Venturacountys Rt Aug 18 2003 August 15, 2003 Office of the

In 1976, the State AssembJy created the Low and Moderate Income Housing Fund Bill (AB3670). This legislation required thatall redevelopment new projects set aside 20% of their tax increment for low and revenues use on moderate-income housing. Concur. No response needed.

In 1994, the State Assemb/y created a "use it or lose it," bill (AB1290) related to the 20% set aside funds. Agencies worried that the State could then take back unused funds. It stated that if agencies did not expend encumber or surplus (defined befow) in the low and moderate income housing fund excess within one year from the date it became suplus, the agency must eiher, (a) disburse the excess voluntarily to a housing authority or other public agency exercising housing developmentpowers or (b) expend or encumberits excess 250 North Ventura Road Port Hueneme, California 93041 Phone (805) 986-6500 , * I I within two additional years. It also provided that after three years if it has not spent or encumbered, the agency would be subject to sanctions. The definition of "surplus"is any unexpended or unencumberedamountin an agency's lowand moderate-income fund that exceeds million dollars the aggregate of the one or amounts depositedduring the agency'slastfourfiscalyears. Concur. Section 33334.12(g)(l) of the California Community I Redevelopment Law, Health and Safety Code Section 33000, et. seq. ("CRL"), states that the first fiscal year to be included in this computation is the 1989-90 fiscal year, and the Orst date on which an excess surplus may exist is July 1, 1994. Section 33334.12(g)(3)(D) also states that the State Department of Housing and Community Development (`iHCD") shall develop and periodically the methodology to be used calculating revise in I the surplus. It important to note that pursuant to CRL Section excess is I I 33080.7, the amount of excess surplus an agency has accumulated and a plan to eliminate this surplus must be reported the agency's State in Controller's Report. F=3. Health and Safety Code section 33334.2 subdivision (a), allows CRA to a make hndings, based upon sufficient factual information, that need exists in the I community to improve, increase or preserve the supply of /ow and moderate housing that percentage less than 20 percent of the tax income or some I increment revenues are suMcient to meet those needs. If such findings are properly made, the CRA is not required to a/I part of the 20 percent set use or aside funds." I Concur. No response needed.

