HomeMy WebLinkAboutAB 981 (Bloom)Attachment 3
AB 981 (Bloom)
Redevelopment Agencies:
Statewide Economic Development, infrastructure Construction,
Affordable Housing and Job Creation
Fact Sheet
PURPOSE
It is estimated that approximately $650 million in
2011 redevelopment bond proceeds are currently
sitting idle and cannot be used. If these proceeds
were spent on their intended projects, it is estimated
that approximately 9,300 high wage construction and
related jobs would be generated.
The elimination of redevelopment agencies has put
the State in a difficult predicament and at risk for
costly litigation while jobs are desperately needed.
During the first half of 2011, prior to the dissolution of
all redevelopment agencies, approximately 50
agencies legally issued bonds, of those cities, 37
have outstanding bond proceeds they are now not
allowed to use.
1f these funds were put to work, it is estimated they
could generate approximately 9,300 jobs and,
conservatively, over $1.2 billion in statewide
economic activity and $60 million dollars in new
State and local tax revenues.
The State has asserted that the vast majority of the
2011 redevelopment bonds must be defeased and
their proceeds not spent on projects, however, over
90% of these bonds cannot be defeased for 10
years.
During this ten year period nearly $1 billion will be
spent on the debt service payments for these bonds,
and the bond proceeds will continue to go unused. If
the proceeds were used for their intended purposes,
the construction of these projects would generate
over $1.2 billion in statewide economic activity, more
than the debt service payments during the ten year
period.
The vast majority of these bonds were issued for
public works projects such as infrastructure
construction and repair, new public facilities, and
affordable housing.
Bondholders who purchased tax-exempt bonds
(approximately 70% of the bonds in question) for
specific public works projects were promised tax-free
returns.
Per Federal Tax Law, tax-exempt bond proceeds
must be used for their intended purpose, or the
bonds could be subject to losing their tax-exempt
status.
There are 37 successor agencies (former
redevelopment agencies) holding these bond
proceeds and they are located throughout the State.
SUMMARY
AB 981 would adjust the cutoff date for the use of
redevelopment bond proceeds, from December 31,
2010, as currently established in AB 1484, to June
28, 2011, the date the dissolution legislation was
signed, thus allowing 2011 bond funds to be used for
economic development and job creation.
EXISTING LAW
AB 1484, a clean-up bill to AB X1 26 (the dissolution
legislation), granted successor agencies the ability to
use bond proceeds issued prior to January 1, 2011,
but was ambiguous on the use of bonds issued
between January 1, 2011 and June 28, 2011 (legally
issued prior to the dissolution of redevelopment
agencies).
The Department of Finance has interpreted AB 1484
to mean that successor agencies cannot use 2011
bond proceeds unless the former redevelopment
agency had entered into third party contract to
expend the proceeds, prior to agency dissolution.
The Department of Finance contends that the bonds
must be defeased using the remaining proceeds.
However, the majority of the 2011 bonds cannot be
defeased for 10 years.
Office of Assemblymernber Richard Bloom
AB 981 - Fact Sheet
Contact: Guy Strahl
(916. 319-2050
Page 1
BACKGROUND
Prior to the dissolution of redevelopment agencies in
the State, several cities through their local
Redevelopment Agencies (RDA) legally issued
bonds between January 1, 2011 and June 28, 2011,
for qualified local projects, including infrastructure,
public works, and affordable housing projects.
Chapter 5, Statutes of 2011 (AS X1 26, Blumenfield),
imposed an immediate freeze on RDA authority to
engage in most of their previous functions, including
incurring new debt, making loans or grants, entering
into new contracts or amending existing contracts,
acquiring or disposing of assets, or altering
redevelopment plans. The bill also dissolved RDAs,
effective February 1, 2012 (Supreme Court adjusted
date) and created a process for winding down
redevelopment financial affairs and distributing any
net funds from assets or property taxes to other local
taxing agencies.
Chapter 6, Statutes of 2011 (ABX1 27, Blumenfield)
allowed RDAs to opt into a voluntary alternative
program to avoid the dissolution included in AB X1
26. The program included annual payments to K-12
districts ($1.7 billion in 2011-12 and about $400
million in future years) to offset the fiscal effect of
redevelopment. AB X1 27 was struck down by the
State Supreme court on a 6-1 vote in 2011, on the
grounds that it violated Prop 22 (Passed by voters in
2010).
Because of the decision, redevelopment agencies
were dissolved and replaced by successor agencies
and oversight boards. After the court decisions, AB
1484 was enacted and specifies how the successor
agencies will manage and administer the functions of
the former redevelopment agencies, the role of the
oversight boards and state Department of Finance in
the Redevelopment Dissolution process.
SPONSOR
Author Sponsored
SUPPORT
City of West Hollywood
City of Lynwood
City of Signal Hili
Palm Communities
OPPOSITION
None on File
Version: 3/2012013
Office of Assemblymember Richard Bloom
AB 981 - Fact Sheet
Contact: Guy Sall
(916) 319-2050
Page 2