/mod increment into a fund that the State Auditor would use to pay for auditing redevelopment agencies. The bill would limit the interest redevelopment agencies could pay on loans, including existing loans, from its sponsoring agency. Lastly, it would streamline and strengthen reporting requirements for redevelopment agencies.

While some of these changes would tighten redevelopment law in welcome ways, CSAC has some serious concerns with other sections. We worry about decoupling the state’s financial interest from redevelopment by excluding school property tax from their funding. It is unwise to require passthrough payments to give past and future Attorney General opinions the weight of settled law, because the issues have not been fully argued in a court of law. We are concerned with expanding redevelopment’s goals to energy efficiency improvements and job retention, which are valid public policy goals but are not related to redevelopment. Lastly, we have misgivings about the legality and precedence of the state requiring any kind of local agency to dedicate a portion of its property taxes to a state activity.

The Senate Governance and Finance Committee will consider SB 286 at its hearing next Wednesday, May 4.

Bankruptcy

AB 506 (Wieckowski) – Oppose
As Amended on March 31, 2011

AB 506, by Assembly Member Wieckowski, would impose a mandatory mediation requirement for local agencies prior to seeking bankruptcy protection in federal court. The process outlined in AB 506 could result in significant unintended consequences for local agencies already facing fiscal distress.

Unlike typical mediation, where a mediator is brought in to help resolve issues between parties who wish to come to resolution, AB 506 gives the mediator tremendous powers – specifically, certifying that the local agency acted in good faith during mediation and a local agency’s solvency – and forces all parties, even those with no interest in a resolution, into a mediation process. AB 506 contemplates the mediator acting as a gatekeeper of sorts, essentially granting him or her sole discretion to allow or not allow a local agency to seek the protections the federal courts provide. Of greater concern, AB 506 does not provide a remedy for resolving disputes regarding decisions made by the mediator.

Given the complex nature of governance and funding of public services in California, it is difficult to contemplate a mediation process as outlined in AB 506 that is a timely and effective remedy for counties. 

As a result, CSAC is opposing AB 506 and will be communicating our concerns to the Assembly Local Government Committee next week.

The Assembly Local Government Committee will hear AB 506 at its meeting next Wednesday, May 4.

Local Taxes

SB 653 (Steinberg) – Support
As Amended on April 27, 2011

SB 653, by Senate President pro Tem Darrell Steinberg, would grants counties new taxing authority within limits set by the Constitution.

The Constitutional only allows counties to raise taxes with the voters’ explicit approval. For general taxes, the voter approval must be by a two-thirds margin. Voters in California have a long history of wanting their say in policy matters, especially taxes, and the Constitution gives it to them.

Even with these safeguards, counties have few choices. They may impose a marginal sales tax, but it is subject to a limit affected by other agencies’ choices. They may impose a utility users tax or a transient occupancy tax, but they only apply in unincorporated areas, where by design less economic activity takes place.

Despite their tax authority being so limited in both instance and geography, counties are the level of government that is primarily responsible for the general health and welfare of all Californians. As the cost of providing government services continues to rise and counties’ major revenue sources – sales tax, property tax, and state funding – continue to flag, counties seek new revenue options.

SB 653 would allow communities that are willing to pay more money for local services to do so, and do so with a revenue source that is appropriate for those communities, without forcing the same of residents in other areas. This is true local control, which counties support.

The Senate Governance and Finance Committee will consider SB 653 at its hearing next Wednesday, May 4.


SB 223 (Leno) – Support
As Introduced on February 9, 2011

SB 223, by Senator Mark Leno, would authorize each county to place a measure before voters to impose an assessment on vehicles owned by that county’s residents.

SB 223 would allow communities that are willing to pay more money for local services to do so, without forcing the same of residents in other areas. CSAC supports local control; counties believe that each community should be able to decide for itself what level of services its government provides and the appropriate method of funding them.

The two percent vehicle license fee rate, which would be the maximum aggregate rate allowed under SB 223, is the rate Californians were accustomed to paying for decades. SB 223 goes beyond the current constitutional vote requirements by requiring a 2/3 vote of the Board of Supervisors to place such a measure before voters.

The Senate Governance and Finance Committee passed SB 223 on a party-line vote at its meeting on Wednesday, April 27.

Senior Tax Deferral Program

AB 1090 (Blumenfield) – Support
As Introduced on February 18, 2011

AB 1090, by Assembly Member Bob Blumenfield, would allow counties, at their option, to implement the County Deferred Property Tax Program for Senior Citizens and Disabled Citizens, allowing qualified property owners to defer their property taxes until the property is sold. The state eliminated the statewide version of the program in the February 2009 budget agreement.

The Senior Citizen’s Property Tax Postponement Program offered income-eligible seniors and the disabled the opportunity to postpone their property tax payments in exchange for full repayment with interest when their home is sold. The program had a minimal start-up cost and, in most years, generated revenue for the state General Fund. Unfortunately, in large part due to the recent recession and housing crisis, the program failed to pay for itself in 2007-08 and 2008-09, making it a target for elimination given the state’s budget crisis.

CSAC, along with county assessors, auditor-controllers, and treasurer-tax collectors, has worked with Assembly Member Blumenfield, the State Controller’s Office, and the State Treasurer’s Office to improve the program and ensure it is fully self-funded. AB 1090 would even allow counties to retroactively defer taxes back to the elimination of the statewide program.

Some have raised concerns about the priority lien status of the deferred property taxes. Counties strongly endorse the priority lien as a long-standing practice for collecting local taxes and assessments. The tax deferral program authorizes deferral and later payment of property taxes, thus the appropriate placement of the lien is first lien status.

The Assembly Revenue and Taxation Committee will consider AB 1090 at its hearing next Monday, May 2