BILL ANALYSIS Ó
AB 664
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Date of Hearing: May 11, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 664 (Ammiano) - As Amended: April 25, 2011
Policy Committee: Local
GovernmentVote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill creates an infrastructure financing district (IFD)
along the San Francisco waterfront, to be called the America's
Cup district. Specifically, this bill:
1)Allows the Educational Revenue Augmentation Fund (ERAF) share
from the America's Cup district to be used to finance
planning, design and construction work connected with hosting
America's Cup.
2)Restricts the proceeds of ERAF-secured debt to the Port's
cruise terminal project, which will be used as America's Cup
Village.
3)Requires 20% in the aggregate of the America's Cup ERAF share
allocated to the Port be set aside to finance costs of
improvement to federally or state-owned waterfront lands
approved by trustee agencies for the purpose of public
spectator viewing sites for America's Cup related events.
4)Requires the San Francisco Board of Supervisors, before any
debt can be issued for the America's Cup District, to submit a
fiscal analysis to the California Infrastructure and Economic
Bank (I-Bank) for review and approval.
5)Requires the I-Bank, within 30 days from receipt of the fiscal
analysis, to approve the fiscal analysis if the I-Bank can
make the finding that the economic activity from hosting
America's Cup would result in GF revenue with a net present
value that is greater than the amount of property tax
increment that would be diverted from ERAF. If that condition
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cannot be met, the I-Bank must return the fiscal analysis to
the Board with specific recommendations for changes that would
allow the I-Bank to approve the fiscal analysis.
FISCAL EFFECT
1)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 approximately $2 million beginning in 2014,
rising to $3.6 million in 2042. The net present value of the
ERAF diversions over this time period is estimated to be $26
million. The diversions are on property tax revenues that do
not currently exist, but will be the ERAF-increment that
occurs as a result of the investment and improvements that are
envisioned in the legislation and the plan for the IFD.
2)The actual impact of these diversions on the GF depends on the
amount of future property tax growth associated with
development in the IFD relative to what would have occurred
absent the financing mechanism authorized by this bill and the
actual economic impact of hosting America's Cup.
a) If it is assumed that development of the area within the
IFD would occur without tax-increment financing, the future
loss to the GF 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. This is the more likely scenario as 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.
c) If it is assumed that San Francisco will host America's
Cup and the estimated beneficial economic impacts do occur,
then there will be approximately $85 million in new state
and local revenues in 2013, with the state receiving about
$60 million of the total. The net present value of the tax
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revenues generated from the America's Cup exceeds the net
present value of the proposed ERAF property tax diversion.
3)Administrative costs to the I-Bank of approximately $50,000
for the requirements to review and comment on the fiscal
analysis.
COMMENTS
1)Purpose. Supporters state it is unlikely this development
will occur but for investing state ERAF funds. Renovation of
these facilities for America's Cup is infeasible for private
investment, due to extraordinary costs associated with
environmental remediation, historic preservation, repair and
seismic retrofit of pier structures in the Bay and new
infrastructure
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
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.
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 America's Cup District. "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
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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 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 IDF to retain the tax increment (or growth
in property tax values resulting from development of Pier 70)
for up to 45 years.
4)America's Cup. In February 2010, the BMW ORACLE Racing Team,
sailing for the Golden Gate Yacht Club, won the 33rd America's
Cup, off the coast of Valencia, Spain. On December 31, 2010,
the team designated the City and County of San Francisco to
host the 34th America's Cup sailing regatta. The team
anticipates holding the 34th America's Cup match in San
Francisco Bay in 2013, with preliminary races worldwide
beginning in 2011 and in San Francisco Bay in 2012.
The Port of San Francisco is currently conducting
environmental review under the California Environmental
Quality Act (CEQA) of the proposed America's Cup Event. The
Event Authority will use nine piers and a two acre upland
parcel, rent-free. The City will fund the costs of compliance
with CEQA and pay for all transportation and public safety
requirements. The City will also fund the construction of the
Pier 27 cruise terminal in preparation for using it as the
America's Cup Village.
5)Economic impacts. According to the Beacon Economics report on
the America's Cup, the state is projected to receive $61
million in direct tax benefits (in 2013 dollars) from hosting.
The City is expected to realize approximately $23 million in
tax proceeds (primarily hotel taxes). All of the City's
projected tax proceeds projected to accrue from the America's
Cup is expected to be spent covering City services (police,
fire, transportation) for the event. In addition, the City
has pledged its available property tax increment from future
Event Authority long-term development sites to offset the
costs of public improvements at those sites. In addition, the
City is funding the construction of a new cruise terminal at
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Pier 27, currently estimated to cost $97 million.
6)Prior legislation. This measure is similar to AB 1199
(Ammiano), Chapter 664, Statutes of 2010, which revised the
special statute that controls how local officials can form,
finance, and operate an IFD along the San Francisco
waterfront, at Pier 70, on public trust lands that are under
the jurisdiction of the Port of San Francisco.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081