BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Patricia Wiggins, Chair
BILL NO: AB 1176 HEARING: 6/17/09
AUTHOR: Ammiano FISCAL: No
VERSION: 2/27/09 CONSULTANT: Detwiler
SAN FRANCISCO'S INFRASTRUCTURE FINANCING DISTRICT
Background and Existing Law
Cities and counties can create Infrastructure Financing
Districts (IFDs) and issue bonds to pay for community scale
public works: highways, transit, water systems, sewer
projects, flood control, child care facilities, libraries,
parks, and solid waste facilities. To repay the bonds,
IFDs divert property tax increment revenues from other
local governments for 30 years. However, IFDs can't divert
property tax increment revenues from schools (SB 308,
Seymour, 1990).
Forming an IFD is cumbersome. The city or county must
develop an infrastructure plan, send copies to every
landowner, consult with other local governments, and hold a
public hearing. Every local agency that will contribute
its property tax increment revenue to the IFD must approve
the plan. Once the other local officials approve, the city
or county must still get the voters' approval to:
Form the IFD (requires 2/3 voter approval).
Issue bonds (requires 2/3 voter approval).
Set the IFD's appropriations limit (majority voter
approval).
The 1968 Burton Act resulted in transferring the state
tidelands along San Francisco's waterfront to the City and
County of San Francisco which assumed $55 million in state
debt obligations. The Port of San Francisco wants to
promote development, but officials lack the public capital
to attract and retain private investors. The cost to
implement the Port's ten-year capital plan is $1.9 billion.
In 2008, San Francisco voters approved a charter amendment
to divert most of the Pier 70 area's hotel tax and payroll
tax revenues to fund historic preservation and
infrastructure costs. To generate the rest of the needed
money, Port officials plan to use local general obligation
bonds, revenue bonds, and IFD bonds.
AB 1176 -- 2/27/09 -- Page 2
In 2005, legislators passed special provisions that apply
just to IFDs in San Francisco (SB 1085, Migden, 2005). The
2005 legislation:
Waived the requirement for an election to form an
IFD if all of the land within the proposed IFD is
publicly owned.
Allowed San Francisco to extend the 30-year time
for an IFD to receive property tax increment revenues
for 10 more years.
Made environmental remediation, seismic safety,
hazardous material remediation, and other projects
specifically eligible for IFD financing.
Expanded the statutory "debt" definition to include
commercial paper.
Proposed Law
Assembly Bill 1176 repeals the special statute that
controls how local officials can form, finance, and operate
an infrastructure financing district (IFD) along the San
Francisco waterfront on land that is under the jurisdiction
of the Port of San Francisco. In addition to making
extensive legislative findings, Assembly Bill 1176 enacts a
new special statute governing the formation and activities
of IFDs along San Francisco's waterfront, including these
provisions:
I. Area . The Community Redevelopment Law restricts the
use of property tax increment financing to urbanized areas
where the property is blighted. Unlike redevelopment, the
statewide IFD statute doesn't require property in an IFD to
be blighted, but an IFD can't overlap a redevelopment
project area. The statute declares (but does not require)
that IFDs should include substantially undeveloped areas.
Assembly Bill 1176 applies only to land under the
jurisdiction of the Port of San Francisco. AB 1176 also
contains special provisions for a San Francisco waterfront
IFD in the 65-acre Pier 70 area.
II. Projects . The standard IFD statute allows an IFD to
finance capital facilities, listing eight examples. In
addition, the special San Francisco IFD statute allows an
IFD to pay for:
Environmental remediation
Planning and design work.
Seismic and life-safety improvements.
Building rehabilitation, restoration, and
AB 1176 -- 2/27/09 -- Page 3
preservation.
Structural repairs and improvements to piers,
seawalls, and wharves.
Hazardous material remediation.
Storm water management facilities, utilities, and
access improvements.
Assembly Bill 1176 allows a San Francisco waterfront IFD to
pay for:
Remediation of hazardous materials.
Seismic and life-safety improvements.
Rehabilitation, restoration, and preservation of
historic buildings.
Structural repairs and improvements to piers,
seawalls, and wharves.
Removal of bay fill.
Stormwater management facilities, utilities, or
open space improvements.
Shoreline restoration.
Repairs and improvements to maritime facilities.
Planning and design work directly related to public
facilities.
III. Infrastructure financing plan . The statewide IFD
statute requires local officials to prepare and adopt an
infrastructure financing plan that describes the affected
territory, describes the facilities to be financed, finds
that the facilities provide significant benefits, includes
a seven-part financing section, and plans for the
replacement of any housing. Assembly Bill 1176 requires
San Francisco officials to adopt a detailed infrastructure
plan for a proposed San Francisco waterfront IFD. The plan
must include:
A description of the proposed boundaries.
