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SB-1435 Opportunity zone funds: reporting.(2019-2020)

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Date Published: 04/09/2020 09:00 PM
SB1435:v98#DOCUMENT

Amended  IN  Senate  April 09, 2020

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Senate Bill
No. 1435


Introduced by Senator Durazo

February 21, 2020


An act to amend Section 65940 of, to amend and renumber Section 12097.5 of, to add Section 12097.5 to, and to add and repeal Sections 12097.7 and 12097.8 of, the Government Code, relating to opportunity zones.


LEGISLATIVE COUNSEL'S DIGEST


SB 1435, as amended, Durazo. Opportunity zone funds: reporting.
Existing law authorizes the Governor’s Office of Business and Economic Development to develop content on its internet website or through other mediums to be used for public dissemination, through outreach activities, in order to provide information and resources to inform the general public about place-based and other geographically targeted economic development programs, including California promise zones and California opportunity zones. Existing law requires the Governor’s Office of Business and Economic Development to convene, at least annually, representatives from various programs and agencies across the state and from various federal programs and agencies for the purpose of discussing how California can leverage promise zones and opportunity zones to meet state and local community and economic development needs.
Existing law, the Planning and Zoning Law, among other things, requires the legislative body of each county and city to adopt a comprehensive, long-term general plan for the physical development of the county or city and of any land outside its boundaries that relates to its planning. That law authorizes the legislative body of any county or city, pursuant to specified procedures, to adopt ordinances that, among other things, regulate the use of buildings, structures, and land as between industry, business, residences, open space, and other purposes. That law also requires public agencies to compile lists that specify in detail the information that will be required from any applicant for a development project.
This bill, until January 1, 2026, 2025, would require the Governor’s Office of Business and Economic Development, in cooperation with the Office of Planning and Research, to track specified information regarding California opportunity zone investments and to post some of that information on the Governor’s Office of Business and Economic Development’s internet website. The bill, to assist the Governor’s Office of Business and Economic Development in this regard, would require, for purposes of those provisions, would require, until January 1, 2026, the manager of an opportunity zone fund to submit 2025, public agencies that are required to compile the development project lists described above to include specified information about the all development projects funded by an opportunity zone fund and any real estate investments in those lists, and to submit that information to the Governor’s Office of Business and Economic Development, as provided. The bill would authorize public agencies to charge a reasonable regulatory fee, not to exceed the costs of complying with these provisions, as part of the application fee charged for the development permit.
This bill would require, on or before January 1, 2022, the Legislative Analyst’s Office, in collaboration with the Office of Planning and Research, in consultation with the Department of Housing and Community Development, Development and the Governor’s Office of Business and Economic Development, among others, to publicly issue a report to the Legislature that summarizes and explicates data on California opportunity zones and answers specified questions relating to opportunity zones.

This bill would state the intent of the Legislature to enact legislation that would accomplish specified acts, including imposing a registration fee on the development of projects within a California opportunity zone, that would be paid by the managers of qualified opportunity zone funds funding the project, calculated by the size and type of development project.

This bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.
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.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NOYES  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) Housing is critical to the safety and wellness of Californians and the provision of secure, quality housing and a safe living environment for every Californian is of vital importance to the welfare of our entire state.
(b) California is was experiencing a major affordable housing and homelessness crisis. According to the California Department of Housing and Community Development, on average, rent has increased by 25 percent across California since 2000, yet renter wages have dropped by 6 percent. crisis before the COVID-19 public health crisis.
(c) According to an analysis of the United States Census data by the California Housing Partnership Corporation, from 2000 to 2018, the median annual cost to rent an apartment or home in California increased 40 percent while incomes have gone up only 8 percent, after adjusting for inflation.

(c)

(d) High housing costs, coupled with high costs of other basic necessities, leaves nearly one 1 in 5 Californians in poverty. Over one-half of renters are rent burdened, paying more than 30 percent of income on rent, and 8 in 10 renters are low-income renters. Women, low-income renters, and people of color experience higher rates of rent burden and severe rent burden and therefore are at greater risk of displacement and gentrification. California also has the highest percentage, at 70 percent, of unsheltered homeless individuals in the country.
(e) The COVID-19 public health crisis has illustrated the importance of keeping people housed to curb the spread of diseases. During a public health crisis, Californians will only be as safe as the most uninsured and housing insecure Californian.
(f) Housing is one of the most important social determinants of health. The lack of affordable housing affects families’ ability to meet other essential expenses, placing many under tremendous financial strain. High housing-related costs place a particular economic burden on low-income families, forcing trade-offs between food, heating, and other basic needs. One study found that low-income people with difficulty paying rent, mortgage, or utility bills were less likely to have a usual source of medical care and more likely to postpone treatment and use the emergency room for treatment. Another study showed that children in areas with higher rates of unaffordable housing tended to have worse health, more behavioral problems, and lower school performance.

