BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 664|
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THIRD READING
Bill No: AB 664
Author: Ammiano (D)
Amended: 8/31/11 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 07/06/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 6-3, 08/25/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson, Runner
ASSEMBLY FLOOR : 79-0, 05/31/11 - See last page for vote
SUBJECT : Infrastructure financing districts: Americas
Cup
SOURCE : Port of San Francisco
DIGEST : This bill allows San Francisco to form a special
waterfront infrastructure financing districts for the Port
Americas Cup.
ANALYSIS : Existing law allows cities and counties to
create Infrastructure Financing Districts (IFDs) and issue
bonds to pay for community scale public works: 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
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increment revenues from other local governments for 30
years. However, IFDs can't divert property tax increment
revenues from schools (SB 308, Seymour, 1990).
This bill amends the statute governing San Francisco's
waterfront infrastructure financing districts and creates a
new statute for San Francisco's special waterfront
infrastructure financing districts.
I. Waterfront infrastructure financing districts .
Existing law requires that the public facilities financed
by a waterfront IFD must be public trust assets controlled
by the Port of San Francisco, except for utilities, public
transportation facilities, and facilities on land that's
free of the public trust. This bill substitutes the
waterfront IFD for the Port's control.
Existing law prevents an IFD from overlapping a
redevelopment project area and from supplanting existing
facilities and services. This bill lifts those
restrictions for a waterfront IFD.
Existing law limits IFDs' bonds to 30 years and waterfront
IFDs' bonds to 45 years, measured from the date on which
the IFD issues the bonds. This bill changes the starting
date for waterfront IFDs' bonds to the date on which the
waterfront IFD received an aggregate of $100,000 in
property tax increment revenues.
This bill contains procedures that allow San Francisco to
buy facilities that a waterfront IFD constructs, either
entirely or in phases, once a facility's purchase value is
more than $1 million.
Existing law allows waterfront IFDs to divert property tax
increment revenues, but requires a waterfront IFD to
set-aside at least 20% of those revenues for shoreline
restoration, removal of bay fill, waterfront public access,
or environmental remediation of the San Francisco
waterfront. This bill acknowledges a new requirement that
a special waterfront IFD must set-aside revenues to finance
improvements to federally- or state-owned waterfront lands
used for America's Cup public spectator viewing sites.
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Existing law allows the Pier 70 IFD to divert property tax
increment revenues, including revenues that would have gone
to the Educational Revenue Augmentation Fund (ERAF). This
bill defines "affected taxing entity" for the purpose of
diverting these property tax increment revenues. This bill
provides that these allocations apply to revenues that are
available for allocation under the applicable laws.
Existing law contains an extended statement of legislative
intent regarding the allocation of property tax increment
revenues to a waterfront IFD. This bill repeals that
statement and enacts a new statement of legislative intent
which declares that these revenues are neither "proceeds of
taxes" or an appropriation subject to Article XIII B of the
California Constitution.
Existing law provides procedures for issuing IFD bonds,
including: publishing notices before adopting a resolution
that starts the procedure for issuing IFD bonds, obtaining
2/3-voter approval, and publishing notices before selling
the bonds at a 5% discount. This bill waives these
requirements for waterfront IFDs.
II. Special waterfront infrastructure financing districts .
This bill creates procedures and powers for a special
waterfront IFD and a Port America's Cup special waterfront
IFD.
Set-aside requirements . Existing law for waterfront IFDs
require San Francisco to set aside at least 20% of the
property tax increment revenues for shoreline restoration,
removal of bay fill, waterfront access, or environmental
remediation.
This bill requires a Port America's Cup special waterfront
IFD to set aside at least 20% of its share of property tax
increment revenues from ERAF to pay for improvements to
federally or state-owned waterfront lands used a public
spectator viewing sites for America's Cup events.
To approve the fiscal analysis, the I-Bank must find that
there is a reasonable probability that the economic
activity proposed to occur from hosting the America's Cup
would result in State General Fund revenue with a net
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present value greater than the net present value of the
property tax increment revenues diverted from ERAF over the
term of the special waterfront IFD. The I-Bank must
consider only those State General Fund revenues that would
occur as a result of hosting the America's Cup in
California. This bill prohibits the I-Bank from
considering State General Fund revenues that would have
occurred otherwise.
Property tax increment allocations . If the financing plan
for a special waterfront IFD allocates less than 100% of
San Francisco's property tax increment revenues to the
special waterfront IFD, this bill requires the special
waterfront IFD to pay a proportionate share of property tax
increment revenues to ERAF. The special waterfront IFD
doesn't have to pay ERAF if the special waterfront IFD
receives 100% of San Francisco's property tax increment
revenues.
Background
San Francisco's Waterfront Development Plans
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 lacks the public capital to
attract and retain private investors. The cost to
implement the Port's ten-year capital plan is $1.9 billion.
Naval Station Treasure Island is one of about 30 former
military bases in California closed by federal officials
during the 1990s. Besides the usual problems with
converting a former military base to civilian use, land use
decisions at "T.I." are complicated by the constitutional
public trust doctrine that applies to tide and submerged
lands. The 1968 Burton Act gave the San Francisco Port
Commission jurisdiction over San Francisco's tide and
submerged lands. When considering how to convert Treasure
Island to civilian uses, San Francisco officials worried
about jurisdictional conflicts between its Port and
redevelopment agency. Because a community can have only
one redevelopment agency, the Treasure Island Conversion
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Act allowed San Francisco's supervisors to designate a
public benefit nonprofit corporation called the Treasure
Island Development Authority (TIDA) as the redevelopment
agency for the former navy base (AB 699, Migden, Chapter
897, Statutes of 1997).
