BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 2551 HEARING: 7/3/12
AUTHOR: Hueso FISCAL: Yes
VERSION: 6/21/12 TAX LEVY: No
CONSULTANT: Lui
INFRASTRUCTURE FINANCING DISTRICTS
Authorizes local agencies to form IFDs in renewable energy
infrastructure areas, without voter approval.
Background and Existing Law
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 local
governments that consent to forgo those revenues for up to
30 years. IFDs can't divert property tax increment
revenues from schools (SB 308, Seymour, 1990).
Forming an IFD is cumbersome. The city or county must
develop an infrastructure plan, send copies to every
landowner, consult with other local governments, and hold a
public hearing. Every local agency that will contribute
its property tax increment revenue to the IFD must approve
the plan. Once the other local officials approve, the city
or county must still 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.
The deadline for filing lawsuits to challenge an IFD's
creation, financing plan, allocation of property tax
increment revenues, and tax allocation bonds is 30 days
after the local officials get voter approval.
Unlike former redevelopment projects, the property in an
IFD doesn't have to be blighted, but an IFD can't overlap a
former redevelopment project area. The Legislature has
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declared, but not required, that IFDs should include
substantially undeveloped areas.
Public officials continue to search for ways to raise the
capital they need to invest in public works projects.
Expanded public infrastructure can boost the value of
nearby property. Higher property values produce higher
property tax revenues. Property tax increment financing
captures those property tax increment revenues.
Proposition 13 (1978) capped ad valorem taxes on real
property at one percent. Assessors reappraise property
whenever it is purchased, newly constructed, or when
ownership changes. Since 1980, assessors don't include the
value of a solar energy system in a property assessment; a
solar energy system installation also doesn't trigger a
reassessment. AB 1451 (Leno, 2008) extended the date on
which the property tax exclusion for active solar energy
systems will expire in 2016.
Last year, the Legislature approved SBX1 2 (Simitian,
2011), which requires that at least 33% of retail energy
sales by investor owned utilities, local publicly owned
utilities, and energy service providers must come from
renewable energy resources by December 31, 2020. Renewable
energy sources include solar, geothermal, biomass,
hydroelectric, and wind.
Most of California's renewable energy potential rests in
the East Bay, southeastern counties, rural areas, and
tribal lands. The author would like to encourage local
governments to overcome local resistance and approve
renewable energy projects.
Proposed Law
Assembly Bill 2551 authorizes a city or county to create an
infrastructure financing district in a renewable energy
infrastructure area without voter approval. This statute
applies only to a city or county that created and approved
a renewable energy infrastructure area in its jurisdiction.
The bill defines "renewable energy infrastructure area" as
an area that contains a proposed development project or
AB 2551 -- 6/21/12 -- Page 3
projects that would generate in total more than 10
megawatts of electricity using an eligible renewable energy
resource, as defined in state law, that is intended to be
used for commercial renewable energy production
AB 2551 defines "commercial renewable energy production" as
a project that has an executed power purchase agreement for
the sale of the electricity from an eligible renewable
energy resource to a California retail seller, as defined
in state law, or a local publicly owned electric utility.
The bill requires that property tax increment collected
from a renewable energy infrastructure area must only be
used within the boundaries of the district.
AB 2551 authorizes the city's legislative body to aggregate
the total megawatts of several areas that are not
contiguous in determining whether an area is a renewable
energy zone.
The bill authorizes a city's legislative body to use this
statute to form an IFD in renewable energy infrastructure
area to promote renewable energy projects.
The bill exempts a city's legislative body from the
voter-approval requirements for the creation of an IFD in a
renewable energy infrastructure area. The bill provides
that the legislative body must comply with all other
requirements of IFD law relating to its financing.
The bill declares that this statute is not intended to
interfere with, or prevent the exercise of, an agency or
department's existing authority to carry out its program,
projects, or responsibilities to identify, review, approve,
deny, or implement any mitigation requirements. The bill
further provides that this statute must not be construed as
a limitation on mitigation requirements for the project, or
a limitation on compliance with California Environmental
Quality Act requirements.
State Revenue Impact
No estimate.
AB 2551 -- 6/21/12 -- Page 4
Comments
1. Purpose of the bill . Some local governments resist
approving renewable energy projects, citing residents'
environmental, safety, and aesthetic concerns. In 2006,
the Legislature allocated a greater share of unitary
property tax revenues to the city or county in which a
qualified electrical facility is located (SB 1317,
Torlakson, 2006). Similarly, AB 2251 acknowledges that
local opposition may impede renewable energy infrastructure
development, so it offers an incentive for local
governments to overcome opposition by compensating areas
with energy facilities in their communities. AB 2551
anticipates that a renewable energy project will increase
property tax revenues, so the bill authorizes cities and
counties to create a financing mechanism around a specified
renewable energy project area to collect increased
increment. Because the bill requires that all increment
from the district stays in the district's boundaries, local
residents can associate community benefits with the
renewable energy development. By retaining the
voter-approval for bond issuance and the appropriation
limit, AB 2551 ensures that local communities have the
final say over where their money goes.
