Existing law establishes a low-income housing tax credit program pursuant to which the California Tax Credit Allocation Committee provides procedures and requirements for the allocation, in modified conformity with federal law, of state insurance, personal income, and corporation tax credit amounts to qualified low-income housing projects that have been allocated, or qualify for, a federal low-income housing tax credit, and farmworker housing projects.

Existing law, beginning on or after January 1, 2009, and before January 1, 2020, requires, in the case of a project that receive a preliminary reservation of a state low-income housing tax credit, that the credit be allocated to the partners of a partnership owning the project in accordance with the partnership agreement, as provided. Existing law, beginning on or after January 1, 2016, and before January 1, 2020, authorizes a taxpayer that is allowed a low-income housing tax credit to elect to sell all or a portion of that credit to one or more unrelated parties for each taxable year in which the credit is allowed, as described.

This bill would delete the January 1, 2020, date with respect to both of these provisions, thereby requiring the allocation of credits among partners in accordance with the partnership agreement and authorizing the sale of a credit, as described above, indefinitely.

 UNFINISHED BUSINESS  

Bill No: SB 9

Author: Durazo (D), et al.

Amended: 8/26/20

Vote: 21

PRIOR SENATE VOTES NOT RELEVANT

ASSEMBLY FLOOR: Not available

SUBJECT: Surplus property: sale procedures

SOURCE: Author

DIGEST:

This bill makes changes to the Roberti Act to encourage the sale of homes owned by Department of Transportation (Caltrans) for low- and moderate-income rental housing and makes changes to the Surplus Land Act.

Assembly Amendments

gut and amend the bill to deal with surplus properties.

ANALYSIS:

Existing law:

1. Allows Caltrans to acquire any real property that it considers necessary for state highway purposes.
2. Allows Caltrans, whenever it determines that any real property acquired by the state for highway purposes is no longer necessary, to sell or exchange it in the manner established by the California Transportation Commission.
3. Establishes priorities and procedures for the disposition of surplus residential properties in the SR 710 corridor. Under the Roberti Act, Caltrans must offer surplus property in the following priority order:
   1. First, homes presently occupied by their former owners must be offered for sale to the occupant at fair market value;
   2. Second, homes are to be offered to present occupants that have lived in the property for at least two years and who are persons and families of low or moderate income at an affordable price, but not less than the acquisition price or more than fair market value;
   3. Third, homes must be offered for sale to present occupants that have lived in the home for more than five years and whose household income does not exceed 150 percent of the area median income at an affordable price, but not less than the acquisition price or more than fair market value;
   4. Then, homes not sold under these terms must then be offered to housing-related private and public entities for a price which is best suited economically to using the property for low- or moderate-income housing or, if the property is a historic home, it may be offered to a nonprofit entity dedicated to maintaining it for public access; and,
   5. Any excess homes not sold pursuant to these provisions are then to be sold at fair market value with first priority given to purchasers who are present occupants, second to former tenants in good standing, and then to purchasers who will be owner occupants.
4. Establishes the Surplus Lands Act and defines “surplus land” as land owned in fee simple by any local agency for which the local agency’s governing body takes formal action in a regular public meeting declaring that the land is surplus and is not necessary for the agency’s use.
5. Specifies exemptions to the Surplus Lands Act, including but not limited to, land that is put out to open, competitive bid by a local agency for either of the following purposes:
   1. A housing development, which may have ancillary commercial ground floor uses, that restricts 100 percent of the residential units to persons and families of low or moderate income, with an affordable sales price or an affordable rent for a minimum of 55 years for rental housing and 45 years for ownership housing.
   2. A mixed-use development that is more than one acre in area that includes not less than 300 housing units, and that restricts at least 25 percent of the residential units to lower income households with an affordable sales price or an affordable rent for a minimum of 55 years for rental housing and 45 years for ownership housing.
6. Exempts, from the additional Surplus Land Act requirements enacted by AB 1486 (Ting, Chapter 664, Statutes of 2019), the disposition of a surplus property for which a local agency has entered into an exclusive negotiating agreement or legally binding agreement to dispose of the property as of September 30, 2019.
7. Requires the Department of Housing and Community Development to implement the changes in AB 1486, as specified, on January 1, 2021.

This bill:

1. Provides, under the Roberti Act, that after surplus residential properties have been offered for sale to the present tenants within the State Route 710 corridor who are former owners or meet existing specified income requirements, properties will be disposed of as follows:
   1. First, the property must be offered at fair market value to any other present tenants, who have occupied the property for five years and are in good standing with all rent obligations current and paid in full.
   2. Then, if a property is a historic site it must first be offered to the city in which the property is located or to a nonprofit entity dedicated to rehabilitation and maintaining historic structures, as specified.
   3. Finally, the properties must be offered to housing-related entities at the original purchase price, without being adjusted for inflation.
2. Requires a housing-entity that purchases a property to cause the property to be used for low- and moderate- income housing for at least 55 years, subject to a recorded covenant. Requires any new units added to a property to be used for low- and moderate- income rental housing. Requires the affordability covenant must remain in effect if a property is sold. Requires the housing-entity to comply with monitoring requirements if any, as determined by Caltrans.
3. Requires the first right of occupancy for a property to be offered to the present occupants and requires the rental amount to be in accordance with income certification if the current occupants qualify as low or moderate income.
4. Provides that if the current tenants' income exceeds the limits for low- and moderate- income the rent for those occupants shall be no more than the current rent, or adjusted no higher than the current market rates for the area.
5. Sets the original acquisition price of a property, not adjusted for inflation, as the minimum price of property sold under the Roberti Act.
6. Requires Caltrans to adopt emergency regulations by June 1, 2021, to implement the changes made to the Roberti Act by this bill.
7. Amends the Surplus Land Act as follows:
   1. Adds to the list of "exempt surplus land," surplus land that a local agency has entered into an exclusive negotiated agreement before September 1, 2020 for a housing development, which may have ancillary commercial ground floor uses, that restricts 100 percent of the residential units to persons and families of low or moderate income, with an affordable sales price or an affordable rent for a minimum of 55 years for rental housing and 45 years for ownership housing.
   2. Provides that if a local agency issued a completive request for proposals as of September 30, 2019, that included at least 100 residential units and at least 25% of the total units are restricted to lower income housing, and other factors specified, then the property is not subject to changes made to the Surplus Land Act made by AB 1468 (Ting).
8. Includes language to avoid chaptering out SB 1030 (Committee on Housing) of the current legislative session.

Comments

1. Purpose. According to the author, "Seventy years ago, through a process of eminent domain, the State of California displaced families and altered the community of El Sereno for a freeway expansion. Community opposition delayed the SR 710 project, requiring Caltrans to begin renting out the homes… It is critical that affordable housing be preserved and expanded in the 710 corridor and that Caltrans tenants be able to remain safely in their homes with the ability to buy or continue to rent… SB 9 seeks to provide a long-term solution for healing, focused on the primary goal of expanding and preserving affordability for all these properties while protecting the rights of tenants. The residents of El Sereno deserve a fair process. This bill will move ownership away from Caltrans, secure long-term affordability, and create more affordable options in the corridor, while ensuring current Caltrans tenants are protected by rules on affordable housing and increasing the number of affordable housing units.”
2. SB 9 deals with the sale of Caltrans-owned properties in the SR 710 corridor. Beginning in the 1950s, Caltrans began acquiring property by eminent domain for the purpose of extending the SR 710 freeway through Alhambra, El Sereno, South Pasadena, and Pasadena. Local political opposition stalled the project, at which point Caltrans began renting the residential properties. Property management of the homes in the SR 710 corridor has created long-standing tension between SR 710 corridor tenants and Caltrans. Over the years, tenants argued that Caltrans inadequately maintained the homes and failed to make appropriate improvements. Caltrans argued that the homes were being rented on a temporary basis and were expected to be razed to make way for freeway construction; hence, homes were kept up to health and safety standards, but long-term improvements were not a reasonable expense of public funds.

Caltrans currently owns over 400 properties in the SR 710 corridor. These include roughly 300 homes and 100 multi-family housing units for a total of over 430 units of housing. More than 360 of those units are currently occupied.

1. The SR 710 extension project is not moving forward, so the Caltrans properties along this corridor are now surplus. While, over the past fifty years, alternative concepts have been proposed and evaluated to build the SR 710 freeway between I-10 and I-210, community members, particularly residents of Pasadena, have opposed the freeway project because of concerns about the impact of the freeway on their community.

In 2018, the Los Angeles County Metropolitan Transportation Authority and Caltrans identified transportation system management and transportation demand management as a transportation alternative to the freeway gap closure. This solution does not require demolition of these homes. Last year, legislation restricted Caltrans from pursuing freeway gap closure. As such, many of these properties are no longer needed for the transportation project and are now surplus. Caltrans has begun dispensing of properties. So far, it has sold 22 parcels in the SR 710 corridor across El Sereno, Pasadena, and South Pasadena.

1. SB 9 amends the process for the sale of Caltrans properties in the SR 710 corridor, with the intent to increase opportunities for affordable housing.

