BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 214|
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                              UNFINISHED BUSINESS


          Bill No:  SB 214
          Author:   Wolk (D)
          Amended:  6/21/11
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-3, 4/27/11
          AYES:  Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
          NOES:  Huff, Fuller, La Malfa

           SENATE FLOOR  :  24-13, 5/16/11
          AYES:  Alquist, Calderon, Corbett, De León, DeSaulnier, 
            Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu, 
            Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, 
            Simitian, Steinberg, Vargas, Wolk, Wright, Yee
          NOES:  Anderson, Berryhill, Blakeslee, Cannella, Correa, 
            Dutton, Emmerson, Fuller, Gaines, Harman, Huff, La Malfa, 
            Runner
          NO VOTE RECORDED:  Strickland, Walters, Wyland

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Infrastructure financing districts: voter 
          approval: repeal

           SOURCE  :     Author


           DIGEST  :    This bill eliminates the requirement of voter 
          approval to create an infrastructure financing district 
          (IFD) and revises the provisions governing the public 
          facilities that may be financed by an IFD.
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           Assembly Amendments  make clarifying and technical changes.

           ANALYSIS  :    Existing law:

          1. Authorizes cities and counties to create 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. 

          2. Allows an IFD to divert property tax increment revenues 
             from other local governments, excluding school 
             districts, for up to 30 years, in order to pay back 
             bonds issued by the IFD. 

          3. Requires that in order to form an IFD a city or county 
             must develop an infrastructure plan, send copies to 
             every landowner, consult with other local governments, 
             and hold a public hearing. 

          4. Requires that when forming an IFD, local officials must 
             find that its public facilities are of communitywide 
             significance and provide significant benefits to an area 
             larger than the IFD. 

          5. Requires that every local agency who will contribute its 
             property tax increment revenue to the IFD approve the 
             plan. 

          6. Requires a two-thirds voter approval of the formation of 
             the IFD and the issuance of bonds. 

          7. Requires majority voter approval for setting the IFD's 
             appropriations limits. 

          8. Specifies that public agencies that own land in a 
             proposed IFD may not vote on issues regarding the 
             district. 

          9. Authorizes IFDs to issue a variety of debt instruments, 
             including bonds, certificates of participation, leases, 
             and loans. 


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          10.Requires any IFD that constructs dwelling units to set 
             aside not less than 20 percent of those units to 
             increase and improve the community's supply of low- and 
             moderate-income housing available at an affordable 
             housing cost to persons and families of low- and 
             moderate-income. 

          11.Prohibits a local agency from providing any form of 
             financial assistance to a vehicle dealer or big box 
             retailer, or a business entity that sells or leases land 
             to a vehicle dealer or big box retailer, that is 
             relocating from the territorial jurisdiction of one 
             local agency to the territorial jurisdiction of another 
             local agency but within the same market area. 

          12.Requires the regional transportation plan for specified 
             regions to include an sustainable communities strategy 
             (SCS), as specified, designed to achieve certain goals 
             for the reduction of greenhouse gas emissions from 
             automobiles and light trucks in a region.

          This bill eliminates the requirement of voter approval to 
          create an IFD and revises the provisions governing the 
          public facilities that may be financed by an IFD.  
          Specifically, this bill: 

          1. Requires an IFD to only finance structural or 
             nonstructural public capital facilities. 

          2. Adds the following to the types of facilities an IFD can 
             finance: 

             A.    Facilities and watershed lands used for the 
                collection and treatment of water for urban uses; 

             B.    Flood management, including levees, bypasses; and, 


             C.    Habitat restoration. 

          3. Authorizes an IFD to finance the cleanup and development 
             of brownfields-properties contaminated by hazardous 
             waste under the provisions of the Polanco Redevelopment 
             Act. 

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          4. Removes the prohibition against an IFD including any 
             portion of a redevelopment project area. 

          5. Authorizes an IFD to finance any projects that implement 
             a SCS as required under SB 375 (Steinberg), Chapter 728, 
             Statutes of 2008. 

