BILL ANALYSIS
AB 1199
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Date of Hearing: January 21, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1199 (Ammiano) - As Amended: January 4, 2010
Policy Committee: Local
GovernmentVote:5-0
Urgency: No State Mandated Local Program:
Reimbursable:No
SUMMARY
This bill revises existing law that controls how local officials
can form, finance, and operate an infrastructure financing
district (IFD) on San Francisco waterfront land that is under
the jurisdiction of the Port of San Francisco.
FISCAL EFFECT
1)No state mandated costs or significant impacts on state
agencies.
2)Diversion of future growth in certain property taxes from
school districts to the IFD (referred to as "ERAF-increment
revenues"). The state would be required to backfill the
property tax revenues diverted away from ERAF, under the terms
of Proposition 98 (whereby local property revenues allocated
to school districts offset the state's contribution to K-14
education funding on a dollar for dollar basis). Diversion
amounts would be as follows:
a) No diversion until the IFD is formed in 2014.
b) Limited diversions in the subsequent four to seven
years, given the time needed for rezoning, environmental
cleanup, satisfaction of CEQA requirements, and other steps
that must be completed prior to full scale development.
c) Annual diversions reaching about $4 million when the
project is eventually developed in 10-15 years, which could
continue through 45 years from the creation of the IFD.
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3)The actual impact of these diversions on the General Fund
depends on the amount of future property tax growth associated
with future Pier 70 development that is assumed to occur
absent the financing mechanism authorized by this bill.
a) If it is assumed that development of the Pier 70 area
would occur without tax-increment financing, the future
loss to the General Fund is equal to the amount of ERAF
revenues diverted under the bill (future annual increased
expenditures of up to $4 million per year).
b) If it is assumed that development would not take place
without the increment-financing, there would be no General
Fund impact.
A strong case can be made that growth will not occur without tax
increment or related public financing, and that the bill
therefore will not negatively affect the GF. The high cost of
remediation and environmental cleanup needed for development of
this area has proven to be a major barrier to new development,
as evidenced by the fact that the Pier 70 area has remained
blighted for 40 years.
SUMMARY (Continued)
Specifically, the bill:
1)Allows the City and County of San Francisco to form an
infrastructure financing district (IFD) on or after January 1,
2014 that includes a span of San Francisco waterfront, at Pier
70, and divert property tax increment to help fund development
of the property. Specifies that the formation can occur
without an election.
2)Authorizes equal portions of tax increment revenue from the
City and County of San Francisco and the county's Educational
Revenue Augmentation Fund (ERAF) to be allocated to the IFD
for 45 years. (ERAF revenues are a portion of property tax
revenues that are normally allocated to K-14 school
districts).
3)Allows other local taxing entities to contribute their
increment revenues to the IFD. If other entities choose not
to contribute, the City and County of San Francisco would
contribute an additional amount to make up the difference.
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4)Expands the list of authorized expenditures to include removal
of bay fill, shoreline restoration, and other repairs and
improvements of maritime facilities.
5)Requires 20 % of the tax increment revenues to be used for
shoreline restoration, removal of bay fill, or waterfront
public access to, or environmental mediation of, the SF
waterfront.
6)Prohibits the issuance of ERAF-secured debt after 20 years
from the effective date of the bill, and specifies that, after
20 years from the initial issuance of ERAF-secured debt, any
property tax increment that exceeds the amount dedicated to
ERAF-secured debt will revert to the ERAF.
7)Requires San Francisco officials to prepare a detailed
infrastructure plan for the proposed waterfront IFD, which
includes a financing section.
8)Authorizes the owners of land contiguous to the border of an
IFD to request that their property be added to the IFD.
COMMENTS
1)Purpose . Following the passage of special IFD legislation for
San Francisco in 2005, further study and financial analysis
has convinced Port officials they need additional changes to
state law to implement their economic development strategies.
This bill is intended to accomplish this objective by
repealing the 2005 provisions and replacing them with new
provisions that provide more flexibility and funding for the
San Francisco IFD. These provisions: (a) permit the diversion
of ERAF-related property taxes from schools to the IFD, (b)
expand the life of IFDs to 45 years (thereby providing a
longer time frame for use of tax increment financing to meet
development goals); (c) remove various election requirements;
and (d) expand the scope of projects that can qualify for IFD
funding. They also require San Francisco to adopt an extensive
financing plan.
2)Background - IFDs . Existing law authorizes cities and counties
to create Infrastructure Financing Districts (IFDs) and issue
bonds to pay for highways, transit, water systems, sewer
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projects, flood control, child care facilities, libraries,
parks, and solid waste facilities. To repay the bonds, IFDs
divert property tax increment (that is, the growth in property
tax revenues resulting from the developments) from other local
governments for 30 years. However, IFDs cannot divert
property tax increment revenues from schools (although there
is some ambiguity with respect to the ERAF portion of school
property taxes). There are numerous requirements for the
formation and operation of IFDs, including extensive
infrastructure planning and consultation with other local
governments, public hearings, and voter approval.
In 2005, the state enacted special provisions that apply just
to IFDs in San Francisco (SB 1085, [Migden], Chapter 213,
Statutes of 2005). The 2005 legislation waived the
requirement for elections under specified circumstances,
extended the 30-year time for an IFD to receive property tax
increment revenues to 40 years, and made environmental
remediation, seismic safety, hazardous material remediation
and other project eligible for IFD financing.
3)Background-ERAF . A key source of funding authorized by this
bill is the bond-financing backed by ERAF portion of property
tax increment resulting from projected future development of
the Pier 70 area. "ERAF" is shorthand for a portion of
property taxes that support school districts.
Each year, property taxes are collected by the county
assessor, and are then allocated back to cities, special
districts, the incorporated county, and K-12 and community
college districts in accordance with formulas established over
time dating back to Proposition 13. In response to serious
budgetary shortfalls in the early 1990s, the Legislature and
administration permanently redirected over $3 billion of
property taxes from cities, counties, and special districts to
schools and community college districts. These redirected
funds reduce the state's funding obligation for school and
community college districts by a like amount.
These redirected funds are deposited by cities, counties, and
special districts into the Educational Revenue Augmentation
Fund (ERAF), which is then used to supplement school and
community college district funding. In San Francisco County
about 25 cents out of every property tax dollar collected is
deposited into the ERAF account. This bill would authorize the
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IDF to retain the tax increment (or growth in property tax
values resulting from development of Pier 70) for up to 45
years.
4)Recent Legislation . This bill is identical to AB 1176
(Ammiano, 2009) that was vetoed by the governor. The acrostic
veto message did not contain specific comments regarding what
changes should be made to AB 1176.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081