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HomeMy WebLinkAbout4.04 AffordHousIncenSB1509 CITY CLERK File # 660-40 AGENDA STATEMENT CITY COUNCIL MEETING DATE: April 2, 2002 SUBJECT: Support of SB 1509, Affordable Housing Incentives Report Prepared By: Jason Behrmann, Administrative Analyst ATTACHMENTS: 1) 2) Letter from Senator Joseph Dunn requesting the City's support for SB 1509 Text of SB 1509, as introduced February 19, 2002 RECOMMENDATION:/~r~ Direct Staff to draft a letter to the City's State.legislative representatives for the Mayor's signature in support of SB 1509. FINANCIAL STATEMENT: The Bill, if passed, would provide a financial incentive to local governments for approving affordable housing projects. DESCRIPTION: The City recently received a letter from Senator Joseph Dunn requesting the City's support for SB 1509, affordable housing incentives. In response to the letter, Mayor Lockhart requested that Staff review and analyze Senate Bill 1509 to determine the impact that it would have on the City. Attached is a copy of the Bill including the Legislative Counsel's Digest. The authOr of the Bill, Senator Joseph Dunn claims that there is currently a disincentive for cities to approve affordable housing. He argues that one of these disincentives is the property tax exemption that many multi-family affordable housing developments receive. In order to qualify for tax-exempt status, the developer must be a 501 (c)(3) non-profit corporation and include units offered to families at or below 80% of the median household income. This may limit its applicability to future affordable housing projects in the City. The Bill would have no impact for example, on single family units offered for sale or multi-family units built by for-profit developers. However, SB 1509 would compensate local governments for their share of lost revenue from developments that qualify for the property tax exemption. The Bill proposes to reduce cities' Educational Revenue Augmentation Fund (ERAF) contributions by the amount of the property tax they would otherwise have received. By eliminating this financial disincentive, the authors hope to increase the number of affordable housing projects across the State. : The Bill will not be applied retroactively to existing affordable housing units but would affect all projects approved after January 1, 2003. The magnitude of the ERAF reduction or increased revenue would H/cc-forms/agdastmt. doc COPIES TO: ITEM NO. obviously vary depending on the size of the project. In order to illustrate the potential impact, the following is an estimate of the revenue potential from a 250 unit apartment' complex with 50% of its units meeting the property tax exemption requirements. For mixed developments, the exemption is applied on a proportional basis for the percent of units that are at or below the 80% level. Under the current law, the City would receive $40,000 annually in property tax, instead of $80,000 on a project valued at $30,000,000. This Bill would enable the same amount of property tax ($80,000) for the project had it been a 100% market rate project, thereby generating an additional $40,000 annually in property tax revenue for the City. The Bill seeks to reward cities for building affordable housing as opposed to penalizing cities for not building adequate affordable housing as other bills have attempted to do. However its impact on the City would be limited due to its restriction to projects that include a property tax exemption. Staff believe that the Bill would be much more effective in increasing affordable housing if financial incentives were available for all affordable housing projects. However, despite the Bill's limitations, there are no negative impacts associated with the Bill and it could potentially increase property tax revenue, depending on the nature of future affordable housing projects in the City. Staff therefore recommends that the City support SB 1509 with the admonition that future legislation provide incentives that allow more flexibility in approving affordable housing projects. RECOMMENDATION: Staff recommends that the Council direct Staff to draft a letter to the City's State legislative representatives for the Mayor's signature in support of SB 1509. SACF~AM ENTO OFFICE STATE CAPITOL SACRAMENTO, CA 95814-4900 (916) 445-5831 RICK BATTSON CHIEF OF STAFF DISTRICT OFFICE 12397 LEWIS STREET, SUITE 103 GARDEN GROVE, CA 92840-4965 (714) 705- ! 580 Honorable Janet Lockhart Mayor City Of Dublin 100 Civic PIz Dublin, CA 94568-2658 Dear Mayor Lockhart: SENATOR JOSEPH I. DUNN THIRtY-FOURTH SENATORIAL DISTRICT March 14, 2002 COMMITTEES: CHAIR, HOUSING 8: COMMUNITY DEVELOPMENT BUDGET & FISCAL REVIEW GOVERNMENTAL ORGANIZATION PRIVACY TRANSPORTATION VETERANS AFFAIRS SELECT COMMITTEES: CHAIR, INVESTIGATE PRICE MANIPULATION OF' THE WHOLESALE ENERGY MARKET CHAIR, MOBILE AND MANUFACTURED HOMES CALIFORNIA'S WINE INDUSTRY FAMILY, CHILD AND YOUTH DEVELOPMENT JOINT RULES NAR 0 2002, I am writing to request your support for legislation that would financially reward cities and counties for approving new affordable housing developments. In spite of the overwhelming need for more affordable housing in California, local governments often face fiscal disincentives and community opposition when it comes to approving new developments. When they promote affordable housing, there are few tangible rewards other than the satisfaction of serving the community's needs. The property tax exemption that affordable housing cJevelopments receive, while critical to affordability, exacerbates these problems. I strongly believe that local governments should receive a financial benefit for approving new affordable housing· That is why Senator Torlakson and I fought for and won an additional $100 million in the pending housing bond to provide local government incentives. That is also why I have introduced Senate Bill 1509, which would compensate local governments for their share of lost revenue from developments that qualify for the property tax exemption· SB 1509 would reduce cities' ERAF contributions by the amount of