Senate Standing Committee on Transportation

[Roll call]

The assistant notes a quorum has been established. I see that the author is here. Assembly Member Fong, you're welcome to come up and present your bill.

Good morning, Mister Chair and Members. First, I'd like to thank you, your chief consultant, and the pro-tem's office for working with us and holding this hearing today. Thank you so much to my colleagues, Senator Portantino, for joint authoring this bill as well, and for your leadership and efforts on this.

Assembly Bill 1038 amends the process for the City of South Pasadena to acquire and sell surplus property and use the proceeds for affordable housing. Beginning in the 1950s, Caltrans started to acquire properties to make way for the extension of the 710 Freeway in the greater Los Angeles area.

In 2018, after many years of contention, alternatives to the freeway were identified and a decision was made to halt the plans for the freeway extension.

In 2021 and 2022, several bills were enacted to establish the processes for disposing of homes acquired by Caltrans, consistent with state law, the Roberti Act, and in order to create affordable housing. For the City of South Pasadena, two processes were established, one for historic homes and one for non-historic homes.

For historic homes, the city is able to purchase the homes from Caltrans at cost and sell the properties as is at market rate.

With the proceeds from the sale of these properties, the city is required to develop or acquire affordable housing for very low-, low-, or moderate-income households had a ratio of three to 13 units for every unit acquired from Caltrans.

For non-historic homes, however, the city is required to rehabilitate the properties which are unoccupied and uninhabitable and either rent or sell to low-income families at affordable prices. The problem is that the homes are in dilapidated conditions and need a lot of rehabilitation.

The city commissioned inspections of the properties and received a report indicating a need of more than $7 million to bring the homes up to building codes. This cost would make it hard for the city to take control of the properties if they are not disposed of by the city or another housing entity.

The properties will be sold through auction and will use the opportunity to increase our affordable housing stock. What assembly bill 138 does is change the process so that the city can dispose of non-historic homes the same way they dispose of historic homes. This will align with the City of South Pasadena's authorization.

With the City of Pasadena's authorization, which does not distinguish between historic and non-historic homes. This bill will enable the city to sell all 20 properties offered by Caltrans to market rate buyers. With the proceeds, the city will be able to increase the number of affordable housing units in the City of South Pasadena.

And the language in this bill has been vetted by Caltrans, the Department of Housing and Community Development, and the governor's office. Here to testify and support is the honorable Dario Frommer, our former Assembly Member representing the City of South Pasadena. And joining us also at the dais is Roxanne Diaz, the city's attorney, to answer any technical questions. Thank you.

Alright. Thank you, Assembly Member. Witnesses may proceed in whatever order you prefer. You'll have a couple minutes each.

Thank you, Mister Chairman. Dario Frommer. I'm a partner at Mayor Brown Law Firm. I'm special counsel to the City of South Pasadena.

AB 1038 is critical to advancing the development of affordable housing in South Pasadena under our recently certified housing element, because it will allow the city to purchase and sell 13 dilapidated vacant surplus properties on the State Route 710 corridor at market prices and use the proceeds to fund affordable housing at a three to one ratio.

If this bill is enacted, then we will be able to develop 60 units of affordable housing in South Pasadena. As the Assemblyman mentioned, the existing law treats the affordable, the historic, and non-historic surplus properties differently.

We're simply asking for the bring them into conformity with what the City of Pasadena has, which is to be able to acquire those historic and non-historic properties at the price that Caltrans paid and to be able to sell them at market rates and then use the proceeds to develop or acquire affordable housing at a three to one ratio.

We have looked at the houses. As Assemblyman said, we hired an inspector to come in when the houses were offered to the city in 2022. They are in very bad condition.

The inspections yielded a report that was about $7 million, more than $7 million in repair costs, which is difficult for a city the size of South Pasadena to sustain and would ultimately, we don't think any housing-related entity would take these properties, and they would therefore go to public auctions.

This is an important bill to preserve an opportunity to use these resources for affordable housing.

We thank you for your consideration, and the city wishes to thank Assembly Member Mike Fong, Senator Anthony Portantino, the Caltrans folks, and the community housing, Community Development Department have worked collaboratively with us, along with the governor's office, to develop this bill to find a solution and make sure these resources do go to affordable housing and do not go to public auction. Thank you

Thank you.

Thank you. I don't have any comments. Thank you.