Order of sale. The Roberti Act lays out the priority order in which residential surplus properties must be sold. Under current law, single-family homes must be offered to (a) the former owners, (b) present occupants who have occupied the property two years or more who are low or moderate income, (c) present occupants who have occupied the units for five or more years whose incomes do not exceed 150 percent of the area median income, (d) a housing-related private or public entity, (e) any present tenants, and finally, (f) former tenants. This bill amends the order of sale to give present tenants of five or more years the opportunity to buy the property before it is offered to a housing related entity.

Sales Price and Conditions. The Roberti Act generally requires properties to be sold at the fair market value. For low and moderate income households, the price must be affordable, but no lower than the original purchase price. If sold to a housing related entity, current law requires Caltrans to sell it at a reasonable price which is best suited to using the property as affordable housing. The price falls between the floor (the original purchase price) and the ceiling (fair market value). While promulgating regulations for the sale of these properties, Caltrans determined it was legally obligated to adjust its original purchase prices for inflation to determine a minimum sales price for affordable sales. This inflation-adjusted minimum was sometimes above what a tenant could actually afford. However, this adjustment was not described in the Roberti regulations and, in a 2018 lawsuit brought by some affordable price buyers, the court ruled this adjustment was an unenforceable underground regulation.

This bill specifies that the sales price floor is the original acquisition price not adjusted for inflation. Furthermore, Caltrans is required to offer a property at original acquisition price without adjusting for inflation when selling a property to a housing related entity. The housing-related entity would be required to record a 55-year affordability covenant on the property and ensure that affordability is maintained if they sell the property. In addition, any new units added to a property must be restricted to low- and moderate-income households. SB 9 preserve first right of occupancy for current tenants.

Under current law, a housing related entity must develop acquired surplus property as cooperative housing and only offer it for rent only if the cooperative is not feasible. According to information provided by the author’s office, no such cooperatives have been formed since the 1980s. SB 9 instead requires a housing related entity to offer the residence as affordable rental housing.

1. Surplus Land Act (SLA) exemptions for ongoing projects. The SLA spells out the steps local agencies must follow to dispose of land they no longer need. The SLA exempts certain surplus properties from its requirements. AB 1486 expanded SLA requirements with the intent of promoting the use of surplus lands for affordable housing. Among other changes, AB 1486 created new SLA exemptions for affordable housing developments that meet specified criteria.

SB 9 was amended in the Assembly Appropriations Committee to include clean-up to last year’s AB 1486. These changes are intended to facilitate ongoing affordable housing projects that are in-line with existing exemptions in AB 1486. First, AB 1486 exempted from the SLA any surplus land that is put out for competitive bid for housing developments that restrict 100% of the residential units to low or moderate income households or, for mixed-use development, provide at least 300 housing units and restrict 25% of the units for lower income households. SB 9 additionally exempts surplus lands that meet the housing development affordability requirements, but were not put out for competitive bid, if the local agency has entered into an exclusive negotiation agreement before September 1, 2020.

Second, AB 1486 specifies that projects where the local agency has entered into an exclusive negotiation by September 30, 2019 may follow the SLA as it existed before AB 1486 went into effect. SB 9 additionally grandfathers-in projects for which a local agency has issued a competitive request for proposals by September 30, 2019, so long as the proposals include a residential component of at least 100 units with at least 25% restricted to lower income households.

Related/Prior Legislation

SB 7 (Portantino, Chapter 835, Statutes of 2019) restricted Caltrans from considering a freeway or tunnel as a feasible alternative for SR 710 between I-10 and I-210, made other changes related to the SR 710 corridor.

AB 29 (Holden, Chapter 791, Statutes of 2019) restricted Caltrans from considering a freeway or tunnel as a feasible alternative for SR 710 between I-10 and I-210, excluded specified portions of SR 710 from the state freeway system.

AB 1486 (Ting, Chapter 664, Statutes of 2019) imposed additional requirements on the surplus property disposition process.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Assembly Appropriation Committee, the Department of Housing and Community Development estimates annual costs of $736,000 (GF) in the first year and $732,000 (GF) in the second year and ongoing for program design, regulation development, and sales activity with ongoing monitoring activities. Program design includes assisting Caltrans with outreach to the community to solicit eligible purchasers, evaluating submittals and other activities related to the sale of the property.

SUPPORT: (Verified 8/30/20)

Affirmed Housing

California YIMBY

Mayor Eric Garcetti, City of Los Angeles

Public Counsel

San Diego Metropolitan Transit System

Southern California Association of Nonprofit Housing

OPPOSITION: (Verified 8/30/20)

None received

ARGUMENTS IN SUPPORT: Los Angeles Mayor, Eric Garcetti writes in support of this bill that it, “would ensure that [properties along the SR 710 corridor] are dedicated to affordable housing in the long term and facilitate the rehabilitation and use of these properties in the near term by a housing related entity like HACLA. It would do this while maintaining the rights and abilities of former owners and current occupants to take ownership of the properties.”

San Diego Metropolitan Transit System writes in support of this bill that, “SB 9 will allow MTS to move forward with 100% low-income housing projects that originated from an unsolicited proposal process, so long as the development was under an exclusive negotiating agreement entered into before September 1, 2020… MTS has two pending projects that will meet this requirement and passage of SB 9 will allow them to move forward in the current funding cycle.”

Prepared by: Amy Gilson / TRANS. / (916) 651-4121

8/31/20 23:17:08

**** END ****

SENATE THIRD READING

STR Bill Id:SB 9

Author:(Durazo)

As Amended Ver:August 26, 2020

Majority vote

SUMMARY:

This bill makes changes to the Roberti Act to encourage the sale of homes owned by Caltrans for low- and moderate-income rental housing and makes changes to the Surplus Lands Act

Major Provisions

1. Provides that after surplus residential properties have been offered for sale to the existing occupants within the State Route 710 corridor, properties will be disposed of as follows:
   1. The property must be offered at fair market value to purchasers who are the present tenants, who have occupied the property for five years and are in good standing with all rent obligations current and paid in full;
   2. If a property is a historic site it must first be offered to the city in which the property is located or to a nonprofit entity dedicated to rehabilitation and maintaining historic structures, as specified.
   3. The properties must be offered to housing-related entities;
2. Requires a housing-entity that purchases a property to do all of the following:
   1. Cause the property to be used for low- and moderate- income housing for at least 55 years, as follows:.
      1. The purchase and operation of the property must be subject to a recorded covenant that requires the property to remain available to low- and moderate income households for no less than 55 years;
      2. The affordability covenant must remain in effect if a property is sold;
      3. A housing-entity must transfer title of a property to the City of Los Angeles if the housing-related entity is no longer able to maintain ownership; and,
      4. A housing entity must comply with monitoring requirements if any, as determined by the Department of Transportation.
3. Require the first right of occupancy for a property to be offered to the present occupants.
   1. Require the rental amount to be in accordance with income certification if the current occupants qualify as low or moderate income. Provides that if the current tenants' income exceeds the limits for low- and moderate- income the rent for those occupants shall be no more than the current rent, or adjusted no higher than the current market rates for the area.
4. Requires any new units added to a property to be used for low- and moderate- income rental housing; and,
5. Provides relocation assistance as required under existing law.
6. Requires the Department of Transportation to adopt emergency regulations to implement the changes made to the Roberti Act by this bill.
7. Amends the Surplus Lands Act as follows:
   1. Adds to the list of "exempt surplus land," surplus land that a local agency has entered into an exclusive negotiated agreement before September 1, 2020 for a housing development that may have ancillary commercial ground floor uses that restricts 100% of the residential units to housing for person of low and moderate income.
   2. Provides that if a local agency issued a completive request for proposals as of September 30, 2019, that included at least 100 residential units and at least 25% of the total units are restricted to lower income housing, and other factors specified, then the property is not subject to changes made to the Surplus Lands Act made by AB 1468 (Ting) Chapter 664, Statues of 2019.
8. Includes language to avoid chaptering out SB 1030 (Committee on Housing) of the current legislative session.

COMMENTS:

Background: Beginning in the 1950s, Caltrans began acquiring property by eminent domain for the purpose of extending the SR 710 freeway through Alhambra, El Sereno, South Pasadena, and Pasadena. Local political opposition stalled the project, at which point Caltrans began renting the residential properties. Caltrans currently owns over 400 properties in the corridor, most of them single-family homes.

Property management of the homes in the SR 710 corridor has created long-standing tension between SR 710 corridor tenants and Caltrans. In 2018 the Los Angeles County Metropolitan Transportation Authority (LA Metro) and Caltrans identified a transportation alternative that would not require demolition of these homes. As such, many of these properties are no longer needed for the transportation project and are now surplus. Caltrans has begun dispensing of properties and is currently continuing to sell excess properties.

The Roberti Act: The Roberti Act outlines the procedure for selling off surplus properties owned by Caltrans. Single-family homes must first be offered at fair market value to the former owners, second to present occupants who have occupied the property two years or more who are low or moderate income, third to present occupants who have occupied the units for five or more years whose incomes do not exceed 150% of the area median income (AMI). Properties that are not purchased by a current or former owner must be offered to housing-related private or public entity at a reasonable price. Housing related entities are required to offer the property as a limited-equity cooperative with first right of refusal for occupancy to existing occupants unless that is infeasible in which case the housing can be offered to low- and moderate-income households.

