BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 310 HEARING: 4/27/11 AUTHOR: Hancock FISCAL: Yes VERSION: 4/25/11 TAX LEVY: No CONSULTANT: Detwiler TRANSIT PRIORITY PROJECTS Allows cities and counties to create incentives for transit priority projects. Background and Existing Law California has a goal of reducing greenhouse gas emissions (AB 32, Nuñez & Pavley, 2006). Reducing vehicle emissions involves multiple strategies, including clean technology as well as reducing the amount of vehicle miles traveled. Among the ways to reduce vehicle miles is better coordination of transportation and land use plans and increasing the density in existing areas and new development projects. To those ends, the Legislature linked transportation planning and land use planning by state, regional, and local agencies. Metropolitan planning organizations and their constituent counties and cities are preparing sustainable communities strategies. Among the incentives to implement those policies is the opportunity for developers to gain accelerated approval for projects that promote those goals (SB 375, Steinberg, 2008). Proposed Law I. Transit priority projects . A "transit priority project" must contain at least 50% residential use, have a residential density of at least 20 dwelling units an acre, and be within a half-mile of a major transit stop. If the transit priority project meets additional environmental criteria, it qualifies as a "sustainable communities project," and is statutorily exempt from the California Environmental Quality Act (CEQA) (SB 375, Steinberg, 2008). Some builders, community leaders, and legislators want to create additional incentives to develop projects that help to reduce greenhouse gas emissions, reduce vehicle travel, SB 310 -- 4/25/11 -- Page 2 promote transit, and result in more balanced development. Senate Bill 310 creates the Transit Priority Project Program and allows a city or county to participate by adopting an ordinance. A city or county cannot participate if it: Prohibits paying prevailing wages for public works. Prohibits contractors and others from prehire, collective bargaining, or similar agreements with labor organizations regarding employment terms and conditions on construction projects. A participating city or county must amend its general plan and community plan to allow participating developers to build a minimum of three stories. A development project must: Be in a designated transit priority project and within a half-mile of a transit station. Be within a zone that allows three-story buildings. Meet State Air Resources Board land use guidelines regarding distance from major emitters. Comply with the Gold standard of the United State Green Building Council Leadership in Energy and Environmental Design or Standard 189.1 of the American Society of Heating, Refrigerating and Air Conditioning Engineers. Provide onsite bicycle parking. Provide car sharing, if available. The developer must either provide car sharing onsite or pay a fee to provide the car sharing offsite. The developer must provide one car share for the first 20 units and one car share for every subsequent 50 units. Provide "unbundled parking," that is, renting parking spaces separately from residential rents. Alternatively, the developer can pay a fee to cover half the cost of a parking space. Provide transit passes for 10 years as part of the rent or condo fees. Provide recycling for bottles, cans, papers, and plastic container. Provide onsite open space, including roof gardens. Alternatively, the developer can pay a maximum fee of 10¢ per square foot. Provide 20% affordable units for low- or moderate-income persons and families. Alternatively, SB 310 -- 4/25/11 -- Page 3 the developer can pay an equivalent amount as a fee to provide the affordable units somewhere else within the city or county. Rental housing units must remain affordable for at least 55 years and owner-occupied units for 45 years, guaranteed by the developer's covenants or restrictions. Pay prevailing wages to construction workers in residential projects with more than 100 units. Meet the affordable housing standards set by an existing law that requires public officials to act more quickly on applications for qualifying projects. The project must also comply with any local design guidelines adopted before the submission of the project application. If the project is within an Infrastructure Finance District (IFD), the IFD may pay for the developer's: Permit processing fees. Costs of constructing affordable housing units. II. Infrastructure Financing Districts . Cities and counties can create Infrastructure Financing Districts (IFDs) and issue bonds to pay for community scale public works. To repay the bonds, IFDs divert property tax increment revenues from other local governments. However, IFDs can't divert property tax increment revenues from schools (SB 308, Seymour, 1990). Voter approval . 