(d)

(g) The Federal Opportunity Zones Program enacted in 2017 as part of the federal Tax Cuts and Jobs Act incentivizes development in 879 low-income census tracts throughout California. These make up 25 percent of the state’s low-income communities and are home to more than 3 million Californians.
(h) Major job losses in low-wage restaurant and hospitality sectors during the COVID-19 public health crisis could create an even greater need for affordable housing. It is important that any housing that is currently affordable to low-income communities remains affordable.
(i) Opportunity zones incentivize massive investments in low-income communities. These investments could result in rent increases and loss of housing that is affordable to existing communities, further exacerbating California’s affordable housing crisis.
(j) The low-income communities that make up opportunity zones were at great risk of displacement before the COVID-19 public health crisis. Data collection that can lead to solutions that will protect these communities after the COVID-19 public health crisis is crucial.

(e)

(k) There is currently no federal or state-level data reporting mechanism to track the type, scale, geographies, or effectiveness of existing or new opportunity zone investments.

(f)

(l) The Legislature acknowledges the value of investment in communities that benefit its existing residents, particularly amidst the housing affordability crisis and the importance of ensuring said investments are tracked and analyzed in order to prevent further displacement.

(g)

(m) Development in opportunity zones must be intentional and provide the existing residents with the opportunity to remain and thrive in their neighborhoods.

SEC. 2.

 Section 12097.5 is added to the Government Code, to read:

12097.5.
 For purposes of this article, all of the following definitions shall apply:
(a) “Affordable” means housing for persons and families of extremely low, very low, and low incomes in accordance with the following:
(1) Housing units targeted for persons and families of extremely low income shall be made available at a monthly housing cost that does not exceed 30 percent of the area median income with adjustments for household size made in accordance with the adjustment factors on which the moderate-income eligibility limits are based.
(2) Housing units targeted for persons and families of very low income shall be made available at a monthly housing cost that does not exceed 31 to 50 percent, inclusive, of the area median income with adjustments for household size made in accordance with the adjustment factors on which the moderate-income eligibility limits are based.
(3) Housing units targeted for persons and families of low income shall be made available at a monthly housing cost that does not exceed 51 to 80 percent, inclusive, of the area median income with adjustments for household size made in accordance with the adjustment factors on which the moderate-income eligibility limits are based.
(b) “Area median income” means area median income as periodically established by the Department of Housing and Community Development pursuant to Section 50093 of the Health and Safety Code.

(a)

(c) “California opportunity zone” means a census tract in this state that has been designated by the United States Treasury as a qualified opportunity zone, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.

(b)

(d) “California promise zone” means a community in this state that has been designated by the United States Department of Housing and Urban Development as a promise zone.

(c)

(e) “Governor’s Office of Business and Economic Development” means the Governor’s Office of Business and Economic Development established pursuant to Section 12096.2.

SEC. 3.

 Section 12097.5 of the Government Code is amended and renumbered to read:

12097.6
 (a) (1) The Governor’s Office of Business and Economic Development is hereby authorized to develop content on its internet website or through other mediums to be used for public dissemination, through outreach activities, in order to provide information and resources to inform the general public about place-based and other geographically targeted economic development programs, including, but not limited to, federal promise zones within California that are designated by the United States Department of Housing and Urban Development; and opportunity zones designated by the United States Treasury, pursuant to Sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code.
(2) The information and resources shall include, but not be limited to, how the local jurisdictions or census tracts were created, where locals and investors may get additional information, and updates regarding federal programs as that information becomes available.
(b) The Governor’s Office of Business and Economic Development shall convene, at least annually, representatives from various programs and agencies across the state and from various federal programs and agencies for the purpose of discussing how California can leverage promise zones and opportunity zones to meet state and local community and economic development needs. The convention topics shall include, but not be limited to, discussions on enhanced engagement opportunities and targeted outreach to assist designated areas in their efforts to access state resources and services.

SEC. 4.

