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SB-696 Enhanced infrastructure financing districts: housing: underutilized or deteriorated retail property: covenants and restrictions: eminent domain.(2021-2022)

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Date Published: 09/09/2021 09:00 PM
SB696:v97#DOCUMENT

Amended  IN  Senate  September 09, 2021
Amended  IN  Senate  March 10, 2021

CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 696

Introduced by Senator Allen

February 19, 2021

An act to amend Sections 53398.51.1 and Section 53398.52 of, and to add Section 53398.52.1 to, the Government Code, relating to local government.


LEGISLATIVE COUNSEL'S DIGEST


SB 696, as amended, Allen. Enhanced infrastructure financing districts: public financing authority: membership and powers. housing: underutilized or deteriorated retail property: covenants and restrictions: eminent domain.
Existing law authorizes the legislative body of a city or a county to designate a proposed enhanced infrastructure financing district, with a governing body referred to as the public financing authority by adopting a resolution of intention to establish the proposed district. authority, to finance public capital facilities and specified other projects that provide significant benefits to the district or surrounding community. Existing law requires the public financing authority to prepare and adopt an infrastructure financing plan and a resolution to form the district, as provided. Existing law provides for the participation of an affected taxing entity, as defined, in the district, other than a county office of education, school district, or community college district. authorizes a district to finance a mixed-income housing development if the district is only financing units restricted to occupancy by persons of very low, low, or moderate incomes or onsite facilities for childcare, after school care, and social services for tenants of the restricted units.

Existing law requires, if the district only has one participating affected taxing entity, that the public financing authority include 3 members of the legislative body of the participating entity, and 2 members of the public, as specified. Existing law requires, if the district has 2 or more participating affected taxing entities, that the public financing authority include a majority of members from the legislative body of each participating affected taxing entity and 2 members of the public, as specified. Existing law authorizes a district to finance public capital facilities or other specified projects of communitywide significance that provide significant benefits to the district or the surrounding community, as specified.

This bill would require that if any participating affected taxing entity is a city that has an elective mayor, that one of the members representing the legislative body of that participating entity on the public financing authority be the mayor. The bill would also authorize a public financing authority to invite any state agency to participate in the district that, in the judgment of the public financing authority, is able to provide expertise or resources to assist in the development of public facilities and development described in the infrastructure financing plan. The bill would provide that if the state agency accepts the invitation to participate, the state agency shall designate a representative to serve on the authority as an ex-officio member. The bill would require a participating state agency to ensure that any state resources provided to the district are used in accordance with any requirements under any applicable law and that those resources not be used in such a manner as to pledge of the full faith and credit or the taxing power of the state or any of its political subdivisions, other than the district, to secure any debt or liability of the district.

This bill would authorize a district to also finance units in a mixed-income housing development that are allocated to the jurisdictions in the district pursuant to regional housing needs allocations determined in accordance with housing element laws.
This bill would authorize, upon fulfilling certain requirements, a district to purchase, lease, obtain option upon, acquire by gift, grant, bequest, devise, or otherwise, any real or personal property, any interest in property, and any improvements on it, including repurchase of developed property previously owned by the district, if the property is within the physical boundaries of the district and the property will serve a significant benefit to the district and to acquire real property by eminent domain if the property will serve a significant benefit to the district and the acquisition of real property by eminent domain conforms to constitutional requirements relating to eminent domain. acquire, as defined, any restrictive covenant or easement of underutilized or deteriorated retail property identified in an infrastructure financing plan that is preventing the use of the property in a manner that advances public use, as described by the bill. The bill would authorize the authority to acquire the real property and any interest in the property by eminent domain, so long as the activities that would produce the benefit are defined as a public use for eminent domain purposes. The bill would make the acquired restrictive covenants and easements void and unenforceable upon acquisition, and would require the authority to provide specified notice to holders of interests that would be made void and unenforceable. The bill would require the authority to conduct an appraisal process to determine the fair market value of the prospective real property and covenants and restrictions, and to establish and identify through an independent community benefits analysis the value of the private and public contributions, to be considered at a specified infrastructure finance hearing. The bill would authorize the district to finance costs related to those powers. The bill would make related findings and declarations.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YESNO   Local Program: NO  

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


SECTION 1.