All right, thank you. Is there anyone in the room who wishes to express support for the bill? If so, please come forward now. Do we have any opposition witnesses? Seeing none. Is there any public comment in opposition? If so, please come forward now. Seeing none, we'll come back to the Committee. Senator Portantino.

Thank you, Mister Chair, for setting the bill. And thank you, Mister Fong, for providing the bill that was available to do this very necessary piece of legislation. The most important piece of this is we're conforming with existing law relative to Pasadena.

And I think that's very important to note as well as if we don't do this bill, there would be a $7 million liability to bring historic homes up to a sellable form, and then they would not be for affordable housing.

By allowing the city to purchase these homes at the original price and use the proceeds, we're going to get three times the number of affordable units, and we're going to preserve historic homes and be consistent with the law that was passed for Pasadena. And so, this is a win-win for everyone.

As Mister Frommer mentioned, HCD and Mister Fong, HCD, the governor's office, everyone has been working for six months to get this language to where it is right now.

And it's exciting for me, as my final term in the Legislature, to never have to look at a 710 bill again is exciting that we can move past and get rid of these properties, get them into private ownership, and let the cities do what they need to do, which is provide affordable housing and then preserve the historic nature of these homes.

Some of you may not know, but one of the historic homes in the corridor was Julia Child's actual home that she grew up in as one of the historic homes. So, there's a lot of history in this corridor. There was a 70-year struggle over the freeway that ultimately folks saw fit to not build.

And let's get this property into private hands and give the city the tools they need to do it right. So, I would respectfully ask for an aye vote as well, when appropriate, and move the bill.

All right, thank you, Senator. Any other comments or questions for Members? Senator Niello?

So, I understand the efficacy of the idea and the proposal. But the property is being sold by the state to the city for its original purchase price, not current market value. There's quite a difference between the two. And then the city is able to sell the included assets that they're going to sell at current market value.

There are a lot of people that would like to get in on a deal like that, but they couldn't because it would be a gift of public funds. So how do we avoid that?

Yes. Thank you, Senator.

So, on your balance sheet, you have to score the $7 million, because in order to sell the houses, the city would have to put $7 million of repairs into those houses to make them marketable. And so, you have to put that $7 million in the equation.

So, by doing this formula, the ultimate purchaser of the home will be responsible for the repairs, not the city. And so that's why the economics of this work, and that's why it's good for the State of California, because a government agency, whether it would be Caltrans or the city, would be on the hook for those repairs.

This saves the taxpayer $7 million and provides three times the affordable housing units for the city to make. If that makes sense to you and if city attorney, if I said that right, I mean, I don't know if you want to add anything to that.

No, that is correct. The purpose of the Roberti Act is to move forward the statewide concern of affordable housing. And I believe that in the bill itself, when it was adopted, made findings with respect to it not being a gift of public funds because of the shortage of affordable housing.

Otherwise, Caltrans would have an obligation to which for funds that they do not have, to be able to fix the units and sell them. And so, this provides the opportunity for the cities to along the corridor to create needed affordable housing for all of the constituents in that area as well. So, hopefully that answers the question.

Anything else, Senator Niello?

No. Thank you.

Thank you. Anybody else on the Committee wishing to ask questions or make comments? Seeing none. We do have a motion that's been offered by Senator Portantino. We'll give you an opportunity to close, Assembly Member.

Thank you so much for all the questions and for the discussion here today. Respectfully ask for an aye vote.

All right, thank you. We will ask the assistant to call the roll call vote at this time.

This is file item number one, AB 1038. The motion is do pass, and re-refer to the Committee on Appropriations. Nine to zero. On call.

Alright the current vote is nine to zero. We leave this bill on call until 9:30 and it appears to have enough votes to get out, Assembly Member. Thank you all for being here.

Thank you to the witnesses and everyone else in the room. Appreciate it. I'm going to call a recess for purposes of audio visual here, and we'll see if we get any more Members coming in. In the meantime, five minutes is as long as we'll go in recess. Thank you.

Thank you so much.

We are going to call the Committee back to order. The recess is now over, and we have been hearing SB 1038. I'm sorry, AB 1038. The bill is on call. We'll go ahead and call the roll again and try to conclude the vote now. Thank you.

[Roll call] 12 to zero.

All right, the bill is out, 12 to zero. That concludes our agenda for today. Thank you to the committee staff for pulling this hearing together and everyone else who got the hearing room ready this morning for us. We are now adjourned.