BILL ANALYSIS AB 1199 Page 1 Date of Hearing: January 13, 2009 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Anna Marie Caballero, Chair AB 1199 (Ammiano) - As Amended: January 4, 2010 SUBJECT : Infrastructure financing districts: City and County of San Francisco. SUMMARY : Revises the special statute that controls how local officials can form, finance, and operate an infrastructure financing district (IFD) along the San Francisco waterfront, at Pier 70, on land that is under the jurisdiction of the Port of San Francisco. Specifically, this bill : 1)Defines various terms for the purposes of an IFD created in the waterfront area of San Francisco, including the following: a) "Base year" means the fiscal year during which any infrastructure plan adopted under this chapter becomes effective; b) "Board" means the Board of Supervisors of the City and County of San Francisco, which is the legislative body for any district formed in San Francisco; c) "District" means any district created under this chapter, including any project area within a district; d) "Port" means the Port of San Francisco; e) "San Francisco" means the City and County of San Francisco; f) "ERAF" as the Educational Revenue Augmentation Fund; g) "ERAF-secured debt" means the debt incurred to finance a Pier 70 IFD subject to a Pier 70 enhanced financing plan that is secured by and will be repaid from the ERAF share; and, h) "ERAF share" as the county ERAF portion of incremental tax revenue committed to a Pier 70 IFD under a Pier 70 enhanced financing plan. AB 1199 Page 2 2)Adds, for the purposes of San Francisco, shoreline restoration and other repairs and improvements to maritime facilities to the statutory list of activities whose costs are eligible to be covered by an IFD. 3)Clarifies that facilities on land, located in a previously formed district that the Port subsequently leases, sells, or otherwise transfers to any person, are free of the public trust, the Burton Act, and any additional restrictions on use or alienability created by the Burton Act transfer agreement, provided that the State Lands Commission has concurred in the lifting of trust restrictions on the transferred property, will remain in and subject to the district. 4)States that for a district created along the San Francisco Waterfront the plan provisions established for other IFDs do not apply. 5)States that the Board will initiate proceedings for the establishment of a district by adopting a resolution of intention to establish the proposed district that does all of the following: a) States an infrastructure financing district is proposed to be established and describes the boundaries of the proposed district; b) States the type of public facilities proposed to be financed by the district; c) States that incremental property tax revenue from San Francisco, and some or all affected taxing entities within the district may be used to finance these public facilities, or, alternatively, that incremental property tax revenue from San Francisco, and no other taxing entity within the district, may be used to finance these public facilities; and, d) Directs the Executive Director of the Port, or an appropriate official designated by the Executive Director, to prepare a proposed infrastructure financing plan. 6)Requires that the proposed infrastructure financing plan be consistent with the general plan of San Francisco. AB 1199 Page 3 7)Requires that the proposed infrastructure financing plan to include all of the following: a) A map and legal description of the proposed district that may include all or a portion of the district designated by the Board in its resolution of intention; b) A description of the public facilities required to serve the development proposed in the district, including those to be provided by the private sector, those to be provided by governmental entities without assistance under this chapter, those public improvements and facilities to be financed with assistance from the proposed district, and those to be provided jointly; and, c) A financing section that shall contain all of the following: i) A statement that specifies the maximum portion of the incremental tax revenue of San Francisco and of any affected taxing entity proposed to be committed to the district; ii) A limitation on the use of levied taxes allocated to and collected by the district providing that no less than 20% of that amount must be expended on shoreline restoration, removal of bay fill, or waterfront public access to, or environmental remediation of, the San Francisco waterfront; iii) A projection of the amount of incremental tax revenues expected to be received by the district, assuming a period of 45 years from the base year of the infrastructure financing plan; iv) Projected sources of financing public facilities to be assisted by the district, including debt to be repaid with incremental tax revenues; v) A limitation on the number of dollars of taxes that may be divided and allocated to the district. Taxes shall not be divided or be allocated to the district beyond this limitation, except by amendment of the infrastructure financing plan pursuant to the procedures in this subdivision; AB 1199 Page 4 vi) A date on which the