Bill Text: CA SB593 | 2023-2024 | Regular Session | Enrolled

California Senate Bill 593

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Redevelopment: successor agency debt: City and County of San Francisco.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2023-10-11 - Chaptered by Secretary of State. Chapter 782, Statutes of 2023. [SB593 Detail]

Download: California-2023-SB593-Enrolled.html

Enrolled September 14, 2023

Passed IN Senate September 12, 2023

Passed IN Assembly September 11, 2023

Amended IN Assembly September 07, 2023

Amended IN Assembly June 30, 2023

Amended IN Senate March 21, 2023

CALIFORNIA LEGISLATURE— 2023–2024 REGULAR SESSION

Senate Bill

No. 593

Introduced by Senator Wiener
(Coauthor: Assembly Member Haney)

February 15, 2023

An act to amend Section 34177.7 of the Health and Safety Code, relating to housing.

LEGISLATIVE COUNSEL'S DIGEST

SB 593, Wiener. Redevelopment: successor agency debt: City and County of San Francisco.

Existing law dissolved redevelopment agencies and community development agencies as of February 1, 2012, and provides for the designation of successor agencies to, among other things, wind down the affairs of the dissolved redevelopment agencies and make payments due for enforceable obligations. Existing law, among other powers granted to successor agencies generally, additionally vests the successor agency to the former Redevelopment Agency of the City and County of San Francisco with the authority, rights, and powers of that former redevelopment agency solely for the purpose of issuing bonds or incurring other indebtedness, subject to the approval of the oversight board of the successor agency, to finance the construction of affordable housing and infrastructure required by specified development agreements. Under existing law, these bonds and indebtedness are considered indebtedness incurred by the dissolved redevelopment agency secured by moneys deposited in the Redevelopment Property Tax Trust Fund established for that agency.

This bill would expand this authority to include bonds issued and other indebtedness incurred to finance the development, construction, repair, renovation, or reconstruction of affordable housing units that are or remain affordable to, and occupied by, persons and families of low-, moderate-, extremely low, and very low income households for at least 55 years for rental units and 45 years for owner-occupied units, subject to specified conditions and authorizations. The bill would specify the security requirements for the bonds issued or other indebtedness incurred to finance the development, construction, repair, renovation, or reconstruction of affordable housing units.

This bill would make legislative findings and declarations as to the necessity of a special statute for the City and County of San Francisco.

This bill would incorporate additional changes to Section 34177.7 of the Health and Safety Code proposed by AB 143 and SB 143 to be operative only if this bill and either of those bills are enacted and this bill is enacted last.

Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

The Legislature finds and declares all of the following:

(a) Under the authority granted by the Legislature in Senate Bill No. 2113 (Chapter 661 of the Statutes of 2000) and Senate Bill No. 701 (Section 3 of Chapter 782 of the Statutes of 2002), the former Redevelopment Agency of the City and County of San Francisco (hereafter “former redevelopment agency”) sought, prior to its dissolution, to redress the demolition of a substantial number of residential dwelling units affordable to very low, low-, and moderate-income households during the agency’s earlier urban renewal efforts.

(b) In 2003, the Department of Housing and Community Development determined that the former redevelopment agency had an unmet affordable housing replacement need resulting from its demolition of 14,207 units and replacement of only 7,498 units in pre-1976 project areas. The department certified “a net loss of 6,709 units the Agency must replace.”

(c) In authorizing the former redevelopment agency’s replacement of units, the Legislature found that San Francisco’s early redevelopment activities, including the removal of previously existing dwelling units serving a lower income population, compounded the effects of the private market that have led to the city’s housing crisis (Section 1 of Chapter 661 of the Statutes of 2000).

(d) Prior to its dissolution, the former redevelopment agency exceeded the housing production goals of the Community Redevelopment Law (Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code) and developed over 12,000 units of affordable housing. Nonetheless, it was only able to approve and develop 867 replacement units out of the total 6,709 units that the Department of Housing and Community Development had certified. When the Legislature dissolved redevelopment agencies by enactment of Chapter 5 of the First Extraordinary Session of the Statutes of 2011, the former redevelopment agency had an outstanding balance of 5,842 affordable units that needed to be replaced.

(e) After dissolution of the former redevelopment agency, the Oversight Board for the City and County of San Francisco confirmed, by Resolution No. 5-2012 (April 10, 2012), the unfulfilled replacement housing obligations of the former redevelopment agency and approved the successor agency’s expenditures of funds to fulfill those obligations, but the Department of Finance disapproved those expenditures on the grounds they were inconsistent with the wind down of redevelopment agencies.