The Roberti Act requires properties to be sold at the fair market value. For low and moderate income households, the price must be affordable. The properties cannot be sold for less than what Caltrans originally paid for the home. The price falls between the ceiling – the fair market value—and the floor – the original purchase price. Caltrans was sued recently for adjusting the sales price by inflation. As a result, some previous owners had to pay six to seven times more than what they originally paid for the property in the 1960s. The court found Caltrans policy contrary to state law. This bill proposes to require Caltrans to sell surplus properties for no less the price paid by Caltrans for the original acquisition of the property, without being adjusted for inflation.

This bill creates an alternative process for the sale of surplus properties to housing related entities. For those properties, after Caltrans offered them for sale per the current process, the property would be available for purchase by a housing-related entity. Existing law requires a housing entity to pay a reasonable price for the property and when a property is sold a portion of the equity goes into an affordable housing trust fund. This bill would change the purchase price to Caltran's acquisition price without adjusting for inflation. As alternative to this process, a housing-related entity would be required to record a 55-year affordability covenant on the property and ensure if it is sold that it is sold to the City of Los Angeles and the affordability is maintained. In addition, any new units added to a property, like an additional detached unit (ADU), must be restricted to low- and moderate-income households.

According to the Author:

According to the author, "Seventy years ago, through a process of eminent domain, the State of California displaced families and altered the community of El Sereno for a freeway expansion. Community opposition delayed the SR 710 project, requiring Caltrans to begin renting out the homes. Within the SR 710 corridor, tenants have experienced years of mismanagement, which have particularly affected the El Sereno neighborhood where homes are in a state of worsening disrepair and vacancies have proliferated. For over five decades, Caltrans bought properties without regard for the families in the corridor, disrupting the economic, social and cultural fabric of this predominately Latino community. As the future of the 710 has been decided, El Sereno has been disproportionately and acutely impacted by neglect, traffic, congestion and vacancies. With over 100 homes currently vacant and many in poor condition, we have an opportunity to repair and improve the housing in this neighborhood, and significantly increase long-term affordable housing."

Arguments in Support:

Los Angeles Mayor, Eric Garcetti writes in support of this bill, "that properties along the SR 710 corridor represent an excellent opportunity to make these underutilized housing resources available for affordable housing, and allow the City to take a comprehensive approach to plan for additional housing investment in the El Sereno area. This bill would ensure that these properties are dedicated to affordable housing in the long term and facilitate the rehabilitation and use of these properties in the near term by a housing related entity like HACLA. It would do this while maintaining the rights and abilities of former owners and current occupants to take ownership of the properties."

Arguments in Opposition:

None on file

FISCAL COMMENTS:

According to the Assembly Committee on Appropriations, the Department of Housing and Community Development (HCD) estimates annual costs of $736,000 (GF) in the first year and $732,000 (GF) in the second year and ongoing for program design, regulation development, and sales activity with ongoing monitoring activities. Program design includes assisting CalTrans with outreach to the community to solicit eligible purchasers, evaluating submittals and other activities related to the sale of the property.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Chiu, Diep, Gabriel, Gloria, Kiley, Limón, Bonta, Quirk-Silva

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bauer-Kahan, Bloom, Bonta, Calderon, Carrillo, Chau, Megan Dahle, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Petrie-Norris, Quirk, Robert Rivas, Voepel

UPDATED:

VERSION: August 26, 2020

CONSULTANT: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0003508

Date of Hearing: August 18, 2020

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 9

Author:(Durazo) – As Amended Ver:August 3, 2020

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill amends the Roberti Act to encourage the sale of homes owned by the California Department of Transportation (Caltrans) in the State Route 710 corridor for low- and moderate-income rental housing. Specifically, this bill:

1. Specifies requirements for the sale of surplus residential properties that have been offered to the existing occupants in the 90032 zip code of the El Sereno neighborhood of the City of Los Angeles as follows:
2. The properties must be offered to housing-related entities and sold in “as is” condition.
3. The sales price of the property must be the price paid by Caltrans at original acquisition and the original acquisition price must not be adjusted for inflation.
4. Requires a housing-entity that purchases a property under “1” above to cause the property to be used for low- and moderate- income housing for at least 55 years, require the first right of occupancy to be offered to the present occupants, require new units added to a property to be used for low- and moderate-income rental housing, and provide relocation assistance as required under existing law.
5. Specifies priorities and procedures for selling a property located in the City of Los Angeles that does not meet the criteria in “1” above and is not sold to a housing-related entity for low- and moderate- income housing.

FISCAL EFFECT:

The Department of Housing and Community Development (HCD) estimates annual costs of $736,000 (GF) in the first year and $732,000 (GF) in the second year and ongoing for program design, regulation development, and sales activity with ongoing monitoring activities. Program design includes assisting CalTrans with outreach to the community to solicit eligible purchasers, evaluating submittals and other activities related to the sale of the property.

COMMENTS:

1. Purpose. This bill seeks to preserve and expand affordable housing in the SR 710 corridor while ensuring current tenants are protected. According to Los Angeles Mayor, Eric Garcetti:

Properties along the SR 710 corridor represent an excellent opportunity to make these underutilized housing resources available for affordable housing, and allow the City to plan for additional housing investment in the El Sereno area. This bill would ensure these properties are dedicated to affordable housing in the long term and facilitate the rehabilitation and use of these properties in the near term, while maintaining the rights and abilities of former owners and current occupants to take ownership of the properties.

1. Background. In the 1950s, Caltrans began acquiring property by eminent domain for the purpose of extending the SR 710 freeway through Alhambra, El Sereno, South Pasadena, and Pasadena. Local political opposition stalled the project, and Caltrans began renting the residential properties. Caltrans currently owns over 400 properties in the SR 710 corridor, including 330 homes and 103 multi-family housing units.

Property management of the homes in the SR 710 corridor has created long-standing tension between SR 710 corridor tenants and Caltrans. Over the years, tenants argued that Caltrans inadequately maintained the homes and failed to make appropriate improvements. Caltrans argued that the homes were being rented on a temporary basis and were expected to be razed to make way for freeway construction; hence, homes were kept up to health and safety standards, but long-term improvements were not a reasonable expense of public funds.

Over the past fifty years, alternative concepts have been proposed and evaluated to build the SR 710 freeway between I-10 and I-210. However, community members, particularly residents of Pasadena, have opposed the freeway project over concerns about the impact of the freeway on their community.

In 2018, the Los Angeles County Metropolitan Transportation Authority (LA Metro) and Caltrans identified a transportation alternative that does not require demolition of these homes. Accordingly, many of these properties are no longer needed by Caltrans and are now surplus. Caltrans has begun dispensing of properties and is currently continuing to sell excess properties.

1. The Roberti Act. The Roberti Act outlines the procedure for selling surplus properties owned by Caltrans. Single-family homes must first be offered at fair market value to the former owners, second to present occupants who have occupied the property two years or more who are low or moderate income, third to present occupants who have occupied the units for five or more years whose incomes do not exceed 150% of the area median income (AMI). Properties not purchased by a current or former owner must be offered to housing-related private or public entity at a reasonable price.

The Roberti Act requires properties be sold at the fair market value. For low- and moderate- income households, the price must be affordable, but the properties cannot be sold for less than what Caltrans originally paid. Caltrans was sued recently for adjusting the original sales price by inflation. As a result, some previous owners paid substantially more than they originally paid for the property in the 1960s. The court found Caltrans policy contrary to state law. This bill requires Caltrans to sell surplus properties for no less than the original acquisition price paid by Caltrans, without being adjusted for inflation.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: July 29, 2020

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

SBPCA Bill Id:SB 9

Author:(Durazo) – As Amended Ver:July 27, 2020

AS PROPOSED TO BE AMENDED

SENATE VOTE: 38-0

SUBJECT: Surplus residential property: sale procedures: generally and El Sereno neighborhood

SUMMARY: Makes changes to the Roberti Act to encourage the sale of homes owned by Caltrans for low- and moderate-income rental housing, as well as other changes. Specifically, this bill:

1. Specifies requirements for sale of surplus residential properties that have been offered to the existing occupants in the 90032 zip code of the El Sereno neighborhood of the City of Los Angeles:
   1. The properties must be offered to housing-related entities;
2. The sales price of the property must be the price paid by the Department of Transportation at original acquisition and the original acquisition price must not be adjusted for inflation; and
3. The property must be sold in “as is” condition.
4. Requires a housing-entity that purchases a property to do all of the following:
5. Cause the property to be used for low- and moderate- income housing for at least 55 years, as follows:.
6. The purchase and operation of the property must be subject to a recorded covenant that requires the property to remain available to low- and moderate income households for no less than 55 years;
7. The affordability covenant must remain in effect if a property is sold;
8. A housing-entity must transfer title of a property to the City of Los Angeles if the housing-related entity is no longer able to maintain ownership; and,
9. A housing entity must comply with monitoring requirements if any, as determined by the Department of Transportation.
10. Require the first right of occupancy for a property to be offered to the present occupants.
    1. Require the rental amount to be in accordance with income certification if the current occupants qualify as low or moderate income. Provides that if the current tenants’ income exceeds the limits for low- and moderate- income the rent for those occupants shall be no more than the current rent, or adjusted no higher than the current market rates for the area.
11. Requires any new units added to a property to be used for low- and moderate- income rental housing; and,
12. Provides relocation assistance as required under existing law.
13. Provides that a property located in the City of Los Angeles that does not meet the criteria in (1) above, and is not sold to a housing-related entity for low- and moderate- income housing, must be sold with the following priority and procedures:
14. The property must be offered at fair market value to purchasers who are the present tenants in good standing with all rent obligations current and paid in full;
15. The property must be sold at fair market value with priority given first to purchasers who are former tenants of the property who were in good standing at the time they vacated the premise, with priority given to the most recent tenants;
16. A selling agent is authorized to commence sale of a property 30 days after the selling agency has done both of the following:
17. Posted information regarding the sale on the selling agency’s internet website; and
18. Made a good faith effort to provide written notice, by first-class mail, to the last known address of each former tenant of the property;
19. Requires the property to be offered a second time to present tenants at fair market value to purchasers who are the present tenants in good standing with all rent obligations current and paid in full; and
20. The property must be offered at fair market value with property to purchasers who will be owner-occupants.

