BILL ANALYSIS Ó AB 746 Page 1 ASSEMBLY THIRD READING AB 746 (Ting) As Amended April 14, 2015 Majority vote ----------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+--------------------| |Local |6-3 |Gonzalez, Alejo, |Maienschein, | |Government | |Chiu, Cooley, |Linder, Waldron | | | |Gordon, Holden | | | | | | | |----------------+------+--------------------+--------------------| |Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, | | | |Bonta, Calderon, |Gallagher, Jones, | | | |Daly, Eggman, |Wagner | | | |Eduardo Garcia, | | | | |Holden, Quirk, | | | | |Rendon, Weber, Wood | | | | | | | | | | | | ----------------------------------------------------------------- SUMMARY: Extends the sunset date from January 1, 2029, to January 1, 2049, for statutes governing the San Francisco Bay Restoration Authority (Authority) and makes other specified changes. Specifically, this bill: AB 746 Page 2 1)Extends the sunset date for the Authority from January 1, 2029, to January 1, 2049. 2)Extends the sunset date for the Authority to levy a benefit assessment, special tax, or property-related fee, as specified, from December 31, 2028, to December 31, 2048. 3)Adds a cross reference to California Constitution Article XIII A to a provision in existing law that authorizes the Authority to levy a benefit assessment, special tax or property-related fee pursuant to the requirements in California Constitution Articles XIII C and XIII D. 4)Extends the date that the Authority must pay and discharge the principal and interest of any bond indebtedness from January 1, 2029, to January 1, 2049. 5)Repeals a provision of current law that prohibits the Authority from incurring more bonded indebtedness than 10% of the Authority's total revenues in the preceding fiscal year. 6)Makes changes to provisions in current law that establish procedures for the Authority in conducting a multi-county election for a proposed special tax measure, as follows: a) Deletes references to a "special tax" and replaces with the term "measure"; b) Adds to the list of provisions in existing law the Authority can propose a measure to generate revenues, a cross reference to current law which allows the Authority to incur AB 746 Page 3 indebtedness, subject to certain requirements; and, c) Adds to the list of constitutional requirements a proposed measure must comply with, a cross reference to California Constitution (tax limitation relating to ad valorem property tax). 7)Extends the repeal date, from January 1, 2017, to January 1, 2019, for provisions in existing law which requires the Authority to reimburse each county for the incremental costs of the first election at which the Authority proposes a measure. 8)Requires the appropriations limit for the Authority to be originally established based on the receipt from the initial revenue generating measure because the Authority has no state revenues as of the effective date of this bill. Prohibits the establishment of an appropriations limit from being deemed a change in an appropriations limit for purposes of California Constitution Article XIII B, Section 4. 9)Requires an elected official of a bayside city or county, instead of a resident of the San Francisco Bay Area, to serve as the Chair of the Authority. 10)Finds and declares that the Authority has not assumed any existing duties from another local or state government entity and has received no state or local government revenues not counted toward another entity's appropriations limit; therefore, the Authority has no associated appropriations limit pursuant to California Constitution Article XIII B as of the date of enactment of this bill. 11)Provides that no reimbursement is required by this bill because AB 746 Page 4 the local agency has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level or service mandated by this bill. 12)Makes other technical changes. EXISTING LAW: 1)Establishes the San Francisco Bay Restoration Authority Act (Act), which establishes the jurisdiction of the Authority to include all areas within the San Francisco Bay Area Conservancy Program, which includes the Counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma. 2)States the Authority's purpose is to raise and allocate resources for the restoration, enhancement, protection, and enjoyment of wetlands and wildlife habitats in the San Francisco Bay and along its shoreline. 3)Establishes the governing board for the Authority composed of seven members, as specified, to be appointed by the Association of Bay Area Governments, including one member, to serve as chair, who must be a resident of the Bay Area with expertise in the implementation of the San Francisco Bay Area Conservancy Program. 4)Authorizes the Authority, until December 31, 2028, to levy a benefit assessment, special tax, or property-related fee consistent with the requirements of California Constitution Articles XIII C and XIII D, as specified. 