(f) In 2015, the Legislature authorized the successor agency to the former redevelopment agency to issue bonds and incur other indebtedness secured by the property tax revenues available in the Redevelopment Property Tax Trust Fund to finance certain enforceable obligations that the Department of Finance had approved, but this legislation did not include authorization for funding of the replacement housing obligation (Sections 9 and 27 of Chapter 325 of the Statutes of 2015).

(g) San Francisco faces a continuing shortage of affordable housing for low- and moderate-income households. The San Francisco Planning Department reports that “San Francisco and the Bay Area are currently in the midst of a housing affordability crisis unprecedented in their history. Increases in housing prices and displacement pressures have been a long-term trend, driven by policy decisions first established decades ago and amplified by regional and national economic trends. Over the last 5 years, the crisis has intensified as the region’s high-wage employment base has grown while regional housing production has not kept pace” (San Francisco Housing Needs and Trends Report (July 2018)).

(h) The San Francisco residential real estate market is one of the most expensive in the United States. In September 2022, RealtyHop reported that the median-priced home in San Francisco was $1,388,500. A household earning the city’s median household income of $126,117 would have to spend almost 67 percent of its yearly income to afford the median priced home. While the national home ownership rate is approximately 64 percent, only approximately 36 percent of San Franciscans own their own home. The majority of market-rate homes for sale in San Francisco are priced out of the reach of low- and moderate-income households. In 2022, the average rent was $3,340, which is affordable to households earning over $133,600. The Black population of San Francisco, with a median household income of less than $35,000 has little chance of being able to purchase or rent a home in the city. These factors contribute to a heavy demand for affordable housing in the city that the private market cannot meet.

(i) The San Francisco Planning Housing Element 2022 update states that the City and County of San Francisco has an unmet housing need at every income level and mandates the creation of more than 82,000 units within the city. Approximately 46,000 of these units are targeted to households with extremely low to moderate incomes. To meet these affordability targets will require a substantial increase in public funding to cover the gap between the cost of development and operations and the reduced revenue due to lower rents and prices. The San Francisco Planning Housing Element 2022 update estimates that meeting the regional housing needs allocation goals will require a range of additional investments for affordable housing from $1,300,000,000 in 2023 to $2,500,000,000 in 2031.

(j) Some of the 7,498 affordable units constructed to replace the units removed as a result of urban renewal are no longer available at affordable housing cost to low- and moderate-income households because the income restrictions have expired. In addition, some of these units are in need of substantial rehabilitation or replacement if they are to continue to provide decent and safe affordable housing and address the housing needs of those displaced by urban renewal. For example, Freedom West Homes is a 382 unit housing cooperative constructed in 1974 to replace a portion of the housing units removed from the Western Addition Redevelopment Project Area. It suffers from deterioration and its affordability restrictions have expired.

(k) The removal of units as a result of urban renewal contributed to the significant decline in the Black population in San Francisco from a high of 13 percent of the population prior to the urban renewal project to the current 5.3 percent. Urban renewal destroyed a disproportionate amount of affordable housing in and near Japantown and the South of Market area where large numbers of Filipino Americans had resided. The continued lack of affordable housing in the city further exacerbates urban renewal’s impact on communities of color.

(l) San Francisco’s housing situation is unique, in that median rents and sales prices are among the highest in the United States even though it has committed a significant amount of local funds to assist affordable housing development. A special law is necessary and a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances relating to the replacement of affordable housing demolished by the former redevelopment agency.

(m) It is the intent of the Legislature to authorize, subject to compliance with redevelopment dissolution law (Part 1.8 (commencing with Section 34161) and Part 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code), the successor agency to the former redevelopment agency to issue bonds or incur other indebtedness for the purpose of financing the construction of replacement affordable housing units demolished and not replaced by the former redevelopment agency and the replacement of the obsolete replacement units that were constructed previously. The procedures and standards in the redevelopment dissolution law, as amended, will govern the issuance of bonds or incurrence of other indebtedness by the successor agency and will supersede those provisions in Chapter 661 of the Statutes of 2000 requiring approval of the Department of Housing and Community Development. These bonds or other indebtedness may be secured by property tax revenues available in the successor agency’s Redevelopment Property Tax Trust Fund from those project areas that generated tax increments for the former redevelopment agency upon its dissolution, as described in subdivision (e) of Section 27 of Chapter 325 of the Statutes of 2015, to the extent the revenues represent the amount of moneys on deposit in the Redevelopment Property Tax Trust Fund that otherwise would have been distributed to the City and County of San Francisco pursuant to paragraph (4) of subdivision (a) of Section 34183 of the Health and Safety Code.