EXISTING LAW:

1. Allows Caltrans to acquire any real property that it considers necessary for state highway purposes.
2. Allows Caltrans, whenever it determines that any real property acquired by the state for highway purposes is no longer necessary, to sell or exchange it in the manner and upon terms, standards, and conditions established by the California Transportation Commission.
3. Requires Caltrans, to the greatest extent possible, to offer to sell or exchange excess real property within one year from the date that it determines the property is excess.
4. Generally requires state and local agencies, prior to disposing of excess lands, first to offer property for sale or lease to local public agencies, housing authorities, or redevelopment agencies within whose jurisdiction the property is located. Requires Caltrans to give priority first to entities agreeing to use the land for low- or moderate-income housing then to entities for open-space purposes, school facilities construction, enterprise zone purposes, and infill opportunities, in that order.
5. Provides an exception from these provisions for the disposal of excess residential properties in the unconstructed portion of the SR 710 corridor, i.e., the portion of SR 710 addressed in this bill. According to this exception, excess residential properties in this corridor are to be sold as follows:
   1. First, homes presently occupied by their former owners must be offered for sale to the occupant at fair market value.
   2. Second, homes are to be offered to present occupants that have lived in the property for at least two years and who are persons and families of low or moderate income;
   3. Third, homes must be offered for sale to present occupants that have lived in the home for more than five years and whose household income does not exceed 150 percent of the area median income;
      
   4. Homes offered to income-qualified buyers are to be offered at an affordable price, but not less than the acquisition price or more than fair market value.
   5. Homes not sold under these terms must then be offered to housing-related private and public entities for a price which is best suited economically to using the property for low- or moderate-income housing; and,
   6. Any excess homes not sold pursuant to these provisions are then to be sold at fair market value with first priority given to purchasers who are present occupants and then to purchasers who will be owner occupants.
6. Directs 50 percent of the revenue collected by Caltrans from rental of historic property that is located in a freeway right-of-way corridor to be deposited in the Historic Property Maintenance Fund to pay for costs associated with maintenance and operation of the historic properties.
7. As set forth in regulations, establishes an Affordable Rent Program by which Caltrans considers affordability when adjusting rents for current residential tenants who are economically disadvantaged.

FISCAL EFFECT: Unknown

COMMENTS:

Author’s statement: According to the author, “Seventy years ago, through a process of eminent domain, the State of California displaced families and altered the community of El Sereno for a freeway expansion. Community opposition delayed the SR 710 project, requiring Caltrans to begin renting out the homes. Within the SR 710 corridor, tenants have experienced years of mismanagement, which have particularly affected the El Sereno neighborhood where homes are in a state of worsening disrepair and vacancies have proliferated. For over five decades, Caltrans bought properties without regard for the families in the corridor, disrupting the economic, social and cultural fabric of this predominately Latino community. As the future of the 710 has been decided, El Sereno has been disproportionately and acutely impacted by neglect, traffic, congestion and vacancies. With over 100 homes currently vacant and many in poor condition, we have an opportunity to repair and improve the housing in this neighborhood, and significantly increase long-term affordable housing. 

We must actualize the goals of affordable housing in California, a top priority for policymakers. It is critical that affordable housing be preserved and expanded in the 710 corridor and that Caltrans tenants be able to remain safely in their homes with the ability to buy or continue to rent. Residents renting apartments and homes in the 710 corridor deserve fair treatment and stable housing. SB 9 seeks to provide a long-term solution for healing, focused on the primary goal of expanding and preserving affordability for all these properties while protecting the rights of tenants. The residents of El Sereno deserve a fair process. This bill will move ownership away from Caltrans, secure long-term affordability, and create more affordable options in the corridor, while ensuring current Caltrans tenants are protected by rules on affordable housing and increasing the number of affordable housing units.”

Background: Beginning in the 1950s, Caltrans began acquiring property by eminent domain for the purpose of extending the SR 710 freeway through Alhambra, El Sereno, South Pasadena, and Pasadena. Local political opposition stalled the project, at which point Caltrans began renting the residential properties. Caltrans currently owns over 400 properties in the corridor, most of them single-family homes.

Property management of the homes in the SR 710 corridor has created long-standing tension between SR 710 corridor tenants and Caltrans. Over the years, tenants argued that Caltrans inadequately maintained the homes and failed to make appropriate improvements. Caltrans argued that the homes were being rented on a temporary basis and were expected to be razed to make way for freeway construction; hence, homes were kept up to health and safety standards, but long-term improvements were not a reasonable expense of public funds.

No more freeway gap closure: While, over the past fifty years, alternative concepts have been proposed and evaluated to build the SR 710 freeway between I-10 and I-210, community members, particularly residents of Pasadena, have opposed the freeway project because of concerns about the impact of the freeway on their community.

As noted, Caltrans currently owns over 400 properties in the SR 710 corridor, including 330 homes and 103 multi-family housing units. Additionally, six nonprofits currently reside in properties owned by Caltrans within this corridor.

In 2018 the Los Angeles County Metropolitan Transportation Authority (LA Metro) and Caltrans identified a transportation alternative that would not require demolition of these homes. As such, many of these properties are no longer needed for the transportation project and are now surplus. Caltrans has begun dispensing of properties and is currently continuing to sell excess properties.

The Roberti Act: The Roberti Act outlines the procedure for selling off surplus properties owned by Caltrans. Single-family homes must first be offered at fair market value to the former owners, second to present occupants who have occupied the property two years or more who are low or moderate income, third to present occupants who have occupied the units for five or more years whose incomes do not exceed 150 percent of the area median income (AMI). Properties that are not purchased by a current or former owner must be offered to housing-related private or public entity at a reasonable price. Housing related entities are required to offer the property as a limited-equity cooperative with first right of refusal for occupancy to existing occupants unless that is infeasible in which case the housing can be offered to low- and moderate-income households.

The Roberti Act requires properties to be sold at the fair market value. For low and moderate income households, the price must be affordable. The properties cannot be sold for less than what Caltrans originally paid for the home. The price falls between the ceiling – the fair market value—and the floor – the original purchase price. Caltrans was sued recently for adjusting the sales price by inflation. As a result, some previous owners had to pay six to seven times more than what they originally paid for the property in the 1960s. The court found Caltrans policy contrary to state law. This bill proposes to require Caltrans to sell surplus properties for no less the price paid by Caltrans for the original acquisition of the property, without being adjusted for inflation.

90032: This bill creates an alternative process for the sale of surplus properties to housing related entities, in the El Sereno neighborhood in the City of Los Angeles, located in the 90032 postal ZIP Code. For those properties, after Caltrans offered them for sale per the current process, the property would be available for purchase by a housing-related entity. Existing law requires a housing entity to pay a reasonable price for the property and when a property is sold a portion of the equity goes into an affordable housing trust fund. This bill would change the purchase price to Caltran’s acquisition price without adjusting for inflation. As alternative to this process, a housing-related entity would be required to record a 55-year affordability covenant on the property and ensure if it is sold that it is sold to the City of Los Angeles and the affordability is maintained. In addition, any new units added to a property, like an additional detached unit (ADU), must be restricted to low- and moderate-income households. Finally this bill, would require homes to be sold to tenants rather than occupants in good standing.

Arguments in support: Los Angeles Mayor, Eric Garcetti writes in support of this bill, “that properties along the SR 710 corridor represent an excellent opportunity to make these underutilized housing resources available for affordable housing, and allow the City to take a comprehensive approach to plan for additional housing investment in the El Sereno area. This bill would ensure that these properties are dedicated to affordable housing in the long term and

facilitate the rehabilitation and use of these properties in the near term by a housing

related entity like HACLA. It would do this while maintaining the rights and abilities of

former owners and current occupants to take ownership of the properties.”

