Local Government
AB 2 Appears to be the Long-Awaited Redevelopment Replacement Law

AB 2 Appears to be the Long-Awaited Redevelopment Replacement Law

By Seth Merewitz and Sigrid K. Asmundson, Best Best & Krieger.

Since the demise of redevelopment in 2012, and the assurance of a “replacement” by Gov. Jerry Brown, we have been waiting. We saw valiant efforts by Sen. Darrell Steinberg and Assemblyman Luis Alejo in each of the proceeding years to bring “Redevelopment 2.0,” only to see these efforts vetoed or die on the Senate floor year after year.

The Community Revitalization and Investment Authority Law (AB 2), authored by Alejo and signed by Brown this week, appears to be a true “redevelopment replacement.” It will allow a city, county, or city and county (with a Department of Finance Finding of Determination) or a city, county, or special district — or any combination of these via entering into a joint powers agreement — to establish a Community Revitalization and Investment Authority in specified disadvantaged communities (as discussed below) and ensure that 25 percent be set aside for affordable housing. School districts, however, are prohibited from establishing a CRIA.

The stated intent of AB 2 is to “invest property tax increment revenue to relieve conditions of unemployment, reduce high crime rates, repair deteriorated or inadequate infrastructure, promote affordable housing and improve conditions leading to increased employment opportunities.” That is accomplished by the ability to establish a CRIA composed of members of a public agency and at least two public members, and to adopt a “community revitalization plan” within a CRIA area. In addition, any city, county or special district that collect ad valorem property tax from property located with the CRIA area may adopt a resolution to allocate its share of property tax increment to the CRIA. A school district may not allocate its property tax increment to the CRIA.

The CRIA and community revitalization plan are deemed to comply with section 16 of Article XVI of the California Constitution, which is significant for the issuance of debt secured by property tax increment revenues.

The CRIA area must include at least 80 percent of land that has an annual household income that is less than 80 percent of the statewide annual median income, as well as three of the following four criteria further defined in the statute: (1) unemployment (at least 3 percent higher than statewide median); (2) crime rates (5 percent higher than statewide median); (3) deteriorated or inadequate infrastructure; or (4) deteriorated commercial or residential structures, including a former military base.

The authority of the CRIA largely mirrors the authority of former redevelopment agencies outlined in the redevelopment law, including real property acquisition by eminent domain within 12 years from the adoption of the community revitalization plan. There are areas of assistance specifically prohibited, such as assistance to an automobile dealership, property used for gambling or development of undeveloped land.

Additionally, a minimum of 25 percent of all tax increments allocated to the CRIA must be deposited into a separate low- and moderate-income housing fund and used solely for the purpose of increasing, improving and preserving the community’s supply of affordable housing. These funds must be spent in the CRIA area from which they were generated. Funds may be used for many purposes of the former redevelopment law. These funds must be expended over each 10-year period of the community revitalization plan, although there are shorter time requirements for expenditure of funds that qualify as “excess surplus.” Rental units assisted by the CRIA must remain affordable for at least 55 years. Owner-occupied units must remain affordable for at least 45 years.

For more information on AB 2, contact one of the attorney authors of this legal alert listed at right in the Municipal Law practice group, or your BB&K attorney.

Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

Merewitz_Seth-c2Seth Merewitz is a partner in the Municipal & Redevelopment Law practice group of Best Best & Krieger LLP.  Mr. Merewitz heads the firms Public-Private Partnership Practice and provides advisory and transactional services to private entities and public agencies.  His practice focuses on real estate development including zoning and land use; municipal and redevelopment law; and public-private partnerships. He can be reached at seth.merewitz@bbklaw.com or at 213-787-2567

Asmundson_Sigrid-c2Sigrid K. Asmundson is of counsel in Best Best & Krieger’s Municipal Law practice group in the firm’s Sacramento office. She serves as general and special counsel to multiple public agencies providing advice on various aspects of local governance including the Brown Act, conflict of interest, election laws, redevelopment agency dissolution, affordable housing and disclosure of public records. She can be reached at Sigrid.Asmundson@bbklaw.com.

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