BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2144|
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THIRD READING
Bill No: AB 2144
Author: John A. Pérez (D), et al.
Amended: 8/20/12 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 6/28/12
AYES: Wolk, DeSaulnier, Hernandez, Kehoe, Liu, Yee
NOES: Dutton, Fuller, La Malfa
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 50-25, 5/21/12 - See last page for vote
SUBJECT : Local government: infrastructure and
revitalization financing
districts
SOURCE : Author
DIGEST : This bill renames Infrastructure Financing
Districts as Infrastructure and Revitalization Financing
Districts (IRFDs) and makes several changes to statutes
governing districts, including voter approval, bond sale,
fire district approval, term life, accountability, and the
types of financeable projects.
Senate Floor Amendments of 8/20/12 place statutes governing
Infrastructure and Revitalization Districts into a new
chapter in the Government Code.
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ANALYSIS : Cities and counties can 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 increment
revenues from other local governments for 30 years.
However, IFDs cannot divert property tax increment revenues
from schools.
This bill renames IFDs as "Infrastructure and
Revitalization Financing Districts." This bill makes the
following changes to the statutes governing the districts:
I. Voter approval . Existing law requires local officials
to prepare an infrastructure financing plan and get
voter approval to:
Form the IFD, which requires 2/3-voter
approval.
Issue bonds, which requires 2/3-voter approval.
Set the appropriations limit, which requires
majority-voter approval.
This bill authorizes local officials to create IRFDs
and issue debt with 55% voter approval.
II. Net available revenue . Citing a significant state
General Fund deficit, Governor Brown's 2011-12 budget
proposed eliminating RDAs and returning billions of
dollars of property tax revenues to schools, cities,
and counties to fund core services. The Legislature
adopted AB 1X26 (Blumenfield, 2011), which dissolved
all RDAs. Current law creates the Redevelopment
Property Tax Fund, which receives property taxes that
formerly would have been allocated to a redevelopment
agency. Money deposited in the Fund is used to help a
successor agency wind down its affairs. Any excess
funds are allocated to local governments as property
taxes.
This bill defines "net available revenue" (NAR) as
periodic distributions to the city from the
Redevelopment Property Tax Trust Fund, pursuant to
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state law, available to the city after all preexisting
legal commitments and obligations from that revenue
are made, pursuant to state law. It must only include
revenue remaining after all current distributions,
including, but not limited to payment of enforceable
obligations, all distributions to other taxing
entities, an applicable administrate fees, have been
made.
This bill:
Authorizes the city's legislative body to
dedicate any NAR through the financing plan;
Requires a legislative body to states that NAR
from the city may be used to finance public
facilities and must state the maximum portion of NAR
to be committed to the district for each year in the
resolution of intention to establish the proposed
district and in the IRFD's financing plan.
III. Bond sale . Existing law allows IFD bonds to be sold
at discount not to exceed 5% of par at public sale.
Bonds may be sold at no less than par to the federal
government at private sale without any public
advertisement. At least five days prior to the sale,
a notice must be published in a general circulation
newspaper and financial newspaper published in the
Cities of San Francisco and Los Angeles.
This bill authorizes bonds to be sold at discount not
to exceed five percent of par at negotiated sale.
This bill specifies that the notice of the bond sale
in newspapers only apply to a public sale.
A negotiated sale for bond issuances of an
infrastructure and revitalization financing district
that exceeds $5 million shall be contracted for and
let to the lowest responsible bidder.
IV. Fire district approval . Before an IFD can divert
property tax increment from another taxing entity,
current law requires every local agency that will
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contribute its property tax increment revenue to the
IFD must approve the infrastructure financing plan.
Some special districts are governed ex officio by
county boards of supervisors or city councils.
In the case of a special district that provides fire
protection services where the county board of
supervisors is the governing authority, this bill
requires the special district to act on an IRFD's plan
by adopting a separate resolution.
V. Term life . Existing law limits the terms of IFDs'
bonds to no more than 30 years.
This bill extends the maximum term of IFDs' bonds from
30 years to 40 years, or a later date, if specified by
an ordinance, on which the allocation of tax increment
will begin.
This bill requires the resolution of intent to
establish a district to state a date when the district
and any NAR allocation will end.
The district may issue debt with a final maturity date
of up to 30 years from the date of issuance of each
debt issue, subject to the time limit on tax
allocation to the district.
VI. Accountability . The current IFD law is silent on
fiscal protections, project management, or reporting
measures.
This bill requires that no later than June 30 each
year after an IRFD is created, the legislative body
must post on the legislative body's Web site an annual
report, which must contain:
A summary of the district's expenditures.
A progress report of the district's adopted
goals.
