BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 214 (Wolk)
          As Amended  June 21, 2011
          Majority vote 

           SENATE VOTE  :24-13  
           
           LOCAL GOVERNMENT    5-3                                         
           
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          |Ayes:|Alejo, Bradford, Campos,  |     |                          |
          |     |Gordon, Hueso             |     |                          |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Smyth, Knight, Norby      |     |                          |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           SUMMARY  :  Eliminates the requirement of voter approval to create 
          an infrastructure financing district (IFD) and revises the 
          provisions governing the public facilities that may be financed 
          by an IFD.  Specifically,  this bill  :   

          1)Requires an IFD to only finance structural or nonstructural 
            public capital facilities. 

          2)Adds the following to the types of facilities an IFD can 
            finance:

             a)   Facilities and watershed lands used for the collection 
               and treatment of water for urban uses;

             b)   Flood management, including levees, bypasses; and,

             c)   Habitat restoration.

          3)Authorizes an IFD to finance the cleanup and development of 
            brownfields-properties contaminated by hazardous waste under 
            the provisions of the Polanco Redevelopment Act.  

          4)Removes the prohibition against an IFD including any portion 
            of a redevelopment project area.








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          5)Authorizes an IFD to finance any projects that implement a 
            sustainable communities strategy (SCS) as required under SB 
            375 (Steinberg), Chapter 728, Statutes of 2008. 

          6)Removes intent language that an IFD has to cover areas that 
            are substantially undeveloped.

          7)Changes the time period that any action or proceeding to 
            attack, review, set aside, void, or annul the creation of an 
            IFD or the adoption of an infrastructure financing plan from 
            30 days after the enactment of the ordinance creating the IFD 
            to 30 days after the date the legislative body adopted the 
            resolution adopting the infrastructure financing plan. 

          8)Changes the time period that any action or proceeding to 
            attack, review, set aside, void, or annul the issuance of 
            bonds by the IFD from 30 days after the resolution that the 
            voters approved the issuance of bonds to 30 days from the date 
            the legislative body adopted the resolution providing for the 
            issuance of bonds. 

          9)Prohibits an IFD from providing any form of financial 
            assistance to a vehicle dealer or big box retailer, or a 
            business entity that sells or leases land to a vehicle dealer 
            or big box retailer that is relocating from the territorial 
            jurisdiction of one local agency to the territorial 
            jurisdiction of another local agency but within the same 
            market area.

          10)Requires the resolution of intention for the creation of an 
            IFD to state the need for the IFD and the goals the IFD 
            proposes to achieve by financing public facilities.

          11)Requires the legislative body to direct the clerk to mail a 
            copy of the resolution of intention to create an IFD to each 
            affected taxing entity. 

          12)Removes the requirement that the public facilities of the IFD 
            are of communitywide significance. 

          13)Expands the life of an IFD from 30 to 40 years.








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          14)Provides that in the case of an affected taxing entity that 
            is a special district that provides fire protection service 
            and where the county board of supervisors is the governing 
            authority or has appointed itself as the governing board of 
            the district, the plan shall be adopted by a separate 
            resolution approved by the district's governing authority or 
            governing board

          15)Removes the election requirement to form an IFD, adopt an 
            infrastructure financing plan, or issue bonds.

          16)Requires an annual report to be sent to each land owner and 
            affected taxing entity in the IFD that contains all of the 
            following:

             a)   A summary of the IFD's expenditures;

             b)   A description of the progress made towards the IFD's 
               adopted goals; and,

             c)   An assessment of the status regarding completion of the 
               IFD's public works projects. 

          17)Prohibits the IFD, if it fails to provide the annual report, 
            from spending any funds to construct public works projects 
            until the annual report is submitted. 

          18)States that if the IFD fails to produce evidence of progress 
            made towards achieving its adopted goals for five consecutive 
            years, the IFD shall not spend any funds to construct any new 
            public works projects, except to complete any public works 
            projects that it had started. 

          19)Requires, if the IFD fails, that any excess property tax 
            increment revenues that had been allocated for new public 
            works projects be reallocated to the affected taxing entities.

          20)Makes other technical and clarifying changes. 
           










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           EXISTING LAW  :

          1)Authorizes cities and counties to create 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.

          2)Allows an IFD to divert property tax increment revenues from 
            other local governments, excluding school districts, for up to 
            30 years, in order to pay back bonds issued by the IFD.

          3)Requires that in order to form an IFD a city or county must 
            develop an infrastructure plan, send copies to every 
            landowner, consult with other local governments, and hold a 
            public hearing.

          4)Requires that when forming an IFD, local officials must find 
            that its public facilities are of communitywide significance 
            and provide significant benefits to an area larger than the 
            IFD.

          5)Requires that every local agency who will contribute its 
            property tax increment revenue to the IFD approve the plan.

          6)Requires a two-thirds voter approval of the formation of the 
            IFD and the issuance of bonds.

          7)Requires majority voter approval for setting the IFD's 
            appropriations limits.

