THIRD READING  

Bill No: AB 1792

Author:

Amended: 8/16/18 in Senate

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/20/18

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE TRANS. & HOUSING COMMITTEE: 11-2, 7/3/18

AYES: Beall, Cannella, Allen, Dodd, Galgiani, McGuire, Roth, Skinner, Vidak, Wieckowski, Wiener

NOES: Gaines, Morrell

ASSEMBLY FLOOR: 55-23, 5/29/18 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill allows affordable housing authorities to finance public infrastructure needed to support housing.

ANALYSIS:

Existing law:

1. Allows a city, county, or city and county to adopt a resolution creating an affordable housing authority to provide low- and moderate-income housing and affordable workforce housing.
2. Requires the governing board of an authority to be an odd number of members with at least five or seven members in total, as follows:
   1. At least three members of the city council or the board of supervisors appointed by the city council or the board of supervisors;
   2. In the case of an authority created by a city and county authority jointly, at least three members of the city council and three members of the board of supervisors, and;
   3. At least one member of the public who lives or works within the boundaries of the city or county that created the authority.
3. Requires an authority to, by resolution, create a Low and Moderate Income Housing Fund and adopt an affordable housing investment plan with certain specified contents.
4. Requires the authority to hold a public hearing before adopting a plan, and requires the authority to provide notice of that hearing, as specified.
5. Allows any city, county, or special district, as specified, to adopt a resolution directing the county auditor-controller to allocate its share of property tax increment funds within the area covered by the plan to the authority.
6. Allows a taxing entity, via resolution, to allocate other revenues to the authority, including revenues derived from local sales and use taxes imposed pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law, or transactions and use taxes imposed pursuant to the Transactions and Use Tax Law, in specified circumstances.
7. Prohibits a school entity, as defined, and a successor agency to a redevelopment agency from participating in an authority. Allows a city or county that created a redevelopment agency that was dissolved to form an authority only if certain conditions are met, such as receiving a finding of completion from the Department of Finance.
8. Requires a minimum of 95% of the allocated property tax increment revenues pursuant to 6), above, and allocated tax revenues pursuant to 7), above, to be used to increase, improve, and preserve the community’s supply of housing for low-, very low-, and moderate-income households.
9. Allows an authority to do all of the following:
   1. Provide for low- and moderate-income housing and affordable workforce housing;
   2. Remedy or remove a release of hazardous substances, as specified;
   3. Provide for seismic retrofits of existing buildings;
   4. Acquire and transfer real property, as specified;
   5. Issue bonds, as specified;
   6. Borrow money, receive grants, or accept financial or other assistance or investment from the state or the federal government or any other public agency or private lending institution for any project within its area of operation, and comply with any conditions
      of a loan or grant;
   7. Adopt a plan;
   8. Make loans or grants for owners of tenants to improve, rehabilitate, or retrofit buildings or structures within the plan area, and;
   9. Construct foundations, platforms, and other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for the purposes of providing affordable housing.
10. Requires an authority to contract for an independent audit every five years.

This bill allows an authority to finance water, sewer, and other public infrastructure needed to support the development of affordable housing by an authority.

Comments

Purpose of the bill. According to the author, “Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development.”

Related/Prior Legislation

AB 2035 (Mullin, 2018) makes administrative and technical changes to the affordable housing authority statutes.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/21/18)

American Society of Civil Engineers, Region 9

California Housing Partnership Corporation

Ensuring Opportunity Campaign

League of California Cities

Non-Profit Housing Association of Northern California

Northern California Community Loan Fund

OPPOSITION: (Verified 8/21/18)

None received

ASSEMBLY FLOOR: 55-23, 5/29/18

AYES: Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Bigelow, Brough, Chávez, Chen, Choi, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Voepel, Waldron

Prepared by:

8/21/18 13:11:43

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Affordable housing authorities: infrastructure: land use permits: affordable housing

Allows Affordable Housing Authorities to finance public infrastructure necessary to support affordable housing; exempts some organizations from complying with certain prevailing wage requirements.

Background

Redevelopment agencies. From the early 1950s until they were dissolved in 2011, the Community Redevelopment Law allowed local officials to create redevelopment agencies (RDAs), prepare and adopt redevelopment plans, and finance redevelopment activities. RDAs used property tax increment financing to pay for economic development projects in “blighted” areas. Citing a significant State General Fund deficit, Governor Brown’s 2011-12 budget proposed eliminating RDAs and returning billions of dollars of property tax revenues to schools, cities, and counties to fund core services. Among the statutory changes that the Legislature adopted to implement the 2011-12 budget, AB X1 26 (Blumenfield, 2011) dissolved all RDAs. The California Supreme Court's 2011 ruling in California Redevelopment Association v. Matosantos upheld AB X1 26, but invalidated AB X1 27 (Blumenfield, 2011), which would have allowed most RDAs to avoid dissolution.

RDAs’ dissolution deprived many local governments of the primary tool they used to eliminate physical and economic blight, finance new construction, improve public infrastructure, rehabilitate existing buildings, and increase the supply of affordable housing. Local governments could still use tax increment financing through the formation of infrastructure financing districts (IFDs), but unlike an RDA, an IFD requires two-thirds voter approval to form or issue debt. As a result, only two IFDs have been formed in California.

Tax increment financing after RDAs. After the Supreme Court’s 2011 Matosantos decision dissolved all RDAs, legislators enacted a slew of measures creating new tax increment financing tools to pay for local economic development. In 2014, the Legislature enacted SB 628 (Beall) to allow local officials to create Enhanced Infrastructure Financing Districts (EIFDs), which augment the tax increment financing powers available to local government under existing IFD statutes. EIFDs may only issue debt with 55% voter approval. One year later, the Legislature authorized the formation of Community Revitalization and Investment Authorities (CRIAs) in 2015 (AB 2, Alejo). Similar to EIFDs, CRIAs use tax increment financing to fund infrastructure projects, with two big differences: CRIAs may only be formed in economically depressed areas, and they lack the voter approval requirement. Intending to provide additional incentives for the formation of EIFDs, last year the Legislature allowed certain EIFDs to form under the Neighborhood Infill Finance and Transit Improvements Act—known as “NIFTIs” (AB 1568, Bloom, 2017). NIFTIs may receive a portion of the sales and use taxes and transactions and use taxes contributed by participating entities in exchange for spending 20 percent of the NIFTI’s total funds on housing affordable to lower income households.