the property tax they would otherwise have received; in unincorporated areas, the benefit would go to the county. I believe that this bill will reduce the fiscal disincentives for local governments and help elected officials deal more effectively with community opposition· As you well know, this year is shaping up to be a financially difficult one for the state. Nonetheless, I believe SB 1509 has a relatively good chance of success· Although the long-term benefits of this bill are large, the short-term costs are small· We will need all the help we can get to make sure SB 1509 becomes law. I hope you will actively support our efforts as the bill Winds its way through the Legislature. Please feel free to contact my legislative aide, Adam Sofen, at (916) 445-5831 if you have any questions. I look forward to working with you in the coming year. JLD/aas Very truly yours, · DUNN Senator, 34th District ATTACHMENT SENATE BILL No. 1509 Introduced by Senator Dunn February 19, 2002 An act to add Section 97.48 to the Revenue and Taxation Code, relating to local government finance. LEGISLATIVE COUNSEL'S DIGEST SB 1509, as introduced, Dunn. Property tax revenue shifts: exemption: affordable housing developments. Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generallY requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the priOr fi~cal year, subject to certain modifications,, and that jurisdiction's portion of the annual tax increment, as defined. Existing property tax law also reduces the amounts of ad valorem property tax revenue that would otherwise be annually allocated to the county, cities, and special districts pursuant to these general allocation requirements by requiring, for purposes of determining property tax revenue allocations in each county for the 1992-93 and 1993-94 fiscal years, that the amounts of property tax revenue deemed allocated in the prior fiscal year to the county, cities, and special districts be reduced in accordance with certain formulas. It requires that the revenues not allocated to the county, cities, and special districts as a result of these reductions be transferred to the Educational Revenue Augmentation Fund in that county for allocation to school districts, community college districts, and the county office of education. This bill would, for the 2003-04 fiscal year and each fiscal year thereafter, reduce the reduction and transfer amounts of qualified loCal .99 ATTACHMENT 2 ~B 1509 2 agencies, as defined, by the property taxes lost as a result of the granting of a specified exemption from property taxes 'for affordable housing developments that are put into service on or after January 1, 2003. This bill would require that the reduction, resulting from this prohibition, in the mounts of ad valorem property tax revenue deposited in the county's Educational Revenue Augmentation Fund, be applied exclusively to reduce the amounts of ad valorem property tax revenue allocated from that fund to schOol districts and county offices of education. By imposing additional duties upon local tax officials in the apportionment of the allocation reductions required by this bill, this bill would impose a state-mandated local program. The California Constitution requires'the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement, including the creation of a State Mandates Claims Fund to pay the costs of mandates that do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions. Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes. ~ The people of the State of California do enact as folloWS: 1 SECTION 1. Section 97.48 is added to the Revenue and 2 Taxation Code, to read: 3 97.48. (a) Notwithstanding any other provision of'ithis 4 chapter, the auditor shall, in allocating property tax revenue for the 5 2003-04 fiscal year and each fiscal year thereafter, decrease the 6 total amount of property tax revenue that is allocated to the 7 county's Educational Revenue Augmentation Fund rath~ than a 8 qualified local' agency, as a result of the reductions calculated for 9 that local agency pursuant to Section 97.2 or 97.3, by that local 10 agency's share of those property tax revenues lost as a result of 11 exemption from tax under subdivision (f) or (g) of Section 214 of 12 affordable housing developments that are put into service in the 13 county on or after January 1, 2003. 3 SB 1509 1 (b) For the purposes of this section: 2 (1) "Qualified local agency" means a city or a county that has 3 an adopted housing element that the Department of Housing and. 4 'Community Development has determined, pursuant to Section 5 65585 of the Government Code, to be in substantial compliance 6 with the requirements of Article 10.6 (commencing with Section 7 65580) of Chapter 3 of Division 1 of Title 7 of the Government 8 Code. 9 (2) A qualified local agency's share of lost property tax 10 revenues is that additional amount of property tax revenue that 11 would be allocated to that local agency if affordable housing 12 developments, exempted from tax as described in subdivision (a), 13 were instead subject to taxation. 14 (c) Any reduction in the amount of ad valorem property tax 15 revenues deposited in the county's Educational Revenue 16 Augmentation Fund resulting from the implementation of 17 subdivision (a) shall be applied exclusively to reduce the amounts 18 that are allocated from that fund to school districts and county 19 offices of education, andmay not be applied to reduce the amounts 20 of ad valorem property tax revenues that are allocated from that 21 fund to community college districts. 22 SEC. 2. Notwithstanding Section 17610 of the Gove~ht 23 Code, if the Commission on State Mandates determines that this 24 act contains costs mandated by the state, reimbursement to~ 10e~l 25 agencies and School districts for those costs shall be made pursuant 26 to Part 7 (commencing with Section 17500) of Division 4 or. Title 27 2 of the Government Code. If the statewide cost oftheclaim..for 28 reimbursement does not exceed one million dollars ($1,00Q~000), 29 reimbursement shall be made from the State Mandates Claims 30 Fund. O 99 "