An assessment of the status of the IRFD's
public works projects.
VII. Redevelopment . An IFD cannot overlap a redevelopment
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project area.
This bill repeals that statutory prohibition. This
bill provides that any debt or obligation of a
district must be subordinate to an enforceable
obligation of a former redevelopment agency, pursuant
to state law.
VIII. Types of projects . IFDs may finance the (a) purchase,
construction, expansion, improvement, seismic retrofit
rehabilitation of any real property, (b) planning and
design work directly related to the purchase,
construction, expansion, or rehabilitation, and (c)
other authorized costs pertaining to replacement
dwelling units or action seeking to void the creation
of a district. An IFD must finance only public
capital facilities of communitywide significance, like
highways, transit, water systems, sewer projects,
flood control, child care facilities, libraries,
parks, and solid waste facilities.
This bill adds to the list of authorized improvements
that an IRFD may finance to include:
Watershed lands used for the collection and
treatment of water for urban uses.
Flood management, including levees, bypasses.
Open space, and habitat restoration.
Brownfields restoration and other environmental
mitigation.
Purchase of land and property for development
purposes and related site improvements.
Acquisition, construction, or repair of housing
for rental or purchase, including multipurpose
facilities.
Acquisition, construction, or repair of
commercial or industrial structures for private use.
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The repayment of the transfer of funds to a
military base reuse authority pursuant to state law.
This bill requires a district to finance projects of
communitywide significance. This bill also adds that
an IRFD may finance the planning and design related to
a property's seismic retrofit.
This bill makes conforming changes throughout the bill
pertaining to public facilities.
IX. Polanco Act . The Polanco Redevelopment Act encourages
cleanup and development of brownfields-properties
contaminated by hazardous waste. The Act authorized
former redevelopment agencies to conduct a cleanup and
to recover the costs of that cleanup from responsible
parties.
This bill authorizes an IRFD to utilize any powers
under the Polanco Act.
X. Sustainable Communities Strategy . The Sustainable
Communities and Climate Protect Act requires the Air
Resources Board to set regional targets for
automobiles' and light trucks' greenhouse gas emission
reduction, requires a regional transportation plan to
include a Sustainable Communities Strategy to meet
targets for greenhouse gas emission reduction,
requires the California Transportation Commission to
maintain guidelines for travel demand models, requires
cities and counties to revise their housing elements
every eight years in conjunction with the regional
transportation plan, and relaxes California
Environmental Quality Act requirements for housing
developments that are consistent with a Sustainable
Communities Strategy (SB 375, Steinberg, 2008).
This bill allows IRFDs to finance any projects to
implement a sustainable communities strategy.
XI. Military bases . This bill authorizes cities and
counties to finance a project on a former military
base, only if the project is consistent with the
authority reuse plan and is approved by the military
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base reuse authority, if applicable.
This bill removes voter approval for any debt issued
pertaining to a former military base that is publicly
owned, provided that, all land within the proposed
district or project area is owned by one or more
public entities, military base reuse authorities, or
entities control by governmental agencies.
XII. Housing . IFD law provides that if any dwelling units
are proposed to be removed or destroyed, the
legislative body must:
Within four years of the removal or
destruction, require the construction or
rehabilitation, for rental or sale to persons or
families of low or moderate income, of an equal
number of replacement dwelling units at affordable
housing cost.
Within four years of the removal or
destruction, require the construction or
rehabilitation, for rental or sale to persons of low
or moderate income, a number of dwelling units which
is at least one unit but not less than 20% of the
total dwelling units removed at affordable housing
cost.
In the case of dwelling units located on a
former military base that are destroyed or removed
in connection with a base reuse plan, replacement
dwelling units required by subdivisions mentioned
above, may be located anywhere within the territory
of the former military base consistent with the base
reuse plan, local general plan, and infrastructure
financing plan, as applicable.
Provide relocation assistance and make all the
payments required to displaced persons.
Ensure that removal or destruction of any
dwelling units occupied by persons or families of
low or moderate income not take place unless and
until there are suitable housing units, at
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comparable cost to the units.
This bill adds that an equal number of replacement
dwelling units may also be at affordable rent, as
defined in state law.
Existing law states the Legislature's intent that an
IFD's territory should be substantially undeveloped.
This bill removes this intent language and adds that
an IRFD's establishment should not ordinarily lead to
the removal of existing functional, habitable, and
safe dwelling units
XIII. Definitions . This bill defines "district" as an
infrastructure financing and revitalization district.
This bill authorizes a district to be divided into
project areas, which may be subject to distinct
limitations. The legislative body may, at any time,
add territory to a district or amend the IRFD
financial plan, pursuant to procedures for the
formation of the district and bond approval.