The present law indicates tax increments only available to CRAS that are in dibt. Once the debt is paid, the properfy tax increment is not available to are CRAS for the project. This encourages the CRAS to remain in debt so they may collect the funds. It should be noted thatmost ofthe funds receivedbystaying in debtgoes to paythe interest on the debf. Disaqree. The legislative policy statements contained Article 3 of the in CRL (Sections 33030 through 33039) recognize the difficult task of removing blight and that substantial public resources may be required to address this problem. However, the intent of the CRL is NOT to encourage redevelopment agencies to remain in debt. The requirement that agencies must have debt to collect tax increment exists to ensure that agencies only collect tax increment (which is essentially tax money redirected from other taxing entities) to fund established projects and programs to implement the redevelopment plan. This is a way to restrict agencies from collecting tax increment that does not have a specific purpose and that does not go towards furthering the goals and objectives of redevelopment plan. In a addition, this requirement encourages agencies to maximize blight removal efforts by acquiring as much capital as possible early in the process, via bond issues other indebtedness, in order to fund large scale, or substantive projects to address SIGNIFICANT BLIGHTING CONDITIONS in a project area that need immediate attention. Instead of waiting years for blight to get worse, or to fund small-scale "band aid" remedies with the relatively small amounts of tax increment collected during the first few I years of a project, agencies opt to address conditions in a timely manner. It should be noted that the State of California, school districts, and nearly every public entity that receives taxes also issues bonded debt. Many redevelopment agencies have chosen to bonds to fund needed issue public improvements and other types of redevelopment projects, secured I I by the future Oow of tax increment. A bond issue is much like a mortgage in that it is a loan to allow for an immediate purchase. Bond issues, like t mortgages, are popular because projects can be completed in a timely fashion rather than waiting years or decades for sufficient revenue to be collected. With regard to interest payments, it is incorrect that "most" tax increment used to pay debt goes to interest on the debt. "Most" would the majority, an6 most redevelopment bond within the past mean issues two years have been issued at interest rates ranging from 4.5 5.5%. In - addition, "debt" for a redevelopment agency can also be a loan from a City, I bank, agreementwith developer, etc., with competitive interest rates. a an a F-S. There is no specific agency with oversight and audit power over CRAS except for the legislative bodies that create the CRAS. Except mentioned as below, they are largely exempt from government oversight by any agency other I than a Grand Jury. Disaaree. Article 6 of the CRL (Sections 33080 through 33080.8) mandates comprehensive reporting requirements for every redevelopment agency in the State. Pursuant to this Article, the State of California (Controller's Office, Department of Finance, HCD, and Attorney General's Office) has oversight and audit power over redevelopment agencies. In particular, the HCD has significant oversight and audit power over redevelopment agencies use of low and moderate-income housing funds. More specifically, the HCD is responsible for developing the methodology to calculate excess surplus (as discussed on ), is involved (along with the State Department of Finance) in determining whether remaining blight exists within project within the context of CRL Section 33333.11, and a area every redevelopment agency must submit an annual report to HCD (discussed in detail betow). It is also important to note that the State Department of Finance is deemed to be interested party each an in I AUGUST 15, 2003 I validation action filed that challenges a redevelopment plan adoption or I I amendment. I Redevelopment agencies must comply with a myriad of comprehensive reporting requirements to State and local agencies. Each year every redevelopment agency must prepare and submit the following reports to the State of California: Annual independent Onancial audit report (the agency must present O any major violations to the legisiative body and inform the legislative body that the failure to correct the violation may result in the filing of action by the Attorney General pursuant to Section 33080.8 of the an CRL); State Controller's Report annual transactions, including: on Outstandingdebt, O Tax increment generated, O Pass through payments. O HCD Report that includes: The total number of residential units created in project O a area, The total number of low and moderate income housing units O destroyed created in project or a area, The status and of the low and moderate income-housing O use fund (including the date and amount of all deposits and withdrawals of money from the iow and moderate income housing fund). Pursuant to CRL Section 33080.6, the State of California compiles and publishes reports ofthe activities of redevelopmentagencies everyyear. Additionally, CRL Section 33080.8 requires the State Controller to compile list of agencies with major violations pertaining to reporting requirements a EACH YEAR, ON OR BEFORE APRIL IST. By June Ist of each year, the Controller determines if these agencies have corrected the violations. If the violation has not been corrected, the Controller sends list of these a agencies and the violations to the State Attorney General for action. Within 45 days of receiving this information, the Attorney General determines whether to file action to compel the agency's compliance. Within 15 an days of a Oling of action, the court will conduct a hearing to determine if good cause exists to pursue action. If the court Onds that a major violation exists, the court sets hearing within 30 days and immediately a issues an orderthat prohibits the agency from doing any ofthe following: Encumbering any funds or making any expenditures except to pay existing indebtedness, Adopting redevelopment plan, a 1 AUGUST 15, 2003 Amending redevelopment plan, except to correct the violation that a is the subject of court action, Issuing, selling, offering for sale or delivering any bonds or any other evidence of indebtedness, Incurring any indebtedness. I The above restrictions will until the court determines that the I remain I agency has corrected the violation. IN ADDITION TO THESE REPORTS, each redevelopment agency must also submit Statement of Indebtedness to the County auditor-controller's a office each year. This report presents the following information for each project area: Total amount of outstanding indebtedness, Amount of tax increment generated, Amount of pass through payments made to taxing entities, I Financial transactions report required by Section 53891 of the Government Code ofthe State of California, Amount of existing indebtedness and the total amount of payments required to be paid on existing indebtedness for the fiscal year.

If CRA defaults its debt, city has legal responsibility to bail out a on a n-o their defaulting CRA. However, city credit and credibility damaged, because are most CRA board members also members ofthe cRy counciI. as are I Concur with the first sentence. Disagree with the second sentence. While it is true that the debt of a redevelopment agency is not the debt of a city, the could be said about housing authority of city, public same a a or a finance authority. State law mandates that the debt of separate agencies, even if the board of the agency is also the city council, be treated separately from the debt of the city. Redevelopment agencies are a subdivision of the State, not of a city. Redevelopment agency bonds are secured by tax increment that the city has authority to claim no or administer. Additionally, not all city councils the boards of serve as redevelopment agencies in the State of California. It is very important to emphasize that a city's credit rating IS NOT adversely impacted by a default of a redevelopment agency on a bond issue; they are two separate entities that are viewed differently by rating agencies. Finally, and importantly, according to the California Redevelopment Association (an association of all redevelopment agencies the state), there have been in no defaults on any bond issues for any redevelopment agency in the State of California. GRAND KURY

The California State Controller's oMce issues an "annua/ reporl ofhnancial transactions" of CRAS. Each city is responsible to submit a reporf on the status of "/owand moderate income housing." Concur. No response needed.