effectiveness of the infrastructure financing plan and all tax allocation to the district will end and a time limit on the district's authority to repay indebtedness with incremental tax revenues received under this chapter, not to exceed 45 years from the date of the Board's resolution of intent to issue bonds to be repaid with incremental tax revenues under this chapter; vii) An analysis of the costs to San Francisco of providing facilities and services to the district while the area is being developed and after the area is developed and of the tax, fee, charge, and other revenues expected to be received by San Francisco as a result of expected development in the district; viii) An analysis of the projected fiscal impact of the district and the associated development upon any affected taxing entity; and, ix) A statement that the district will maintain accounting procedures in accordance with procedures established for local governments overseeing trusting lands. 8)States that for Pier 70 IFD, the financing plan may contain a provision that allocates a portion of the incremental tax revenues of San Francisco and of other designated affected taxing entities to the Pier 70 IFD. 9)Prohibits a Pier 70 IFD plan from being formed for at least three full fiscal years after the effective date of this bill. 10)Prohibits any new debt secured by the ERAF share to be issued after the 20th year in which the IFD first incurs debt. 11)States that beginning in the 21st year after the IFD first incurs debt, it may collect only the amount of ERAF share necessary to meet ERAF-secured debt (payment and coverage) requirements. 12)Requires the dollar amount for the ERAF-secured debt to be specified in a schedule stating the amount of ERAF share required annually to meet the debt requirements until all AB 1199 Page 5 ERAF-secured debt is paid in full. 13)Requires that all ERAF share above the annual debt requirements be paid into the state ERAF beginning in the 21st year after the district first incurs debt. 14)Provides that the portion of incremental tax revenue of San Francisco to be allocated to the Pier 70 IFD must be equal to the portion of the incremental tax revenue of the county ERAF proposed to be committed to the Pier 70 IFD. 15)States that the Board shall not enact a resolution forming the Pier 70 IFD and providing for the division of taxes of any affected taxing to the IFD unless the affected taxing entities approve such a division of taxes. 16)States that if an affected taxing entity has not approved the infrastructure financing plan prior to the Board's approval, the Board may amend the infrastructure financing plan to remove the allocation of tax revenues of the non-consenting affected taxing entity. 17)States that if the infrastructure financing plan is amended as stated above, San Francisco will be required to match the lost revenue dollar for dollar. 18)Requires that the Board hold a public hearing regarding the infrastructure financing plan no earlier than 60 days after the plan has been sent to each affected taxing entity, or in the absence of any affected taxing entities, no earlier than 30 days after the plan has been lodged with the clerk of the Board. 19)Provides that no election is necessary for the formation of the Pier 70 IFD. 20)Specifies that if the approved plan allocates to the Pier 70 IFD 100% of the incremental tax revenue of San Francisco, then the IFD shall not make a payment to ERAF, but if the plan allocated less than 100% of the incremental tax revenue of San Francisco to the IFD then the IFD shall pay a proportionate share of the incremental tax revenue into ERAF. 21)Allows owners of land that's contiguous to the Port's waterfront jurisdiction to request their addition of that land to the IFD, provided that the landowners agree to conditions AB 1199 Page 6 regarding public access to the waterfront, based on standards set by the San Francisco Bay Conservation and Development Commission. 22)Allows, with an affected taxing entity's permission, the Pier 70 IFD to subordinate payments to the affected taxing entity to the IFD's loans, bonds, or other debts. 23)Requires San Francisco's waterfront IFD to annually file with the county auditor a detailed statement of indebtedness and a detailed reconciliation statement. 24)Declares that it implements the IFD statutes and constitutional provisions. 25)Declares that the property tax increment revenues received under provisions of this measure are not "proceeds of taxes." EXISTING LAW : 1)Clarifies that an IFD can be formed on urban waterfront property. 2)Clarifies that IFDs can be used to finance public infrastructure projects on public trust lands. 3)Specifies that if all of the land within a proposed IFD belongs to a public agency, that agency is a landowner and will be allowed to vote on issues relating to the district. 4)Waives the requirement for an election to form the IFD if all of the land within the proposed IFD is publicly owned. 5)Authorizes environmental remediation work as a type of project that is eligible for IFD spending in San Francisco. 