BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1199|
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THIRD READING
Bill No: AB 1199
Author: Ammiano (D)
Amended: 1/4/10 in Assembly
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 4/7/10
AYES: Cox, Aanestad, Kehoe, DeSaulnier, Price
SENATE APPROPRIATIONS COMMITTEE : 11-0, 8/12/10
AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,
Price, Walters, Wolk, Wyland, Yee
ASSEMBLY FLOOR : Not relevant
SUBJECT : San Franciscos infrastructure
SOURCE : Port of San Francisco
DIGEST : This bill repeals the special statute that
controls how local officials can form, finance, and operate
an infrastructure financing district (IFD) along the San
Francisco waterfront on land that is under the jurisdiction
of the Port of San Francisco. In addition to making
extensive legislative findings, this bill enacts a new
special statute governing the formation and activities of
IFDs along the San Francisco's waterfront, as specified.
ANALYSIS : Existing law specifies that cities and
counties can create IFDs and issue bonds to pay for
community scale public works: highways, transit, water
CONTINUED
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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 can't divert property tax increment revenues
from schools (SB 308 [Seymour], Chapter 1575, Statutes of
1990).
Forming an IFD is cumbersome. The city or county must
develop an infrastructure plan, send copies to every
landowner, consult with other local governments, and hold a
public hearing. Every local agency that will contribute
its property tax increment revenue to the IFD must approve
the plan. Once the other local officials approve, the city
or county must still get the voters' approval to:
1. Form the IFD (requires 2/3 voter approval).
2. Issue bonds (requires 2/3 voter approval).
3. Set the IFD's appropriations limit (majority voter
approval).
The 1968 Burton Act resulted in transferring the state
tidelands along San Francisco's waterfront to the City and
County of San Francisco which assumed $55 million in state
debt obligations. The Port of San Francisco wants to
promote development, but officials lack the public capital
to attract and retain private investors. The cost to
implement the Port's ten-year capital plan is $1.9 billion.
In 2008, San Francisco voters approved a charter amendment
to divert most of the Pier 70 area's hotel tax and payroll
tax revenues to fund historic preservation and
infrastructure costs. To generate the rest of the needed
money, Port officials plan to use local general obligation
bonds, revenue bonds, and IFD bonds.
In 2005, legislators passed special provisions that apply
just to IFDs in San Francisco (SB 1085 [Migden], Chapter
213, Statutes of 2005). The 2005 legislation:
1. Waived the requirement for an election to form an IFD if
all of the land within the proposed IFD is publicly
owned.
2. Allowed San Francisco to extend the 30-year time for an
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IFD to receive property tax increment revenues for 10
more years.
3. Made environmental remediation, seismic safety,
hazardous material remediation, and other projects
specifically eligible for IFD financing.
4. Expanded the statutory "debt" definition to include
commercial paper.
This bill repeals the special statute that controls how
local officials can form, finance, and operate an IFD along
the San Francisco waterfront on land that is under the
jurisdiction of the Port of San Francisco. In addition to
making extensive legislative findings, this bill enacts a
new special statute governing the formation and activities
of IFDs along San Francisco's waterfront, including these
provisions:
I. Area . The Community Redevelopment Law restricts the
use of property tax increment financing to urbanized
areas where the property is blighted. Unlike
redevelopment, the statewide IFD statute doesn't
require property in an IFD to be blighted, but an IFD
can't overlap a redevelopment project area. The
statute declares (but does not require) that IFDs
should include substantially undeveloped areas.
Assembly Bill 1199 applies only to land under the
jurisdiction of the Port of San Francisco. This bill
also contains special provisions for a San Francisco
waterfront IFD in the 65-acre Pier 70 area.
II. Projects . The standard IFD statute allows an IFD to
finance capital facilities, listing eight examples. In
addition, the special San Francisco IFD statute allows
an IFD to pay for:
A. Environmental remediation
B. Planning and design work
C. Seismic and life-safety improvements.
D. Building rehabilitation, restoration, and
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preservation.
E. Structural repairs and improvements to piers,
seawalls, and wharves.
F. Hazardous material remediation.
G. Storm water management facilities, utilities,
and access improvements.
This bill allows a San Francisco waterfront IFD to pay for:
A. Remediation of hazardous materials.
B. Seismic and life-safety improvements.
C. Rehabilitation, restoration, and preservation of
historic buildings.