The above report must also contain form entitled `Statement of a Indebtedness' This reporf must also be filed with fhe County Auditor on or before October 1 ofeach year. Concur. No response needed.

The Health and Safety Code, section 33080 (a) requires every CRA to file with the State Controller within six months of the end ofthe agency's fiscal year all the documents required by 33080.1. In addition, a copy of this report, upon written request, must be furnished to anyperson or taxing authority. Concur. No response needed. F=lO. Although County Board of Supervisors has legislative oversight of a no CRAs, many have adopted `olicies" within the Board of Supervisors policy manua/s to have oversight. Attachmenf B is recent example of Los some a Angeles County Board ofSupervisors action. Disaqree. The board of supervisors of a county only has direct authority and oversight responsibility over a redevelopment agency created by that county. Because redevelopment agencies subdivision of the State, are a counties do not have authority or oversight over the activities of other agencies. Counties are, however, affected taxing entities within redevelopment and such, provided with notification and areas, as are information regarding redevelopment plan adoptions and amendments. The Los Angeles County policy attached to the Grand Jury's report addresses that county's desire to review incoming information regarding new plan adoptions or amendments, as an affected taxing entity. This policy is an internal guide for Los Angeles County to use in determining which new redevelopment plans it will challenge or investigate it does not seek to impose obligations on other redevelopmentagencies. - To knowledge, the County of Los Angeles the only County in the our is State to have adopted any policies. As stated above, it is important to note that the above-mentioned policy ONLY applies to redevelopment plan new adoptions or amendments, and makes no mention of ongoing monitoring or oversight. The intent of this policy was to examine the legal basis for such adoption or amendment given any fiscal impacts incurred by the County result of redevelopment plan. as a a

