Community Revitalization and Investment Authorities: a Step-by-step Guide to Using Ab 2

• Jurisdiction: California,United States
• Citation: Vol. 34 No. 1
• Publication year: 2016
• Author: Alfred Fraijo, Jr. and Rick Rodriguez
• topic: Environmental Law,Tax Law,Public Sector Law,Real Estate

Community Revitalization and Investment Authorities: A Step-by-Step Guide to Using AB 2

Alfred Fraijo, Jr. and Rick Rodriguez

Alfred Fraijo, Jr.

Alfred Fraijo is a partner in the Real Estate, Land Use, and Natural Resources practice group in Sheppard Mullin's Los Angeles office. Mr. Fraijo focuses his expertise on cutting-edge real estate transactions for public, private, and nonprofit developers and multi-national corporations in the United States and abroad. He advises public and private sector clients on state and federal land use and environmental laws, including the Subdivision Map Act, California Community Redevelopment Law, California Environmental Quality Act, National Environmental Policy Act, Clean Water Act, Endangered Species Act, CERCLA, RCRA, California Superfund Law, and the Polanco Redevelopment Act.

Rick Rodriguez

Rick Rodriguez is an associate in the Real Estate, Land Use, and Environmental Practice Group in Sheppard Mullin's Los Angeles office. Mr. Rodriguez represents clients in land use matters and real estate transactions including purchase and sale agreements, option agreements, leases, easements, and public-private partnerships. Mr. Rodriguez has worked on a variety of residential, commercial, and mixed-use projects throughout Los Angeles and California.

The California Legislature passed, and on September 22, 2015 the Governor signed, Assembly Bill 2, Community Revitalization Authority (the "Act" or "AB 2"),¹ which was sponsored by Congressman Alejo. The Act, effective January 1, 2016, is the State's newest financing tool for local government since the statewide dissolution of redevelopment agencies in 2013. The Act gives local governments a new tool to spur private and public development in underserved areas through the creation of a Community Revitalization and Investment Authority (a "CRIA"). This article provides a general overview of how a local government can create a CRIA.² Once created, the CRIA develops a funding mechanism for its activities by adopting an accompanying community revitalization and investment plan ("CRIA Plan"). Possible sources of funds for a CRIA include bond issuances, debt and equity financing, and the use of tax-increment funds. A CRIA can use funds generated through a CRIA Plan to support a wide range of economic development purposes, from seismic retrofits to brownfield cleanup to development of affordable housing.

I. STEP 1: INFORM THE PUBLIC AND POLICYMAKERS

A local government interested in forming a CRIA should begin by identifying the short- and long-term economic development objectives of the municipality. The government entity should also identify potential CRIA Plan areas (a "CRIA Area") and evaluate whether those areas meet the legal requirements to form a CRIA.³ The government entity should also compare the benefits of adopting a CRIA to those of adopting an Enhanced Infrastructure Financing District ("EIFD"), which is another tool available to local governments to promote economic development and finance a wide range of improvements.⁴ For example, a CRIA may be more appropriate where the objective is the development of affordable housing, whereas an EIFD is preferable for infrastructure development.

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II. STEP 2: CONDUCT A FEASIBILITY STUDY AND ECONOMIC ANALYSIS

A city council or other government body should consider conducting a feasibility study and economic analysis to evaluate the funding capacity of a proposed CRIA Area, and estimate the tax increment funds that might be realized through a CRIA Plan in that region. Typically, a consultant is hired to prepare the analysis and work closely with the local government's planning division and economic development department to identify desirable areas within its jurisdiction for adopting a CRIA Plan. The feasibility study results should be presented to the public and the city council, then the economic development department or planning department should make a recommendation to the city council as to whether to create a CRIA.

III. STEP 3: ADOPT A RESOLUTION TO CREATE A CRIA AND ESTABLISH A GOVERNING BOARD

A city's legislative body creates a CRIA by adopting a resolution to this effect.⁵ Alternatively, multiple government agencies (except school districts) can form a joint powers authority to create a CRIA.⁶ The legislative body or joint powers authority must appoint a governing board for the CRIA.⁷ Where a single legislative body creates the CRIA, the CRIA's governing board must contain five members, consisting of (1) three members of the legislative body that created the CRIA, and (2) two public members that live or work within the proposed CRIA Area.⁸ Where a joint powers authority creates the CRIA, the CRIA's governing board must be comprised of (a) a majority of the members that created the joint powers authority, and (b) at least two public members who live or work within the CRIA Area.⁹

IV. STEP 4: OBTAIN REDEVELOPMENT AGENCY'S DESIGNATED AUTHORITY OR SUCCESSOR AGENCY FINDINGS

If the local government creating the CRIA had previously created a redevelopment agency that was dissolved, then the CRIA will not become effective...