D. Structural repairs and improvements to piers,
seawalls, and wharves.
F. Removal of bay fill.
G. Stormwater management facilities, utilities, or
open space improvements.
H. Shoreline restoration.
I. Repairs and improvements to maritime facilities.
J. Planning and design work directly related to
public facilities.
III. Infrastructure financing plan . The statewide IFD
statute requires local officials to prepare and adopt
an infrastructure financing plan that describes the
affected territory, describes the facilities to be
financed, finds that the facilities provide significant
benefits, includes a seven-part financing section, and
plans for the replacement of any housing. This bill
requires San Francisco officials to adopt a detailed
infrastructure plan for a proposed San Francisco
waterfront IFD. The plan must include:
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A. A description of the proposed boundaries.
B. A description of the public facilities,
including their location and costs.
C. A financing section that:
(1) Allocates and limits the property tax
increment revenues.
(2) Limits the use of the property tax
increment revenues to uses within the IFD, and
requires at least 20 percent of the property
tax increment revenues be set aside for
waterfront purposes.
(3) A projection of property tax increment
revenues over 45 years.
(4) A projection of the funding sources that
will pay for the facilities.
(5) A limit on the property tax dollars to
be allocated to the IFD.
(6) A time limit for receiving property tax
increment revenues which cannot exceed 45
years.
(7) An analysis of the fiscal costs and
benefits to San Francisco.
(8) An analysis of the fiscal impact on the
affected taxing entities.
(9) A statement committing the IFD to comply
with the statutory accounting requirements for
tideland trust revenues.
For the Pier 70 IFD only, the "Pier 70 enhanced financing
plan" may allocate property tax increment revenues from San
Francisco and the other affected taxing entities. The
maximum amount of San Francisco's property tax increment
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revenues allocated to the Pier 70 IFD must equal the amount
of property tax increment revenues of the Educational
Revenue Augmentation Fund (ERAF) that will be committed to
the Pier 70 IFD. Officials can't form the Pier 70 IFD for
at least three fiscal years after this bill's effective
date. Further, any debt secured by ERAF revenues can only
last for 20 years, based on limits and a schedule
established in consultation with the county auditor. Once
the ERAF-secured debt is paid, that share of property tax
revenues reverts to ERAF. Starting in the 21st year, any
excess property tax increment revenues of the Pier 70 IFD
must be paid into ERAF.
Officials must send the proposed infrastructure financing
plan and its environmental documents to the affected taxing
entities and other San Francisco officials.
This bill prohibits the San Francisco Board of Supervisors
from diverting property tax increment revenues from another
taxing entity unless the other entity's governing body
adopts a resolution approving the proposed plan. If an
affected taxing entity doesn't agree to a diversion of its
property tax increment revenues, San Francisco must
allocate additional funds to make up the difference.
This bill requires the San Francisco Board of Supervisors
to hold a noticed public hearing on the infrastructure
financing plan and consider any objections,
recommendations, evidence, and testimony. The Board of
Supervisors can adopt the infrastructure financing plan by
ordinance which must also establish the waterfront IFD's
base year for calculating revenues. The board may divide
the waterfront IFD into separate project areas.
Landowners outside San Francisco's waterfront IFD may
petition to have their land included without an election.
A request by the owners of the Mirant site to include their
land in the Pier 70 IFD requires the approval of the State
Department of Finance. A landowner must agree that its
property's "shoreline band" will be improved and maintained
to standards of adjacent waterfront public access ways on
public land.
IV. Formation election . The statewide IFD statute
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requires elections involving registered voters to form
an IFD, issue bonds, and set the appropriations limit.
However, if there are less than 12 registered voters,
landowners can vote, based on the number of acres they
own. The special San Francisco IFD statute waives the
requirement to conduct a formation election if all of
the land within a proposed IFD is publicly owned. This
bill allows the San Francisco Board of Supervisors to
form a waterfront IFD by ordinance; no election is
required.
V. Waterfront set aside . The Community Redevelopment Law
requires redevelopment officials to set aside and spend
20 percent of their gross property tax increment
revenues to increase, improve, and preserve low- and
moderate-income housing. The statewide IFD statute
doesn't require local officials to set aside property
tax increment revenues. This bill requires San
Francisco's waterfront IFD's infrastructure plan to set
aside at least 20 percent of the gross property tax
increment revenues to be spent for shoreline
restoration, removal of bay fill, or waterfront public
access to (or environmental remediation of the
waterfront.