 Section 12097.7 is added to the Government Code, to read:

12097.7.
 (a) For purposes of this section, “opportunity zone fund” means a qualified opportunity zone fund, as defined in Section 1400Z-2 of the Internal Revenue Code, that has investments in qualified opportunity zone property, as defined in the Section 1400Z-2 of the Internal Revenue Code, located in a California opportunity zone.
(b) The Governor’s Office of Business and Economic Development shall, in cooperation with the Office of Planning and Research, track information regarding California opportunity zone investments.
(c) (1) To assist the Governor’s Office of Business and Economic Development for purposes of this section, the manager of an opportunity zone fund shall electronically submit, within 60 days of the operative date of this section or within 60 days of the incorporation or formation of a fund, whichever is later, For the purposes of this section, public agencies subject to Section 65940 shall electronically submit the following information about the fund all development projects funded by an opportunity zone fund to the Governor’s Office of Business and Economic Development:
(A) The name. The name of the fund or funds.
(B) The federal and state employer identification number, if applicable.
(C) The type of entity.
(D) If the fund is a corporation, the date incorporated and the state of incorporation.
(E) If the fund is a partnership, the date of formation and the state of formation.
(F) The structure of the fund as a single or multiasset fund.
(G) The size of the fund, including total assets and eligible deferred gain assets.
(H) The target investment size.
(I) The responsible party or point of contact.
(J) (i) A copy of the offering document, if applicable.
(ii) If the offering document is not submitted or does not contain the information described in this clause, the manager public agency shall submit the following information about the fund development project to the Governor’s Office of Business and Economic Development:
(I) The mission statement or impact objective.
(II) The investment focus, such as housing, green, office, or operating business.
(III) The geographic focus, including, but not limited to, state, ZIP Code, and urban or rural focus.
(IV) A sustainability narrative.
(V) A community engagement narrative.
(VI) An antidemolition narrative.
(VII) A tenant protections narrative.

(2)Within 30 days of receipt of the information received pursuant to paragraph (1), the Governor’s Office of Business and Economic Development shall report the information to the Office of Planning and Research and the Department of Housing and Community Development.

(d)(1)On or before June 30, 2021, and on or before June 30 each year thereafter, the manager of an opportunity zone fund that has made real estate investments shall electronically submit the following information about the fund about those real estate investments to the Governor’s Office of Business and Economic Development:

(A)

(K) The types of properties, such as single-family, multifamily, or commercial properties.

(B)

(L) The square footage of developed real estate.

(C)

(M) The number of housing units developed and the percentage of units in the development that are affordable.

(D)

(N) The net new number of affordable housing units developed.

(E)

(O) The number of affordable housing units demolished or vacated.

(F)

(P) Any other displacement indicator the Governor’s Office of Business and Economic Development and the Office of Planning Research deem appropriate.

(2)The manager shall include in the first report submitted pursuant to paragraph (1) information that dates back to the incorporation or formation of the fund. The manager shall include in each report submitted after the first report information for the relevant reporting period.

(2) Public agencies subject to paragraph (1) may charge applicants a reasonable regulatory fee, not to exceed the costs to the state of complying with this section, as part of the application fee charged for the development permit under Section 65941.5.
(3) Within 30 days of receipt of the information received pursuant to paragraph (1), the Governor’s Office of Business and Economic Development shall report the information to the Office of Planning and Research and the Department of Housing and Community Development.

(3)

(4) Within one year of receipt of the information required by this subdivision, the Governor’s Office of Business and Economic Development shall make the information publicly available on its internet website.

(e)

(d) This section shall remain operative only until January 1, 2026, 2025, and is repealed as of that date.

SEC. 5.

 Section 12097.8 is added to the Government Code, to read:

12097.8.
 (a) On or before January 1, 2022, the Legislative Analyst’s Office, in collaboration with the Office of Planning and Research, in collaboration with the Department of Housing and Community Development, and the Governor’s Office of Business and Economic Development, shall publicly issue a report to the Legislature that summarizes and explicates data on California opportunity zones and answers addresses, at a minimum, all of the following questions:
(1) Are California opportunity zones contributing to displacement in communities? If so, what are the disproportionate impacts on low-income communities and communities of color?
(2) Is overall growth in California opportunity zones similar to, less than, or more than non-opportunity zone census tracts?
(3) Is small business growth in California opportunity zones similar to, less than, or more than non-opportunity zone census tracts?
(4) Is minority business growth in California opportunity zones similar to, less than, or more than non-opportunity zone census tracts?
(5) Is the level of real estate activities in construction and transactions in the California opportunity zones sites similar to, less than, or more than non-opportunity zone census tracts?
(6) Has the maintenance and production of affordable and rent-controlled housing decreased, increased, or remained the same in California opportunity zones compared to non-opportunity zone census tracts?
(7) Has the number of jobs increased, decreased, or remained the same in the California opportunity zones compared to non-opportunity zone census tracts?
(8) What are the changes in “in vs. out movers,” such as race, ethnicity, age, income, employment, educational attainment, and marital status, in opportunity zones compared to non-opportunity zone census tracts?
(9) How have sales and property values changed in opportunity zones compared to non-opportunity zone census tracts?