5)Allows the Authority to issue revenue bonds and incur bond indebtedness, subject to the following requirements: AB 746 Page 5 a) Requires the principal and interest of any bond indebtedness to be paid and discharged prior to January 1, 2029; b) Requires the Authority to comply with provisions in existing law that govern recreation and park districts incurring general obligation bonded indebtedness; and, c) Prohibits the total amount of indebtedness incurred outstanding at any one time from exceeding 10% of the Authority's total revenue in the preceding fiscal year. 6)Requires, when the Authority proposes to levy a special tax, the board of supervisors of the county or counties in which the special tax is proposed to be levied, to call a special election on the measure. 7)Repeals the Act as of January 1, 2029. FISCAL EFFECT: According to the Assembly Appropriations Committee, negligible state fiscal impact. COMMENTS: 1)The San Francisco Bay Restoration Authority. AB 2954 (Lieber), Chapter 690, Statutes of 2008, created the Authority as a regional government agency charged with raising and allocating resources for the restoration, enhancement, protection, and enjoyment of wetlands and wildlife habitat in the San Francisco Bay and along its shoreline. The Authority's mission is to formulate a strategy for raising local revenues to help restore 36,000 acres of publicly owned Bay shoreline into tidal wetlands. The estimated cost of such an endeavor is about $1.43 billion over 50 years. AB 746 Page 6 The Legislature granted the Authority the ability to utilize several financial tools to raise revenue, including levying a benefit assessment, special tax, or property-related fee, subject to constitutional requirements. Proposition 218 (1996) established that a tax levied by a special-purpose authority is a special tax which requires two-thirds voter approval. Additionally, the Authority can issue revenue bonds under the Revenue Bond Law of 1941 and incur bond indebtedness, subject to specified requirements. As a regional government agency, the Authority spans across nine counties. AB 2103 (Hill), Chapter 373, Statutes of 2010, prescribes the method of how the Authority places a proposal to levy a special tax before the voters. The Authority's officials wanted to specify the procedures for conducting a special election on a special tax proposed by the Authority and to clarify their existing statutory authority to levy special taxes. AB 1656 (Fong), Chapter 535, Statutes of 2012, made membership and project eligibility changes, but also contained a provision to extend the sunset date for the Authority from 2029 to 2036. At the time, the Authority wanted the extension to ensure that they would be able to administer revenues from a regional ballot measure they planned to submit to voters. The sunset date extension was removed from AB 1656 following policy concerns raised over the lack of information about the timing of a proposed ballot measure. Most recently, SB 279 (Hancock), Chapter 514, Statutes of 2013, specified procedures for conducting a multi-county election to approve a special tax measure proposed by the Authority. 2)Bill Summary. Current law provides several sunset dates that govern the Authority. This bill provides a 20-year sunset date AB 746 Page 7 extension for the following: 1) The Authority, until January 1, 2049; 2) The power to levy a benefit assessment, special tax, or property-related fee, until December 31, 2048; and, 3) The date the principal and interest of any bond indebtedness must be paid, until January 1, 2049. Current law requires the board of supervisors of a county or counties to call a special election if the Authority proposes to levy a special tax pursuant to existing law, which allows the Authority to levy special taxes, pursuant to California Constitution Article XIII C (voter approval for local tax levy) and California Constitution Article XIII D (assessment and property-related fees). This bill makes changes to this provision by requiring a county or counties to call a special election if the Authority proposes a measure to incur bond indebtedness pursuant to existing law which establishes requirements for general obligation bonded indebtedness, pursuant to California Constitution Article XIII A, relating to ad valorem taxes. Current law establishes appropriations limits to create a restriction on the amount of government revenue that can be appropriated in any fiscal year. This bill finds and declares that the Authority has no appropriations limit pursuant to the Constitution because it has not received any state or local government revenues. Under this bill, the appropriations limit for the Authority would be established based on the revenue generated by receipt of a measure adopted by the voters. Current law requires a resident of the San Francisco Bay Area to serve as Chair of the Authority. This bill replaces the public member, and instead, requires an elected official of a bayside city or county to serve as Chair. This bill is sponsored by the Authority. AB 746 Page 8 3)Author's Statement. According to the author, "The San Francisco Bay is one of our nation's greatest natural treasures, and has a critical impact on the health and well-being of all the local communities it surrounds. However, the San Francisco Bay has endured enormous harm over the last century caused by landfill and toxic pollution. In 2008, following years of budget cuts for natural resources protection, the Legislature created the Authority, to determine how to raise local revenues to