BILL ANALYSIS                                                                                                                                                                                                    




                     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, Nuez & 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, 




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          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. See 2 to 18 of the bill.]
           





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          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. 
          ݧ1]

           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. ݧ4]  

          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. ݧ4]


                               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 (Nuez & 
          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 





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          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.






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          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.