BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2551 (Hueso) - Infrastructure financing districts: renewable
energy zones.
Amended: August 6, 2012 Policy Vote: G&F 5-3
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Mark McKenzie
This bill does not meet the criteria for referral to the
Suspense File.
Bill Summary: AB 2551 would authorize cities and counties to
establish infrastructure financing districts (IFDs) and use tax
increment revenues derived from project areas to finance
renewable energy infrastructure or renewable energy upgrades.
An IFD formed for this purpose would be exempt from voter
approval requirements for formation of the district, adoption of
an infrastructure financing plan, and issuance of bonds.
Fiscal Impact: Unknown diversion of local agency property tax
revenues for IFD purposes, subject to approval by each affected
local taxing agency. IFD law prohibits the diversion of
schools' share of the property tax, so the bill would have no
state fiscal impact related to backfilling diversions of school
revenues to meet the minimum funding guarantees of Proposition
98.
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.
AB 1551 (Hueso)
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In order to form an IFD, a city or county must develop an
infrastructure financing plan, submit a copy to every landowner
and each affected taxing entity in the proposed district, and
hold a public hearing. Each taxing agency that is expected to
contribute property tax increment revenues for IFD purposes must
affirmatively approve the plan. Once the resolution to
establish the IFD is approved by each affected agency and the
city or county governing body, the formation of the IFD must be
approved by 2/3 of the voters in the district. In addition, the
issuance of IFD bonds must be approved by 2/3 of the affected
voters, and setting or changing the appropriations limit for the
IFD requires approval of a majority of the district's voters.
Proposed Law: AB 2551 would authorize a city or county to form
an IFD in a renewable energy infrastructure area that contains
proposed developments that would generate over 50 megawatts of
electricity from eligible renewable resources for commercial
energy production, as specified in an executed power purchase
agreement. Any tax increment generated within the IFD may only
be used within the district's boundaries on renewable energy
infrastructure or renewable energy upgrades, and may not be used
to offset any mitigation responsibilities imposed on the
development project. This bill would also delete the election
requirement for the formation of an IFD, adoption of a financing
plan, and issuance of bonds for IFDs established in a renewable
energy infrastructure area.
Related Legislation: Numerous bills have been introduced to
amend the IFD Law. The following list includes legislation that
is currently scheduled for hearing:
SB 214 (Wolk), which is scheduled for hearing in the Assembly
Appropriations Committee, would delete voter-approval
requirements to form an IFD, issue bonds, or set the
appropriations limit, and make numerous other changes to the
IFD Law.
AB 2144 (Perez), which is scheduled for hearing in this
Committee, would delete voter-approval requirements to form an
IFD and issued debt if the IFD is on a former military base,
and revise the voter-approval threshold for all other IFDs
from 2/3 to 55 percent to form an IFD and issue debt. This
bill would also expand the types of projects that an IFD may
fund and make other changes to the IFD Law.
AB 2259 (Ammiano), which is scheduled for hearing in this
Committee, would revise provisions of IFD law that apply to
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special waterfront districts in San Francisco to fund
improvements related to the 34th America's Cup sailing
regatta.
Staff Comments: This bill is intended to facilitate the
development of renewable energy infrastructure and upgrades. By
removing voter-approval requirements and making it easier to
form an IFD and issue debt, the author and sponsors hope to
create an incentive for local agencies to finance these
facilities with property tax increment revenues.
It is unclear how effective the formation of an IFD and use of
property tax increment revenues would be for the financing of
renewable energy infrastructure or upgrades. IFD Law limits the
use of tax increment revenues for financing public capital
facilities. Energy infrastructure is generally owned and
operated by investor-owned utility companies and local publicly
owned utility companies. The costs of siting, building, and
operating energy infrastructure are generally governed by a
power purchase agreement between a project developer and the
utility purchasing the electricity, and the costs are ultimately
recovered from the rates paid by customers. It would be
inappropriate to use public monies to subsidize or offset costs
that are normally the responsibility of private developers,
utility companies, and ratepayers. In addition, if a local
entity decides to participate in this type of IFD and contribute
property tax increment revenues for up to 30 years, there would
be fewer general revenue resources available to pay for other
critical services.
According to the sponsors, renewable energy projects often need
additional roads, water and sewer lines, transmission upgrades,
and other infrastructure associated with the development of
renewable energy resources. The sponsors envision the creation
of an IFD to provide a source of public revenue to provide this
necessary infrastructure, and in exchange, the renewable energy
developer would fund other community enhancements, such as parks
or other needs identified by the local jurisdiction. This
mechanism would also appear to be an inappropriate use of public
funds, as it would serve to offset costs that would otherwise be
the responsibility of the developer in exchange for other
unrelated public benefits.
AB 2551 could result in a diversion of local property tax
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Page 3
revenues for specified renewable energy infrastructure purposes.
Actual local fiscal impacts would depend upon a number of
factors, including the number of IFDs formed, the boundaries of
each district, the participation of other local taxing agencies,
the amount of increment dedicated by each participating local
agency, the duration of the district, and the property tax
growth rates within the district. There is no direct or
indirect state fiscal impact because IFDs are explicitly
prohibited from capturing the schools' share of property taxes.
Proposed Author Amendments: The author has proposed the
following amendment to exclude rooftop solar projects from
renewable energy infrastructure areas:
Page 2, line 14, after the period, insert:
Renewable energy infrastructure areas may not include
property proposed to include rooftop solar energy systems
unless the property owner provides written consent to be
contained in the renewable energy infrastructure area.