SB 286 Offers Redevelopment Reform Option

As part of the CRA’s Legislative update issued at the end of last week, they made the following statement about the future of Redevelopment. “CRA recognizes that the strong reforms in SB 286 represent significant changes and may not meet with favor by all our members… The reality is that redevelopment must operate differently in the future. (CRA’s Board of Directors) also believe that the reforms contained in SB 286 will achieve those objectives and actually strengthen redevelopment and increase its support.”

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

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

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

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

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

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

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

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

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

Of the bill, CSAC has stated that:

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

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