Affordable Housing Authorities. Also in 2017, the Legislature authorized the formation of Affordable Housing Authorities (AHAs), which may use tax increment financing exclusively for rehabilitating and constructing affordable housing and also do not require voter approval to issue bonds (AB 1598, Mullin). Specifically, an AHA can capture property tax increment, or revenues from a local sales and use tax or transactions and use tax provided that the use of those revenues by the authority is consistent with the purposes for which that tax was imposed, to adopt and implement an affordable housing investment plan. State law also establishes the process for forming an AHA and mandates the form of the governance structure of the AHA. The AHA statutes replicate the powers and other administrative provisions that apply to CRIAs. As such, state law grants AHAs the power to:

• Provide for low- and moderate-income housing and affordable workforce housing;
• Remedy or remove a release of hazardous substances;
• Provide for seismic retrofits of existing buildings;
• Acquire and transfer property;
• Issue bonds;
• Borrow money, receive grants, or accept financial or other assistance or investment from public and private entities;
• Enter into an agreement to coordinate investments of funds derived from the New Markets Tax Credit;
• Make loans or grants for owners or tenants to improve, rehabilitate, or retrofit structures within the plan area; and
• Construct foundations, platforms, and other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for purposes of providing affordable housing pursuant to this division.

However, an AHA must spend 95 percent of the tax revenues it receives to increase, improve, and preserve the community’s supply of housing for low-, very low-, and moderate-income households. The remaining 5 percent of funds may be spent on administration. The AHA statutes became effective on January 1, 2018, and accordingly, no AHAs have yet been formed.

Housing corporations. The California Corporations Code provides for the formation and governance of various business entities, including corporations, associations, partnerships, limited partnerships, limited liability companies, and limited liability partnerships. Each of these businesses must file certain documents with the Secretary of State in order to form and stay in good standing with the state, including articles of incorporation, annual statements, and others. State law allows for the formation of several types of non-profit corporations, including public benefit corporations, mutual benefit corporations, and religious corporations. In California, a nonprofit corporation is not necessarily a tax-exempt one, regardless of its federal tax status. All nonprofits must apply to the Franchise Tax Board (FTB) for tax-exempt status, or provide FTB with a copy of the Internal Revenue Service’s determination that the organization is tax-exempt under the Internal Revenue Code (AB 897, Houston, 2008). FTB then notifies the organization of its determination, or its acknowledgement of the IRS determination, either of which entitles the organization to an exemption from the Corporation Tax. A nonprofit that does not obtain approval from FTB for their tax-exempt application is subject to the Corporation Tax.

A housing cooperative is a non-profit corporation that owns a housing development for the benefit of its members. Members of a cooperative own stock in the corporation and therefore own the right to occupy a unit in the cooperative, while ownership of the unit itself stays with the corporation. Members of a cooperative receive a variety of benefits, including personal income tax deductions, lower turnover rates, lower real estate tax assessments (in some areas), controlled maintenance costs, and resident participation and control. Rather than making a mortgage payment each month, each member pays his or her share of the total operating costs of the corporation. By design, the transfer value of an owner’s membership in the cooperative is limited in order to keep the housing affordable. The transfer value of a membership must be defined in the articles of incorporation or bylaws of the cooperative and are also limited by state law. “Limited equity housing cooperatives” further limit the transfer value of a member's share to the sum of the amount the first occupant paid for the share, the value of any improvements made by the member (and that were approved by the board of directors) to the share, and the accumulated interest on the share (not to exceed a 10% annual increase on the amount originally paid for the share). Some limited equity housing cooperatives can transition to market-rate cooperatives after a certain period has elapsed. Limited equity housing cooperatives are sometimes referred to as limited dividend housing corporations.

Labor requirements. Workers on “public works” projects must be paid at least the general “prevailing wage” rate, as determined by the director of the Department of Industrial Relations. The prevailing wage rate is the basic hourly rate paid on public works projects to a majority of workers engaged in a particular craft, classification or type of work within the locality and in the nearest labor market area. In general, “public works” is defined to include construction, alteration, demolition, installation or repair work done under contract and “paid for in whole or in part out of public funds.” Historically, state law did not specifically define the fund sources that were captured under this requirement. However, in 2001, SB 975 (Alarcon) codified a definition of “paid for in whole or in part out of public funds,” which includes:

• The payment of money or the equivalent of money by a state or local public agency directly to or on behalf of the public works contractor, subcontractor, or developer;
• Performance of construction work by a public agency in execution of the project;
• Transfer by a public agency of an asset of value for less than fair market price;
• Fees, costs, rents, insurance or bond premiums, loans, interest rates, or other obligations that would normally be required in the execution of the contract, that are paid, reduced, charged at less than fair market value, waived, or forgiven by a public agency;
• Money loaned by a public agency that is to be repaid on a contingent basis; and
• Credits that are applied by a public agency against repayment obligations to the public agency.

Some projects that might otherwise be public works are specifically exempted, such as private residential projects built on private property that are not built pursuant to an agreement with a public agency.

Some public projects must also employ a “skilled and trained workforce,” depending on the contracting method used to deliver the projects. Specifically, contractors and sub-contractors on projects that use the design-build, construction manager at-risk, best-value, or lease-leaseback contracting methods must employ a specified percentage of registered apprentices or skilled journeypersons. Such journeypersons are graduates of programs in which they have received applicable training and education approved by certain state or federal regulators.

California’s Housing Challenges. California faces a severe housing shortage. In its most recent statewide housing assessment, the California Department of Housing and Community Development (HCD) estimated that California needs to build an additional 100,000 units per year over recent averages of 80,000 units per year for at least 10 years to meet the projected need for housing in the state. A variety of causes have contributed to the lack of housing production. Recent reports by the Legislative Analyst’s Office (LAO) and others point to local approval processes as a major factor. They argue that local governments control most of the decisions about where, when, and how to build new housing, and those governments are quick to respond to vocal community members that may not want new neighbors. The building industry also points to CEQA review, and housing advocates note a lack of a dedicated source of funds for affordable housing.

SB 35 (Weiner, 2017). Last year, the Legislature enacted a substantial package of legislation aimed at addressing the state’s housing crisis. Among other legislation, the Legislature enacted SB 35 (Weiner, 2017) to provide for a streamlined, ministerial process for approving housing developments that are in compliance with the applicable objective local planning standards—including the general plan, zoning ordinances, and objective design review standards—as well as a host of other conditions. In addition, to be eligible for streamlining under SB 35, a specified percentage of the total housing units in the development must be affordable to lower-income households (those under 80 percent of area median income), as follows:

• 10 percent, if the locality has not issued building permits for enough above-moderate income (>120 percent of area median income) units to meet their regional housing needs allocation;
• 50 percent, if the locality has not issued building permits for enough lower-income units to meet their regional housing needs allocation; or
• The percentage in a local inclusionary zoning ordinance if it is higher than the requirements above.