This bill defines "project area" as a defined area
within a district in which activities of the district
share a common purpose or goal and an overall
financing plan.
This bill defines "public works" to mean public
facilities or any other facilities described in
Section 53395.3 that are to be financed in whole or in
part by the district.
XIV. Findings and declarations . This bill makes findings
to support the bill's purpose.
Comments
According to the Senate Governance and Finance Committee,
this bill creates a more flexible development tool to
finance needed public works projects, while incorporating
rigorous accountability measures to ensure local government
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diligence, positive project results, and healthier
community development. This bill recognizes the potential
for infrastructure revitalization and financing districts
to implement SB 375's sustainable communities strategy and
the benefits of protecting and rehabilitating brownfields
from hazardous waste. Local officials use tax increment
financing to divert part of the property tax revenue stream
to a separate IRFD. If a local government decides not to
participate in the IRFD formation, its tax increment
revenue shares aren't touched. Before taxes are raised,
assessments are levied, or bonds are issued, the California
Constitution requires local officials to get voters'
approval: special taxes require 2/3-voter approval;
general taxes require majority-voter approval; benefit
assessments require a weighted ballot approval by property
owners; local general obligation bonds that require new
property tax revenues need 2/3-voter approval; local
revenue bonds that rely on new fee revenues require
majority-voter approval. However, in contrast to taxes,
assessments, or bonds, IFDs neither raise taxes nor
generate new revenue. This bill makes it easier for local
governments to use property tax increment financing while
retaining voter-approval.
Related Legislation
SB 214 (Wolk, 2011) removes the vote requirement to issue
bonds, form an IFD, and to set the appropriation limit.
The bill requires annual construction progress reports,
prohibits big-box subsidies, and promotes the use of IFDS
for Polanco Act clean-up, transit priority projects, and
disadvantaged communities.
SB 310 (Hancock, Chapter 446, Statutes of 2011) seeks to
use IFDs for transit priority projects.
AB 485 (Ma, 2011) removes the vote requirement to issue
bonds, form an IFD, and to set the appropriations limit, if
an IFD implements a transit village plan. Also, the bill
requires the transit village plan to set-aside 20% of the
IFD's property tax increment for affordable housing.
AB 664 (Ammiano, Chapter 314, Statutes of 2011) allows San
Francisco to use IFD revenues along its waterfront to
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support the America's Cup venue.
AB 910 (Torres, 2011) adds affordable housing, economic
development, and transit villages to the list of authorized
IFD projects.
AB 1827 (Bonilla, 2012) authorizes military base reuse
authority to form IFDs. The bill authorizes IFDs to
finance homeless accommodations.
AB 2551 (Hueso, 2012) authorizes local agencies to form
IFDs in renewable energy infrastructure districts, as
defined. The bill exempts local agencies from
voter-approval requirements when creating an IFD in a
renewable energy infrastructure district.
AB 2259 (Ammiano, 2012) amends provisions pertaining to San
Francisco's use of IFD revenues to support America's Cup.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/21/12)
AFSCME
California Special Districts Association
Cities of Alameda, Burbank, Concord, and West Sacramento
City and County of San Francisco
County of Imperial
Lennar Urban
OPPOSITION : (Verified 8/21/12)
California Association of Realtors
California Taxpayers Association
Fieldstead and Company
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : According to the author, "The
elimination of redevelopment agencies on February 1, 2012
has removed a major tool used by local governments to
remedy blight, provide affordable housing, and spur local
economic development. This bill establishes IRFDs to
provide an enhanced tool for local governments to address
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economic development housing, sustainable development,
environmental mitigation, and other needs in a fiscally
responsible manner that promotes local cooperation."
ARGUMENTS IN OPPOSITION : The California Association of
Realtors writes: "Generally, two-thirds of the voters must
favor creation of an infrastructure financing district in
order for such a district to be established. The voters of
California have been steadfast in their position that the
expenditure of public funds should be held to the higher
standard of a two-thirds vote. We strongly believe
creation of such districts should require a two-thirds vote
and that the vote requirement should not be diminished."
ASSEMBLY FLOOR : 50-25, 5/21/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Furutani, Galgiani, Gatto, Gordon, Hall, Hayashi, Hill,
Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma,
Mendoza, Mitchell, Monning, Pan, V. Manuel Pérez,
Portantino, Skinner, Solorio, Swanson, Torres,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Achadjian, Bill Berryhill, Conway, Donnelly, Beth
Gaines, Garrick, Gorell, Grove, Hagman, Harkey, Jeffries,
Jones, Knight, Logue, Mansoor, Miller, Morrell, Nestande,
Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Cook, Fletcher, Halderman, Roger
Hernández, Perea
AGB:m 8/21/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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