Arguments in opposition: None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

Eric Garcetti, Mayor of Los Angeles

Opposition

None on file

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

Amended Mock-up for 2019-2020 SB-9 (Durazo (S))

Mock-up based on Version Number 97 - Amended Assembly 7/27/20

Date of Hearing: July 28, 2020

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

SBPCA Bill Id:SB 9

Author:(Durazo) – As Amended Ver:July 27, 2020

AS PROPOSED TO BE AMENDED

SENATE VOTE: 38-0

SUBJECT: Surplus residential property: sale procedures: generally and El Sereno neighborhood

SUMMARY: Makes changes to the Roberti Act to encourage the sale of homes owned by Caltrans for low- and moderate-income rental housing, as well as other changes. Specifically, this bill:

1. Specifies requirements for sale of surplus residential properties that have been offered to the existing occupants in the 90032 zip code of the El Sereno neighborhood of the City of Los Angeles:
   1. The properties must be offered to housing-related entities;
2. The sales price of the property must be the price paid by the Department of Transportation at original acquisition and the original acquisition price must not be adjusted for inflation; and
3. The property must be sold in “as is” condition.
4. Requires a housing-entity that purchases a property to do all of the following:
5. Cause the property to be used for low- and moderate- income housing for at least 55 years, as follows:.
6. The purchase and operation of the property must be subject to a recorded covenant that requires the property to remain available to low- and moderate income households for no less than 55 years;
7. The affordability covenant must remain in effect if a property is sold;
8. A housing-entity must transfer title of a property to the City of Los Angeles if the housing-related entity is no longer able to maintain ownership; and,
9. A housing entity must comply with monitoring requirements if any, as determined by the Department of Transportation.
10. Require the first right of occupancy for a property to be offered to the present occupants.
    1. Require the rental amount to be in accordance with income certification if the current occupants qualify as low or moderate income. Provides that if the current tenants’ income exceeds the limits for low- and moderate- income the rent for those occupants shall be no more than the current rent, or adjusted no higher than the current market rates for the area.
11. Requires any new units added to a property to be used for low- and moderate- income rental housing; and,
12. Provides relocation assistance as required under existing law.
13. Provides that a property located in the City of Los Angeles that does not meet the criteria in (1) above, and is not sold to a housing-related entity for low- and moderate- income housing, must be sold with the following priority and procedures:
14. The property must be offered at fair market value to purchasers who are the present tenants in good standing with all rent obligations current and paid in full;
15. The property must be sold at fair market value with priority given first to purchasers who are former tenants of the property who were in good standing at the time they vacated the premise, with priority given to the most recent tenants;
16. A selling agent is authorized to commence sale of a property 30 days after the selling agency has done both of the following:
17. Posted information regarding the sale on the selling agency’s internet website; and
18. Made a good faith effort to provide written notice, by first-class mail, to the last known address of each former tenant of the property;
19. Requires the property to be offered a second time to present tenants at fair market value to purchasers who are the present tenants in good standing with all rent obligations current and paid in full; and
20. The property must be offered at fair market value with property to purchasers who will be owner-occupants.

EXISTING LAW:

1. Allows Caltrans to acquire any real property that it considers necessary for state highway purposes.
2. Allows Caltrans, whenever it determines that any real property acquired by the state for highway purposes is no longer necessary, to sell or exchange it in the manner and upon terms, standards, and conditions established by the California Transportation Commission.
3. Requires Caltrans, to the greatest extent possible, to offer to sell or exchange excess real property within one year from the date that it determines the property is excess.
4. Generally requires state and local agencies, prior to disposing of excess lands, first to offer property for sale or lease to local public agencies, housing authorities, or redevelopment agencies within whose jurisdiction the property is located. Requires Caltrans to give priority first to entities agreeing to use the land for low- or moderate-income housing then to entities for open-space purposes, school facilities construction, enterprise zone purposes, and infill opportunities, in that order.
5. Provides an exception from these provisions for the disposal of excess residential properties in the unconstructed portion of the SR 710 corridor, i.e., the portion of SR 710 addressed in this bill. According to this exception, excess residential properties in this corridor are to be sold as follows:
   1. First, homes presently occupied by their former owners must be offered for sale to the occupant at fair market value.
   2. Second, homes are to be offered to present occupants that have lived in the property for at least two years and who are persons and families of low or moderate income;
   3. Third, homes must be offered for sale to present occupants that have lived in the home for more than five years and whose household income does not exceed 150 percent of the area median income;
      
   4. Homes offered to income-qualified buyers are to be offered at an affordable price, but not less than the acquisition price or more than fair market value.
   5. Homes not sold under these terms must then be offered to housing-related private and public entities for a price which is best suited economically to using the property for low- or moderate-income housing; and,
   6. Any excess homes not sold pursuant to these provisions are then to be sold at fair market value with first priority given to purchasers who are present occupants and then to purchasers who will be owner occupants.
6. Directs 50 percent of the revenue collected by Caltrans from rental of historic property that is located in a freeway right-of-way corridor to be deposited in the Historic Property Maintenance Fund to pay for costs associated with maintenance and operation of the historic properties.
7. As set forth in regulations, establishes an Affordable Rent Program by which Caltrans considers affordability when adjusting rents for current residential tenants who are economically disadvantaged.

FISCAL EFFECT: Unknown

COMMENTS:

Author’s statement: According to the author, “Seventy years ago, through a process of eminent domain, the State of California displaced families and altered the community of El Sereno for a freeway expansion. Community opposition delayed the SR 710 project, requiring Caltrans to begin renting out the homes. Within the SR 710 corridor, tenants have experienced years of mismanagement, which have particularly affected the El Sereno neighborhood where homes are in a state of worsening disrepair and vacancies have proliferated. For over five decades, Caltrans bought properties without regard for the families in the corridor, disrupting the economic, social and cultural fabric of this predominately Latino community. As the future of the 710 has been decided, El Sereno has been disproportionately and acutely impacted by neglect, traffic, congestion and vacancies. With over 100 homes currently vacant and many in poor condition, we have an opportunity to repair and improve the housing in this neighborhood, and significantly increase long-term affordable housing. 

We must actualize the goals of affordable housing in California, a top priority for policymakers. It is critical that affordable housing be preserved and expanded in the 710 corridor and that Caltrans tenants be able to remain safely in their homes with the ability to buy or continue to rent. Residents renting apartments and homes in the 710 corridor deserve fair treatment and stable housing. SB 9 seeks to provide a long-term solution for healing, focused on the primary goal of expanding and preserving affordability for all these properties while protecting the rights of tenants. The residents of El Sereno deserve a fair process. This bill will move ownership away from Caltrans, secure long-term affordability, and create more affordable options in the corridor, while ensuring current Caltrans tenants are protected by rules on affordable housing and increasing the number of affordable housing units.”

Background: Beginning in the 1950s, Caltrans began acquiring property by eminent domain for the purpose of extending the SR 710 freeway through Alhambra, El Sereno, South Pasadena, and Pasadena. Local political opposition stalled the project, at which point Caltrans began renting the residential properties. Caltrans currently owns over 400 properties in the corridor, most of them single-family homes.

Property management of the homes in the SR 710 corridor has created long-standing tension between SR 710 corridor tenants and Caltrans. Over the years, tenants argued that Caltrans inadequately maintained the homes and failed to make appropriate improvements. Caltrans argued that the homes were being rented on a temporary basis and were expected to be razed to make way for freeway construction; hence, homes were kept up to health and safety standards, but long-term improvements were not a reasonable expense of public funds.

No more freeway gap closure: While, over the past fifty years, alternative concepts have been proposed and evaluated to build the SR 710 freeway between I-10 and I-210, community members, particularly residents of Pasadena, have opposed the freeway project because of concerns about the impact of the freeway on their community.

As noted, Caltrans currently owns over 400 properties in the SR 710 corridor, including 330 homes and 103 multi-family housing units. Additionally, six nonprofits currently reside in properties owned by Caltrans within this corridor.

In 2018 the Los Angeles County Metropolitan Transportation Authority (LA Metro) and Caltrans identified a transportation alternative that would not require demolition of these homes. As such, many of these properties are no longer needed for the transportation project and are now surplus. Caltrans has begun dispensing of properties and is currently continuing to sell excess properties.

The Roberti Act: The Roberti Act outlines the procedure for selling off surplus properties owned by Caltrans. Single-family homes must first be offered at fair market value to the former owners, second to present occupants who have occupied the property two years or more who are low or moderate income, third to present occupants who have occupied the units for five or more years whose incomes do not exceed 150 percent of the area median income (AMI). Properties that are not purchased by a current or former owner must be offered to housing-related private or public entity at a reasonable price. Housing related entities are required to offer the property as a limited-equity cooperative with first right of refusal for occupancy to existing occupants unless that is infeasible in which case the housing can be offered to low- and moderate-income households.

The Roberti Act requires properties to be sold at the fair market value. For low and moderate income households, the price must be affordable. The properties cannot be sold for less than what Caltrans originally paid for the home. The price falls between the ceiling – the fair market value—and the floor – the original purchase price. Caltrans was sued recently for adjusting the sales price by inflation. As a result, some previous owners had to pay six to seven times more than what they originally paid for the property in the 1960s. The court found Caltrans policy contrary to state law. This bill proposes to require Caltrans to sell surplus properties for no less the price paid by Caltrans for the original acquisition of the property, without being adjusted for inflation.

90032: This bill creates an alternative process for the sale of surplus properties to housing related entities, in the El Sereno neighborhood in the City of Los Angeles, located in the 90032 postal ZIP Code. For those properties, after Caltrans offered them for sale per the current process, the property would be available for purchase by a housing-related entity. Existing law requires a housing entity to pay a reasonable price for the property and when a property is sold a portion of the equity goes into an affordable housing trust fund. This bill would change the purchase price to Caltran’s acquisition price without adjusting for inflation. As alternative to this process, a housing-related entity would be required to record a 55-year affordability covenant on the property and ensure if it is sold that it is sold to the City of Los Angeles and the affordability is maintained. In addition, any new units added to a property, like an additional detached unit (ADU), must be restricted to low- and moderate-income households. Finally this bill, would require homes to be sold to tenants rather than occupants in good standing.