          6. Removes intent language that an IFD has to cover areas 
             that are substantially undeveloped. 

          7. Changes the time period that any action or proceeding to 
             attack, review, set aside, void, or annul the creation 
             of an IFD or the adoption of an infrastructure financing 
             plan from 30 days after the enactment of the ordinance 
             creating the IFD to 30 days after the date the 
             legislative body adopted the resolution adopting the 
             infrastructure financing plan. 

          8. Changes the time period that any action or proceeding to 
             attack, review, set aside, void, or annul the issuance 
             of bonds by the IFD from 30 days after the resolution 
             that the voters approved the issuance of bonds to 30 
             days from the date the legislative body adopted the 
             resolution providing for the issuance of bonds. 

          9. Prohibits an IFD from providing any form of financial 
             assistance to a vehicle dealer or big box retailer, or a 
             business entity that sells or leases land to a vehicle 
             dealer or big box retailer that is relocating from the 
             territorial jurisdiction of one local agency to the 
             territorial jurisdiction of another local agency but 
             within the same market area. 

          10.Requires the resolution of intention for the creation of 
             an IFD to state the need for the IFD and the goals the 
             IFD proposes to achieve by financing public facilities. 

          11.Requires the legislative body to direct the clerk to 
             mail a copy of the resolution of intention to create an 
             IFD to each affected taxing entity. 

          12.Removes the requirement that the public facilities of 
             the IFD are of communitywide significance. 

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          13.Expands the life of an IFD from 30 to 40 years. 

          14.Provides that in the case of an affected taxing entity 
             that is a special district that provides fire protection 
             service and where the county board of supervisors is the 
             governing authority or has appointed itself as the 
             governing board of the district, the plan shall be 
             adopted by a separate resolution approved by the 
             district's governing authority or governing board.
           
          15.Removes the election requirement to form an IFD, adopt 
             an infrastructure financing plan, or issue bonds. 

          16.Requires an annual report to be sent to each land owner 
             and affected taxing entity in the IFD that contains all 
             of the following: 

             A.    A summary of the IFD's expenditures; 

             B.    A description of the progress made towards the 
                IFD's adopted goals; and, 

             C.    An assessment of the status regarding completion 
                of the IFD's public works projects. 

          17.Prohibits the IFD, if it fails to provide the annual 
             report, from spending any funds to construct public 
             works projects until the annual report is submitted. 

          18.States that if the IFD fails to produce evidence of 
             progress made towards achieving its adopted goals for 
             five consecutive years, the IFD shall not spend any 
             funds to construct any new public works projects, except 
             to complete any public works projects that it had 
             started. 

          19.Requires, if the IFD fails, that any excess property tax 
             increment revenues that had been allocated for new 
             public works projects be reallocated to the affected 
             taxing entities. 

          20.Makes other technical and clarifying changes.


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           Comments
           
          According to the author, "SB 214 makes it easier for local 
          agencies to use IFDs to pay for public projects, without 
          impacting school district's share of property tax or the 
          state's general fund.  In a fiscally distressed economic 
          climate, local officials need a flexible financing tool 
          that is rigorous and responsible.  Currently, existing law 
          perversely incentivizes locals to pursue less accountable 
          financing mechanisms."

          Cities and counties can create 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 are prohibited from diverting property tax 
          increment revenues from schools. 

          For several years, local officials were reluctant to form 
          IFDs because they worried about the constitutionality of 
          using tax increment revenue from property that was not 
          within the redevelopment project area.  When a 1998 
          Attorney General's opinion allayed those concerns, the City 
          of Carlsbad formed an IFD in 1999 to fund the public works 
          for a new hotel located adjacent to the Legoland theme 
          park.  That small project is the only example of local 
          officials' use of the 1990 IFD law.  The broader use of 
          IFDs may attract more attention and the appellate courts 
          may be asked to determine whether it is constitutional to 
          divert property tax increment to IFDs. 

          Public officials continue to search for ways to raise the 
          capital they need to invest in public works projects, like 
          public transit facilities, infill development, or clean 
          water.  One concept recognizes that expanded public 
          structures can boost the value of nearby property.  Higher 
          property values produce higher property tax revenues.  
          Property tax increment financing captures those property 
          tax increment revenues.  When redevelopment officials use 
          property tax increment financing to eradicate blight, state 
          law does not require voter approval.  When local officials 
          use IFDs to capture property tax increment revenues, state 

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          law requires a two-thirds approval. 