restore over 36,000 acres of publicly-owned bay shoreline into tidal wetlands, and to provide oversight of funded restoration projects. "In addition to providing clean water, flood control, habitat protection, and recreational benefits, there are significant economic advantages that stem from wetlands restoration. Restoration provides hundreds of jobs by creating long-term projects that require project planning, implementation, assessments, and observation after completion. In addition, over $60 billion worth of goods pass through the narrow channel of the Golden Gate Strait every year, and the effects of pollution and other environmental threats directly affect the security of the local Bay Area economy. "Restoring the wetlands along the San Francisco Bay requires long-term investment, estimated to cost about $1.43 billion over 50 years. Since limited state and federal funds are available for these projects, the Authority is in the process of raising new revenue to narrow the funding gap and is authorized to do so by a variety of means. The Authority has statutory power to levy benefit assessments, property-related fees, and special taxes consistent with the requirements of Proposition 218 throughout its nine-county jurisdiction, in addition to applying for grants, fundraising, and issuing bonds. After years of careful consideration, the Authority believes that a bond, rather than an assessment, fee, or tax, would provide the most AB 746 Page 9 stable source of revenue for ongoing restoration projects. However, the SFBRA's [Authority] underlying statute also inadvertently includes certain limitations that effectively preclude it from using its bonding authority to maximum benefit. "This bill allows the Authority to effectively carry out its statutory mission to restore critical bay wetlands along the San Francisco Bay shoreline, by ensuring it has the ability to issue bonds in an amount and for a duration that will leverage the greatest impact. The bill would eliminate the restrictive limitation of the Authority's bonding authority to 10% of its prior year's revenue, which makes significant projects nearly impossible, and extend its existence to January 1, 2049, long enough for it to meet the obligations of any bonds issued. The bill would also ensure that any bond measure is uniformly submitted to voters across the nine counties within the Authority's jurisdiction, allowing the Authority to move forward in planning and seeking voter approval for an initial revenue measure to fund needed restoration projects." 4)Revenue Options Identified by the Authority. The Authority decided against placing a parcel tax measure on the ballot in 2014 and has continued to examine revenue options. Most recently, the Authority has discussed at several meetings of their governing board the feasibility of placing a parcel tax measure or a general obligation bond (GO bond) measure backed by ad valorem property taxes on the ballot in 2016. In addition to cities, counties, and school districts, the Legislature has granted the authority to several types of special districts to issue GO bonds. GO bonds are secured by the legal obligation to levy an ad valorem property tax on taxable property in an amount sufficient to pay the debt service. Two-thirds of voters must approve the issuance of a GO bond, and in doing so, approve the levy of an ad valorem tax to AB 746 Page 10 pay the bond. 5)Policy Considerations. The Legislature may wish to consider the following: a) GO Bonds. Supporters of this bill argue that current law provides the Authority the ability to issue GO bonds backed by ad valorem taxes. Absent any specific discussions in any past analysis of the four Authority bills prior to this one, or more explicit statutory authority, the Legislature may wish to consider, if it was, and continues to be, the Legislature's intent to give the Authority the power to issue GO bonds backed by ad valorem property taxes. Additionally, the Committee may wish to consider, if this bill will provide the Authority with sufficient assurances to place a GO bond on the ballot and aid in protecting it from any future legal challenges. b) Fourth Time is a Charm? The Legislature established the Authority in 2008, and since then, the Legislature has passed three bills making additional changes to their enabling Act, as requested by the Authority. However, the Authority has yet to raise any revenue to fulfill their statutory purpose. Supporters of this bill argue that the sunset extension is necessary to accommodate a 30-year GO bond or revenue bond term that would allow the Authority to fulfill their statutory mission. The Legislature may wish to consider, given recent history, if this is a reasonable extension. 6)Arguments in Support. Supporters argue that this bill is essential for the Authority to propose a revenue measure to the voters in 2016 and accomplish its statutory mission. 7)Arguments in Opposition. Opposition argues that by removing AB 746 Page 11 bonding caps and increasing the number of years to generate revenue, this bill inhibits accountability and exposes Bay Area residents to the threat of higher taxes and assessments. Analysis Prepared by: Misa Lennox / L. GOV. / (916) 319-3958 FN: 0000336