The former Community Redevelopment Agency of the City of Union City used tax increment financing to fund the construction of affordable housing at Station Center, Mission Gateway, the senior village on Alvarado-Niles Road, E Street units, and other affordable housing located at scattered locations in Union City.

The California Legislature, in response to a request by Governor Jerry Brown disbanded redevelopment agencies in 2011.  Assemblymember Kevin Mullin has recently introduced Assembly Bill 1598 that would allow cities and counties to use tax increment financing to fund the construction of affordable housing, thereby restoring a badly-needed local funding mechanism for the construction of affordable housing. 

The former Union City Redevelopment Project Area generates approximately $25 million a year in property tax increment.  About 30 percent of the tax increment finances debt service on bonds issued by the former redevelopment agency.  Approximately 24 percent of the tax increment generated goes to Alameda County.  Education received 29 percent of the tax increment generation in 2017 and the City of Union City received 10 percent.

When the Woodstock and Windflower projects go onto the tax roll, property value assessments will increase by an estimated $500 million. The property tax generated on the five blocks to be developed by Windflower and Woodstock would thus generate an additional $5 million in new property taxes per year.  The new property taxes would be pure tax increment.

AB 1598 would allow the City Council and the Alameda County Board of Supervisors to jointly agree to pledge a portion their tax increment to fund affordable housing.  A new Community Revitalization and Investment Authority (Authority) would be created to prepare an affordable housing plan and would have the authority to issue bonds to finance affordable housing.  The members of the Authority would be composed of three City Council members, three members of the Board of Supervisors, and a member of the public living in the Project Area. 

If AB 1598 is signed into law, City Council could make a proposal to the Alameda County Board of Supervisors to form the Authority and agree to pledge a portion of its share of tax increment to fund new affordable housing construction.  The City Council could argue that the Union City Successor Agency generates the second highest pass-through tax increment payments to Alameda County of the 13 successor agencies in Alameda County.  Union City Successor Agency pass through payments to Alameda County are likely to exceed Oakland Successor Agency’s pass through payments to Alameda County when the Windflower housing goes on the tax roll in FY 16/17. 

Alameda County is projected to receive almost $6 million in pass through payments from the Union City Successor Agency in calendar year 2017.  This figure does not include the approximate $240,000 a year Alameda County will receive from the Windflower project when it goes on the tax roll. 

In concept, the Alameda County Board of Supervisors could pledge the tax increment it will receive from the Windflower and Woodstock parcels to fund affordable housing.  This formula would not reduce Alameda County’s current $6 million annual tax increment pass through payments it receives from the Union City Successor Agency.  Alameda County would simply be investing the new tax generation it receives from new Station District development into affordable housing construction.  The new property tax generation is made possible by the planning policies and infrastructure investments made by the City of Union City and the Redevelopment Agency.  The Board of Supervisors may request the City Council to pledge a portion of its 10 percent of tax increment receipts from the Woodstock and Windflower projects.

For illustrative purposes, Alameda County and Union City together, receive about 34 percent of gross tax increment generated.  If the City Council and the Alameda County Board of Supervisors were to jointly pledge 24 percent of the 34 percent the two entities will jointly receive from the Windflower and Woodstock projects, approximately $20 million in housing bonds could be issued. 

Affordable housing construction costs have increased significantly in recent years. Twenty million dollars in affordable housing funds would not be adequate to fund an entire affordable housing product.  By way of comparison, the Union City Redevelopment Agency underwrote the 157 unit Station Center family affordable housing with a $21.7 million cash contribution plus a land donation.  The Redevelopment Agency underwrote the 121 units at Mission Gateway by $12.5 million in the form of a land donation and cash contribution to construction. 

Depending on the unit count, level of affordability, and density, a new affordable housing development would likely require the $20 million bond, Union City’s $9 million share of Measure 1A, a land donation, and the affordable housing provider would need to secure tax credits.   

If AB 1598 is signed into law, the City Council will need to establish policy priorities for expending tax increment funding.  Union City’s share of property tax generation from the Woodstock and Windflower projects is likely to be $500,000 a year.  That funding could also go directly into the General Fund for City operations.

City Council endorsement of AB 1598 will not impact the City Budget.