Before the approval of a redevelopmentplan, the agency shall conduct a public hearing the plan. CRAS required to publish notice ofthe hearingl on are a I not less than once a week for four successive weeks prior to the hearing. The i notice shall be publishedin a newspaperofgeneral circulation andpublishedin the affected community. It is required that the notices be non-technical and in a clearand coherent using words with everyday meanings. manner common Concur. No response needed. I F-12. Copies of the published notices shall also be mailed first class to the last known ofeach parcel of/and in the designatedin the redevelopment owner area plan. /n addition, notice shall also be provided to all residents and businesses within the project at least 30 days priorto the hearing. area Concur. No response needed. I I F-13. Citizen involvement is minimal in most CRA planning operations. Project Area Committees (PACs) required at the formation of CRA residential are a project. Once the project is approved, there normally is continuing citizen no involvement with the p/an. Agencies not required to notiorrecallthe PACs, are ifthe plan is revised. Disaaree. First, it not correct to state that PACS only required for is are "residential projects." Section 33385 of the CRL states that PAC must be formed either of the following situations: in 1. A substantial number of low=income persons or moderate-income persons, or both, reside within a proct area, and the redevelopment plan will contain authority for the agency to acquire, by eminent domain, property on which any persons reside; or 2. The redevelopment plan contains public projects that one or more will displace a substantial number of low-income persons or moderate-Jncome persons, or both. Most law Orms the State who specialize redevelopment will indicate in in that twelve (12) or more low"income or moderate-income units within a redevelopment constitutes "substantial numbef' and would area a recommend that a PAC be formed. It is important to note that in the event of a PAC formation, at least t`/1/o PAC formation meetings are held to provide information the CRL, the project and the PAC. Mailed on area, notice is provided to all residents, businesses, and community organizations within a project area at least 30 days prior to the first meeting, and published notice pursuant to the Government Code also is provided. I Also, CRL Section 33385(0 requires that if a project area does not contain a substantial number of low= and moderate-income individuals, the agency shall either form PAC consult with, and obtain the advice of residents a or I and community organizations as provided for PACS and shal,l provide these persons and organizations with the redevelopment plan prior to its adoption. This consultation typically public information occurs via meeting. Notice for these meetings usually provided with the notice of is joint public hearing, with separate meeting notice published a in a newspaper of genera! circulation. Therefore, in the event PAC not required, all redevelopment even a is I agencies are legally obligated to consult with project area residents and community organizations. Secondly, the statement that "the project is approved, there normally once continuing citizen involvement with the plan" also incorrect. CRL is no is I Section 33366 states that the agency may consult with a PAC for a three- year period after the adoption of redevelopment plan. This would occur if BOTH the agency and the PAC wished to continue consultations. Many agencies opted to leave PACS in place to continue to provide policy guidance to the redevelopment agencies. As this rarely occurs due to the busy schedules of most people, it important to note at least three known is examples of this. The Orange County Development Agency ("OCDA"), the I redevelopment agency for the County of Orange, has a PAC that still meets regularly (six times year) the Santa Ana Heights Redevelopment a on Project, which adopted 1986. The PAC has remained almost 20 was in years after the adoption of the plan. The PAC for the San Fernando Boulevard South Corridor has also remained in place for nearly 20 years after the redevelopment plan adopted. In addition, the City of Long was Beach also has at least one PAC that continues to meet years after the redevelopment plans adopted. were Finally, the statement that agencies "are not required to notify or recall the PACs, if the plan is revised" is incorrect. In the event of a redevelopment plan amendment, Section 33385.5 ofthe CRL requires the following: The agency shali fo~ward copies of the proposed amendment to the redevelopment plan to the PAC if one exists, at least 30 days prior to the hearing the plan. on When the amendment would enlarge the project area, the agency shall call upon the PAC to expand its membership to include additional members to adequately represent all affected (the areas CRL prohibits the legislative body from holding public hearing to a adopt the plan unless the PAC membership has been enlarged). i The PAC may prepare a report and recommendations for the legislative body. If the PAC opposed the amendment, the legislative body may only adopt the amendment by a two-thirds vote of its entire membership eligible to vote the amendment. on I If a redevelopment plan amendment is proposed and a PAC does not exist, I CRL Section 33385.3 requires that a PAC be formed if the proposed amendment would do either ofthe following: I 1. Grant the redevelopment agency authority to acquire, by eminent domain, property on which persons reside in a project area in which I a substantial number of low- and moderate-income persons reside; or 2. Add territory in which substantial number of low- and moderate= a income persons reside and grant the authority to the agency to acquire, by eminent domain, property on which persons reside in the added territory-