2. A different mechanism . IFDs were created to finance
public works, but AB 2551 does not construct any public
works at the outset. Instead, the IFD takes community's
increased tax increment, which will then be used at a later
time for an unspecified purpose. If the bill's goal is to
assist the state in its RPS goals and promote renewable
energy development, the Committee may wish to consider
amending the bill to require that the increment from IFDs
created in renewable energy infrastructure areas must only
be spent on renewable energy infrastructure or upgrades.
3. 10 vs. 50 . According to the California Energy
Commission, 49 California power plant projects are
currently on-line or operational. Those 49 projects'
capacity ranges from 17 megawatts (mw) for Lake County's
Bottle Rock Geothermal to Monterey County's Moss Landing at
1,060 mw. To ensure that the creation of a renewable
energy infrastructure area IFD is linked to commercial
renewable energy production, the Committee may wish to
consider amending the bill to increase the minimum megawatt
capacity from 10 to 50.
AB 2551 -- 6/21/12 -- Page 5
4. State vs. local control. Under SB 1078 (Sher, 200), SB
107 (Simitian, 2006), and SBX1 2 (Simitian, 2011),
California created one of the most ambitious renewable
energy standards in the country. Developers have many
different reasons to locate a specific project in a
particular area, like access to transmission lines and
proximity to water. While developers can determine which
renewable projects to pursue and where, both the state,
under the California Energy Commission, and local
governments have final siting authority. Local governments
are authorized to regulate solar photovoltaic and wind
generation projects. As part of the CEQA review, a city or
county may impose specific conditions of project approval
and mitigation requirements for a developer. In light of
existing tools that are already available to local
governments to mitigate effects of large-scale power
generation projects, AB 2551 may add little value to local
governments' existing authority.
5. Implementation issues . AB 2551 leaves unanswered
questions.
AB 2551 authorizes an IFD to be created if a city
or county approves and creates a renewable energy
development. However, what happens if the development
isn't completed? Will a local government be authorized
to continue bonding against an IFD's increment, absent
a renewable energy project?
AB 2551 requires 2/3-voter approval to issue bonds
and a majority vote to set the bond appropriation
limit. If an IFD is authorized to issue bonds under a
vote that is contingent on the existence of a
renewable energy project, will the IFD be authorized
to issue bonds?
6. Additions to the rule . Legislators have passed special
bills to adapt the IFD statute to their local
circumstances:
SB 207 (Peace, 1999): border development zone IFD.
SB 223 (Kelley, 1999: Salton Sea Authority IFD.
SB 1085 (Migden, 2005): San Francisco waterfront
IFD.
AB 2882 (De La Torre, 2006): Orangeline transit
corridor.
AB 2551 seeks to create a new IFD zone, promoting a land
use policy that ensures that IFDs are used to benefit a
AB 2551 -- 6/21/12 -- Page 6
community at large.
7. Related legislation . AB 2551 is not the only bill this
year seeking to update the IFD financing mechanism. The
Committee may wish to consider how each bill impacts the
same law differently.
AB 485 (Ma, 2011) removes the vote requirement to
issue bonds, form an IFD, and to set the
appropriations limit, if an infrastructure financing
district implements a transit village plans. The bill
also requires the transit village plan to set-aside
20% of the IFD's property tax increment for affordable
housing.
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 2114 (Pérez, 2012) renames IFD law to the
Infrastructure and Revitalization Financing District.
It removes the vote requirement to issue bonds, form
an IFD, and to set the appropriation limit. AB 2114
requires annual construction progress reports,
prohibits big-box subsidies, and authorizes IFD use
for military bases, sustainable community strategies,
and powers under the Polanco Act.
AB 2259 (Ammiano, 2012) amends provisions
pertaining to San Francisco's use of IFD revenues to
support America's Cup.
SB 214 (Wolk, 2011) removes the vote requirement to
issue bonds, form an IFD, and set the appropriation
limit. SB 214 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.
Assembly Actions
Assembly Local Government: 6-3
Assembly Appropriations: 12-5
Assembly Floor: 46-26
Support and Opposition (6/28/12)
AB 2551 -- 6/21/12 -- Page 7
Support : East County Renewables Coalition.
Opposition : California Association of Realtors; California
Taxpayers Association.