          Recognizing these barriers, this bill removes key 
          impediments to IFDs, such as the voting requirements to 
          form and bond the IFD.  In addition, this bill extends the 
          term of the IFD bonds from 30 to 40 years, allowing for a 
          longer debt repayment period lowering monthly payments.  
          Also, to increase transparency, this bill includes measures 
          of programmatic and fiscal accountability, requiring IFDs 
          to annually report its progress and expenditures to its 
          affected taxing entities and landowners. 

          Since the creation of IFD law there have been multiple 
          bills that have tailored IFD law to specific local 
          circumstances.  In 1999 the Legislature created a parallel 
          law for IFDs to stimulate development and international 
          trade in the "border development zone," about 400 square 
          miles next to the Mexico border (SB 207 ÝPeace], Chapter 
          773, Statutes of 1999).  However, San Diego officials have 
          yet to use this authority.  In 2005, the Legislature passed 
          SB 1085 (Migden), Chapter 213, Statutes of 2005, which 
          provided for changes and additions to the IFD law to enable 
          the City and County of San Francisco to finance needed 
          public infrastructure improvements to specified waterfront 
          properties.  This authority was expanded even further for 
          San Francisco last year in AB 1199 (Ammiano), Chapter 664, 
          Statutes of 2010.

           Similar Legislation
           
          AB 485 (Ma), 2011-12 Session, utilizes IFDs to create more 
          transit-oriented development and related low-income 
          housing.  

          AB 664 (Ammiano), 2011-12 Session, authorizes, under 
          existing authorization for the City of County of San 
          Francisco to create IFDs, the adoption of a financing plan 
          and use of IFD revenues for the portion of the San 
          Francisco waterfront district designated as the America's 
          Cup venue.  

          AB 664 (Ammiano), 2011-12 Session, also requires the County 
          Board of Supervisors to submit a fiscal analysis to the 
          California Infrastructure and Economic Development Bank for 

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          review and approval before adopting the resolution 
          authorizing issuance of debt.  

          AB 910 (Torres), 2011-12 Session, expands the list of 
          project IFDs can finance to include affordable housing 
          facilities and economic development.  

          SB 310 (Hancock), 2011-12 Session, which seeks to use IFDs 
          for transit priority projects.  

          AB 1836 (Fueur), 2007-08 Session, which would have repealed 
          the 2/3-voter approval for local officials to form an IFD, 
          repealed the 2/3-voter approval to issue tax bonds, and 
          extended the time an IFD could receive property tax 
          increment revenues from 30 years to 40 years.  AB 1836's 
          intent was to adapt IFDs to public transit projects.  The 
          bill failed passage in the Senate Local Government 
          Committee.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

           SUPPORT  :   (Verified  4/28/11)

          California Professional Firefighters
          California Rural Legal Assistance Foundation
          California Special Districts Association
          California State Association of Counties
          County of Yolo
          Davis Board of Education Trustee Susan Lovenburg
          Non-Profit Housing Association of Northern California
          Imperial County Board of Supervisors

           OPPOSITION  :    (Verified  4/28/11)

          California Taxpayers Association
          Howard Jarvis Taxpayers Association

           ARGUMENTS IN SUPPORT  :    The California Special Districts 
          Association note in their letter of support that "Senate 
          Bill 214 removes a number of key impediments to forming and 
          utilizing Infrastructure financing districts, providing an 
          important alternative to traditional redevelopment agency 
          project area financing, specifically the use of mandatory 

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          tax increment financing."

           ARGUMENTS IN OPPOSITION  :    According to the Cal Tax 
          "Eliminating voter approval for infrastructure financing 
          removes the people from the decision process of what their 
          communities will look like, how bonds are issued, and how 
          property tax revenues are spent.  Tax increment financing 
          also produces unfavorable results for local school 
          districts and public safety, since property taxes are 
          earmarked for specific purposes."  
           

          AGB:kc  9/9/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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