SB 35 also included certain requirements for labor standards, including paying prevailing wage and the use of a skilled and trained workforce on an eligible project. However, SB 35 also exempts projects that are 100% subsidized affordable housing from the skilled and trained workforce requirement.

SB 35 has the potential to speed the production of housing in California. However, some critics argue that the labor standards in SB 35 can make new construction more expensive, potentially undermining the bill’s goals of producing additional housing. Moreover, additional or improved infrastructure is often needed to support new housing, such as water and sewer upgrades. The author wants to allow AHAs to help develop such infrastructure and to exempt some projects from SB 35’s labor standards.

Proposed Law

Assembly Bill 1792 allows an AHA to finance water, sewer, or other public infrastructure necessary to support the development of affordable housing developed by the AHA.

AB 1792 also exempts from the prevailing wage and skilled and trained workforce requirements in SB 35 a project that meets either of the following:

• A project that includes only affordable for sale or rental units at the moderate or lower-income levels; or
• An affordable housing project that is sponsored by: any type of non-profit organization, as defined in existing law; a housing stock cooperative, as defined in existing law; or a limited dividend housing corporation.

AB 1792 makes other technical changes.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development.”

In addition, California made significant strides towards approving and building new housing with the enactment of SB 35 (Wiener) last year. But SB 35’s approval process came with strings attached, including prevailing wage and skilled and trained workforce requirements. Affordable housing projects are already challenging to build without layering on additional costs. AB 1792 limits the labor requirements imposed on housing that is 100% affordable or built by non-profits or cooperatives, makes it easier to build affordable housing and other types of housing that don’t just put money in the pockets of developers.

2. Job protections. Prevailing wage and skilled and trained workforce requirements are important protections to ensure that workers are treated fairly by their employers and that project proponents hire graduates of regional apprenticeship programs. Because of these requirements, the workers who build these projects have all the requisite skills, and the need to employ apprentices ensures that an adequate supply of skilled labor is available for future projects. Together, paying prevailing wage and using skilled and trained workforces produces high-quality construction for project developers, as well as a robust local economy and living wage for workers. Currently, SB 35 strikes a reasonable balance between giving developers the benefits—and cost savings—associated with a streamlined approval process, while ensuring that workers’ interests are also protected. However, AB 1792 allows developers using SB 35’s streamlined process to pay lower wages and use unskilled labor if they are a nonprofit, a stock cooperative, or a limited-dividend housing corporation, without imposing any additional affordability requirements beyond those that any other private developer must meet. While some of these entities may be truly dedicated to the public benefit, others may not be. For example, AB 1792’s exemption for non-profits also captures mutual benefit corporations—corporations formed for the common benefit of specific individuals, which are not always tax-exempt because they don’t provide a public benefit. Similarly, housing cooperatives do not necessarily impose restrictions on the profit that occupants can make when they sell their shares in the cooperative. It is unclear why these entities, which may be providing private benefits, should be exempt from these labor requirements. Finally, excluding any developers from these labor requirements—even those that are constructing affordable housing or are otherwise serving a public purpose—may only exacerbate California’s housing affordability crisis. Paying lower wages to the workers that build housing can exclude those workers from living in the very housing that they are have helped construct. The Committee may wish to consider whether AB 1792’s exemptions for these entities are prudent.

3. The more things change, the more they stay the same. Developers rely on loans to build housing, repaid by income from the sale or rental of the units. In the case of affordable housing development, this presents a challenge because low-income residents lack the income necessary to fully repay the costs of construction. As a result, affordable housing development relies on subsidies from federal, state, and local fund sources. Because current law requires projects that receive public funds to pay prevailing wages, virtually all affordable housing projects that are 100% affordable must pay prevailing wages, even without applying SB 35’s requirements. AB 1792 exempts projects that are 100% affordable from SB 35’s requirements, but not other prevailing wage laws that otherwise apply. In addition, projects that are entirely affordable are currently exempt from SB 35’s skilled and trained workforce requirements by SB 35’s own provisions. As such, AB 1792’s exemptions for 100% affordable projects are likely to have little to no effect on the types of projects that would or would not have to comply with these labor standards. The Committee may wish to consider whether AB 1792’s exemptions for 100% affordable projects are necessary.

4. Spare the air. The California Environmental Quality Act (CEQA) requires public agencies to analyze, and mitigate where possible, the effects on the environment due to their actions—“projects” in CEQA parlance. However, ministerial decisions do not count as projects under CEQA and therefore do not receive scrutiny for their environmental impacts. Because many housing approvals are discretionary, CEQA review is an important step for most housing construction. AB 1792 potentially expands the number of projects that benefit from the streamlined, ministerial process in SB 35 by removing one of the conditions that a project must meet, which could increase the number of projects that escape environmental review.

5. Conflict avoidance. AB 1792 amends some of the same code sections that would be amended by AB 2035 (Mullin) and SB 765 (Weiner). If these bills are signed into law, the changes made by the bill that’s chaptered first would be wiped out by the changes made by the bill that's chaptered second. AB 1792 includes “double-jointing” provisions to avoid the possibility of “chaptering out” AB 2035’s changes but does not contain similar provisions for SB 765, and neither SB 785 nor AB 2035 contain double-jointing provisions to avoid chaptering out AB 1792’s changes.

6. 29.10 (b). As approved by the Committee at its June 20^th meeting, AB 1792 contained only those provisions relating to AHAs. The Senate Rules Committee referred the bill back to the Committee when the author amended it on the Senate Floor to add provisions relating to SB 35, pursuant to Senate Rule 29.10(b). Under that Rule, the Committee has three choices at its August 15^th hearing: (1) hold the bill, (2) return the bill as approved to the Senate Floor, or (3) rerefer the bill to the Appropriations Committee.

7. Related legislation. AB 2035 (Mullin), which the Committee approved at its June 20^th hearing on a vote of 5-0, makes several administrative and technical changes to the AHA statutes. AB 2035 is currently pending on the Senate Floor. SB 765 (Weiner) expands and revises numerous aspects of the streamlined, ministerial approval process for housing development established by SB 35. SB 765 is currently pending on the Assembly Floor.

Assembly Actions

Not relevant to the August 7^th version of the bill.