Arguments in support: Los Angeles Mayor, Eric Garcetti writes in support of this bill, “that properties along the SR 710 corridor represent an excellent opportunity to make these underutilized housing resources available for affordable housing, and allow the City to take a comprehensive approach to plan for additional housing investment in the El Sereno area. This bill would ensure that these properties are dedicated to affordable housing in the long term and

facilitate the rehabilitation and use of these properties in the near term by a housing

related entity like HACLA. It would do this while maintaining the rights and abilities of

former owners and current occupants to take ownership of the properties.”

Arguments in opposition: None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

Eric Garcetti, Mayor of Los Angeles

Opposition

None on file

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

Amended Mock-up for 2019-2020 SB-9 (Durazo (S))

Mock-up based on Version Number 97 - Amended Assembly 7/27/20

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Income taxes: low-income housing credits: allocation: sale of credits

Extends the two forms of special treatment the Legislature has provided under to the Low-Income Housing Tax Credit.

Background

Current state law allows credits against the Personal Income Tax, Corporation Tax, and Gross Premiums Tax to subsidize investors who provide project capital to affordable rental housing projects. State Low-Income Housing Tax Credits (LIHTCs) are calculated in partial conformity with federal LIHTCs, and complement federal credits in the hopes of providing capital necessary to pay costs to construct affordable housing.

Federal tax credits can equal either 70% of the qualified basis – generally equal to the costs of construction - for projects that are not federally subsidized (known as 9% credits), or 30% for federally subsidized (known as 4% credits), and are claimed over a ten year period after the building is placed in service. Tax-exempt bonds are generally the source of any qualifying federal subsidy. Under federal law, projects must remain affordable for 15 years.

The California Tax Credit Allocation Committee (CTCAC), comprised of the State Treasurer, the State Controller, the Director of Finance, and three non-voting members, allocates state and federal LIHTCs. CTCAC awards 9% federal credits up to a dollar threshold set in federal law using a competitive process, totaling $97.1 million in federal credits for 64 projects in 2017, inducing almost one billion dollars in equity financing, and developing 3,844 affordable rental units. While federal law caps CTCAC’s authority to allocate federal 9% and state tax credits, CTCAC can allocate 4% credits with few limits. CTCAC allocated $124.9 million in federal credits for 105 subsidized projects in 2017, generating $1.2 billion in equity investment, constructing or rehabilitating 4,220 units.

CTCAC can only allocate state tax credits when federal credits do not provide sufficient subsidy, up to a cap set in state law, plus any unused credits from previous years. Taxpaying investors can only claim state credits in the first four taxable years after a project is placed in service. State law generally excludes acquisition costs from basis for the purposes of state LIHTCs, except for previously subsidized projects that qualify as "at-risk" of being converted to market rate. CTCAC awarded state credits of $102.2 million to 24 projects in 2017.

Housing developers design projects and apply to CTCAC for credits. CTCAC then reviews the application in a competitive process; if CTCAC grants credits, it then enters a regulatory agreement with the housing developer setting forth income and rent restrictions. CTCAC then reserves the amount of credit for that application, and then the housing developer forms partnership agreements with investors that provide project capital for the housing in exchange for the credits at a discount. The developer then returns to CTCAC for a final credit allocation. Investors claim the credit until exhausted, then walk away from the partnership, and deduct the amount paid to the partnership in exchange for the tax credits as a capital loss.

Federal law limits that the initial incomes of households in tax credit units. When a project developer or sponsor applies for tax credits, he or she irrevocably chooses one of the following minimum federal set-aside requirements:

• A minimum of 40% of the units must be both rent-restricted and occupied by households whose incomes are 60% or less of the area median gross income, adjusted for family size;
• A minimum of 20% of the units must be both rent-restricted and occupied by households whose incomes are 50% or less of the area median gross income, adjusted for family size; or
• A minimum of 40% of the units must be both rent-restricted and occupied by households whose incomes are 80% or less of the area median gross income, adjusted for family size, and the average income and rent limitation must not exceed 60% of the area median income.

The Internal Revenue Service (IRS) ensures compliance with affordability and other restrictions set in federal law for the 15-year federal compliance period. CTCAC enforces the regulatory agreement up to 30 years for older projects, or 55 years for newer ones, which includes physical inspections. If either IRS or CTCAC detects violations, investors can have credits recaptured.

The Legislature has enacted two different forms of special treatment for LIHTCs in the hopes of driving additional investment in affordable housing. First, partnership agreements formed to construct housing projects can disconnect federal rules to allow allocations of state tax credits to investors in a manner that differs from the proportional division of the federal credit (SB 585, Lowenthal, 2008). This change responds to the situations where some investors have a state tax obligation, but not a federal one, and federal partnership rules generally require partnership agreements to allocate federal and state credits the same way. However, any taxpayer who receives a credit under a partnership allocation of tax credits not in accordance with federal rules must wait until the expiration of the ten-year carry-forward period of the federal LIHTC to claim a capital loss from the partnership.

Additionally, taxpayers receiving credits until January 1, 2020, can sell credits to taxpayers who do not enter the partnership agreement under certain conditions (SB 837, Committee on Budget and Fiscal Review, 2016), after the Governor vetoed a similar measure (SB 377, Beall, 2015). To sell a credit:

• The taxpayer must make an irrevocable election to do so;
• The consideration received for the sale is greater than 80% of its value, and CTCAC’s executive director can rescind the election to sell the credit if the consideration received falls below 80% of the amount of credit reserved; and
• It must be sold to an unrelated party who has previously claimed the federal or state LIHTC in connection with a project in this state.

SB 837 prohibited a taxpayer who purchases a credit from subsequently reselling it. The measure also extended SB 585’s extension to January 1, 2020.

On December 22, 2017, President Trump signed HR 1, which enacted fundamental changes to the federal income tax, including eliminating the graduated rate schedule for corporate income with a top rate of 35%, and replacing it with a single rate of 21%, effective in the 2018 taxable year. HR 1 also limits significantly the taxation of a U.S. taxpayer’s foreign source income by adopting a “territorial system,” which allows a 100% deduction for the foreign-source portion of dividends received from its 10% owned foreign corporations. As a result, corporations will pay much less in federal taxes, thereby reducing the demand for federal LIHTCs.

Seeking to maintain the authority previously added by the Legislature, and partially offset the negative effects of HR 1 on LIHTC demand, affordable housing advocates want to eliminate the sunset date for both forms of special treatment, and modify the previous restrictions on credit sales.

Proposed Law

Senate Bill 9 extends the two forms of special treatment the Legislature has provided under to the Low-Income Housing Tax Credit, and applies its changes to the Gross Premiums, Personal Income, and Corporation Taxes. First, the measure eliminates the sunset on the authority for partnership agreements formed to construct affordable housing to allocate state tax credits to investors in a manner that differs from the proportional division of the federal credit. Second, the measure removes the sunset date on the authority for taxpayers to sell credits, with the following modifications:

• Allows the taxpayer to revoke the election once to sell credits, at any time before CTCAC makes a final allocation of credit, after which the election becomes irrevocable. However, the taxpayer cannot elect to sell credits unless they stated that it will do so in its application to CTCAC;
• Permits any taxpayer to claim the credit, not only those who have previously claimed the state or federal LIHTC in connection with a project in the state; and,
• Removes the prohibition against taxpayers purchasing credits from subsequently reselling them.

The measure makes a conforming change to eliminate the authority for CTCAC’s executive director to rescind an election to sell the credit if the consideration received falls below 80% of the amount of credit reserved, and maintains the requirement that consideration received for the sale must not be less than 80% of the value of the credit.

State Revenue Impact

Pending.

Comments

1. Purpose of the bill. According to the author, “SB 9 will increase the impact of the state’s existing low-income housing tax credit by continuing to allow the tax credits to be structured in a way that is not subject to federal taxation. In 2016, California enacted legislation that permitted a developer who receives an award of state LIHTCs to sell the credits to an investor without requiring the investor to be part of the project ownership. Under federal and state tax laws, tax credits that are bought by an investor are considered a payment of the investor’s tax rather than a reduction in their tax liability. As a result, purchased credits do not reduce the taxpayer’s federal deductions. To date, CTCAC and the California Housing Partnership Corporation have data to show the value of the tax credits has increased by 14 cents, or closer to 80 cents on the dollar, when utilizing this new structure. This increased value means more housing units for the state without any additional costs to taxpayers. California must do all in its power to increase the production of affordable housing. SB 9 is part of the solution. Without SB 9’s extension to the ability to certificate state LIHTCs, California would forgo hundreds of millions of dollars back to the federal government that could otherwise be used to finance additional affordable housing construction in California.”

