BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 664
                                                                  Page  1

          CONCURRENCE IN SENATE AMENDMENTS
          AB 664 (Ammiano)
          As Amended  August 31, 2011
          Majority vote
           
           ----------------------------------------------------------------- 
          |ASSEMBLY:  |79-0 |(May 31, 2011)  |SENATE: |26-7 |(September 7,  |
          |           |     |                |        |     |2011)          |
           ----------------------------------------------------------------- 
            
           Original Committee Reference:    L. GOV.  

           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 
          the special waterfront district.  

           The Senate amendments  :  

          1)Specify that the Port America's Cup district is part of a 
            special waterfront district.

          2)Define "special waterfront district" as a waterfront district 
            in San Francisco that may comprise some or all of the 
            America's Cup venues or potential venues. 

          3)Place a cap, of $1 million, on the amount of the county 
            educational revenue augmentation fund (ERAF) portion of 
            incremental tax revenues that can be committed to a special 
            waterfront district in any fiscal year.

          4)Clarify that the Port America's Cup district with a special 
            waterfront district enhanced financing plan is authorized to 
            fund the construction of the port maritime facilities at Pier 
            27, planning and design work related to the port's maritime 
            facilities at Pier 27, and other specified activities. 

          5)Specify that the 20% set aside of the aggregate of the special 
            waterfront district ERAF share allocated to the Port 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 is in lieu of the set aside for shoreline restoration 
            required in existing law for Pier 70. 









                                                                  AB 664
                                                                  Page  2

          6)Clarify that a special waterfront district enhanced financing 
            plan for a Port America's Cup district shall provide that the 
            proceeds of a special waterfront district ERAF-secured debt 
            are restricted for use to finance directly, reimburse the port 
            for its costs related to, or refinance other debt incurred, 
            the construction of the port's maritime facilities at Pier 27, 
            including public access and public open-space improvements. 

          7)Authorize a waterfront district to finance reimbursement 
            payments made to the CA Infrastructure and Economic 
            Development Bank. 

          8)Specify that the financial section of an IFD plan shall make a 
            projection on the amount of tax increment received by the IFD, 
            assuming a period of 45 years beginning on the date which San 
            Francisco projects that the IFD will have received $100,000 in 
            tax increment revenues. 

          9)Provide that the effectiveness of the IFD plan will be for 45 
            years from the date the IFD has actually received $100,000 in 
            tax increment revenues. 

          10)Delay the Pier 70 financing plan until January 1, 2014. 

          11)Contain 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.

          12)Define "affected taxing entity" as any governmental agency 
            that levied, or had levied on its behalf, a property tax on 
            all or a portion of the land located in the proposed IFD in 
            the fiscal year prior to the designation of the special 
            waterfront district. 

           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 








                                                                  AB 664
                                                                  Page  3

            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, five 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 
            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)Requires that the proposed infrastructure financing plan for 
            Pier 70 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 








                                                                  AB 664
                                                                  Page  4

               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;

               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 








                                                                  AB 664
                                                                  Page  5

                 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.

          11)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.

          12)Prohibits a Pier 70 IFD plan from being formed for at least 
            three full fiscal years after the effective date of this bill.

          13)Prohibits any new debt secured by the ERAF share to be issued 
            after the 20th year in which the IFD first incurs debt.

          14)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. 

          15)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 
            ERAF-secured debt is paid in full.

          16)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.

          17)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.









                                                                  AB 664
                                                                  Page  6

           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Defined various terms for the purposes of an IFD created in 
            the waterfront area of San Francisco, including the following:

             a)   "America's Cup district" means a waterfront district 
               that includes the waterfront area in the City and County of 
               San Francisco designated as America's cup venues, excluding 
               the Rincon Point-South Beach Redevelopment Project Area;

             b)   "America's Cup enhanced financing plan" means an 
               infrastructure district financing plan for an America's Cup 
               district that contains provisions identical to those 
               authorized for a Pier 70 district;

             c)   "ERAF" as the Educational Revenue Augmentation Fund;

             d)   "America's Cup ERAF-secured debt" means the debt that is 
               secured by and will be repaid from the ERAF share and is 
               incurred to finance, an America's Cup district enhanced 
               financing plan; 

             e)   "America's Cup ERAF share" as the county ERAF portion of 
               incremental tax revenue committed to an America's Cup 
               district enhanced financing plan; and,

             f)   "Cruise terminal project" means all phases of the Port 
               of San Francisco's public works project to build new cruise 
               terminal facilities at Pier 27 in San Francisco and 
               includes any public access and public open space 
               improvements on Pier 27. 