 The Legislature finds and declares all of the following:
(a) The fiscal impact of the COVID-19 pandemic has hit local government budgets particularly hard. An equitable recovery for all Californians will require the use of new governance structures and financial tools that can provide the fiscal resources and coordination necessary to support resilient economic growth throughout the Golden State.
(b) While strategic efforts to bring home federal dollars to California are pursued, California’s long-term competitiveness will also depend on a parallel track promoting bottom-up innovation. By any measure, the state needs to better leverage its current spending and structured incentives on community development infrastructure, such as schools, healthcare, transit, affordable housing, water, and greenhouse gas reduction, through innovative finance mechanisms and capital asset management strategies.
(c) Establishing an infrastructure district accelerator framework which enables enhanced infrastructure financing districts, as public investment authorities, to facilitate the mission of such districts, pursuant to Section 53398.59 of the Government Code, is key to achieving community revitalization and inclusive regional growth and competitiveness through the installation of public uses. In support of these efforts, the state may be invited and may voluntarily participate in effectuating the objectives of the district.
(d) Changes in buying habits, including increasing consumer shifts to online purchasing of retail goods and expanded consumer goods distribution, pick-up and delivery options, resulting in increased vacancies in shopping malls based on reduced square footage tenant requirements, store closures and diminishing availability of replacement retailers, create economic and physical blight in affected communities. Many of these commercial properties, including retail shopping malls that have lost major retail anchor tenants, are now underutilized with significant big box and in-line store vacancies, empty parking lots, poorly maintained landscaping, and diminished security. An estimated 25 percent of retail malls could close across the country over the next five years.
(e) While these underutilized properties create many challenges for the affected communities, they also offer significant opportunities to repurpose these properties for uses that advance state and local priorities because they occupy large tracts of land with access to major roadways, transit, and local infrastructure.
(f) A functional impediment exists as related to reuse of underutilized or deteriorated retail centers and malls that need to restructure their mix of uses resulting from downsizing of retail in a digital post COVID-19 economy. These properties are burdened with a series of extremely restrictive covenants and easements known as construction, operation and reciprocal easement agreements (COREAs). COREAs almost universally apply to parking lots and typically include unilateral veto rights for each major anchor that is a signatory, as well as additional reciprocal easement and covenants and other recorded and unrecorded restrictions that make it nearly impossible to untangle and revitalize these centers without cooperation from all recorded owners, most of which are downsizing or vacating their property and buildings and have vastly different exit strategies and timing. Even though the property is of declining value as a retail center, the inaction, obstinance, or leverage efforts by one party, can delay the conversion of the property indefinitely. It is in the public interest to devise a mechanism that can ensure that the conversion of these properties can occur in an expedited manner.
(g) This act enables an underutilized or deteriorated retail center or retail mall property, or any portion of or entire associated recorded or unrecorded construction, operation and reciprocal easement agreements, and other restrictions to development to be acquired by a public financing authority in an enhanced infrastructure financing district, including by eminent domain, based on the inclusion of a specific component of the infrastructure finance plan that identifies the properties and supported by public findings that attribute acquisition of the problematic recorded covenants and easements, or component thereof, via eminent domain as an eligible public purpose to advance the public uses pursuant to the enhanced infrastructure financing district statutory scheme.
(h) The Legislature anticipates that equipping local agencies with this tool may provide additional leverage for affected parties to arrive at voluntary and more timely solutions that allow for the expedited reuse of underutilized or deteriorated retail centers and malls.
SEC. 2.Section 53398.51.1 of the Government Code is amended to read:
53398.51.1.