(8)

(10) Has the median household income increased, decreased, or remained the same in California opportunity zones compared to non-opportunity zone census tracts?

(9)Have the demographic characteristics shifted more, less, or remained the same in California opportunity zones compared to non-opportunity zone census tracts?

(11) What have been the changes in “in vs. out” movers, such as race, ethnicity, age, income, employment, educational attainment, and marital status? Have the demographic characteristics shifted more, less, or remained the same in opportunity zones compared to non-opportunity zone census tracts?

(10)

(12) Has the median gross rent increased, decreased, or remained the same in California opportunity zones compared to non-opportunity zone census tracts?
(13) What have been the changes in the number of people living in crowded housing conditions, time-traveled, and distance to work in opportunity zones compared to non-opportunity zone census tracts?
(b) The Office of Planning and Research shall, when completing the report, consult with the University of California Urban Displacement Project and interested stakeholders.
(c) A report required to be submitted pursuant to this section shall be submitted in compliance with Section 9795.

(b)

(d) This section shall remain operative only until January 1, 2026, 2025, and is repealed as of that date.

SEC. 6.

It is the intent of the Legislature to enact legislation that would accomplish all of the following:

(a)Require applicants for development projects proposed within a California opportunity zone, as defined in Section 12097.5 of the Government Code, to include information as to whether the project will use funds from a qualified opportunity zone fund, as defined in Section 1400Z-2 of the Internal Revenue Code, and in that case, to require the submission of specified information with the application for the development project.

(b)Impose a registration fee on the development of projects within a California opportunity zone that would be paid by the managers of qualified opportunity zone funds funding the project, calculated by the size and type of development project, to recover the additional costs of reviewing the applications described in subdivision (a) and the costs to the Governor’s Office of Business and Economic Development to administer Section 12097.7 of the Government Code, as proposed to be added by this act, and for allocation to the Judicial Council to fund legal assistance for undocumented tenants.

(c)Waive or reduce the registration fee for any development project that contains housing units that are affordable, as determined by a percentage of average median income, with respect to those portions of development project that are the affordable housing units.

SEC. 6.

 Section 65940 of the Government Code, as amended by Section 6 of Chapter 654 of the Statutes of 2019, is amended to read:

65940.
 (a) (1) Each public agency shall compile one or more lists that shall specify in detail the information that will be required from any applicant for a development project. Each public agency shall revise the list of information required from an applicant to include a certification of compliance with Section 65962.5, and the statement of application required by Section 65943. Copies of the information, including the statement of application required by Section 65943, shall be made available to all applicants for development projects and to any person who requests the information.
(2) An affected city or affected county, as defined in Section 66300, shall include the information necessary to determine compliance with the requirements of subdivision (d) of Section 66300 in the list compiled pursuant to paragraph (1).
(b) The list of information required from any applicant shall include, where applicable, identification of whether the proposed project is located within 1,000 feet of a military installation, beneath a low-level flight path or within special use airspace as defined in Section 21098 of the Public Resources Code, and within an urbanized area as defined in Section 65944.
(c) (1) A public agency that is not beneath a low-level flight path or not within special use airspace and does not contain a military installation is not required to change its list of information required from applicants to comply with subdivision (b).
(2) A public agency that is entirely urbanized, as defined in subdivision (e) of Section 65944, with the exception of a jurisdiction that contains a military installation, is not required to change its list of information required from applicants to comply with subdivision (b).
(d) (1) The list of information required from any applicant shall include, where applicable and for applications for developments within qualified opportunity zones, identification of whether development and operation of the proposed project will use funds from a qualified opportunity zone fund, and shall require projects using funds from a qualified opportunity zone fund to submit information required under Article 4.6 (commencing with Section 12097.5) of Chapter 1.6 of Part 2 of Division 3 of Title 2.
(2) A public agency that does not have any census tracts designated as qualified opportunity zones that lie within the boundaries of the affected city or affected county shall not be required to comply with paragraph (1).

(d)

(e) This section shall remain in effect only until January 1, 2025, and as of that date is repealed.

SEC. 7.

 The Legislature finds and declares that Sections 4 and 6 of this act, amending Section 65940 of, and adding Section 12097.7 to, the Government Code address a matter of statewide concern rather than a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. Therefore, Sections 4 and 6 of this act apply to all cities, including charter cities.

SEC. 8.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.