          2)Specified that the America's Cup ERAF share produced in the 
            America's Cup District shall only be used to finance the 
            following:

             a)   Construction of the Port of San Francisco's cruise 
               terminal project at Pier 27;

             b)   Planning and design work that is directly related to the 
               Port's Pier 27 cruise terminal project; and,

             c)   Planning, design, and construction of improvements to 
               publicly-owned waterfront lands held by trustee agencies, 
               such as the National Park Service and the California State 








                                                                  AB 664
                                                                  Page  7

               Parks, and used a public spectator viewing sites for 
               America's Cup related events.  

          3)Required that an America's Cup enhanced financing plan provide 
            that the proceeds of ERAF-secured debt are restricted for use 
            to finance directly, reimburse the Port for its costs related 
            to, or refinance other debt incurred, in the construction of 
            the Port's cruise terminal project. 

          4)Required 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.  

          5)Required the San Francisco Board of Supervisors (Board), 
            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.  

          6)Authorized the I-Bank to circulate the fiscal analysis to 
            other state agencies, including, but not limed to, the 
            Department of Finance, the Department of Housing and Community 
            Development, and the Governor's Office of Planning and 
            Research, and solicit their comments and recommendations. 

          7)Required I-Bank within 30 days from receipt of the fiscal 
            analysis, after considering the comments and recommendations, 
            to take one of the following actions:

             a)   Approve the fiscal analysis if the I-Bank can make the 
               finding that the economic activity proposed to occur as a 
               result of hosting the America's Cup even in California 
               would result in an amount of revenue to the General Fund 
               with a net present value that is greater than the amount of 
               property tax increment that would be diverted from ERAF 
               over the term of the America's Cup District, or,

             b)   Return the fiscal analysis to the Board with specific 
               recommendations for changes that would allow the I-Bank to 
               approve the fiscal analysis. 

          8)Specified that if the approved plan allocates to an America's 
            Cup district, as applicable, 100% of the incremental tax 
            revenue of San Francisco, then the IFD shall not make a 








                                                                  AB 664
                                                                  Page  8

            payment to ERAF, but if the plan allocated less than 100% of 
            the incremental tax revenue of San Francisco to an America's 
            Cup district, as applicable, then the IFD shall pay a 
            proportionate share of the incremental tax revenue into ERAF.

          9)Declared that it implements IFD statutes and constitutional 
            provisions.

          10)Declared that the property tax increment revenues received 
            under provisions of this measure are not "proceeds of taxes."

           FISCAL EFFECT  :   According to the Senate Appropriations 
          Committee, this bill has a $1 million diversion in ERAF property 
          tax annually from 2014 to 2059. 

           COMMENTS  :  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.

          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.

          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 








                                                                  AB 664
                                                                  Page  9

          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.

          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.

          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 34th America's Cup Event at locations on Port 
          property and Golden Gate National Recreation Area lands and 
          proposed improvements to Pier 27 to build a new, 
          state-of-the-art primary cruise terminal for the Port.  As 
          proposed, Pier 27 would serve as one of the central AC34 venues 
          in the proposed America's Cup Village.

          The bidding for the America's Cup was not unlike bidding for 
          other major worldwide sporting events such as the Olympics or 
          the World Cup.  For America's Cup 34, the Event Authority will 
          use 9 piers and a 2 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 the America's Cup Village. 

          According to the Beacon Economics report on the 34th America's 
          Cup, the state is projected to receive $61 million in direct tax 








                                                                  AB 664
                                                                  Page  10

          benefits (in 2013 dollars) from the 34th America's Cup.
          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 Pier 27, 
          currently estimated to cost $97 million.  The Legislature may 
          wish to ask the author to specify that the ERAF monies 
          authorized under this measure be used for the purpose of overall 
          maritime facilities in order to be consistent with the general 
          provisions of IFD law related to San Francisco.

          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 land that 
          is under the jurisdiction of the Port of San Francisco.

          Support Arguments:  Supporters state that because of the 
          competitive nature of the process to land the America's Cup, it 
          is unlikely this development will occur but for the investment 
          of the state's ERAF funds.  Renovation of these facilities for 
          America's Cup 34 is unlikely to pencil as a private investment 
          development opportunity, due to extraordinary costs associated 
          with environmental remediation, historic preservation, repair 
          and seismic retrofit of pier structures in the Bay and new 
          infrastructure.  Bonding capacity from these proposed IFDs will 
          enable development to move forward enabling America's Cup 34 to 
          generate up to $60.9 million in tax revenue to the state in 
          2013.  

          Opposition Arguments:  Opposition could argue that providing 
          state funding to pay for America's Cup is a large long-term 
          commitment of state funds when the state will only receive the 
          short-term benefits of the additional sales and use tax dollars. 
           Under this measure, the state would lose an estimated 
          $25,578,190 in ERAF funds over a 30-year period.  
           

          Analysis Prepared by  :    Katie Kolitsos / L. GOV. / (916) 
          319-3958 








                                                                  AB 664
                                                                  Page  11



                                                               FN: 0002588