The California Housing Consortium, in conjunction with CAL-ALHFA, hosted a workshop July 18th, sponsored by CHASE, entitled “What’s Next? The New Reality for Affordable Housing.” Attended by over 75 people, the workshop provided an opportunity to hear from a distinguished list of speakers and ask questions about the implementation of recently passed RDA dissolution and opt-in legislation.
Panel 1: Background on the legislation and potential lawsuit
Our first panel, moderated by Linda Mandolini, included Lynn Hutchins and Jack Nagle from Goldfarb & Lipman. As soon as the governor signed the legislation, all redevelopment agencies in the state were suspended. Unless agencies choose to “opt-in” to the new system and make a required payment to the state, they will be dissolved effective October 1, 2011. The three main parts of the legislation deal with suspension, dissolution and, so called, pay-to-play or opting-in. During suspension, a binding obligation is still enforceable. However, formerly routine requests like slight modification of terms or lengthening a time-line are no longer authorized. Any discretionary approval has been eliminated during the suspension period.
If an agency can not opt-in (San Jose, for example), they will no longer exist as of October 1st. For that community, “tax increment” ceases to exist and the 20% set-aside for affordable housing also goes away. Even for those agencies that disappear, enforceable obligations are still honored, however. For those agencies that choose to “opt-in,” they must first make their voluntary/ransom/extortion payment. If this is found to be constitutional, this is the only ray of hope for affordable housing. If you CAN opt-in, there will be housing money available for pre-existing deals and the “new” rda will have the ability to undertake new deals. Finally, in year one only, housing funds CAN be used to make the required payment to the state but can not be used in following years.
John Shirey from CRA, also a part of this panel, gave us “breaking news” about the lawsuit that was filed yesterday in the California Supreme Court seeking to invalidate the recently passed RDA dissolution legislation. CRA is the lead and is joined by The CA League of Cities, The City of San Jose, The City of Union City and John Shirey as an individual CA taxpayer. This lawsuit states that the legislation is unconstitutional on its face in violation of Prop 22. They are seeking a stay of the legislation (with a request that a decision on the stay be reached by August 15th) and a request that a decision on the merits be reached by December 20th (required payments to the state due January 15, 2012).
On another note, John mentioned that based on what he’s hearing from rdas around the state, approximately 80% of them will be opting into the new system and making the required payments to the state.
Panel 2: Perspective from the Capitol
Our second panel, moderated by Tim O’Connell, included Mark Stivers, Senate Transportation & Housing Committee Consultant, and Steve Shea, budget advisor to Senator Steinberg. Mark talked about ongoing reforms to the housing set-aside portion of redevelopment funds contained in SB 450. Those reforms continue to move forward in the legislature and center around four main areas: (1) Planning and admin costs, (2) Timeline required to begin development for property purchased with low/mod money, (3) Income targeting and a focus on housing production and (4) Increasing oversight. As NPH wrote in their member update, both Shea and Stivers confirmed that concepts for clean up legislation are currently being vetted but that no language has yet been made available or printed. The clean up bills are to correct “drafting errors” and inconsistencies in the legislation and will focus on the following critical affordable housing issues:
1. Destination of housing fund balances of agencies that will dissolve;
2. Terms under which FY 2011-2012 housing tax increment may be taken to make remittances;
3. Potential payment flexibility for sponsoring communities/agencies that cannot make the required remittances; and
4. Further definition of qualifying projects that meet “statewide goals” and “fiscal incentives” for such projects as alluded to in AB1x 27.
CRA is advising its members that housing fund balances accrued from previous fiscal years are not to be used to make the voluntary opt-in payments
Our final participant in this panel was Samantha Lui, Senate Governance & Finance Committee Consultant. Samantha discussed the five different bills pending in the legislature that address Infrastructure Financing Districts. These types of bills have been said, by some, to offer a strong alternative to redevelopment. While IFDs do not require a blight determination and seem to be good for large scale public projects, they do not have a large amount of purchasing power for affordable housing.
Panel 3: Perspective from the RDAs
Our final panel, moderated by Mary Ellen Shay, included Leslye Corsiglia from San Jose, Cynthia Shallit from the City of Woodland and Le Shelle Dozier from the Sacramento Housing and Redevelopment Agency. While the City of Woodland and Sacramento have decided to opt in to the new system, the City of San Jose will be forced to opt out and their redevelopment agency will cease to exist.
On the opting-in side, Woodland, a small city, will be losing approximately half their money to payments required of the new system and Sacramento, a larger city, will be required to pay $22 million this year and approximately $5 million every year thereafter. Coupling these payments with declining tax increment revenue means that there will certainly be less money for future projects in both cities. As for San Jose, their approximately $52.8 million required contribution to the state is impossible to raise. They have joined the CRA lawsuit seeking to undo the legislation. In the meantime, hundreds of affordable housing units will fall by the wayside. While San Jose will look to other sources of funding to generate affordable housing dollars, they will pale in comparison to what they have done historically.
Thanks again to all our panelists, attendees and sponsors for making this workshop so informative and successful.