(n) It is further the intent of the Legislature that the successor agency to the former redevelopment agency, to the greatest extent feasible, replace the amount of lost units, as previously certified by the Department of Housing and Community Development, according to the formulas in Section 33413 of the Health and Safety Code.

SEC. 2.

Section 34177.7 of the Health and Safety Code is amended to read:

34177.7.

(a) (1) In addition to the powers granted to each successor agency, and notwithstanding anything in the act adding this part, including, but not limited to, Sections 34162 and 34189, the successor agency to the Redevelopment Agency of the City and County of San Francisco shall have the authority, rights, and powers of the Redevelopment Agency to which it succeeded solely for the purpose of issuing bonds or incurring other indebtedness to finance:

(A) The affordable housing required by the Mission Bay North Owner Participation Agreement, the Mission Bay South Owner Participation Agreement, the Disposition and Development Agreement for Hunters Point Shipyard Phase 1, the Candlestick Point-Hunters Point Shipyard Phase 2 Disposition and Development Agreement, and the Transbay Implementation Agreement.

(B) The infrastructure required by the Transbay Implementation Agreement.

(C) (i) The development, construction, repair, renovation, or reconstruction of up to 5,842 units of affordable housing by or on behalf of the City and County of San Francisco that shall be or remain affordable to, and occupied by, persons and families of low-, moderate-, extremely low, and very low income households for the longest feasible time, but not less than 55 years for rental units and 45 years for owner-occupied units.

(ii) For purposes of this subparagraph, and notwithstanding Section 34177.3, the successor agency to the Redevelopment Agency of the City and County of San Francisco may create enforceable obligations that are related to the issuance of bonds or incurrence of other indebtedness and may enter into any contracts or arrangements that are related to the development, construction, repair, renovation, or reconstruction of the units of affordable housing, so long as the expenses of any of those arrangements are paid solely from property tax revenues available in the Redevelopment Property Tax Trust Fund to the extent the property tax revenues represent the amount of revenues on deposit in the Redevelopment Property Tax Trust Fund that otherwise would have been distributed to the City and County of San Francisco pursuant to paragraph (4) of subdivision (a) of Section 34183 remaining after the payment of debt service on the bonds or debt for the applicable fiscal year.

(iii) The successor agency to the Redevelopment Agency of the City and County of San Francisco may enter into arrangements with the City and County of San Francisco for the purpose of providing the proceeds from the issuance of bonds or the incurrence of debt under this subparagraph to the City and County of San Francisco for development, construction, repair, renovation, or reconstruction of the units of affordable housing described in this subparagraph and to facilitate compliance with any obligations of the successor agency resulting from the issuance of bonds or incurrence of debt.

(iv) Any costs related to the issuance and administration of bonds issued or debt incurred that are not paid with the proceeds from the sale of those bonds or incurrence of debt shall be repaid solely from property tax revenues available in the Redevelopment Property Tax Trust Fund to the extent the property tax revenues represent the amount of revenues on deposit in the Redevelopment Property Tax Trust Fund that otherwise would have been distributed to the City and County of San Francisco pursuant to paragraph (4) of subdivision (a) of Section 34183 remaining after the payment of debt service on the bonds or debt for the applicable fiscal year.

(2) (A) For purposes of financing the obligations described in subparagraphs (A) and (B) of paragraph (1), the successor agency to the Redevelopment Agency of the City and County of San Francisco may pledge to the bonds or other indebtedness the property tax revenues available in the successor agency’s Redevelopment Property Tax Trust Fund that are not otherwise obligated.

(B) For purposes of financing the development, construction, repair, renovation, or reconstruction of the units of affordable housing described in subparagraph (C) of paragraph (1), the successor agency to the Redevelopment Agency of the City and County of San Francisco may pledge to the bonds or other indebtedness issued, incurred, or entered into by the successor agency to the Redevelopment Agency of the City and County of San Francisco the property tax revenues available in the Redevelopment Property Tax Trust Fund to the extent the property tax revenues represent the amount of revenues on deposit in the Redevelopment Property Tax Trust Fund that otherwise would have been distributed to the City and County of San Francisco pursuant to paragraph (4) of subdivision (a) of Section 34183. Property tax revenues allocated to the successor agency pursuant to this subparagraph for the development, construction, repair, renovation, or reconstruction of the units of affordable housing shall not include any moneys that are payable to local agencies other than the City and County of San Francisco, school districts that maintain kindergarten and grades 1 to 12, inclusive, community college districts, or the Educational Revenue Augmentation Fund, pursuant to paragraph (4) of subdivision (a) of Section 34183.