A description of the public facilities, including
their location and costs.
A financing section that:
o Allocates and limits the property tax
increment revenues.
o Limits the use of the property tax
increment revenues to uses within the IFD, and
requires at least 20% of the property tax
increment revenues be set aside for waterfront
purposes.
o A projection of property tax increment
revenues over 45 years.
o A projection of other sources that will
AB 1176 -- 2/27/09 -- Page 4
finance public facilities.
o A limit on the dollars to be allocated to
the IFD.
o A time limit for receiving property tax
increment revenues which cannot exceed 45 years.
o An analysis of the fiscal costs and
benefits to San Francisco.
o An analysis of the fiscal impact on the
affected taxing entities.
o A statement committing the IFD to comply
with the statutory accounting requirements for
tideland trust revenues.
For the Pier 70 IFD only, the financing plan may allocate
property tax increment revenues from San Francisco and the
other affected taxing entities. The maximum amount of San
Francisco's property tax increment revenues allocated to
the Pier 70 IFD must equal the amount of property tax
increment revenues of the Educational Revenue Augmentation
Fund (ERAF) that will be committed to the Pier 70 IFD.
Officials must send the proposed infrastructure financing
plan and its environmental documents to the affected taxing
entities and other San Francisco officials.
AB 1176 prohibits the San Francisco Board of Supervisors
from diverting property tax increment revenues from another
taxing entity unless the other entity's governing body
adopts a resolution approving the proposed plan. If an
affected taxing entity doesn't agree to a diversion of its
property tax increment revenues, San Francisco must
allocate additional funds to make up the difference.
The bill requires the San Francisco Board of Supervisors to
hold a noticed public hearing on the infrastructure
financing plan and consider any objections,
recommendations, evidence, and testimony. The Board of
Supervisors can adopt the infrastructure financing plan by
ordinance which must also establish the waterfront IFD's
base year for calculating revenues. The board may divide
the waterfront IFD into separate project areas.
Landowners outside San Francisco's waterfront IFD may
petition to have their land included without an election.
A request by the owners of the Mirant site to include their
land in the Pier 70 IFD requires the approval of the State
AB 1176 -- 2/27/09 -- Page 5
Department of Finance. A landowner must agree that its
property's "shoreline band" will be improved and maintained
to standards of adjacent waterfront public access ways on
public land.
IV. Formation election . The statewide IFD statute
requires elections involving registered voters to form an
IFD, issue bonds, and set the appropriations limit.
However, if there are less than 12 registered voters,
landowners can vote, based on the number of acres they own.
The special San Francisco IFD statute waives the
requirement to conduct a formation election if all of the
land within a proposed IFD is publicly owned. Assembly
Bill 1176 allows the San Francisco Board of Supervisors to
form a waterfront IFD by ordinance; no election is
required.
V. Waterfront set aside . The Community Redevelopment Law
requires redevelopment officials to set aside and spend 20%
of their gross property tax increment revenues to increase,
improve, and preserve low- and moderate-income housing.
The statewide IFD statute doesn't require local officials
to set aside property tax increment revenues. Assembly
Bill 1176 requires San Francisco's waterfront IFD's
infrastructure plan to set aside at least 20% of the gross
property tax increment revenues to be spent for shoreline
restoration, removal of bay fill, or waterfront public
access to (or environmental remediation of) the waterfront.
VI. Tax increment time limits . The Community
Redevelopment Law allows redevelopment projects formed
after 1993 to receive property tax increment revenues for
up to 45 years. The statewide IFD statute allows IFDs to
receive property tax increment revenues for up to 30 years.
The special San Francisco IFD statute allows San Francisco
officials to extend the time limit for receiving property
tax increment revenues by an additional 10 years, for a
total of up to 40 years. Assembly Bill 1176 allows San
Francisco's waterfront IFD to receive property tax
increment revenues for up to 45 years.
VII. Property tax increment revenues . The statewide IFD
statute allows an IFD to divert property tax increment
revenues from other local governments that formally agree
to the diversion. An IFD cannot divert the schools' shares
of property tax increment revenues because the statute
AB 1176 -- 2/27/09 -- Page 6
excludes school entities from the definition of an
"affected taxing entity." Because the IFD statute predates
the creation of the Educational Revenue Augmentation Fund
(ERAF), it's not clear how county auditors should allocate
an IFD's property tax increment revenues. The ERAF statute
tells county auditors to divert property tax increment
revenues to redevelopment agencies before calculating other
local governments' ERAF contributions.
Assembly Bill 1176 directs the county auditor to divert San
Francisco's waterfront IFD's share of property tax
increment revenues before calculating other local
governments' ERAF contributions. The county auditor must
divert San Francisco's waterfront IFD's share of property
tax increment revenues in the same manner as redevelopment
agencies' property tax increment revenues. If the Pier 70
IFD's plan calls for allocating 100% of San Francisco's
property tax increment revenues, then the IFD will not make
a payment to ERAF. If the plan allocates less than 100% to
the Pier 70 IFD, then the IFD must pay a proportionate
share of its property tax increment revenues to ERAF.