2. Gimme shelter. With the exception of the motion picture production credit allocated to independent filmmakers, California does not permit taxpayers to sell tax credits because it allows high-income taxpayers to buy down their tax obligations at a discount. A taxpayer with sufficient means can shelter income from other sources from tax by purchasing credits at a discount that other taxpayers cannot. However, Congress and the Legislature designed LIHTCs as a tax shelter because it is difficult for these socially beneficial projects to attract capital when other investments offer better returns. This tax shelter becomes all the more necessary given the state’s affordable housing crisis, and the disruption to the LIHTC market resulting from HR 1. CTCAC reports that the authority to sell credits, also called “certification,” was used in approximately half of state tax credit projects in 2017, and the bill’s proponents state that SB 9’s modifications to the sales authority will likely increase potential investment. Additionally, CTCAC reports that certificated credits sold for significantly higher prices, thereby providing more project capital, than non-certificated ones. The Committee may wish to consider whether extending the authority for tax credit sales is merited in this case.

3. A different kind of credit. The LIHTC induces investment in affordable housing by providing a tax shelter for investors who allocate capital to an asset class with a relatively poor rate of return. In return for providing the tax shelter, the state gets more housing than it otherwise would have. Housing faces many barriers in California: high costs of land, labor, and capital; resistance from local residents and state and local laws, and policies protecting the environment; among others. Because the credit is capped and allocated, CTCAC awards tax credits to projects on a competitive process based on an evaluation of the most effective use of the tax credits. This program differs from other tax credits, where any individual or businesses can qualify for a credit by virtue of incurring specific costs, such as research and development or hiring specific individuals.

4. Permanence. In addition to allowing sales of LIHTCs, SB 9 makes permanent the ability for partnership agreements to allocate state credits differently than federal credits, which is generally precluded by federal and state law guiding partnerships. CTCAC reports that taxpayers use this ability often, which creates more investor demand. It is likely that allowing the ability to expire would result in a reduction in demand, and thereby a loss of available capital. However, these rules are an important tenet of federal tax law that California applies to partnerships for state tax purposes because they prevent income sheltering because each investor in the partnership’s tax benefits must mirror their interest in the housing’s profits and losses.

5. Sunset? SB 9 repeals the sunset on two different tax benefits, the disconnection of federal partnership rules, which has been in place since 2009; and credit sales, which have only been allowed since 2018. The bill modifies credit sale authority in the hopes of drawing additional investor demand and helping administration. To ensure these modifications are delivering the results legislators want without unintended consequences, the Committee may wish to consider placing a sunset provision on its credit sales provisions in ten years.

Support and Opposition

(4/5/19)

Support: State Treasurer Fiona Ma; American Planning Association; California Chapter; Burbank Housing; California Housing Partnership Corporation; California Coalition for Rural Housing; California YIMBY; Coalition of Homeless Service Providers; EAH Housing; Eden Housing; The Housing Authority for the City of Alameda; Housing California; The John Stewart Company; The Non-Profit Housing Association of Northern California; Petaluma Pie Company; San Diego Housing Federation; Silicon Valley at Home.

Opposition: Unknown.

-- END --

 THIRD READING  

Bill No: SB 9

Author: Beall (D), et al.

Amended: 4/3/19

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/10/19

AYES: McGuire, Moorlach, Beall, Hertzberg, Hurtado, Nielsen, Wiener

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SUBJECT: Income taxes: low-income housing credits: allocation: sale of credits

SOURCE: State Treasurer Fiona Ma

DIGEST:

This bill removes the sunset dates on two forms of special treatment applicable to the Low-Income Housing Tax Credit.

ANALYSIS:

Existing law:

1. Allows credits against the Personal Income Tax, Corporation Tax, and Gross Premiums Tax to subsidize investors who provide project capital to affordable rental housing projects. These state Low-Income Housing Tax Credits (LIHTCs) are calculated in partial conformity with federal LIHTCs, and complement federal credits in the hopes of providing capital necessary to pay costs to construct affordable housing.
2. Creates the California Tax Credit Allocation Committee (CTCAC), consisting of the State Treasurer, the State Controller, the Director of Finance, and three non-voting members, to allocate state and federal LIHTCs.
3. Restricts CTCAC allocations of state tax credits to only those applications where federal credits do not provide sufficient subsidy to complete the project, and up to a cap set in state law, plus any unused credits from previous years.
4. Provides that taxpayers can only claim state credits in the first four taxable years after a project is placed in service.
5. Disconnects federal rules guiding partnerships, to which California conforms, to allow partnership agreements formed to construct housing projects to allocate state tax credits to investors in a manner that differs from the proportional division of the federal credit and that does not have substantial economic effect (SB 585, Lowenthal, Chapter 382, Statures of 2008).
6. Requires any taxpayer who receives a credit under a partnership allocation of tax credits not in accordance with federal rules to wait until the expiration of the 10-year carry-forward period of the federal LIHTC to claim a capital loss from the partnership.
7. Permits taxpayers receiving credits until January 1, 2020, to sell them to taxpayers who do not enter the partnership agreement under certain conditions (SB 837, Committee on Budget and Fiscal Review, Chapter 32, Statutes of 2016). To sell a credit:
   1. The taxpayer must make an irrevocable election to do so;
   2. The consideration received for the sale must be greater than 80% of its value, and CTCAC’s executive director can rescind the election to sell the credit if the consideration received falls below 80% of the amount of credit reserved; and
   3. It must be sold to an unrelated party who has previously claimed the federal or state LIHTC in connection with a project in this state.
8. Prohibits a taxpayer who purchases a credit from subsequently reselling it.
9. Sunsets both the disconnection of federal partnership rules binding the allocation of state LIHTCs, and the authority to sell them, on January 1, 2020.

This bill:

1. Eliminates the sunset on the authority for partnership agreements formed to construct affordable housing to allocate state tax credits to investors in a manner that differs from the proportional division of the federal credit and that lacks substantial economic effect.
2. Removes the sunset date on the authority for taxpayers to sell credits, with the following modifications:
   1. Allows the taxpayer to revoke the election once to sell credits, at any time before CTCAC makes a final allocation of credit, after which the election becomes irrevocable. However, the taxpayer cannot elect to sell credits unless they stated that it will do so in its application to CTCAC.
   2. Permits any taxpayer to claim a sold credit, not only those who have previously claimed the state or federal LIHTC in connection with a project in the state.
   3. Removes the prohibition against taxpayers purchasing credits from subsequently reselling them.
3. Makes a conforming change to eliminate the authority for CTCAC’s executive director to rescind an election to sell the credit if the consideration received falls below 80% of the amount of credit reserved.
4. Maintains the requirement that consideration received for the sale must not be less than 80% of the value of the credit.

Background

The LIHTC induces investment in affordable housing by providing a tax shelter for investors who allocate capital to an asset class with a relatively poor rate of return. In return for providing the tax shelter, the state gets more housing than it otherwise would have. Housing faces many barriers in California: high costs of land, labor, and capital; resistance from local residents and state and local laws, and policies protecting the environment; among others. Because the credit is capped and allocated, CTCAC awards tax credits to projects on a competitive process based on an evaluation of the most effective use of the tax credits. This program differs from other tax credits, where any individual or businesses can qualify for a credit by virtue of incurring specific costs, such as research and development or hiring specific individuals.

Federal tax credits can equal either 70% of the qualified basis – generally equal to the costs of construction - for projects that are not federally subsidized (known as 9% credits), or 30% for federally subsidized (known as 4% credits), and are claimed over a 10-year period after the building is placed in service. Tax-exempt bonds are generally the source of any qualifying federal subsidy. Under federal law, projects must remain affordable for 15 years.

CTCAC awards 9% federal credits up to a dollar threshold set in federal law using a competitive process, totaling $97.1 million in federal credits for 64 projects in 2017, inducing almost one billion dollars in equity financing, and developing 3,844 affordable rental units. While federal law caps CTCAC’s authority to allocate federal 9% and state tax credits, CTCAC can allocate 4% credits with few limits. CTCAC allocated $124.9 million in federal credits for 105 subsidized projects in 2017, generating $1.2 billion in equity investment, constructing or rehabilitating 4,220 units. CTCAC awarded state credits of $102.2 million to 24 projects in 2017.

Housing developers design projects and apply to CTCAC for credits. CTCAC then reviews the application in a competitive process; if CTCAC grants credits, it then enters a regulatory agreement with the housing developer setting forth income and rent restrictions. CTCAC then reserves the amount of credit for that application, and then the housing developer forms partnership agreements with investors that provide project capital for the housing in exchange for the credits at a discount. The developer then returns to CTCAC for a final credit allocation. Investors claim the credit until exhausted, then walk away from the partnership, and deduct the amount paid to the partnership in exchange for the tax credits as a capital loss.

Federal law limits that the initial incomes of households in tax credit units. When a project developer or sponsor applies for tax credits, he or she irrevocably chooses one of the following minimum federal set-aside requirements:

• A minimum of 40% of the units must be both rent-restricted and occupied by households whose incomes are 60% or less of the area median gross income, adjusted for family size;
• A minimum of 20% of the units must be both rent-restricted and occupied by households whose incomes are 50% or less of the area median gross income, adjusted for family size; or
• A minimum of 40% of the units must be both rent-restricted and occupied by households whose incomes are 80% or less of the area median gross income, adjusted for family size, and the average income and rent limitation must not exceed 60% of the area median income.