(b) Bonds issued pursuant to this section may be sold pursuant to either a negotiated or a competitive sale. The bonds issued or other indebtedness obligations incurred pursuant to this section may be issued or incurred on a parity basis with outstanding bonds or other indebtedness obligations of the successor agency to the Redevelopment Agency of the City and County of San Francisco and may pledge the revenues pledged to those outstanding bonds or other indebtedness obligations to the issuance of bonds or other obligations pursuant to this section. The pledge, when made in connection with the issuance of bonds or other indebtedness obligations under this section, shall have the same lien priority as the pledge of outstanding bonds or other indebtedness obligations, and shall be valid, binding, and enforceable in accordance with its terms.

(c) (1) Prior to issuing any bonds or incurring other indebtedness pursuant to subparagraph (A) or (B) of paragraph (1) of subdivision (a), the successor agency to the Redevelopment Agency of the City and County of San Francisco may subordinate to the bonds or other indebtedness the amount required to be paid to an affected taxing entity pursuant to paragraph (1) of subdivision (a) of Section 34183, provided that the affected taxing entity has approved the subordinations pursuant to this subdivision.

(2) At the time the agency requests an affected taxing entity to subordinate the amount to be paid to it, the agency shall provide the affected taxing entity with substantial evidence that sufficient funds will be available to pay both the debt service on the bonds or other indebtedness and the payments required by paragraph (1) of subdivision (a) of Section 34183, when due.

(3) Within 45 days after receipt of the agency’s request, the affected taxing entity shall approve or disapprove the request for subordination. An affected taxing entity may disapprove a request for subordination only if it finds, based upon substantial evidence, that the successor agency will not be able to pay the debt service payments and the amount required to be paid to the affected taxing entity. If the affected taxing entity does not act within 45 days after receipt of the agency’s request, the request to subordinate shall be deemed approved and shall be final and conclusive.

(d) Prior to issuing any bonds or incurring other indebtedness pursuant to subparagraph (C) of paragraph (1) of subdivision (a), the successor agency to the Redevelopment Agency of the City and County of San Francisco may subordinate to the bonds or other indebtedness the amount required to be paid to the City and County of San Francisco pursuant to paragraph (1) of subdivision (a) of Section 34183, provided that the City and County of San Francisco has approved the subordinations.

(e) An action may be brought pursuant to Chapter 9 (commencing with Section 860) of Title 10 of Part 2 of the Code of Civil Procedure to determine the validity of bonds or other obligations authorized by this section, the pledge of revenues to those bonds or other obligations authorized by this section, the legality and validity of all proceedings theretofore taken and, as provided in the resolution of the legislative body of the successor agency to the Redevelopment Agency of the City and County of San Francisco authorizing the bonds or other indebtedness obligations authorized by this section, proposed to be taken for the authorization, execution, issuance, sale, and delivery of the bonds or other obligations authorized by this section, and for the payment of debt service on the bonds or the payment of amounts under other obligations authorized by this section. Subdivision (c) of Section 33501 shall not apply to any such action. The department shall be notified of the filing of any action as an affected party.

(f) Notwithstanding any other law, including, but not limited to, Section 33501, an action to challenge the issuance of bonds or the incurrence of indebtedness by the successor agency to the Redevelopment Agency of the City and County of San Francisco shall be brought within 30 days after the date on which the oversight board approves the resolution of the agency approving the issuance of bonds or the incurrence of indebtedness under this section.

(g) The actions authorized in this section shall be subject to the approval of the oversight board, as provided in Section 34180. Additionally, the oversight board may direct the successor agency to the Redevelopment Agency of the City and County of San Francisco to commence any of the transactions described in subdivision (a) so long as the agency is able to recover its related costs in connection with the transaction. After the agency, with approval of the oversight board, issues any bonds or incurs any indebtedness pursuant to subdivision (a), the oversight board shall not unilaterally approve any amendments to or early termination of the bonds or indebtedness. If, under the authority granted to it by subdivision (h) of Section 34179, the department either reviews and approves or fails to request review within five business days of an oversight board approval of an action authorized by this section, the scheduled payments on the bonds or other indebtedness shall be listed in the Recognized Obligation Payment Schedule and shall not be subject to further review and approval by the department or the Controller. The department may extend its review time to 60 days for actions authorized in this section and may seek the assistance of the Treasurer in evaluating proposed actions under this section.