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 the voters' 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. Senate Bill 310 repeals the voter approval requirements to form an IFD, issue IFD bonds, and set the IFD's appropriations limit. ÝSee §2 to §18 of the bill.] SB 310 -- 4/25/11 -- Page 4 IFD spending . An IFD can fund public capital facilities of community-wide significance which benefit an area that's larger than the district, including highways, transit, sewer projects, water systems, flood control, child care facilities, libraries, parks, and solid waste facilities. Senate Bill 310 allows an IFD to reimburse the permit expenses and affordable housing costs of a developer of a project located within the IFD and qualifies for streamlined permit procedures under an existing statute. Ý§1] IFD plan . When local officials want to establish an IFD, they must propose an infrastructure financing plan, including a detailed financing section. If local officials want to reimburse the permit expenses and affordable housing costs of a qualified developer, Senate Bill 310 requires the proposed infrastructure financing plan's financing section to include that information. Ý§4] Bond terms . The term of IFDs' bonds can't be more than 30 years. Senate Bill 310 extends the maximum term of IFDs' bonds from 30 years to 40 years. Ý§4] State Revenue Impact No estimate. Comments 1. Purpose of the bill . Building better communities in the new century requires intense collaboration among willing developers, local leaders, and supportive neighbors. The statewide goals launched by AB 32 (Nuñez & Pavley, 2006) need to be translated into well-designed and economically feasible development projects in downtowns, older suburbs, and new development. SB 375 (Steinberg, 2008) pointed the way to this future by linking transportation and land use planning programs. SB 375 contained incentives for developers who want to build projects that fit state, regional, and local growth policies. As communities explore other opportunities to promote better development decisions, legislators can help by pointing the way. SB 310 encourages builders with SB 310 -- 4/25/11 -- Page 5 projects that meet these goals by allowing local officials to use funds from infrastructure financing districts to pay for the developer's processing fees and the costs of affordable housing. These economic incentives show that communities are willing to support developers who want to build smart. 2. Sometimes a great notion . To qualify for the economic subsidies offered by SB 310, a builder must propose a project that meets more than a dozen conditions, from car sharing to prevailing wages. Some of these requirements may be difficult for builders and local officials to adapt to specific projects. Some of the bill's detailed language looks more like a deal sheet than a statewide policy program. Local officials already bargain with developers. Cities regularly ask builders for concessions in return for lowering fees or expediting decisions. The Committee may wish to consider whether the incentives in SB 310 are enough to convince builders to use the bill. 3. Voter review . The California Constitution requires 2/3-voter approval before cities or counties can issue long-term debt backed by local general purpose revenues; school districts need 55%-voter approval. That's why local general obligation bonds need 2/3-voter approval. The courts have explained that cities need 2/3-voter approval before they dedicate portions of their general funds to pay for bonds. That's why local limited obligation bonds need 2/3-voter approval. However, because that constitutional limit doesn't mention redevelopment agencies, local officials don't need voter approval before they issue tax allocation bonds. Redevelopment agencies are not diverting local general funds, they pay for their bonds with property tax increment revenues. When Governor Deukmejian signed the 1990 Seymour bill that created IFDs, there was a political agreement that local officials should get 2/3-voter approval before they could issue IFD bonds. That requirement is statutory and not based on a constitutional limitation. There is no constitutional requirement for IFDs to seek 2/3-voter approval (or any voter-approval) before they issue bonds backed by property tax increment revenues. SB 310 repeals the statutory requirement for 2/3-voter approval of IFDs' bonds. The Committee may wish to consider what voter approval (if any) local officials should seek before issuing IFD bonds. SB 310 -- 4/25/11 -- Page 6 4. Back to Rules . Other Senate policy committees may want to review SB 310. If the Senate Governance & Finance Committee approves the bill on April 27, the Senate Rules Committee has directed this Committee to send the bill back to Rules for further review and possible re-referral. Support and Opposition (4/21/11) Support : American Federation of State, County and Municipal Employees; State Building and Construction Trades Council of California. Opposition : American Forest & Paper Association; American Wood Council; California Forestry Association; California Taxpayers Association.