(a)(1)The public financing authority shall have a membership consisting of one of the following, as appropriate:

(A)If a district has only one participating affected taxing entity, the public financing authority’s membership shall consist of three members of the legislative body of the participating entity, subject to paragraph (2), and two members of the public chosen by the legislative body. The appointment of the public members shall be subject to the provisions of Section 54974.

(B)If a district has two or more participating affected taxing entities, the public financing authority’s membership shall consist of a majority of members from the legislative bodies of the participating entities, subject to paragraph (2), and a minimum of two members of the public chosen by the legislative bodies of the participating entities. The appointment of the public members shall be subject to the provisions of Section 54974.

(2)If any participating affected taxing entity is a city that has an elective mayor, pursuant either to Article 3 (commencing with Section 34900) of Chapter 4 of Part 1 of Division 2 of Title 4 or a charter adopted pursuant to Section 3 of Article XI of the California Constitution, one of the members representing the legislative body of that participating entity pursuant to paragraph (1) shall be the mayor.

(3)Upon establishment of a district pursuant to this chapter, the public financing authority may invite any state agency, as that term is defined in Section 11000, to participate in the district that, in the judgment of the public financing authority, is able to provide expertise or resources to assist in the development of public facilities and development described in the infrastructure financing plan. If the state agency accepts the invitation to participate, the state agency shall designate a representative to serve on the public financing authority as an ex-officio member. A state agency that participates in a district pursuant to this paragraph shall ensure that any state resources provided to the district are used in accordance with any requirements under any applicable law and that those resources are not used in such a manner as to pledge of the full faith and credit or the taxing power of the state or any of its political subdivisions, other than the district, to secure any debt or liability of the district.

(b)The legislative body shall ensure the public financing authority is established at the same time that it adopts a resolution of intention pursuant to Section 53398.59.

(c) Members of the public financing authority established pursuant to this chapter shall not receive compensation but may receive reimbursement for actual and necessary expenses incurred in the performance of official duties pursuant to Article 2.3 (commencing with Section 53232) of Chapter 2.

(d) Members of the public financing authority are subject to Article 2.4 (commencing with Section 53234) of Chapter 2.

(e) The public financing authority created pursuant to this chapter shall be a local public agency subject to the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950)), the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1), and the Political Reform Act of 1974 (Title 9 (commencing with Section 81000)).

SEC. 3.SEC. 2.

 Section 53398.52 of the Government Code is amended to read:

53398.52.
 (a) (1) A district may finance any of the following:
(A) The purchase, construction, expansion, improvement, seismic retrofit, or rehabilitation of any real or other tangible property with an estimated useful life of 15 years or longer that satisfies the requirements of subdivision (b).
(B) The planning and design work that is directly related to the purchase, construction, expansion, or rehabilitation of property.
(C) The costs described in Sections 53398.56 and 53398.57.
(D) The costs associated with carrying out the powers and activities authorized in Section 53398.52.1.
(E) (i) The ongoing or capitalized costs to maintain public capital facilities financed in whole or in part by the district.
(ii) Notwithstanding clause (i), a district shall not use the proceeds of bonds issued pursuant to the authority in Article 4 (commencing with Section 53398.77) to finance maintenance of any kind.
(2) Except as provided in Section 53398.52.1, the facilities are not required to be physically located within the boundaries of the district. However, any facilities financed outside of a district shall have a tangible connection to the work of the district, as detailed in the infrastructure financing plan adopted pursuant to Section 53398.69.
(3) A district shall not finance the costs of an ongoing operation or providing services of any kind.
(b) The district shall finance only public capital facilities or other specified projects of communitywide significance that provide significant benefits to the district or the surrounding community, including, but not limited to, all of the following:
(1) Highways, interchanges, ramps and bridges, arterial streets, parking facilities, and transit facilities.
(2) Sewage treatment and water reclamation plants and interceptor pipes.
(3) Facilities for the collection and treatment of water for urban uses.
(4) Flood control levees and dams, retention basins, and drainage channels.
(5) Child care Childcare facilities.
(6) Libraries.
(7) Parks, recreational facilities, and open space.
(8) Facilities for the transfer and disposal of solid waste, including transfer stations and vehicles.
(9) Brownfield restoration and other environmental mitigation.
(10) The development of projects on a former military base, provided that the projects are consistent with the military base authority reuse plan and are approved by the military base reuse authority, if applicable.
(11) The repayment of the transfer of funds to a military base reuse authority pursuant to Section 67851 that occurred on or after the creation of the district.
(12) The acquisition, construction, or rehabilitation of housing for persons of very low, low, and moderate income, as defined in Sections 50105 and 50093 of the Health and Safety Code, for rent or purchase.
(13) Acquisition, construction, or repair of industrial structures for private use.
(14) Transit priority projects, as defined in Section 21155 of the Public Resources Code, that are located within a transit priority project area. For purposes of this paragraph, a transit priority project area may include a military base reuse plan that meets the definition of a transit priority project area and it may include a contaminated site within a transit priority project area.
(15) Projects that implement a sustainable communities strategy, when the State Air Resources Board, pursuant to Chapter 2.5 (commencing with Section 65080) of Division 1 of Title 7, has accepted a metropolitan planning organization’s determination that the sustainable communities strategy or the alternative planning strategy would, if implemented, achieve the greenhouse gas emission reduction targets.
(16) Projects that enable communities to adapt to the impacts of climate change, including, but not limited to, higher average temperatures, decreased air and water quality, the spread of infectious and vector-borne diseases, other public health impacts, extreme weather events, sea level rise, flooding, heat waves, wildfires, and drought.
(17) Port or harbor infrastructure, as defined by Section 1698 of the Harbors and Navigation Code.
(18) The acquisition, construction, or improvement of broadband Internet access service. For purposes of this section, “broadband Internet access services” has the same meaning as defined in Section 53167. A district that acquires, constructs, or improves broadband Internet access service may transfer the management and control of those facilities to a local agency that is authorized to provide broadband Internet access service, and that local agency when providing that service shall comply with the requirements of Article 12 (commencing with Section 53167) of Chapter 1 of Part 1 of Division 2 of Title 5.
(c) The district shall require, by recorded covenants or restrictions, that housing units built pursuant to this section shall remain available at affordable housing costs to, and occupied by, persons and families of very low, low, or moderate income for the longest feasible time, but for not less than 55 years for rental units and 45 years for owner-occupied units.
(d) The district may finance mixed-income housing developments, but may finance only those units in such a development that are restricted to occupancy by persons of very low, low, or moderate incomes as defined in Sections 50105 and 50093 of the Health and Safety Code, that are allocated to the jurisdictions in the district per regional housing needs allocations as outlined in Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7, and those onsite facilities for child care, childcare, after school care, and social services that are integrally linked to the tenants of the restricted units.
(e) A district may utilize any powers under either the Polanco Redevelopment Act (Article 12.5 (commencing with Section 33459) of Chapter 4 of Part 1 of Division 24 of the Health and Safety Code) or Chapter 6.10 (commencing with Section 25403) of Division 20 of the Health and Safety Code, and finance any action necessary to implement that act.

SEC. 4.Section 53398.52.1 is added to the Government Code, to read:
53398.52.1.

(a)A district is authorized, upon fulfilling the requirement in subdivision (b), to do both of the following:

(1)Purchase, lease, obtain option upon, acquire by gift, grant, bequest, devise, or otherwise, any real or personal property, any interest in property, and any improvements on it, including repurchase of developed property previously owned by the district, if the property is within the physical boundaries of the district and the property will serve a significant benefit to the district, as described in subdivision (b) of Section 53398.52.

(2)Acquire real property by eminent domain if the property will serve a significant benefit to the district, as described in subdivision (b) of Section 53398.52, and the acquisition of real property by eminent domain conforms to the requirements of Section 19 of Article I of the California Constitution and associated laws relating to the acquisition of real property by eminent domain.

