BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Tom Torlakson, Chair
BILL NO: SB 211 HEARING: 5/2/01
AUTHOR: Torlakson FISCAL: Yes
VERSION: 4/30/01 CONSULTANT: Detwiler
REDEVELOPMENT AGENCIES' LIMITS
Background and Existing Law
Besides being controversial, redevelopment is lucrative for
communities that use its two extraordinary powers --
eminent domain and property tax increment financing -- to
attract and retain private investment. Stung by criticism
and trying to stave off radical challenges, redevelopment
advocates sponsored the Community Redevelopment Law Reform
Act of 1993 (AB 1290, Isenberg, 1993).
Before local officials can create new redevelopment project
areas or amend older redevelopment plans, the 1993 reforms
required them to document both physical and economic
blight. The 1993 law also defined "blight" for the first
time.
Impatient with redevelopment projects that seem to never
end, the Legislature required local officials to impose
time limits on redevelopment. For projects adopted before
1994, these time limits include:
For establishing debt, 20 years from the plan's
adoption or January 1,
2004, whichever is later.
For the effectiveness of the plan, 40 years from the
plan's adoption or
January 1, 2009, whichever is later.
For receiving property tax increment revenues to
repay debts, 10 years
after the redevelopment plan ends.
As the 2004 deadline approaches, some redevelopment
officials want to extend their project areas. Some
requests may be legitimate because serious blight remains
within a project area, even after years of work and
millions in redevelopment spending. Inner cities and
first-ring suburbs may need more time to eradicate
persistent pockets of blight. Other requests, however, may
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be motivated by local officials' desire to keep receiving
property tax increment revenues even though the original
blight has gone away.
Proposed Law
Senate Bill 211 allows a redevelopment agency to extend the
deadlines in a redevelopment plan adopted on or before
December 31, 1984, if the agency and its underlying city or
county meet specified criteria.
Specifically, SB 211 allows redevelopment officials to
extend deadlines for:
The plan's effectiveness from for an additional 10
years.
Receiving tax increment revenue for an additional 10
years.
The bill requires the plan amendment to
Identify the significant blight that remains on
specific parcels.
Restrict activities to eradicating the blight on
just those parcels.
Restrict spending the agency's Low and Moderate
Income Housing
Funds only to low- and very low-income families.
Increase the amount of property tax increment
revenues that they set-
aside in the Low and Moderate Income Housing Fund
to an unspecified
percentage.
Before the agency can amend its redevelopment plan to
extend the deadlines, it must adopt a resolution that finds
that:
The city or county has adopted a housing element
certified by the State
Department of Housing and Community Development.
For the previous three years, the State Controller
has not listed the
agency in her annual report to the Attorney General
regarding redevel-
opment agencies with major violations in their
annual audits.
The State Controller has confirmed that the agency
does not have excess
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surplus money in its Low and Moderate Income
Housing Fund.
If the city or county has one or more rail transit
stations, local officials
have adopted at least one transit village plan.
After amending the plan to extend these deadlines, the
agency and its city or county shall not subsidize the
relocation of big-box retailers and auto malls.
SB 211 requires local officials to amend their plans by
following the standard procedures for amendments, including
the adoption of a referendable ordinance.
The bill prohibits San Francisco from extending any of its
project areas that have already been extended under an
existing law.
SB 211 contains legislative declarations, including the
need for state agencies to have the power to take action to
ensure that local officials extend the time limits only for
redevelopment project areas that contain significant
remaining blight.
Comments
1. Persistent and pervasive . Redevelopment is a powerful
tool but in some communities physical and economic blight
is so persistent and pervasive that it resists the efforts
of well-intentioned local officials and well-financed
programs. The uniform statewide deadlines set by the
Legislature in 1993 just don't fit these situations.
Communities need to rid their downtown districts,
low-income neighborhoods, and industrial areas of physical
and economic blight. SB 211 gives redevelopment officials
the time and money they need to finish the job.
2. How much money ? SB 211 applies to 60% of the existing
project areas that control 80% of the property tax
increment revenues. By 1998-99, there were 373 active
redevelopment agencies with 823 project areas that received
$1,761,991,000 in property tax increment revenues. Over
60% of these project areas started before the December 31,
1984 qualification date in SB 211. Those 512 project areas
received $1,425,648,000 in property tax increment revenues.
SB 211 -- 4/30/01 -- Page 4
The Committee may wish to consider if the bill allows too
many project areas to go beyond the deadlines set in 1993.
