BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2259 (Ammiano) - San Francisco special waterfront
infrastructure financing districts.
Amended: August 6, 2012 Policy Vote: G&F 8-0
Urgency: No Mandate: No
Hearing Date: August 16, 2012
Consultant: Mark McKenzie
SUSPENSE FILE. AS AMENDED.
Bill Summary: AB 2259 would make numerous changes to the special
statutes governing infrastructure financing districts (IFDs)
along the waterfront in San Francisco.
Fiscal Impact: Negligible state fiscal impact.
Background: Existing law authorizes cities and counties to form
IFDs and divert property tax increment revenues from
participating local agencies to finance public capital
facilities of communitywide significance. The types of projects
financed through an IFD include: transportation facilities;
water, sewer, and flood control infrastructure; child care
facilities; libraries; parks, recreational facilities, and open
space; and solid waste transfer and disposal facilities. IFDs
retain property tax increment revenues from participating local
taxing agencies for up to 30 years to directly finance projects
or to pay debt service on bonds issued to finance projects.
School district property tax revenues may not be diverted for
IFD purposes. 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.
As a result of stringent requirements in the general IFD
statutes, the Legislature has passed several bills tailored
specifically for San Francisco. SB 1085 (Migden), Chap
213/2005, was enacted with special provisions related to
development on San Francisco's waterfront. AB 1199 (Ammiano),
Chap 664/2010, repealed and replaced those special statutes to
allow local officials to form, finance, and operate an IFD along
the San Francisco waterfront at Pier 70, on land that is under
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the jurisdiction of the Port of San Francisco. AB 1199
authorized the use of ERAF property tax increment to support the
development of an area that has not attracted private investment
for development in over 40 years.
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 (AC34). The team anticipates holding the
AC34 match in San Francisco Bay in 2013, with preliminary races
beginning worldwide in 2011 and locally in 2012.
Last year, AB 664 (Ammiano), Chap 314/2011, was enacted to
provide authority similar to that enacted by AB 1199 for Pier 70
for the creation of an IFD to finance improvements to the San
Francisco waterfront for the America's Cup. AB 664 authorized
the creation of a Port America's Cup special waterfront IFD, and
a corresponding enhanced financing plan that allows the district
to retain the ERAF share of property tax increment, limited to
$1 million per year for up to 45 years. The ERAF share in this
district may only be used to finance the following:
Construction of the Port's maritime facilities at Pier 27,
including public access and open space improvements.
Planning and design work for the Port's maritime facilities at
Pier 27.
Planning, design, and construction of improvements to publicly
owned waterfront lands used as public spectator viewing sites
for America's Cup events, including the San Francisco Bay
Trail.
Future installations of shoreside power facilities on Port
maritime facilities.
20% of the ERAF share must be set aside to finance
improvements to publicly owned lands approved by federal or
state trustee agencies, as applicable.
AB 664 also requires San Francisco officials to submit a fiscal
analysis to the California Infrastructure and Economic
Development Bank (I-Bank) to ensure that the economic activity
generated by hosting the America's Cup would result in state
General Fund revenues with a net present value greater than the
net present value of the property tax increment revenues
diverted from the ERAF over the term of the IFD. The I-Bank is
prohibited from considering General Fund revenues that would
have occurred if the America's Cup event were not held in
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California.
In the past year, America's Cup race organizers have narrowed
plans for renovating the waterfront, and have adjusted projected
economic benefits. For example, the original Beacon Economics
report on the America's Cup projected that the state would
receive $61 million in direct tax benefits from the race (in
2013 dollars), but these estimates were recently adjusted
downward 20% by the Bay Area Council Economic Institute. The
Port of San Francisco now estimates the state tax benefits would
be $39.8 million. This bill is intended to adjust the America's
Cup IFD statutes to reflect the Port's revised plans for the
race.
Proposed Law: AB 2259 would make numerous changes to the San
Francisco special waterfront IFD statutes. Among other things,
this bill would do the following:
Revise the existing annual $1 million cap on diversions
of ERAF for the America's Cup IFD to allow for an annual
increase of three percent.
Revise the definition of "Port America's Cup district"
to Seawall Lot 330, Pier 19, Pier 23, and Pier 29, rather
than areas designated as America's Cup venues.
Deem all improvements in a Port America's Cup district
to be "public capital facilities of communitywide
significance" so these improvements qualify for financing
under IFD law.
Allow improvements financed by the Port America's Cup
district to be located outside district boundaries.
Expand the uses of improvements financed by the ERAF
share to include improvements to publicly owned waterfront
lands held by departments of San Francisco.
Specify that the use of 20% set-aside funds by federal,
state, and local trustee agencies need not be described in
the district's financing plan.
Modify the definition of "public facilities" that may be
financed by any waterfront IFD to include facilities that
may be publicly or privately owned utility infrastructure
that is available to or serves the general public,
including any capital facilities fees used to pay for
public facilities.
Expands the types of projects that may be financed by
any waterfront IFD to include improvements to protect
against potential sea level rise that may be publicly
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owned.
Modify the requirements of the Pier 70 enhanced
financing plan with respect to the issuance of ERAF-secured
debt, if specified conditions are met.
Specify that the base year value of land included in or
annexed into a district will be the fiscal year in which
the assessed value of the land was last equalized prior to
the effective date of the annexation or the effective date
of the ordinance for formation of the district, or a
subsequent fiscal year identified in an ordinance forming
the district or approving the annexation.
Express a finding and declaration that the Legislature
ratifies any actions taken by San Francisco that are
consistent with this bill even if those actions were taken
prior to its effective date.
Staff Comments: This bill makes numerous technical and
substantive changes to the statutes governing San Francisco's
special waterfront districts. From a state fiscal perspective,
the primary change is the change that allows for an annual three
percent adjustment to the existing $1 million annual diversion
of ERAF property tax revenues to the America's Cup IFD. In the
second year of the district, this adjustment would result in an
increase in the ERAF diversion of $30,000, which must be
backfilled by the state General Fund. Since the three percent
inflator would apply annually, the impact is compounded and by
the end of the authorized 45 year diversion of ERAF revenues in
2058, the General Fund loss as a result of this bill would rise
to $2.7 million. The cumulative impact over 45 years would be
$47.7 million. It is unclear that any additional benefits would
accrue to the state as a result of this bill that would justify
the additional General Fund expenditure.
Committee amendments delete provisions that would allow an
annual three percent adjustment to the existing annual diversion
of $1 million in ERAF property tax revenues, and make several
technical changes.