Support and Opposition

(8/13/18)

Support: American Society of Civil Engineering; California Housing Partnership Corporation; Ensuring Opportunity; Non-Profit Housing Association of Northern California.

Opposition: State Building and Construction Trades Council.

-- END --

 THIRD READING  

Bill No: AB 1792

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 6/20/18

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE TRANS. & HOUSING COMMITTEE: 11-2, 7/3/18

AYES: Beall, Cannella, Allen, Dodd, Galgiani, McGuire, Roth, Skinner, Vidak, Wieckowski, Wiener

NOES: Gaines, Morrell

ASSEMBLY FLOOR: 55-23, 5/29/18 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill allows affordable housing authorities to finance public infrastructure needed to support housing.

ANALYSIS:

Existing law:

1. Allows a city, county, or city and county to adopt a resolution creating an affordable housing authority to provide low- and moderate-income housing and affordable workforce housing.
2. Requires the governing board of an authority to be an odd number of members with at least five or seven members in total, as follows:
   1. At least three members of the city council or the board of supervisors appointed by the city council or the board of supervisors;
   2. In the case of an authority created by a city and county authority jointly, at least three members of the city council and three members of the board of supervisors, and;
   3. At least one member of the public who lives or works within the boundaries of the city or county that created the authority.
3. Requires an authority to, by resolution, create a Low and Moderate Income Housing Fund and adopt an affordable housing investment plan with certain specified contents.
4. Requires the authority to hold a public hearing before adopting a plan, and requires the authority to provide notice of that hearing, as specified.
5. Allows any city, county, or special district, as specified, to adopt a resolution directing the county auditor-controller to allocate its share of property tax increment funds within the area covered by the plan to the authority.
6. Allows a taxing entity, via resolution, to allocate other revenues to the authority, including revenues derived from local sales and use taxes imposed pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law, or transactions and use taxes imposed pursuant to the Transactions and Use Tax Law, in specified circumstances.
7. Prohibits a school entity, as defined, and a successor agency to a redevelopment agency from participating in an authority. Allows a city or county that created a redevelopment agency that was dissolved to form an authority only if certain conditions are met, such as receiving a finding of completion from the Department of Finance.
8. Requires a minimum of 95% of the allocated property tax increment revenues pursuant to 6), above, and allocated tax revenues pursuant to 7), above, to be used to increase, improve, and preserve the community’s supply of housing for low-, very low-, and moderate-income households.
9. Allows an authority to do all of the following:
   1. Provide for low- and moderate-income housing and affordable workforce housing;
   2. Remedy or remove a release of hazardous substances, as specified;
   3. Provide for seismic retrofits of existing buildings;
   4. Acquire and transfer real property, as specified;
   5. Issue bonds, as specified;
   6. Borrow money, receive grants, or accept financial or other assistance or investment from the state or the federal government or any other public agency or private lending institution for any project within its area of operation, and comply with any conditions
      of a loan or grant;
   7. Adopt a plan;
   8. Make loans or grants for owners of tenants to improve, rehabilitate, or retrofit buildings or structures within the plan area, and;
   9. Construct foundations, platforms, and other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for the purposes of providing affordable housing.
10. Requires an authority to contract for an independent audit every five years.

This bill allows an authority to finance water, sewer, and other public infrastructure needed to support the development of affordable housing by an authority.

Comments

Purpose of the bill. According to the author, “Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development.”

Related/Prior Legislation

AB 2035 (Mullin, 2018) makes administrative and technical changes to the affordable housing authority statutes.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/30/18)

American Society of Civil Engineers, Region 9

California Housing Partnership Corporation

Ensuring Opportunity Campaign

League of California Cities

Non-Profit Housing Association of Northern California

Northern California Community Loan Fund

OPPOSITION: (Verified 7/30/18)

None received

ASSEMBLY FLOOR: 55-23, 5/29/18

AYES: Aguiar-Curry, Arambula, Baker, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Bigelow, Brough, Chávez, Chen, Choi, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Voepel, Waldron

Prepared by:

8/1/18 12:12:02

**** END ****

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2017 - 2018 Regular

Bill No: AB 1792 Hearing Date: 7/3/2018

SUBJECT: Affordable housing authorities: infrastructure

DIGEST: This bill authorizes an affordable housing authority (AHA) to finance infrastructure for water, sewer, or other public infrastructure necessary to support the development of affordable housing.

ANALYSIS:

Existing law:

1. Authorizes a locality to create an AHA to provide low- and moderate-income housing and affordable workforce housing, defined as housing affordable to households with incomes at or below 120% of area median income (AMI).
2. Prohibits a school entity from participating in the AHA and prohibits a successor agency from participating in, or receiving funding from, an AHA.
3. Requires the governing board to include at least three members of the city council or board of supervisors, appointed by the council or board. If an AHA is created jointly by a city and county, the board must include at least three members of the city council and at least three members of the county board of supervisors. Every AHA board must include at least one public member who lives or works within the boundaries of the city or county that created the AHA.
4. Requires the AHA to create a Low and Moderate Income Housing Fund (L&M Fund) and to adopt an affordable housing investment plan (Plan) that may include provision for the receipt of property tax increment funds generated within the area, provision for the receipt of any tax revenues allocated to the AHA, or both. Tax revenues allocated to the AHA may include revenues from local sales and use taxes (SUT), or transaction and use taxes (TUT), provided the use of those revenues by the AHA is consistent with the purposes for which the tax was imposed.
5. Requires the Plan to include the following:
   1. A statement of principal goals and objectives.
   2. An affordable housing program describing how the AHA will fulfill its objective and whether duties and activities will be assigned to a city or county housing department or public housing authority.
   3. The estimated amount to be deposited in the L&M Fund during each of the next five years.
   4. The estimated number of new, rehabilitated, or price-restricted residential units to be assisted during each of the five years, as well as estimated L&M Fund expenditures during each of the five years.
   5. A description of how the program will implement the requirements for L&M Fund expenditures over a 10-year period at various income levels.
   6. The estimated number of units to be developed by the AHA for very-low, low-, and moderate-income households during the next five years.
   7. A feasible method or plan for relocating families and individuals temporarily or permanently displaced from housing facilities in the area.
6. Authorizes a locality that receives ad valorem property taxes from property located within an AHA area to direct its share of property tax increment funds within the area covered by the Plan, to the AHA.
7. Authorizes a locality, prior to adoption of the Plan, to adopt a resolution allocating tax revenues to the AHA, including revenues from local SUT or TUT, provided the use of those taxes by the AHA is consistent with the purposes for which the tax was imposed and the boundaries of the AHA are coterminous with the locality that established the AHA.
8. Authorizes an AHA to do the following:
   1. Provide low-income, moderate-income, and affordable workforce housing.
   2. Remedy or remove hazardous substances.
   3. Provide for seismic retrofits of existing buildings.
   4. Acquire and transfer real property.
   5. Issue bonds.
   6. Borrow money, receive grants, or accept financial or other assistance or investment from the state or federal government, or any other public agency or private lending institution, for any project within its area of operation.
   7. Receive funds allocated to it.
   8. Adopt an affordable housing plan.
   9. Make loans or grants for owners or tenants to improve, rehabilitate, or retrofit buildings or structures within the plan area.
   10. Construct foundations, platforms, or other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for purposes of providing affordable housing.
9. Requires an AHA to prepare a relocation plan for families or individuals temporarily or permanently displaced as a result of AHA actions.
10. Authorizes an AHA to:
    1. Purchase, lease, or otherwise acquire real property.
    2. Accept surplus property owned by a public entity or property owned by a private entity.
    3. Sell, lease, grant, or donate property owned or acquired by the AHA in a plan area to a housing authority or to any public agency for public housing projects.
    4. Offer for resale property acquired by an AHA for rehabilitation and resale within one year after completion of rehabilitation.