To reduce the State General Fund's exposure, should the
bill apply only to much older project areas with persistent
blight?
3. Why we care - Part I . The state government has a
fiscal interest in redevelopment because the State General
Fund pays about $500 million a year to subsidize
redevelopment. Here's how that works. Redevelopment
diverts property tax revenues from schools. The General
Fund automatically makes up the difference so that schools
are held harmless. Statewide, about 53% of property taxes
go to schools. So, when redevelopment siphons dollars away
from schools, the state is the source of about half of a
redevelopment agency's property tax increment revenues. An
independent researcher's study found that half of the
increase in property values inside redevelopment project
areas would have occurred even without redevelopment. So,
$500 million of redevelopment agencies' annual $1.9 billion
in property tax increment revenues is a clear subsidy from
the State General Fund.
4. Why we care - Part II . The state government has a
policy interest in seeing that legitimate redevelopment
projects succeed. Redevelopment can literally change the
way a community looks, boosting its economy and the supply
of affordable housing. But physical and economic blight
hold back many of the state's inner cities and first-ring
suburbs. Private investors lack confidence in blighted
real estate markets. Local officials' traditional
regulatory programs and public works spending aren't enough
to attract and retain private investment. Without
economically strong urban areas, the pressure for suburban
sprawl increases. Really tough blight requires the really
strong tools that redevelopment provides. If the
Legislature doesn't allow local officials to extend the
deadlines for the most needy project areas, there's not
much hope of eradicating the remaining blight.
5. Reform and retreat . The 1993 Isenberg bill was the
decade's most important redevelopment reform effort. Until
then, as one wag said, redevelopment was the closest thing
to perpetual motion that the Legislature ever created.
Defining blight and setting statutory deadlines brought
discipline to an industry that operates with little
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oversight from a state government that helps pay the bills.
Local officials have closed down about two dozen
redevelopment project areas since the 1960s but in
1999-2000, there were 829 active project areas. Now that
the 2004 deadline looms, some redevelopment agencies want
the Legislature to exempt them from the Isenberg reforms.
The Committee may wish to consider if legislators are
serious about closing out older project areas.
6. Shades of blight . Many redevelopment officials concede
that they'll need to demonstrate serious, continuing blight
before they can persuade legislators to lift the statutory
deadlines. SB 211 contains many conditions that are
designed to separate the truly needy project areas from the
others. The more contentious issue in SB 211 is how state
officials should review local decisions to extend a project
area's deadlines. The bill currently contains a
legislative declaration but no specific requirement. The
redevelopment industry has resisted active state oversight
for years. Last year's bill allowing San Francisco to
incur more debt and to extend the flow of property tax
increment financing until 2044 introduced the precedent of
state oversight. The Department of Housing and Community
Development must agree before San Francisco can take on
more debt. [See Comment #8.] The Committee may wish to
consider how the state government can protect its policy
and fiscal interests in redevelopment.
7. You know we won't say no . SB 211 puts a lot of
conditions on redevelopment agencies that want to extend
their project areas. The bill contrasts with SB 411
(Perata) and SB 1137 (Ortiz), bills that don't require
Oakland or Sacramento officials to demonstrate that
downtown properties still suffer from physical and economic
blight before they extend their deadlines. If legislators
let some redevelopment agencies continue to receive
property tax increment funds from areas without documenting
blight, how can the Committee say "no" when Antioch,
Arcadia, Fullerton, Alameda, Tracy, or Pomona ask for the
same favor? On May 2, for example, the Committee will
consider all three redevelopment extension bills. If the
Legislature passes separate bills for individual project
areas, the Committee should expect lots of similar requests
from other cities.
8. San Francisco's precedent . Last year, the Legislature
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allowed San Francisco officials to extend the receipt of
property tax increment revenues for six redevelopment
project areas until 2044 (SB 2113, Burton, 2000). The
Burton bill required San Francisco to focus on low-income
housing, limit its administrative spending, and get state
approval before incurring more debt. Most importantly, San
Francisco cannot touch the schools' share of property tax
revenues, avoiding a continuing cost to the State General
Fund. Given the precedent set by San Francisco, the
Committee may wish to consider applying those requirements
in SB 211.
Support and Opposition (4/26/)
Support : California Redevelopment Association, California
Rural Legal Assistance Foundation, Western Center on Law &
Poverty, City of Long Beach, .
Opposition : Californian's United for Redevelopment
Education, 29 individuals.