LOS ANGELES -- California legislators on Friday approved major redevelopment reform legislation that would impose various curbs on the industry, including setting a time limit during which a project area can incur debt.
Assembly Bill 1290 was initiated by the California Redevelopment Association to help curtail either actual or perceived abuses of the redevelopment process in the state.
The redevelopment industry has fended off other legislative assaults previously. But in response to mounting concern, redevelopment officials concluded it was better this year to craft their own package rather than let others dictate the direction of reform.
Gov. Pete Wilson's administration has leaned against the bill in recent weeks. The governor has until Oct. 10 to decide whether to sign the measure.
Redevelopment agencies in California are usually formed by cities under a state law that encourages the process to combat blight. The agencies, using tools such as loans and infrastructure rehabilitation, try to promote revitalization of run-down or economically depressed areas.
Property tax revenues generated by that effort are used by the agencies to fund ongoing work or to secure tax increment bonds, also known as tax allocation bonds.
A.B. 1290, sponsored by Assemblyman Phillip Isenberg, D-Sacramento, attempts to address some of the main criticisms often directed at redevelopment.
For example, the bill would tighten the definition of blight and require targeted areas to be predominantly urbanized. Redevelopment officials also would have to clearly explain how their proposed actions would eliminate blight.
A.B. 1290 also would change numerous other aspects of redevelopment law. It would impose various new time limits, require more detail in financial reports provided to counties, establish a fixed formula for passing through a portion of redevelopment revenues to other local agencies, tighten rules for spending surplus funds set aside for affordable housing, repeal much of the redevelopment authority to issue sales tax-backed bonds, and limit use of tax allocation funds to pay for city halls and county administration buildings.
There is nothing in the bill "that should disrupt any present holder of redevelopment bonds," said Martin Coren, a partner of Hinderliter deLlamas, a consulting firm in the industry. "The impact is more on the creation of future redevelopment areas."
Project areas created on or after Jan. 1, 1994, would have to contain certain limits, including setting a deadline of 20 years or less for incurring debt secured by the tax increment revenues. This deadline could be be extended for another 10 years if blight remains.
A.B. 1290 also would set a deadline of 45 years or less for repaying debt with such revenues. Existing areas would also be subject to new limits, but with a longer duration.
"I haven't seen the final language" in the bill, Coren stressed yesterday. and it was unclear if some of the provisions might have changed before passage., A flurry of legislative activity occurred last week because lawmakers concluded their 1993 session on Friday.
Numerous redevelopment agencies and cities, along with advocacy groups for affordable housing, lobbied for passage of A.B. 1290. Counties, fire districts, and some taxpayer groups have fought the bill on various grounds, including a belief that it does not go far enough in imposing restrictions.
The Wilson administration in recent weeks has opposed the bill because the California Department of Housing and Development believes redevelopment agencies should face tighter deadlines for spending housing funds. The state Department of Finance, which supported the bill at one point, is now a "strong neutral" because of the Housing Department's position.
Redevelopment officials already must set aside 20% of their tax increment revenues to support affordable housing. A.B. 1290 tightens the time period for spending these funds, and imposes a penalty that would block agencies from selling bonds if they fail to meet housing timetables.
Based on recent amendments to the bill, certain exceptions would apply to let some agencies sell sales tax-backed bonds or use redevelopment funds for city hall construction under certain conditions.
The new formula for sharing revenues with other public agencies is complicated, and would replace the current requirement to negotiate pass-through agreements with other taxing entities. The redevelopment association estimates that redevelopment agencies would pass through 37.3% of their revenues -- over a 45-year project life -- to other taxing entities under the A.B. 1290 formula, which applies only to new project areas and existing ones that add territory.
A bill report being prepared yesterday by the redevelopment association stresses that the pass-through formula would include a so-called tier feature "to protect pre-existing cash flow that is used to pay bonded indebtedness.