This bill authorizes an AHA to finance infrastructure for water, sewer, or other public infrastructure necessary to support the development of affordable housing.

COMMENTS

1. Purpose. The author states that the dissolution of redevelopment took away a key instrument for developing housing in our cities and counties throughout California. Since then, the Legislature has worked hard to reinstitute some of the tools that were lost. One such tool gave local agencies the ability to establish AHAs to use some tax increment to finance affordable housing for households up to 120% AMI. However, any new housing is only as good as the infrastructure hooked up to it. This bill will give AHAs the ability to finance infrastructure projects around housing developments.
2. Redevelopment. Until 2011, the Community Redevelopment Law allowed local officials to set up redevelopment agencies (RDAs) and finance redevelopment activities. Citing a significant General Fund deficit, Governor Brown’s 2011-12 budget proposed eliminating RDAs and returning billions of dollars of property tax revenues to schools, cities, and counties to fund core services. AB X1 26 (Blumenfield, Chapter 5, Statutes of 2011, First Extraordinary Session) dissolved all RDAs. RDAs used property tax revenues generated by growth in the assessed value of properties in a project area — commonly known as tax increment revenues — to finance redevelopment activities. The dissolution of RDAs deprived many local governments of a primary tool to eliminate physical and economic blight, finance new construction, improve public infrastructure, rehabilitate existing buildings, and increase the supply of affordable housing.
3. The aftermath. Since the demise of redevelopment, the Legislature has enacted or revised a number of different mechanisms to finance economic development, including:
   1. Infrastructure Finance Districts (IFDs). Cities and counties can create IFDs and issue bonds to pay for community public works such as highways, transit, water systems, sewer projects, flood control, child care facilities, libraries, parks, and solid waste facilities. IFDs can divert property tax increment revenues to repay the bonds but cannot divert property tax increment revenues from schools.
   2. Enhanced Infrastructure Finance Districts (EIFDs). SB 628 (Beall, 2014) allows local officials to create EIFDs, which augment the tax increment financing powers available to local government under the IFD statutes. City or county officials can create an EIFD, which is governed by a public finance authority, to finance public capital facilities or other projects that provide significant benefits to the district or surrounding community. Like an RDA, an EIFD may issue bonds backed by sales taxes and use taxes, and transactions and use taxes; unlike RDAs, EIFDs require a 55% voter approval to do so.
   3. Community Revitalization and Investment Authorities (CRIAs). AB 2 (Alejo, Chapter 319, 2015) authorizes local governments, excluding schools, to collect property tax increment and issue debt. A CRIA may invest in disadvantaged communities with a high crime rate, high unemployment, deteriorated and inadequate infrastructure, or commercial and residential buildings. The area where the CRIA could invest must also have an annual median household income below 80% of the statewide annual median income. Like redevelopment, AB 2 allows CRIAs to freeze property taxes at the time the plan for revitalizing the area is approved. The CRIA collects all tax increment generated after that point to use on specified activities. Unlike RDAs, AB 2 specifies that the taxing entities in the area must agree to divert tax increment to the CRIA. No portion of local schools’ share of tax increment may go to the CRIA.
   4. Neighborhood Infill Finance and Transit Improvement Districts (NIFTIs). AB 1568 (Bloom, Chapter 562, 2017) allows for NIFTIs to be formed within EIFDs. NIFTIs finance infrastructure and affordable housing using increases in local SUT and TUT. NIFTI districts must be located in qualified infill locations and 20% of the revenue must be spent on affordable housing.
4. What’s different about AHAs? AB 1598 (Mullin, 2017) created yet another economic development tool for local agencies. AHAs are dedicated to funding the development of affordable housing in areas that currently do not qualify under CRIA law. AB 1598 authorizes AHAs to capture SUT and TUT to be used for its purposes provided those purposes are consistent with the purposes in which the tax was proposed.
5. And another. AB 2035 (Mullin), which will also be heard by this committee today, is a technical cleanup bill to last year’s bill creating the AHA statute.
6. Double referral. This bill passed out of the Governance and Finance Committee on June 20^th on a 7-0 vote.

Assembly Votes:

Floor: 55-23

H&CD: 6-1

Related Legislation:

SB 961 (Allen, 2018) — allows certain enhanced infrastructure financing districts (EIFDs) to issue debt for affordable housing near transit without voter approval. This bill is scheduled to be heard in the Assembly Housing Committee on June 27^th.

AB 2035 (Mullin, 2018) — makes a number of administrative and technical changes to AHA law. This bill is also being heard in this committee today.

AB 1598 (Mullin, Chapter 764, Statutes of 2017) — authorized a city or county to create an affordable housing authority to fund affordable housing similar to a Community Revitalization and Investment Authority (CRIA).

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 27, 2018.)

SUPPORT:

League of California Cities

OPPOSITION:

None received.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Affordable housing authorities: infrastructure.

Allows Affordable Housing Authorities to provide for the public infrastructure necessary to support affordable housing supported by the authority.