VI. Tax increment time limits . The Community
Redevelopment Law allows redevelopment projects formed
after 1993 to receive property tax increment revenues
for up to 45 years. The statewide IFD statute allows
IFDs to receive property tax increment revenues for up
to 30 years. The special San Francisco IFD statute
allows San Francisco officials to extend the time limit
for receiving property tax increment revenues by an
additional 10 years, for a total of up to 40 years.
This bill allows San Francisco's waterfront IFD to
receive property tax increment revenues for up to 45
years.
VII. Property tax increment revenues . The statewide IFD
statute allows an IFD to divert property tax increment
revenues from other local governments that formally
agree to the diversion. An IFD cannot divert the
schools' shares of property tax increment revenues
because the statute excludes school entities from the
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definition of an "affected taxing entity." Because the
IFD statute predates the creation of the ERAF, it's not
clear how county auditors should allocate an IFD's
property tax increment revenues. The ERAF statute
tells county auditors to divert property tax increment
revenues to redevelopment agencies before calculating
other local governments' ERAF contributions.
This bill directs the county auditor to divert San
Francisco's waterfront IFD's share of property tax
increment revenues before calculating other local
governments' ERAF contributions. The county auditor must
divert San Francisco's waterfront IFD's share of property
tax increment revenues in the same manner as redevelopment
agencies' property tax increment revenues. If the Pier 70
IFD's plan calls for allocating 100 percent of San
Francisco's property tax increment revenues, then the IFD
will not make a payment to ERAF. If the plan allocates
less than 100 percnet to the Pier 70 IFD, then the IFD must
pay a proportionate share of its property tax increment
revenues to ERAF.
VIII. Fiscal affairs . With an affected taxing entity's
permission, this bill allows a San Francisco waterfront
IFD to subordinate payments to the affected taxing
entity to the IFD's loans, bonds, or other debts. To
receive its property tax increment revenues, this bill
requires the San Francisco waterfront IFD to annually
file with the county auditor a detailed statement of
indebtedness and a detailed reconciliation statement.
The bill declares that it implements the IFD statutes
and constitutional provisions. This bill declares that
the property tax increment revenues received under its
provisions are not "proceeds of taxes."
Comments
With piers built on bay fill and mud a century ago, the
Port of San Francisco faces a big price tag to restore its
derelict industrial and commercial properties to economic
health. Public investment in these trust lands has lagged
for decades, requiring $1.9 billion to carry out the Port's
capital plan. Generating funds from a mix of local general
obligation bonds, revenue bonds, and IFD bonds can
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stimulate private investors' interest in waterfront
development. The Legislature passed special IFD
legislation for San Francisco in 2005, but further study
convinced Port officials that they need more changes before
they can harness property tax increment revenues to their
economic development goals. This bill replaces the 2005
special legislation with language that clarifies the fiscal
relationship between the waterfront IFD and the allocation
of property tax increment revenues. But without the
waterfront IFD's investments, the trust land property would
never generate the new property tax revenues. This bill
also gives San Francisco 15 more years of property tax
increment revenues which will increase its bonding capacity
and raise more investment capital.
Prior legislation
This bill is identical to the final version of AB 1176
(Ammiano, 2009), an earlier version of which passed the
Senate Local Government Committee by the vote of 5-0.
Although no "no" votes were cast against last year's bill,
Governor Schwarzenegger vetoed AB 1176, saying that other
policy topics had priority. This bill is also similar to
AB 2367 (Leno, 2008) which died on the Senate
Appropriations Committee's suspense file.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Diversion of tax unknown, potentially significant
property General
increment tax increment diversion from ERAF to
the SF
waterfront IFD for 45 years. Costs
could
be negligible if it is assumed that
development
would not occur absent this bill
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SUPPORT : (Verified 8/16/10)
Port of San Francisco
City and County of San Francisco
Dogpatch Neighborhood Association
GreenTrustSF Central Waterfront
Neighborhood Parks Council
Pier70sf.org
Potrero Boosters Neighborhood Association
San Francisco Bay Conservation and Development Commission
San Francisco Planning + Urban Research Association
San Francisco Republican Party
San Francisco Tomorrow
AGB:do 8/16/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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