(h) (1) A bond or indebtedness authorized by this section shall be considered indebtedness incurred by the dissolved redevelopment agency, with the same legal effect as if the bonds or other indebtedness had been issued, incurred, or entered into prior to June 28, 2011, in full conformity with the applicable provisions of the Community Redevelopment Law that existed prior to that date, shall be included in the successor agency to the Redevelopment Agency of the City and County of San Francisco’s Recognized Obligation Payment Schedule, and shall be secured by a pledge of, and lien on, and shall be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund established pursuant to subdivision (b) of Section 34170.5, as provided in paragraph (2) of subdivision (a) of Section 34183. Property tax revenues pledged to any bonds or other indebtedness obligations authorized by this section are taxes allocated to the successor agency pursuant to subdivision (b) of Section 33670 and Section 16 of Article XVI of the California Constitution.

(2) Notwithstanding paragraph (1), a bond or other indebtedness issued, incurred, or entered into pursuant to subparagraph (C) of paragraph (1) of subdivision (a) shall be secured by a pledge of, and lien on, and shall be repaid from, moneys deposited in the Redevelopment Property Tax Trust Fund, established pursuant to subdivision (b) of Section 34170.5, as provided in paragraph (2) of subdivision (a) of Section 34183 only to the extent the moneys represent the amount of moneys on deposit in the Redevelopment Property Tax Trust Fund that otherwise would have been distributed to the City and County of San Francisco pursuant to paragraph (4) of subdivision (a) of Section 34183. Property tax revenues pledged to any bonds or other indebtedness obligations authorized by this paragraph are taxes allocated to the successor agency pursuant to subdivision (b) of Section 33670 and Section 16 of Article XVI of the California Constitution.

(i) The successor agency to the Redevelopment Agency of the City and County of San Francisco shall make diligent efforts to ensure that the lowest long-term cost financing is obtained. The financing shall not provide for any bullets or spikes and shall not use variable rates. The agency shall make use of an independent financial advisor in developing financing proposals and shall make the work products of the financial advisor available to the department at its request.

SEC. 2.5.

Section 34177.7 of the Health and Safety Code is amended to read:

34177.7.

(B) The infrastructure required by the Transbay Implementation Agreement.

(j) (1) (A) For the development of the project described in the Candlestick Point-Hunters Point Shipyard Phase 2 Disposition and Development Agreement, the limitations relating to time for establishing loans, advances, and indebtedness, the effectiveness of the redevelopment plans, the time to repay indebtedness, the time for applying tax increment, the number of tax dollars, or any other matters set forth in Section 33333.2 and Section 33492.13 shall not apply.

(B) The Candlestick Point-Hunters Point Shipyard Phase 2 project agreements shall establish the applicable limitations relating to time for establishing loans, advances, and indebtedness, the effectiveness of the redevelopment plans, the time to repay indebtedness, the time for applying tax increment, number of tax dollars, or any other matters set forth in Section 33333.2 and Section 33492.13. Any amendments to Candlestick Point-Hunters Point Shipyard Phase 2 project agreements to establish or change those time limits shall be approved by the oversight board, and shall be subject to department approval, as described in this part.

(2) This part shall not be construed to limit the receipt and use of property tax revenues generated from the Hunters Point Redevelopment Plan project area or Zone 1 of the Bayview Hunters Point Redevelopment Plan project area for the project described in the Candlestick Point-Hunters Point Shipyard Phase 2 Disposition and Development Agreement.

SEC. 3.

The Legislature finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances relating to the replacement of affordable housing demolished by the former Redevelopment Agency of the City and County of San Francisco, as described in Section 1 of this act.

SEC. 4.

(a) Section 2.5 of this bill incorporates amendments to Section 34177.7 of the Health and Safety Code proposed by this bill and Senate Bill 143. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2024, (2) each bill amends Section 34177.7 of the Health and Safety Code, and (3) this bill is enacted after Senate Bill 143, in which case Section 34177.7 of the Health and Safety Code, as amended by Senate Bill 143, shall remain operative only until the operative date of this bill, at which time Section 2.5 of this bill shall become operative, and Section 2 of this bill shall not become operative.

(b) Section 2.5 of this bill incorporates amendments to Section 34177.7 of the Health and Safety Code proposed by this bill and Assembly Bill 143. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2024, (2) each bill amends Section 34177.7 of the Health and Safety Code, and (3) this bill is enacted after Assembly Bill 143, in which case Section 34177.7 of the Health and Safety Code, as amended by Assembly Bill 143, shall remain operative only until the operative date of this bill, at which time Section 2.5 of this bill shall become operative, and Section 2 of this bill shall not become operative.