Background

Redevelopment agencies. From the early 1950s until they were dissolved in 2011, California redevelopment agencies (RDAs) used property tax increment financing to pay for economic development projects in “blighted” areas pursuant to the provisions of the Community Redevelopment Law. Generally, property tax increment financing involves a local government forming a tax increment financing district to issue bonds and use the bond proceeds to pay project costs within the boundaries of a specified project area. To repay the bonds, the district captures increased property tax revenues that are generated when projects financed by the bonds increase assessed property values within the project area. To calculate the increased property tax revenues captured by the district, the amount of property tax revenues received by any local government participating in the district is “frozen” at the amount it received from property within a project area prior to the project area’s formation. In future years, as the project area's assessed valuation grows above the frozen base, the resulting additional property tax revenues—the so-called property tax “increment” revenues—flow to the tax increment financing district instead of other local governments. After the bonds have been fully repaid using the incremental property tax revenues, the district is dissolved, ending the diversion of tax increment revenues from participating local governments.

Citing a significant State General Fund deficit, Governor Brown’s 2011-12 budget proposed eliminating RDAs and returning billions of dollars of property tax revenues to schools, cities, and counties to fund core services. Among the statutory changes that the Legislature adopted to implement the 2011-12 budget, AB X1 26 (Blumenfield, 2011) dissolved all RDAs. The California Supreme Court's 2011 ruling in California Redevelopment Association v. Matosantos upheld AB X1 26, but invalidated AB X1 27 (Blumenfield, 2011), which would have allowed most RDAs to avoid dissolution.

RDAs’ dissolution deprived many local governments of the primary tool they used to eliminate physical and economic blight, finance new construction, improve public infrastructure, rehabilitate existing buildings, and increase the supply of affordable housing.

Tax increment financing after RDAs. After the Supreme Court’s 2011 Matosantos decision dissolved all RDAs, legislators enacted a slew of measures creating new tax increment financing tools to pay for local economic development. In response, the Legislature enacted SB 628 (Beall, 2014) to allow local officials to create Enhanced Infrastructure Financing Districts (EIFDs), which augment the tax increment financing powers available to local government under existing infrastructure financing district statutes. EIFDs may only issue debt with 55% voter approval. One year later, the Legislature authorized the formation of Community Revitalization and Investment Authorities (CRIAs) in 2015 (AB 2, Alejo). Similar to EIFDs, CRIAs use tax increment financing to fund infrastructure projects, with two big differences: CRIAs may only be formed in economically depressed areas, and they lack the voter approval requirement. Intending to provide additional incentives for the formation of EIFDs, last year the Legislature allowed certain EIFDs to form under the Neighborhood Infill Finance and Transit Improvements Act—known as “NIFTIs” (AB 1568, Bloom, 2017). NIFTIs may receive a portion of the sales and use taxes and transactions and use taxes contributed by participating entities in exchange for spending 20 percent of the NIFTI’s total funds on housing affordable to lower income households.

Affordable Housing Authorities. Also in 2017, the Legislature authorized the formation of Affordable Housing Authorities (AHAs), which may use tax increment financing exclusively for rehabilitating and constructing affordable housing and also do not require voter approval to issue bonds (AB 1598, Mullin). Specifically, an AHA can capture property tax increment, or revenues from a local sales and use tax or transactions and use tax provided that the use of those revenues by the authority is consistent with the purposes for which that tax was imposed, to adopt and implement an affordable housing investment plan. The plan must include each of the following elements:

• A statement of the goals and objectives of the plan;
• An affordable housing program that describes how the AHA will fulfill its objective;
• The estimated amount that will be deposited in, and expended from, the AHA’s Low and Moderate Income Housing Fund during each of the next five years;
• Estimates of the number of housing units to be assisted during each of the five years, including moderate and lower income units;
• A description of how the program will implement the requirements for expenditures of funds in the Low and Moderate Income Housing Fund over a 10-year period at various income levels;
• A fiscal analysis setting forth the projected receipt of revenue and projected expenses over a five-year planning horizon, including the potential issuance of bonds backed by property tax increment revenues during the term of the plan;
• Time limits of 45 years for establishing loans, advances, and indebtedness, repayment of all of the AHA’s debts and obligations, and fulfillment of all of the AHA’s housing obligations; and
• A feasible method or plan for relocation of families and persons to be temporarily or permanently displaced from housing facilities in the plan area.

State law also establishes the process for forming an AHA and mandates the form of the governance structure of the AHA. The AHA statutes replicate the powers and other administrative provisions that apply to CRIAs. Accordingly, it grants AHAs the power to:

• Provide for low- and moderate-income housing and affordable workforce housing;
• Remedy or remove a release of hazardous substances;
• Provide for seismic retrofits of existing buildings;
• Acquire and transfer property;
• Issue bonds;
• Borrow money, receive grants, or accept financial or other assistance or investment from public and private entities;
• Enter into an agreement to coordinate investments of funds derived from the New Markets Tax Credit;
• Make loans or grants for owners or tenants to improve, rehabilitate, or retrofit structures within the plan area; and
• Construct foundations, platforms, and other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for purposes of providing affordable housing pursuant to this division.

However, an AHA must spend 95 percent of the tax revenues it receives to increase, improve, and preserve the community’s supply of housing for low-, very low-, and moderate-income households. The remaining 5 percent of funds may be spent on administration. The AHA statutes became effective on January 1, 2018, and accordingly, no AHAs have yet been formed.

Additional or improved infrastructure is often needed to support new housing, such as water and sewer upgrades. The author wants to allow AHAs to help develop such infrastructure.

Proposed Law

Assembly Bill 1792 allows an AHA to provide for water, sewer, or other public infrastructure necessary to support the development of affordable housing developed by the AHA.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development.”

2. Let’s be clear. The recently enacted variations on redevelopment have been granted a variety of powers to advance infrastructure development and affordable housing. However, these agencies may only finance infrastructure development, with a few exceptions for the construction and operation of housing. But the public infrastructure needed to support housing involves specialized management needs and is often operated by special purpose entities such as water districts, sewer districts, and transit districts. AB 1792 allows AHAs to “provide for” this type of infrastructure, which could be interpreted to include construct, operate, and maintain. This activity is best performed by those entities that have the expertise necessary to do so. The Committee may wish to consider amending AB 1792 to allow AHAs to “finance” infrastructure needed to support affordable housing development instead of “provide.”

3. Double referral. The Senate Rules Committee has ordered a double referral of AB 1792: first to the Senate Governance and Finance Committee to hear issues related to local authority and financing, and then to the Senate Transportation and Housing Committee, which has jurisdiction over housing.