          8)Specifies that public agencies that own land in a proposed IFD 
            may not vote on issues regarding the district.

          9)Authorizes IFDs to issue a variety of debt instruments, 
            including bonds, certificates of participation, leases, and 
            loans.

          10)Requires any IFD that constructs dwelling units to set aside 
            not less than 20% of those units to increase and improve the 
            community's supply of low- and moderate-income housing 
            available at an affordable housing cost to persons and 








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            families of low- and moderate-income.

          11)Prohibits a local agency from providing any form of financial 
            assistance to a vehicle dealer or big box retailer, or a 
            business entity that sells or leases land to a vehicle dealer 
            or big box retailer, that is relocating from the territorial 
            jurisdiction of one local agency to the territorial 
            jurisdiction of another local agency but within the same 
            market area.

          12)Requires the regional transportation plan for specified 
            regions to include an SCS, as specified, designed to achieve 
            certain goals for the reduction of greenhouse gas emissions 
            from automobiles and light trucks in a region.

           FISCAL EFFECT  :  None

           COMMENTS  :  According to the author "SB 214 makes it easier for 
          local agencies to use IFDs to pay for public projects, without 
          impacting school district's share of property tax or the state's 
          general fund.  In a fiscally distressed economic climate, local 
          officials need a flexible financing tool that is rigorous and 
          responsible. Currently, existing law perversely incentivizes 
          locals to pursue less accountable financing mechanisms."

          Cities and counties can create 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 are prohibited from 
          diverting property tax increment revenues from schools. 

          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 
          adjacent to the Legoland theme park.  That small project is the 
          only example of local officials' use of the 1990 IFD law.  The 
          broader use of IFDs may attract more attention and the appellate 








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          courts may be asked to determine whether it is constitutional to 
          divert property tax increment to IFDs.

          Public officials continue to search for ways to raise the 
          capital they need to invest in public works projects, like 
          public transit facilities, infill development, or clean water.  
          One concept recognizes that expanded public structures 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.  When 
          redevelopment officials use property tax increment financing to 
          eradicate blight, state law does not require voter approval.  
          When local officials use IFDs to capture property tax increment 
          revenues, state law requires a two-thirds approval.  

          Recognizing these barriers, this bill removes key impediments to 
          IFDs, such as the voting requirements to form and bond the IFD.  
          In addition, the bill extends the term of the IFD bonds from 30 
          to 40 years, allowing for a longer debt repayment period 
          lowering monthly payments. Also, to increase transparency, this 
          bill includes measures of programmatic and fiscal 
          accountability, requiring IFDs to annually report its progress 
          and expenditures to its affected taxing entities and landowners. 


          Since the creation of IFD law there have been multiple bills 
          that have tailored IFD law to specific local circumstances.  In 
          1999 the Legislature created a parallel law for IFDs to 
          stimulate development and international trade in the "border 
          development zone," about 400 square miles next to the Mexico 
          border ÝSB 207 (Peace), Chapter 773, Statutes of 1999].  
          However, San Diego officials have yet to use this authority.  In 
          2005, the Legislature passed SB 1085 (Migden), Chapter 213, 
          Statutes of 2005, which provided for changes and additions to 
          the IFD law to enable the City and County of San Francisco to 
          finance needed public infrastructure improvements to specified 
          waterfront properties.  This authority was expanded even further 
          for San Francisco last year in AB 1199 (Ammiano), Chapter 664, 
          Statutes of 2010.   

          This bill contains provisions that allow an IFD to be formed in 
          an area that is or was previously in a redevelopment project 








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          area.  Current law expressly prohibits this.  The Legislature 
          may wish to consider if the Legislature chooses not to end 
          redevelopment agencies out right then should we really be 
          allowing the overlap of an IFD and a redevelopment agency since 
          they both are funded through tax increment? 

          This bill allows an IFD to finance the costs of projects that 
          implement and SCS; however, 
          SB 375 (Steinberg) also authorized regional planning agencies to 
          create an alternative planning strategy (APS) in lieu of an SCS. 
           The Legislature may wish to ask the author to amend the bill to 
          allow for projects in an APS to also be financed by an IFD. 

          Support arguments:  Supporters argue that this bill creates a 
          more flexible development tool to finance needed public works 
          projects.  Given the "opt-in" nature of IFDs tax increment 
          financing, more local governments will have a voice in if their 
          growth in property tax is allocated, a luxury currently not 
          provided to them under redevelopment law.  

          Opposition arguments:  Opposition could say that by removing the 
          voter approval requirements for the creation of an IFD and the 
          issuance of tax allocation bonds will remove any input or direct 
          voter oversight.  Moreover, with the removal of the voting 
          requirement the measure is creating more of a redevelopment type 
          agency without the requirement of making a finding of blight.  

          This measure, AB 485 (Ma), AB 910 (Torres), and SB 310 (Hancock) 
          all contain similar provisions in IFD law and will need to 
          contain double-jointing language in order to not have chaptering 
          out issues if the measures move forward. 


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


                                                                FN: 0001448












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