(b)A district may exercise the powers described in subdivision (a) only if the district’s public financing authority adopts as part of the district’s infrastructure financing plan approval process under Article 2 (commencing with Section 53398.59) or amends its infrastructure financing plan pursuant to this chapter to exercise those powers.

SEC. 3.

 Section 53398.52.1 is added to the Government Code, to read:

53398.52.1.
 (a) (1) A public finance authority may acquire any restrictive covenants and easements known as reciprocal easements agreements, or construction, operation and reciprocal easement agreements, of underutilized or deteriorated retail property, or any restrictive covenant that is recorded or unrecorded or other impedance, or component and provisions thereof, that is preventing the reuse of the property in a manner that advances public use.
(2) “Acquire” means purchase, lease, obtain option upon, acquire by gift, grant, bequest, devise, or otherwise, any real or personal property, any interest in property or recorded or unrecorded covenants, easements, and restrictions, licenses, and any improvements on it, including repurchase of developed property previously owned by the agency.
(3) Public use may include funding the creation of needed infrastructure and supporting community facilities and transit priority projects, the implementation of sustainable communities plans, projects that enable communities to adapt to the impacts of climate change, and projects that construct and rehabilitate affordable housing units needed to meet state housing needs and goals for low-income groups.
(b) The acquisition of an underutilized or deteriorated retail center or retail mall real property may not occur unless it is specifically identified in an approved infrastructure financing plan, or amendment to an approved infrastructure financing plan, pursuant to subdivision (b) of Section 53398.63, and subject to the public hearing and approval process associated with the adoption of a plan in Section 53398.66. The provisions of the infrastructure financing plan should identify the requirements needed to meet state goals.
(c) Within the district area and for purposes of obtaining the public use benefits identified by the district to meet state goals spelled out in state housing and environmental laws, a district may, at the discretion of the authority, as part of the district infrastructure financing plan or modification of the infrastructure financing plan pursuant to the statutory process, acquire real property and any interest in property pursuant to this section by eminent domain so long as the activities that would produce the benefit are defined as a public use for eminent domain purposes.
(d) Any covenants, conditions, or restrictions existing on the underutilized retail center or retail mall prior to the time the agency acquires title to the property that restrict or purport to restrict the use or reuse of, or building upon, the real property for development or expansion shall be void and unenforceable as to any other subsequent owners, tenants, lessees, assignees, easement holders, mortgagees, trustees, beneficiaries under a deed of trust, or any other persons or entities acquiring an interest in the real property or recorded or unrecorded covenants, easements, and restrictions from the time title to the real property is acquired, whether acquisition is by gift, purchase, eminent domain, or otherwise.
(e) At least 60 days prior to the acquisition of real property or recorded unrecorded covenants, easements and restrictions, other than by eminent domain, the agency shall provide notice of the acquisition and the provisions of this section to holders of interests that would be made void and unenforceable pursuant to this section as follows:
(1) The authority shall publish notice once in a newspaper of general circulation in the community in which the agency is functioning.
(2) The authority shall mail notice to holders of the interests if the holders appear of record 60 days prior to the date of acquisition.
(f) The authority or assignee may accept any release by written instrument from the holder of any such interest or may commence action to acquire such interest after the date of acquisition of the real property.
(g) The authority may acquire real property and recorded or unrecorded covenants, easements, and restrictions as may be necessary to implement the infrastructure financing plan, including any such transactions with public agencies and private owners.
(h) In order to facilitate implementation of the infrastructure financing plan, the authority shall conduct an appraisal process from a qualified independent appraiser to determine the fair market of the prospective real property or recorded or unrecorded covenants, easements, and restrictions as may be necessary to implement the infrastructure financing plan, including any such transactions with public agencies and private owners. The authority shall establish and identify, through an independent community benefits analysis, the value of the private and public contributions, to be reviewed and considered at the final public hearing pursuant to infrastructure finance hearings required by Section 53398.52.