4. Related legislation. SB 961 (Allen), which the Senate Governance & Finance Committee approved at its April 25^th hearing on a vote of 7-0, authorized the creation of an additional form of local government for the purpose of allocating tax increment revenues to affordable housing. SB 961 is currently pending referral in the Assembly. AB 2035, which the Committee will also hear at its June 20^th hearing, makes several administrative and technical changes to the statutes governing AHAs.

Assembly Actions

Assembly Housing and Community Development Committee: 6-1

Assembly Floor: 55-23

Support and Opposition

(6/15/18)

Support: American Society of Civil Engineering; California Housing Partnership Corporation; Ensuring Opportunity; Non-Profit Housing Association of Northern California

Opposition: Unknown.

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1792

Author:(Frazier)

As Amended Ver:May 10, 2018

Majority vote

SUMMARY: Allows affordable housing authorities (authorities) to provide for public infrastructure necessary to support the development of affordable housing

FISCAL EFFECT: None.

COMMENTS:

Background: Over the last 60 years, redevelopment agencies used tax increment to finance affordable housing, community development, and economic development projects. The dissolution of redevelopment agencies created a void and as such, there have been efforts to create new tools that would support community and economic development activities since then. AB 2 (Alejo, Chapter 319, Statutes of 2015) created Community Revitalization and Investment Authorities (CRIAs), which allow local governments—excluding schools—to collect property tax increment and issue debt. CRIAs can use their powers to invest in disadvantaged communities with a high crime rate, high unemployment, and deteriorated and inadequate infrastructure, commercial, and residential buildings. Three of these four conditions constitute "blight." In addition, the area where the CRIA can invest must have an area median income (AMI) of less than 80% of statewide AMI.

Last year, AB 1598 (Mullin), Chapter 746, Statutes of 2017, created affordable housing authorities, modelled after CRIA law, to fund activities related to the promotion and development of affordable housing. Authorities can capture property tax increment, as well as revenues from a local sales and use tax or transactions and use tax, provided that the use of those revenues by the authority is consistent with the purposes for which that tax was imposed. These authorities are intended for use in areas where the "blight" requirements of CRIAs may not be applicable, but where a shortfall still exists in affordable housing units.

This bill would allow affordable housing authorities formed under the process set out by AB 1598 to provide for infrastructure to support the development of affordable housing within one-quarter mile of the housing.

Infrastructure Finance Districts (IFDs): Cities and counties can create IFDs and issue bonds to pay for community scale public works: highways, transit, water systems, sewer projects, flood control, child care facilities, libraries, parks, and solid waste facilities. To repay the bonds, IFDs can divert property tax increment revenues. However, IFDs can't divert property tax increment revenues from schools (SB 308 (Seymour), Chapter 1575, Statutes of 1990. In 2014, in response to the dissolution of redevelopment, legislators enacted SB 628 (Beall), Chapter 785, Statutes of 2014, to allow local officials to create Enhanced Infrastructure Financing Districts (EIFDs), which augment the tax increment financing powers that are available to local government under the IFD statutes. City or county officials can create an EIFD, which is governed by a public finance authority, to finance public capital facilities or other specified projects of communitywide significance that provide significant benefits to the district or the surrounding community.

In addition, last year AB 56 (Holden, Chapter 289, Statutes of 2017) added housing-related infrastructure to the types of facilities that may be funded by the California Infrastructure and Economic Development Bank (I-Bank).

Need for the bill: According to the author, "Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development."

Related legislation:

AB 56 (Holden), Chapter 289, Statutes of 2017: Allowed the California Infrastructure and Economic Development Bank to fund housing-related infrastructure.

AB 1598 (Mullin), Chapter 746, Statutes of 2017: Created affordable housing authorities and set out specifications for their establishment and use by cities and counties.

AB 2 (Alejo), Chapter 319, Statutes of 2015: Created CRIAs and allowed them to use tax increment revenue to improve infrastructure, assist businesses, and support affordable housing in disadvantaged communities.

SB 628 (Beall), Chapter 785, Statutes of 2014: Allowed local agencies to create EIFDs to finance specified infrastructure projects and facilities.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0002940

Date of Hearing: May 9, 2018

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1792 (

Author:Frazier) – As Amended Ver:March 19, 2018

SUBJECT: Affordable housing authorities: infrastructure

SUMMARY: Allows affordable housing authorities to provide for infrastructure to support the development of affordable housing, including, but not limited to, streets, roads, sidewalks, sewer lines, water lines, power lines, and gas lines within one-quarter mile of an affordable housing development.

EXISTING LAW:

1. Allows a city, county, or city and county (hereafter referred to as “city and county”) to adopt a resolution creating an affordable housing authority (authority) that is limited to providing low- and moderate-income housing and affordable workforce housing. “Affordable workforce housing” means housing with an affordable cost or affordable rent for households whose gross income does not exceed 120% of area median income (AMI). Permits the boundaries of the authority to be identical to the boundaries of the city and county that created it.
2. Prohibits a school entity from participating in an authority. Prohibits a successor agency to a redevelopment agency (RDA) from participating in, or receiving funding from, any authority.
3. Specifies the membership of the governing board of an authority.
4. Requires the authority, by resolution, to create a Low and Moderate Income Housing Fund (L&M Fund) and to adopt an affordable housing investment plan (plan) that may include either or both of the following:
   1. A provision of the receipt of tax increment funds generated within the area; and
   2. A provision for the receipt of any tax revenues allocated to the authority, including revenues from local sales and use taxes or transaction and use taxes.
5. Requires the plan to include the following:
   1. A statement of the principal goals and objectives of the plan;
   2. An affordable housing program that describes how the authority will fulfill its objective and if duties and activities will be assigned to a city or county housing department or public housing authority;
   3. The estimated amount that will be deposited in the L&M Fund during each of the next five years;
   4. Estimates of the number of new, rehabilitated, or price restricted residential units to be assisted during each of the five years, and estimates of moneys from the L&M Fund over a 10-year period at various income levels; and
   5. Estimates of the number of units to be developed by the authority for very low-, low-, and moderate-income households during the next five years.
6. Permits, at any time before or after the adoption of the plan, a city or county that receives ad valorem property taxes from property located within an area to adopt a resolution directing the county auditor-controller to allocate its share of the property tax increment funds within the area covered by the plan to the authority. Permits for a city or county to adopt a resolution to allocate tax revenues to the authority, including revenues from local sales and use taxes or transaction and use taxes, as specified.
7. Permits an authority to do the following:
   1. Provide for low- and moderate-income housing and affordable workforce housing;
   2. Remedy or remove a release of hazardous substances;
   3. Provide for seismic retrofit of existing buildings;
   4. Acquire and transfer real property;
   5. Issue bonds;
   6. Borrow money, receive grants, or accept financial or other assistance or investment from the state or federal government or any other public agency or private lending institution for any project within its area of operation and comply with any condition of a loan or grant;
   7. Receive funds allocated to it pursuant to a resolution adopted by a city or county.
   8. Adopt an affordable housing plan;
   9. Make loans or grants for owners or tenants to improve, rehabilitate, or retrofit buildings or structures within the plan area; and
   10. Construct foundations, platforms or other like structural forms necessary for the provision or utilization of air rights sites for buildings to be used for purposes of providing affordable housing.
8. Requires an authority to prepare a feasible method or plan for relocation of all of any families and persons to be temporarily or permanently displaced from housing facilities as a result of actions by the authority.
9. Permits an authority to:
   1. Purchase, lease, obtain an option upon, acquire by gift, grant, bequest, devise, or otherwise, any real or personal property, any interest in property, and any improvements on it, including repurchase of developed property previously owned by the authority;
   2. Accept, at the request of the legislative body of the community, a conveyance of real property, located either within or outside the plan area, owned by a public entity and declared surplus by the public entity, or owned by a private entity;
   3. Sell, lease, grant, or donate real property owned or acquired by the authority in a plan area to a housing authority or to any public agency for public housing projects; and
   4. Offer for resale property acquired by an authority for rehabilitation and resale within one year after completion of rehabilitation.
10. Establishes the Bergeson-Peace Infrastructure and Economic Development Bank (I-Bank) within the Governor’s Office of Business and Economic Development (GO-Biz) and authorizes it to undertake a variety of infrastructure-related financial activities including, but not limited to, the administration of a revolving loan fund, oversight of the Small Business Finance Center, and the issuance of tax-exempt and taxable revenue bonds.
11. Allows the I-Bank to finance housing-related infrastructure, including:
    1. City streets;
    2. Drainage, water supply, and flood control;
    3. Environmental mitigation measures;
    4. Power and communications;
    5. Public transit improvement that directly supports transit-oriented housing;
    6. Sewage collection and treatment; and
    7. Water treatment and distribution.

