BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1176|
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THIRD READING
Bill No: AB 1176
Author: Ammiano (D)
Amended: 9/2/09 in Senate
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 6/17/09
AYES: Wiggins, Cox, Aanestad, Kehoe, Wolk
SENATE APPROPRIATIONS COMMITTEE : 12-0, 8/27/09
AYES: Kehoe, Cox, Corbett, Denham, Hancock, Leno, Oropeza,
Price, Runner, Walters, Wolk, Yee
NO VOTE RECORDED: Wyland
ASSEMBLY FLOOR : 80-0, 5/11/09 - See last page for vote
SUBJECT : Infrastructure financing districts: City and
County of
San Francisco
SOURCE : Port of San Francisco
DIGEST : This bill repeals the special statute that
controls how local officials can form, finance, and operate
an infrastructure financing district 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, this bill enacts a new
special statute governing the formation and activities of
infrastructure financing districts along San Francisco's
waterfront, as specified.
CONTINUED
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Senate Floor Amendments of 9/2/09 clarify revenue
allocation and make a technical correction.
ANALYSIS : Existing law specifies that 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 cannot divert
property tax increment revenues from schools (SB 308
[Seymour], Chapter 1575, Statutes of 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:
1.Form the IFD (requires two-thirds voter approval).
2.Issue bonds (requires two-thirds voter approval).
3.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 10-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.
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In 2005, legislators passed special provisions that apply
just to IFDs in San Francisco (SB 1085, [Migden], Chapter
213, Statutes of 2005). The 2005 legislation:
1.Waived the requirement for an election to form an IFD if
all of the land within the proposed IFD is publicly
owned.
2.Allowed San Francisco to extend the 30-year time for an
IFD to receive property tax increment revenues for 10
more years.
3.Made environmental remediation, seismic safety, hazardous
material remediation, and other projects specifically
eligible for IFD financing.
4.Expanded the statutory "debt" definition to include
commercial paper.
This bill repeals the special statute that controls how
local officials can form, finance, and operate an 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, this bill enacts a
new special statute governing the formation and activities
of IFDs along San Francisco's waterfront, as specified,
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 does not require property in an IFD
to be blighted, but an IFD cannot overlap a redevelopment
project area. The statute declares (but does not require)
that IFDs should include substantially undeveloped areas.
This bill applies only to land under the jurisdiction of
the Port of San Francisco. This bill 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:
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1. Environmental remediation
2. Planning and design work.
3. Seismic and life-safety improvements.
4. Building rehabilitation, restoration, and preservation.
5. Structural repairs and improvements to piers, seawalls,
and wharves.
6. Hazardous material remediation.
7. Storm water management facilities, utilities, and access
improvements.
This bill allows a San Francisco waterfront IFD to pay for:
1. Remediation of hazardous materials.
2. Seismic and life-safety improvements.
3. Rehabilitation, restoration, and preservation of
historic buildings.
4. Structural repairs and improvements to piers, seawalls,
and wharves.
5. Removal of bay fill.
6. Stormwater management facilities, utilities, or open
space improvements.
7. Shoreline restoration.
8. Repairs and improvements to maritime facilities.
9. 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
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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. This bill requires San
Francisco officials to adopt a detailed infrastructure plan
for a proposed San Francisco waterfront IFD. The plan must
include:
1. A description of the proposed boundaries.
2. A description of the public facilities, including their
location and costs.
3. A financing section that:
A. Allocates and limits the property tax increment
revenues.
B. Limits the use of the property tax increment
revenues to uses within the IFD, and requires at
least 20 percent of the property tax increment
revenues will be set aside for waterfront purposes.
C. A projection of property tax increment revenues
over 45 years.
D. A projection of other sources that will finance
public facilities.
E. A limit on the dollars to be allocated to the IFD.
F. A time limit for receiving property tax increment
revenues which cannot exceed 45 years.
G. An analysis of the fiscal costs and benefits to
San Francisco.
H. An analysis of the fiscal impact on the affected
taxing entities.
I. A statement committing the IFD to comply with the
statutory accounting requirements for tideland trust
revenues.
For the Pier 70 IFD only, the enhanced financing plan may
allocate property tax increment revenues from San Francisco
and the other affected taxing entities. The 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 county Educational Revenue
Augmentation Fund (ERAF) that will be committed to the Pier
70 IFD. This bill prohibits the formation of a Pier 70 IFD
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until January 1, 2013. Pier 70 district shall also be
subject to additional limitation as specified.
This bill specifies that any increment amounts that exceed
amounts dedicated to ERAF-secured debt is paid into the
ERAF, beginning in the 21st year after the initial issuance
of ERAF secured debt.
Officials must send the proposed infrastructure financing
plan and its environmental documents to the affected taxing
entities and other San Francisco officials.
This bill 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
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
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requirement to conduct a formation election if all of the
land within a proposed IFD is publicly owned. This bill
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
percent 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.
This bill requires San Francisco's waterfront IFD's
infrastructure plan to set aside at least 20 percent 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. This bill 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
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.
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This bill 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 percent 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 percent 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, this bill 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, this bill 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.
This bill declares that the property tax increment revenues
received under its provisions are not "proceeds of taxes."
Comments
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 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. This bill 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
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San Francisco 15 more years of property tax increment
revenues which will increase its bonding capacity and raise
more investment capital.
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. This bill 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, this bill requires the San Francisco
waterfront IFD to set-aside 20 percent 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.
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, this bill
makes it clear that no election is needed to form San
Francisco's waterfront IFD.
Related bill
This bill is similar, but not identical, to AB 2367 (Leno),
of 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.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
Diversion of tax Unknown,
potentially significant
General
increment property tax increment diversion
from ERAF to the SF waterfront IFD
for 45 years
SUPPORT : (Verified 9/3/09)
Port of San Francisco (source)
California State Lands Commission
City and County of San Francisco
Dogpatch Neighborhood Association
Green Trust San Francisco Waterfront
Mayor of San Francisco, Gavin Newsom
Neighborhood Parks Council
Pier 70 San Francisco
Potrero Boosters Neighborhood Association
Potrero Hill Democratic Club
San Francisco Bay Conservation and Development Commission
San Francisco Architectural Heritage
San Francisco Chamber of Commerce
San Francisco County Supervisors Alioto-Pier, Dufty,
Elsbernd, Mar, and Maxwell
San Francisco Planning and Urban Research Association
San Francisco Republican Party
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
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Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,
Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Monning, Nava, Nestande, Niello, Nielsen, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, Bass
AGB:do 9/3/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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