Governor Signs AB2 Allowing for a New Tool to Combat Blight in Disadvantaged Communities

After rejecting earlier attempts to revive redevelopment, Governor Jerry Brown signed Assembly Bill 2 on September 22, 2015, creating a new process to allow local governments to address blight in economically disadvantaged communities. The law permits the formation of a new public body called a “Community Revitalization and Investment Authority” (CRIA).  While CRIAs have a similar aim as former redevelopment agencies, the scope of AB2 is a scaled-down version of the redevelopment system that Brown helped dissolve four years ago.

A stated purpose of the new law, which goes into effect in January 2016, is to permit cities and counties to invest in “disadvantaged communities with a high crime rate, high unemployment, and deteriorated and inadequate infrastructure, commercial, and residential buildings.”  CRIAs will have comparable powers as the former redevelopment agencies, including issuing bonds, providing affordable housing, adopting area plans, and eminent domain power, but circumstances in which a CRIA can be formed are narrower than redevelopment agencies in an attempt to avoid what many perceived was an overuse of redevelopment in areas not truly blighted.

Formation:  Under the law, there are two ways a CRIA can be formed.  First, a city, county (or city and county jointly) may create a CRIA (to be governed by a five-member board appointed by forming agency).  Second, a city, county, or special district (or any combination) can form a CRIA through a joint powers agreement with the CRIA administered by members of the legislative bodies of the agencies that created the CRIA.  In both situations, the five-member CRIA board must consist of three members of the legislative body of the agency that created the CRIA, as well as two members of the public who live or work in the area.

Some public agencies cannot take part in a CRIA.  School entities and redevelopment oversight boards may not participate in a CRIA, nor may a public agency that has not yet completed the wind-down process of its redevelopment agency and received a finding of completion from the California Department of Finance.

Qualifications and Public Process:  A CRIA must adopt a “community revitalization and investment plan” for its “community and revitalization and investment area.”  At least 80% of the area designated is required to have an annual median household income less than 80% of the statewide annual median income, and must meet at least three of four conditions:

(1) Unemployment is at least three percent higher in the area than the statewide median unemployment level;

(2) The crime rate is five percent higher than the statewide median crime rate;

(3) The area has deteriorated or inadequate infrastructure; and

(4) The area has deteriorated commercial or residential structures.

In the past, redevelopment agencies simply needed to prepare a study to support a finding that “blight” (which carried a broad and varied definition under the law) existed in a project area.  This allowed local governments broad powers to create redevelopment areas in areas that were neither disadvantaged nor objectively blighted, and freeze the property tax base in order to retain property tax increases regardless of whether they were due to any actual redevelopment.

The CRIA’s plan must be considered at three public hearings held 30 days apart.  The first is to hear public comments; the second is to consider additional comments and modify or reject the plan; and the third is to conduct a protest proceeding where the board considers written and oral protests to the plan’s adoption by property owner and residents, and ultimately makes a decision to terminate or adopt the plan.  However, similar to annexation procedures under local agency formation commission laws, the plan will only be rejected if protests have been filed by over 50% of the property owners and residents in the area.  If only between 25% and 50% of property owners and residents file protests, an election must be called to confirm the plan.  If less than 25% of property owners and residents file protests, the board can adopt the play at the third hearing.  A new protest proceeding must be held every 10 years during the life of the plan.

CRIA Powers:  A CRIA’s has the ability to do all of the following: (1) fund rehabilitation, repair, upgrade or construction of infrastructure, (2) provide low and moderate-income housing, (3) remedy hazardous waste, (4) provide seismic retrofitting to existing buildings, (5) acquire and transfer real property, (6) issue bonds, (7) borrow money, receive grants or accept financial assistance, (8) adopt a community revitalization and investment plan, (9) make loans or grants for rehabilitation or retrofitting of buildings in the area, (10) construct structures necessary for air rights, and (11) provide direct assistance to businesses in the plan area in connection with new or existing industrial or manufacturing facilities.

Like former redevelopment agencies, a CRIA’s plan may also provide for the receipt of tax increment funds, i.e., CRIAs would freeze the property tax base of the area at the time of plan approval, and retain the increased tax increment for use on specified activities.  However, the taxing entities in the plan area must agree to divert tax increment to the CRIA, thus providing a greater voice to such entities than was available under the former redevelopment law.  At least 25% (up from 20% in under redevelopment law) of all tax increment revenues received by the CRIA must be deposited into a separate low- and moderate-income housing fund to be used by the CRIA to increase, improve and preserve the community’s supply of affordable housing.

Special Rules Regarding Low Income Housing:  If the plan calls for the destruction or removal of low- or moderate-income housing, the CRIA must provide an equal number of replacement units for sale or rent to low- or moderate-income persons and families within two years.  The plan must also include a relocation plan for displaced persons.  Also, the number of housing units occupied by extremely low, very low- and low-income households may not be reduced during the plan’s lifetime.

Conclusion:  While the application of AB2 is narrower than the former Community Redevelopment Law, it provides cities and counties with an additional tool to help fund improvements for infrastructure, affordable housing and economic revitalization in disadvantaged communities.