When Governor Brown dissolved redevelopment agencies and community development agencies as of February 1, 2012, the development community and municipal government lost an important tool for economic growth and community revitalization. On Jan. 1, 2015, the Enhanced Infrastructure Finance Districts (“EIFDS”), newly authorized by SB 628, brought some hope that local government would aid in the challenge of financing infrastructure and providing financing to make urban infill projects more feasible. Now AB 2, approved by the Governor on Sept. 22, 2015, authorizes certain local agencies to form a community revitalization authority (“Authority”) within a community revitalization and investment area to carry out certain provisions of the existing Community Redevelopment Law for the financing of infrastructure, affordable housing and economic revitalization through tax-exempt bonds serviced by tax increment revenues.

What is an Authority?

An Authority is a public body, with jurisdiction to carry out a community revitalization plan within a community revitalization and investment area. An Authority can be created by a city, county, or city and county by resolution; or a city, county, or city and county with a special district can create an Authority by entering into a joint powers agreement. School entities cannot participate in an Authority. An Authority formed by a city or county that created a redevelopment agency that was dissolved pursuant to AB 26x cannot become effective until the successor agency or designated local authority for the former redevelopment agency has adopted findings that state (i) that the Finding of Completion from the Department of Finance has been received, (ii) no former redevelopment agency assets are the subject of litigation against the state, (iii) and the agency has complied with all orders of the Controller.

The governance of an Authority is made up of a majority of members from the legislative bodies of the public agencies that created the Authority and a minimum of two public members who live or work with within the community revitalization and investment area. The majority of the board appoints the public members, so there is no public vote for those seats. There are special restrictions on where a community revitalization and investment area can be formed. Namely, a community revitalization plan can be carried out in a community revitalization and investment area where annual median household income is less than 80% of the statewide AMI. Also, three of the following four criteria must be met: (1) non-seasonal unemployment must be at least 3% higher than the statewide median unemployment, (2) crime rates must be 5% higher than the statewide median crime rate, (3) the area is characterized by deteriorated or inadequate infrastructure, such as streets, sidewalks, water supply, sewer treatment, or parks, and (4) there must be deteriorated commercial or residential structures.

Interestingly, an Authority can be created to carry out a community revitalization plan within a community revitalization and investment area established within a former military base that is principally characterized by deteriorated or inadequate infrastructure and structures. This qualification could come in handy with the larger vacant brownfield spaces in California in dire need of reinvestment. Certain stakeholders were looking at both the old and new Infrastructure Finance District law to assist in the redevelopment, but AB 2 may serve as a more viable option.

The Powers of the Authority

An Authority has a wide range of powers, including the ability to rehabilitate, repair, upgrade, and construct infrastructure. Further, to fill a gap left open by the EIFD legislation, Authorities can provide for low- and moderate-income housing. Authorities have the rights conferred to redevelopment agencies under the Polanco Redevelopment Act, and can provide for seismic retrofits of existing buildings. Getting us back to where we once were with redevelopment agencies, an Authority has the power to issue tax-exempt bonds, serviced by tax increment funds generated within the community revitalization and investment area. This is a big victory for those of us in the tax-exempt municipal bond world, as we have been missing that tool in the redevelopment tool box since 2012. Although, note that the tax increments from the revitalization area are dependent on whether the city, county or special districts that receive property taxes from that revitalization area have agreed, by resolution, to allocate their tax increments to the community revitalization and investment area. The Authority is subject to the Brown Act.

A Community Revitalization and Investment Plan

The Plan must have the following elements:

1. a statement of the principal goals and objectives of the Plan, including the territory to be covered by the Plan.

2. a description of the deteriorated or inadequate infrastructure within the area and a program for construction of adequate infrastructure or repair of existing infrastructure

3. a housing program that describes how the Authority will comply with the affordable housing requirements of AB 2.

4. a program to provide funding for or otherwise facilitate the economic revitalization of the community revitalization and investment area.

5. a fiscal analysis setting forth the projected receipt of revenue and projected expenses over a five-year planning period, including the potential issuance of bonds backed by tax increment.

These requirements are more stringent than the requirements for creating a project area under the old redevelopment law. Although, admittedly, few of us doing real estate development when many of the 400 plus redevelopment project areas in California were created.

How does a local government establish the Plan?

The Authority considers the Plan at three public hearings that take place at least 30 days apart, making the process, not less than 90 days. At the first public hearing, the Authority hears comments, but takes no action. At the second hearing, the Authority considers any additional comments and decides whether to modify or reject the Plan. If not previously rejected, the Authority can approve the Plan at the third public hearing.

Issuing Bonds

Much like former redevelopment agencies, the Authorities have the power to issue bonds, which are serviced by tax increment from the specific community revitalization and investment area. The proceeds of the bonds can be spent on any use authorized by the new law, including rehabilitate, repair, upgrade, and construct infrastructure.

Note that these bonds may conflict with the bonds authorized by the existing, but newly created, EIFD law and there may exist some competition for the same tax increment dollars. The point of differentiation may be that the Community Revitalization Law does not require the same findings as the EIFD law, in so far as the EIFD requires a plan that has infrastructure of regional significance, but neither statutory program requires a blight finding and the tax increment is net of any taxes that would otherwise go to school districts.

Accordingly, in a short period of time, the development community has gone from an environment without redevelopment agencies to two different constructs that allow for tax increment financing. It should get interesting as we all vie for dollars that are so necessary for urban projects.

Douglas Praw is partner in the Los Angeles office of Holland & Knight. He focuses on real estate development, public finance and land use entitlement work in connection with state and municipal regulatory matters. He may be contacted at [email protected]. The views expressed here are the author's own.