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 2010, the BMW ORACLE Racing Team won the America's Cup
in Valencia, Spain. San Francisco will host the 34th
America's Cup regatta along the waterfront. The Port of
San Francisco believes that the cost of rebuilding Piers
30-32, Seawall Lot 330, and Pier 50 will be $625 million.
To generate some of the needed money, Port officials want
to use IFD bonds.
San Francisco's Infrastructure Financing Districts
In 2005, legislators passed special provisions that apply
just to IFDs in San Francisco (SB 1085, Migden, Chapter
213, Statutes of 2005). In 2010, the Legislature repealed
those special provisions and instead enacted a new special
statute governing the formation of IFDs along San
Francisco's waterfront, including special provisions for a
San Francisco waterfront IFD in the Pier 70 area (AB 1199,
Ammiano, Chapter 664, Statutes of 2010).
In early 2011, San Francisco created Infrastructure
Financing District No. 1 (Rincon Hill), relying on the
standard IFD statutes. The Rincon Hill IFD is the second
IFD in California.
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
waterfront 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
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obligation bonds, revenue bonds, and IFD bonds can
stimulate private investors' interest in waterfront
development. The Legislature passed special IFD bills for
San Francisco in 2005 and 2010, but the opportunity to host
the next America's Cup regatta convinced Port officials
that they need more changes before they can harness
property tax increment revenues to their economic
development goals. This bill augments San Francisco's
special legislation by creating special waterfront IFDs for
the Port America's Cup venues. Without the special
waterfront IFDs' investments, the trust land property would
never generate enough new property tax revenues to support
the needed improvements.
The Port's argument for tailoring the San Francisco's IFD
law to meet the special needs of the Pier 70 district with
last year's Ammiano bill isn't the same as this year's
arguments for the America's Cup projects. The development
of Pier 70 can't start without deep public subsidies,
including IFD financing. The mixed-use development that
the Port has planned for Pier 70 is the result of its long
consultation with the maritime industry, private investors,
and the area's neighbors. In contrast, the idea to use IFD
financing to subsidize the America's Cup regatta's
facilities emerged last summer. The Port had planned to
use this section of its waterfront for other development,
including a cruise ship terminal. Until the Great
Recession scared away real estate investors, private
capital was available for development projects closer to
the Bay Bridge.
San Francisco officials argue that the state's subsidy for
the Port America's Cup special waterfront IFD and will
result in a net positive revenue gain for the State General
Fund. They say that both the America's Cup regatta and the
Treasure Island development will generate more economic
activity, boosting the State General Fund's revenues. Los
Angeles officials made similar arguments to justify a time
extension for their Hoover Redevelopment Project. They
wanted the state government to subsidize the public works
needed to support the retrofit of the Los Angeles Memorial
Coliseum and attract an NFL franchise. Legislators allowed
that unusual extension, on the condition that Los Angeles
officials could convince the I-Bank that there would be "a
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reasonable probability" that the project would generate
State General Fund revenues greater than the schools' share
of property tax increment revenues. The I-Bank couldn't
consider the revenues that would have occurred without the
time extension (AB 2805, Ridley-Thomas, Chapter 954,
Statutes of 2004). This bill requires San Francisco
officials to meet the same test.
Related Legislation
This bill is not the only bill this year to modify the IFD
statute:
AB 485 (Ma) makes it easier for cities and counties to use
IFDs for transit oriented development projects. For
transit oriented development projects, the bill also
removes the vote requirement to form a district, issue
bonds, and set the appropriations limits.
AB 910 (Torres) expands the list of projects that IFDs can
finance to include affordable housing facilities, economic
development, and transit village projects. For projects
that finance affordable housing, economic development, and
transit villages, the bill also removes the vote
requirement to form a district, issue bonds, and set the
appropriations limits.
SB 214 (Wolk) removes the vote requirement to issue bonds,
form an IFD, and to set the appropriations limit. SB 214
requires annual construction progress reports, prohibits
big-box subsidies, and promotes the use of IFDs for
environmental protection and disadvantaged communities.
SB 310 (Hancock) removes the vote requirement to form a
district, issue bonds, and set the appropriations limit.
SB 310 seeks to use IFDs for transit priority projects.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2011-12 2012-13
2013-14 Fund
Port America's Cup IFD
Annual diversion of $2,056 - $3,650 in
General
ERAF property tax increment from 2014
through 2043
I-Bank: financing plan review
Unknown one-time costs, reimbursed by
General
local entity submitting plan for review
SUPPORT : (Verified 8/31/11)
Port of San Francisco (source)
Bay Area Council
Bonnie Witt Development Services
California Travel Association
Catholic Charities CYO
City and County of San Francisco
Community Housing Partnership
Council of Community Housing Organizations
Haight Ashbury Free Clinics, Inc.
Laborers International Union of North America, Local Union
No. 261
Northern California Carpenters Regional Council
Operating Engineers Local Union No. 3
San Francisco Chamber of Commerce
San Francisco County Supervisor Jane Kim
San Francisco Building Trades Council
Treasure Island Homeless Development Initiative
ASSEMBLY FLOOR : 79-0, 05/31/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
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Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. Pérez
NO VOTE RECORDED: Gorell
AGB:nl 9/6/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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