VIII. Fiscal affairs . With an affected taxing entity's
permission, Assembly Bill 1176 allows a San Francisco
waterfront IFD to subordinate payments to the affected
taxing entity to the IFD's loans, bonds, or other debts.
To receive its property tax increment revenues, AB 1176
requires the San Francisco waterfront IFD to annually file
with the county auditor a detailed statement of
indebtedness and a detailed reconciliation statement. The
bill declares that it implements the IFD statutes and
constitutional provisions. AB 1176 declares that the
property tax increment revenues received under its
provisions are not "proceeds of taxes."
Comments
1. On the waterfront . With piers built on bay fill and
mud nearly a century ago, the Port of San Francisco faces a
big price tag to restore its derelict industrial and
commercial properties to economic health. Public
investment in these trust lands has lagged for decades,
requiring $1.9 billion to carry out the Port's capital
plan. Generating funds from a mix of local general
obligation bonds, revenue bonds, and IFD bonds can
AB 1176 -- 2/27/09 -- Page 7
stimulate private investors' interest in waterfront
development. The Legislature passed special IFD
legislation for San Francisco in 2005, but further study
convinced Port officials that they need more changes before
they can harness property tax increment revenues to their
economic development goals. AB 1176 replaces the 2005
special legislation with language that clarifies the fiscal
relationship between the waterfront IFD and the allocation
of property tax increment revenues. The bill also gives
San Francisco 15 more years of property tax increment
revenues which will increase its bonding capacity and raise
more investment capital.
2. Local revenues, state interest . The 1990 statute
creating IFDs doesn't explain how county auditors should
handle an IFD's property tax increment revenues in light of
the ERAF shifts that legislators created later in the
1990s. AB 1176 clarifies that --- just like redevelopment
agencies' property tax increment revenues --- San
Francisco's Pier 70 IFD's property tax increment revenue
comes "off the top" when county auditors allocate property
tax revenues. This diversion may reduce the amount of the
property tax dollars that the county auditor must shift
from the City and County of San Francisco to ERAF and which
eventually gets to the schools. But without the waterfront
IFD's investments, the trust land property would never
generate the new property tax revenues. The Port worries
that state officials may see this diversion as an indirect
state subsidy. Anticipating this reaction, AB 1176
requires the San Francisco waterfront IFD to set-aside 20%
of its property tax increment revenues and spend the money
on waterfront restoration. This justification is similar
to redevelopment law's set-aside for the state's policy
interest in affordable housing.
3. Clarity for everyone . Although the statewide IFD
statute has been on the books since 1990, local officials
have formed just one IFD. Several communities, however,
are thinking about how to divert the non-school share of
property tax increment revenues from nonblighted areas as a
way of paying for new public works. Because the IFD
statutes predate the ERAF statutes, there's a need to tell
county auditors that an IFD should get its property tax
increment revenues "off the top," just like redevelopment
agencies. AB 1167 provides that direction, but just for
San Francisco's Pier 70 waterfront IFD. The Committee may
AB 1176 -- 2/27/09 -- Page 8
wish to consider an amendment that clarifies that
allocation for any IFD, not just the one on San Francisco's
waterfront.
4. No voter review . The 2005 Migden bill allowed San
Francisco officials to avoid the 2/3-voter approval that's
needed to form a new IFD, arguing that the waterfront has
no residents and the only landowner is the Port itself.
Similarly, AB 1176 makes it clear that no election is
needed to form San Francisco's waterfront IFD.
5. Related bill . AB 1176 is similar, but not identical,
to AB 2367 (Leno, 2008) which the Senate Local Government
passed last year. The 2008 Leno bill died on the Senate
Appropriations Committee's suspense file. This year's
Ammiano bill differs from last year's Leno bill by focusing
attention on the allocation of property tax increment
revenues in the Pier 70 area.
Assembly Actions
Assembly Local Government Committee: 7-0
Assembly Floor: 80-0
Support and Opposition (6/11/09)
Support : Port of San Francisco, San Francisco County
Supervisors Alioto-Pier, Dufty, Elsbernd, Mar, Maxwell;
Dogpatch Neighborhood Association, Green Trust San
Francisco Waterfront, Neighborhood Parks Council, Pier 70
San Francisco, Portrero Boosters Neighborhood Association,
Portrero Hill Democratic Club, San Francisco Architectural
Heritage, San Francisco Chamber of Commerce, San Francisco
Planning and Urban Research Association, San Francisco
Republican Party.
Opposition : Unknown.