The Internal Revenue Service (IRS) ensures compliance with affordability and other restrictions set in federal law for the 15-year federal compliance period. CTCAC enforces the regulatory agreement up to 30 years for older projects, or 55 years for newer ones, which includes physical inspections. If either IRS or CTCAC detects violations, investors can have credits recaptured.

On December 22, 2017, President Trump signed HR 1, which enacted fundamental changes to the federal income tax, including eliminating the graduated rate schedule for corporate income with a top rate of 35%, and replacing it with a single rate of 21%, effective in the 2018 taxable year. HR 1 also limits significantly the taxation of a U.S. taxpayer’s foreign source income by adopting a “territorial system,” which allows a 100% deduction for the foreign-source portion of dividends received from its 10% owned foreign corporations. As a result, corporations will pay much less in federal taxes, thereby reducing the demand for federal LIHTCs.

Seeking to maintain the authority previously added by the Legislature, and partially offset the negative effects of HR 1 on LIHTC demand, affordable housing advocates want to eliminate the sunset date for both forms of special treatment, and modify the previous restrictions on credit sales.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

According to the Senate Appropriations Committee, the Franchise Tax Board estimates that this bill would lead to General Fund revenue gains of $70,000 in 2019-20, and $200,000 in 2020-21. A General Fund revenue loss of $500,000 would occur in 2021-22, increasing to $3.9 million by 2025-26. This bill would not result in new administrative costs for the Board.

SUPPORT: (Verified 5/16/19)

State Treasurer Fiona Ma (source)

American Planning Association, California Chapter

Burbank Housing

California Alliance for Retired Americans

California Apartment Association

California Coalition for Rural Housing

California Housing Partnership Corporation

California State Association of Counties

California YIMBY

Coalition of Homeless Services Providers

EAH Housing

East Bay Housing Association

Eden Housing

Housing Authority of the City of Alameda

Housing California

Non-Profit Housing Association of Northern California

Petaluma Pie Company

San Diego Housing Federation

Silicon Valley at Home

Southern California Association of Non-Profit Housing

The John Stewart Company

OPPOSITION: (Verified 5/16/19)

None received

ARGUMENTS IN SUPPORT: According to the author, “SB 9 will increase the impact of the state’s existing low-income housing tax credit by continuing to allow the tax credits to be structured in a way that is not subject to federal taxation. In 2016, California enacted legislation that permitted a developer who receives an award of state LIHTCs to sell the credits to an investor without requiring the investor to be part of the project ownership. Under federal and state tax laws, tax credits that are bought by an investor are considered a payment of the investor’s tax rather than a reduction in their tax liability. As a result, purchased credits do not reduce the taxpayer’s federal deductions. To date, CTCAC and the California Housing Partnership Corporation have data to show the value of the tax credits has increased by 14 cents, or closer to 80 cents on the dollar, when utilizing this new structure. This increased value means more housing units for the state without any additional costs to taxpayers. California must do all in its power to increase the production of affordable housing. SB 9 is part of the solution. Without SB 9’s extension to the ability to certificate state LIHTCs, California would forgo hundreds of millions of dollars back to the federal government that could otherwise be used to finance additional affordable housing construction in California.”

Prepared by: Colin Grinnell / GOV. & F. / (916) 651-4119

5/18/19 12:04:37

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 9 (Beall) - Income taxes: low-income housing credits: allocation: sale of credits

Bill Summary:

SB 9 would (1) allow taxpayers to sell low-income housing tax credits, and (2) remove the program’s sunset.

Fiscal Impact:

The Franchise Tax Board (FTB) estimates that the bill would lead to General Fund revenue gains of $70,000 in 2019-20, and $200,000 in 2020-21. A General Fund revenue loss of $500,000 would occur in 2021-22, increasing to $3.9 million by 2025-26. The bill would not result in new administrative costs for FTB.

Background:

Current federal law allows tax credits for investors who provide project capital to low-income housing projects. Taxpayers claim Low-Income Housing Tax Credits (LIHTCs) equal to either 9 percent or 4 percent of the project’s basis over 10 years, and start claiming the credit in the taxable year in which the project is placed in service. Projects must remain affordable to residents for 15 years.

The California Tax Credit Allocation Committee (CTCAC) awards 9 percent federal credits up to a limit set in federal law using a competitive process. Total awards were $97 million in federal credits for 64 projects in 2017. While federal law caps CTCAC’s authority to allocate federal 9 percent and state tax credits, CTCAC can allocate 4 percent credits with few limits.

CTCAC can only allocate state tax credits when federal credits do not provide sufficient subsidy, up to a specified cap. Taxpaying investors can only claim state credits in the first four taxable years after a project is placed in service. State law generally excludes acquisition costs from basis for the purposes of state LIHTCs, except for previously subsidized projects that qualify as "at-risk" of being converted to market rate. CTCAC awarded state credits of $102 million to 24 projects in 2017.

Housing developers design projects and apply to CTCAC for credits. CTCAC then reviews the application in a competitive process; if CTCAC grants credits, it then enters a regulatory agreement with the housing developer setting forth income and rent restrictions. CTCAC then reserves the amount of credit for that application, and then the housing developer forms partnership agreements with investors that provide project capital for the housing in exchange for the credits at a discount. The developer then returns to CTCAC for a final credit allocation. Investors claim the credit until exhausted, then walk away from the partnership, and deduct the amount paid to the partnership in exchange for the tax credits as a capital loss.

Federal law includes specified limits on the initial incomes of households in tax credit units. The Internal Revenue Service (IRS) ensures compliance with affordability and other restrictions set in federal law for the 15-year federal compliance period. CTCAC enforces the regulatory agreement up to 30 years for older projects, or 55 years for newer ones, which includes physical inspections. If either IRS or CTCAC detects violations, credits can be recaptured.

The Legislature has enacted two different forms of preferential treatment for LIHTCs to induce additional investment in affordable housing. First, partnership agreements formed to construct housing projects can disconnect federal rules to allow allocations of state tax credits to investors in a manner that differs from the proportional division of the federal credit. This change responds to the situations where some investors have a state tax obligation, but not a federal one, and federal partnership rules generally require partnership agreements to allocate federal and state credits the same way. However, any taxpayer who receives a credit under a partnership allocation of tax credits not in accordance with federal rules must wait until the expiration of the ten-year carry-forward period of the federal LIHTC to claim a capital loss from the partnership.

Additionally, taxpayers receiving credits until January 1, 2020, can sell credits to taxpayers who do not enter the partnership agreement under certain conditions (SB 837, Committee on Budget and Fiscal Review, 2016), after the Governor vetoed a similar measure (SB 377, Beall, 2015). To sell a credit (1) the taxpayer must make an irrevocable election to do so, (2) the consideration received for the sale is greater than 80 percent of its value, and CTCAC can rescind the election to sell the credit if the consideration received falls below 80 percent of the amount of credit reserved, and (3) it must be sold to an unrelated party who has previously claimed the federal or state LIHTC in connection with a project in the State. SB 837 prohibited a taxpayer who purchases a credit from subsequently reselling it.

In December 2017, changes to federal tax law eliminated the graduated corporate income tax (with a top rate of 35 percent), and replaced it with a single rate of 21 percent, effective in taxable year 2018. Consequently, corporations will pay much less in federal taxes, thereby reducing the demand for federal LIHTCs.

Proposed Law:

This bill would extend the two forms of special treatment the Legislature has provided under to the Low-Income Housing Tax Credit, and apply its changes to the Gross Premiums, Personal Income, and Corporation Taxes. The measure would (1) eliminate the sunset on the authority for partnership agreements formed to construct affordable housing to allocate state tax credits to investors in a manner that differs from the proportional division of the federal credit, and (2) remove the sunset date on the authority for taxpayers to sell credits, with specified modifications.

Staff Comments:

Using LIHTC allocation data from the California Tax Credit Allocation Committee, FTB assumes that the maximum credit threshold of approximately $110 million in LIHC would be reached in 2020. The department further assumes five percent (or $6 million) would ultimately be returned to CTCAC due to unforeseen project issues.

Based on current credit awards and usage, FTB estimates that 75 percent (or $85 million) of the annual credits would be used to offset income and franchise taxes.

Based on current LIHC usage, FTB assumes that 70 percent (or $60 million) of the credit would be used over the four-year credit period and the remaining 30 percent would be carried forward to future years. It is further assumed that 25 percent, or $6 million, of the amount to be carried forward would be sold. FTB assumes that the ability to sell the credit or allocate the credit amongst the partners would result in a timing difference because credits sold cannot be used until the building is put into service and the acceleration of credit use relative to current law would not begin until 2022, two years after the credit allocation. The revenue impact of the accelerated credit usage would not be fully phased in until taxable year 2025, because credits must be taken over a four-year period. The fully phased-in revenue loss would be $4.2 million in 2025.

Additionally, for credits that are sold, FTB assumes that the taxpayer would have

additional capital gain income, in the amount of 80 percent of the value of the credits

sold. This capital gain income must be claimed in the year the credits are purchased,

which would result in a positive revenue impact for taxable years 2020 and 2021.

.

The combined revenue impact from expanding the ability to sell the credit or allocate the credit amongst the partners results in a revenue gain of $70,000 in 2019-20, transitioning to a revenue loss of $500,000 in 2021-22, and then increasing to a $3.9 million revenue loss in 2025-26.

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