6)Adds, for the purposes of San Francisco, four more examples to the statutory list of activities whose costs are eligible to be covered by an IFD: a) seismic and life-safety improvements; b) landmark rehabilitation; c) structural work on piers; seawalls, and wharves; d) hazardous material remediation; and, e) storm water management facilities, other utility infrastructure, or public access improvements. 7)Clarifies that if an IFD includes tideland and submerged AB 1199 Page 7 lands, whether filled or unfilled, and finances facilities located on these lands, these facilities must serve and promote uses and purposes consistent with the public trust. 8)Specifies that facilities built by an IFD on tideland or submerged lands are public trust assets subject to the administration and control of the trust grantee of the public lands on which they are constructed. 9)Clarifies that if the facilities built on the trust lands are capitol facilities and are not owned by the public agency administering the public trust land, but are owned and operated by another entity that has a license from or an agreement with the public entity, then those facilities would not become public trust assets. 10)Expands the definition of "debt," as it applies to San Francisco, to include commercial paper and variable rate demand loans. 11)Allows an IFD in San Francisco to extend the diversion of property tax increment revenues for up to 10 additional years if local officials amend the IFD plan, analyze its fiscal impacts on other local governments, hold a public hearing, and obtain the consent of all of the other local governments. 12)Declares, as it applies to San Francisco, that infrastructure improvements that increase public access to public trust lands satisfy the requirement that the public facilities are of communitywide significance and provide significant benefits to an area larger than the IFD. FISCAL EFFECT : Unknown COMMENTS : 1)Under the Burton Act (Chapter 1333, Statutes of 1968), the state conveyed certain state tidelands along the San Francisco waterfront, generally extending from Fisherman's Wharf to Candlestick Point, to the City and County of San Francisco, through its Port, in 1969 in trust for public trust and Burton Act trust purposes, subject to the obligation on the part of the City and County San Francisco to assume $55 million in state debt obligations then existing relating to the waterfront properties. AB 1199 Page 8 2)The San Francisco waterfront is a valuable public trust asset of the state and provides special maritime, navigational, recreational, cultural, and historical benefits to the people of the region and the state. The Port of San Francisco has estimated 10-year capital plan liabilities of $1.9 billion to bring its existing facilities, including facilities listed or eligible for listing on the National Register of Historic Places, to a level of compliance with current codes. Realizing the goals of the Port's waterfront land use plan, the Bay Conservation and Development Commission special area plan and the Port's capital plan and removal of the deteriorating conditions along the San Francisco waterfront are matters of statewide significance. 3)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. San Francisco's proposal to set up large 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. 4)In 2005, the Legislature adopted SB 1085 (Migden), Chapter 213, Statutes of 2005, authorizing the Port of San Francisco to enact infrastructure financing districts to finance specified waterfront improvements. Due to the extraordinary unfunded capital plan liabilities on the Port's property, the City and County of San Francisco is seeking to make various changes to San Francisco's IFD law to authorize the use of IFD moneys on a more diverse group of projects. 5)Pier 70 is a 65-acre brownfields site on San Francisco's Central Waterfront and encompasses the oldest continuously operating shipyard on the West Coast. For over 150 years, some portion of this site was used for ship building and repair. The federal government controlled portions of the site until 1967. Since the state's transfer of the property to the City of San Francisco in 1969, Pier 70 has remained fallow, failing to attract private investment. The blighted AB 1199 Page 9 nature of this land, need for seismic retrofitting of historic buildings and environmental clean-up has prevented private investment. 6)According to the author, this bill will provide the public investment needed to attract private investment and development. This bill expands the Port's infrastructure financing powers, by directing capture of 90% of growth in property taxes from Port revitalization efforts of the Pier 70 area, provided that the Port expends at least 20% of these revenues on waterfront parks, environmental remediation, and removal of contaminated bay fill. 7)This measure is identical to AB 1176 (Ammiano, 2009) that was vetoed by Governor Schwarzenegger. In his veto message the Governor called out the need for reforms in other major policy areas, however, there was no specific comment on what changes should be made to AB 1176. 8)This bill is double-referred to the Committee on Appropriations. REGISTERED SUPPORT / OPPOSITION : Support City and County of San Francisco [SPONSOR] Opposition None on file Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958