BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 214| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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. CONTINUED SB 214 Page 2 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. CONTINUED SB 214 Page 3 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. CONTINUED SB 214 Page 4 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. CONTINUED SB 214 Page 5 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. CONTINUED SB 214 Page 6 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 CONTINUED SB 214 Page 7 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 CONTINUED SB 214 Page 8 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 CONTINUED SB 214 Page 9 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 **** END **** CONTINUED