FISCAL EFFECT: None.

COMMENTS:

Background: Over the last 60 years, redevelopment agencies used tax increment to finance affordable housing, community development, and economic development projects. The dissolution of redevelopment agencies created a void and as such, there have been efforts to create new tools that would support community and economic development activities since then. AB 2 (Alejo, Chapter 319, Statutes of 2015) created Community Revitalization and Investment Authorities (CRIAs), which allow local governments—excluding schools—to collect property tax increment and issue debt. CRIAs can use their powers to invest in disadvantaged communities with a high crime rate, high unemployment, and deteriorated and inadequate infrastructure, commercial, and residential buildings. Three of these four conditions constitute “blight.” In addition, the area where the CRIA can invest must have an AMI of less than 80% of statewide AMI.

Last year, AB 1598 (Mullin, Chapter 746, Statutes of 2017) created affordable housing authorities (authorities), modelled after CRIA law, to fund activities related to the promotion and development of affordable housing. Authorities can capture property tax increment, as well as revenues from a local sales and use tax or transactions and use tax, provided that the use of those revenues by the authority is consistent with the purposes for which that tax was imposed. These authorities are intended for use in areas where the “blight” requirements of CRIAs may not be applicable, but where a shortfall still exists in affordable housing units.

This bill would allow affordable housing authorities formed under the process set out by AB 1598 to provide for infrastructure to support the development of affordable housing within one-quarter mile of the housing.

Infrastructure Finance Districts (IFDs): Cities and counties can create IFDs and issue bonds to pay for community scale public works: highways, transit, water systems, sewer projects, flood control, child care facilities, libraries, parks, and solid waste facilities. To repay the bonds, IFDs can divert property tax increment revenues. However, IFDs can’t divert property tax increment revenues from schools (SB 308, Seymour, 1990). In 2014, in response to the dissolution of redevelopment, legislators enacted SB 628 (Beall, Chapter 785, Statutes of 2014) to allow local officials to create Enhanced Infrastructure Financing Districts (EIFDs), which augment the tax increment financing powers that are available to local government under the IFD statutes. City or county officials can create an EIFD, which is governed by a public finance authority, to finance public capital facilities or other specified projects of communitywide significance that provide significant benefits to the district or the surrounding community.

In addition, last year AB 56 (Holden, Chapter 289, Statutes of 2017) added housing-related infrastructure to the types of facilities that may be funded by the I-Bank.

Need for the bill: According to the author, “Housing is desperately needed throughout California to the tune of 1.8 million new homes by 2025. But, we have to ensure that the infrastructure that is hooked up to these new units function properly. By allowing that an Authority can update and improve the infrastructure around a project, Californians can be sure that the plumbing and electricity work when they need them. This is a practical and efficient approach to improving infrastructure alongside any future development.”

Committee amendment:

To clarify the intent of the bill, the Committee may wish to consider the following amendments, which strike out the list of infrastructure that may be provided by an affordable housing authority and instead permit the authority to provide any public infrastructure necessary for an affordable housing development. The amendments are as follows:

1. On page 3, in line 13, strike out “(1)”
2. On page 3, in line 13, before “infrastructure” insert:

water, sewer, or other public

1. On page 3, in line 13, after “infrastructure” insert:

necessary

1. On page 3, in line 15 to line 18, strike out:

(2) For purposes of this subdivision, infrastructure includes, but is not limited to, streets, roads, sidewalks, sewer lines, water lines, power lines, and gas lines within one-quarter mile of the affordable housing development.

Related legislation:

AB 56 (Holden, Chapter 289, Statutes of 2017): Allowed the California Infrastructure and Economic Development Bank to fund housing-related infrastructure.

AB 1598 (Mullin, Chapter 746, Statutes of 2017): Created affordable housing authorities and set out specifications for their establishment and use by cities and counties.

AB 2 (Alejo, Chapter 319, Statutes of 2015): Created CRIAs and allowed them to use tax increment revenue to improve infrastructure, assist businesses, and support affordable housing in disadvantaged communities.

SB 628 (Beall, Chapter 785, Statutes of 2014): Allowed local agencies to create EIFDs to finance specified infrastructure projects and facilities.

REGISTERED SUPPORT / OPPOSITION:

Support

American Society of Civil Engineers – Region 9

Non-Profit Housing Association of Northern California

Opposition

None on file

Analysis Prepared by: Nicole Restmeyer / H. & C.D. / (916) 319-2085