Many ofthe cities within the County hold their CommunRy Redevelopment meetings the night the City Council meetings and the night's I on same as on published City Council agenda. Some of the cities have separate agenda for a the CRA meeting also listed. I I Concur. Holding these meetings the night done for the on same is of the public, that citizens only have to make night convenience so one availabie. However, because a city and a redevelopment agency are separate legal entities, it practice for city and the is common a redevelopment agency to have separate agendas. In Port Hueneme for example, separate agendas prepared for the City Council, are Redevelopment Agency, Housing Authority, and Surplus Property Authority of the City. Each of these meetings conducted separately but are are held on the same night to best serve the public interest. F=15. The Grand Jury requested information from County Counsel to what as remedies available if CRA fails to comply with the provisions of its are a redevelopmentplan or its implementation. The lawprovides forjudicialreview of CRA actions, without specifying who may bring such action. There are specific procedures that have been established for review of redevelopment plans. A CRA maybe subject to a taxpayes suit. The Afforney Genera/has the powerto bring actions to enforce state law. While no specific agency is given oversight responsibilities with respect to CRAs, various available by which means are judicial review of the agency's actions may be obtained. There appear to be no penalty provisions contained in the law. The only enforcement mechanism available in the lawis forbondholders, affectedindividuals organizatons, or taxpayers the Attorney General to file suit asking courl fo enforce the or a requirements ofthe law. I Disaciree. It is true that any affected property owner, resident, or business within a redevelopment project area may file suit against the adoption or amendment of a redevelopment plan. In addition, any resident of a city, even those that live outside of a redevelopment project area, may put a redevelopment plan amendment the ballot for referendum. However, or on I the adoption amendment of redevelopment plan just part of or a is one redevelopment in California, as yourfindings indicate. I The implementation of redevelopment plans California tracked by each in is redevelopment agency via five-year implementation plans required pursuant to CRL Section 33490. Every redevelopment agency must prepare an implementation plan for each redevelopment project to cover every five-year cycle in the iife of a redevelopment plan. The required contents of the Ove-year plan include: I Agency goals and objectives, Specific programs, including potential projects and estimated expenditures to be made during the five years, and An explanation of how the goals and objectives, programs and expenditures will eliminate blight within the project and area implement low and moderate housing requirements. I income Agency housing responsibilities including: The amount available in the low and moderate income housing O fund and estimated amounts to be deposited this fund in during each of the five years, O A housing program with estimates of the number of new, rehabilitated or price restricted units to be assisted and estimates of the expenditure of from the low and monies moderate income, A housing needs assessment, and O The amounts of low and moderate-income housing fund O monies utilized to assist low and moderate income households. As stated above, implementation plan must be adopted, after noticed an a public hearing, once every Ove years. In addition, CRL Section 33490(c) states that every agency must conduct a mid-term public hearing at ieast once within the Ove year term of the plan to hear testimony of all interested parties for the purpose of reviewing the redevelopment plan and corresponding implementation plan for each redevelopment project to evaluate the progress of the redevelopment project. Agencies must also 1 AUGUST 15, 2003 i adopt a housing compliance plan every ten years that describes how an agency is complying with CRL requirements pertaining to low and I moderate=income housing. It understanding that the HCD does track implementation plan and is our housing compliance plan adoptions and will noti redevelopmentagencies of nonompliance. I It important to emphasize that the State Controller, the State HCD, and is the Attorney General's Office all the ANNUAL activities of all oversee redevelopment agencies and the Attorney General has the authority to take action against violations of agencies. The reporting requirements outline earlier show the exhaustive and comprehensive requirements contained in State Law to insure ongoing compliance with the CRL. The State Controller's Office, annual basis, the compliance of each on an examines redevelopment agency and reports violations to the Attorney General. These violations ALL aspects oO redevelopment, not just financial cover reporting requirements. As stated CRL Section 3308O.8(i), major in a violation means that an agency did not: File independent financial audit report that substantially conforms an with legal requirements, File complete fiscal statement, a Establish time limits for redevelopment plans adopted prior to 1994, such the effectiveness of redevelopment plan, debt, and as a incur pay indebtedness or receive propertytaxes, Establish low and moderate-income housing fund, a Accrue interest earned by the low and moderate-income housing fund, Initiate development of housing on real property acquired using moneys from the low and moderate-income housing fund or sell the property, or Adopt current implementation plan. a There is an established legal process stated in the CRL that the A~orney General and the court must follow to address such violations. With regard to penalties, as stated earlier in this response, ifthe court Onds that an agency is found to have a major violation, the agency will prohibited from: Encumbering any funds or making any expenditures except to pay existing indebtedness, Adopting redevelopment plan, a Amending redevelopment plan except to correct the violation that a the subject of court action, is Issuing, selling, offering for sale or deiivering any bonds or any other evidence of indebtedness, and Incurring any indebtedness. The above restrictions will until the court determines that the remain agency has corrected the violation. In addition, agencies are penalized in the event of surplus of low and moderate-income housing funds. excess Pursuant to Section 33334.12, ff any agency has an excess surplus in the I low and moderate-income housing fund, the agency must voluntarily disburse the surplus to the county housing authority other appropriate or agency, or expend or encumber its excess surplus within t~lo years. If an I agency fails to comply with this after three years after the surplus was identified, the agency will be subject to the same sanctions itemized above. These sanctions will remain in place until the agency has expended or encumbered the surplus, plus additional amount equai to 50 excess an percent of the amount of the surplus that at the end of the excess remains three-year period. The additional expenditure will not be from the agency's low and moderate-income housing fund, but will be used that in a manner meets all the requirements for expenditures from thatfund. 1 1. GRAND JURY I AUGUST 15, 2003 I 2002-2003 Grand Jury Recommendations: I R-1. The Board of Supervisors should monitor and publicize annua//y the accumulation and expenditures ofthe funds. (C-1, C-2) In response to all of the recommendations presented, the leve! of pubic interest should be assessed prior to implementing any of these policies to insure that the expenditure of extra public resources is necessary. At this time, the City of Port Hueneme does not believe that this is I necessary pursuant to the discussion in the "Findings" section of this Response. It is our ooinion that this should not be implemented. I