BILL ANALYSIS Ó
AB 229
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Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 229 (John A. Pérez) - As Amended: April 8, 2013
SUBJECT : Local government: infrastructure and revitalization
financing districts.
SUMMARY : Creates infrastructure and revitalization financing
districts (modeled after infrastructure financing districts in
existing law), authorizes a military base reuse authority to
form a district, and allows these districts to finance a broader
range of projects and facilities to clean-up and develop former
military bases. Specifically, this bill :
1)Creates infrastructure and revitalization financing districts
(IRFDs), separate and apart from existing law that establishes
infrastructure financing districts (IFDs).
2)Defines, for purposes of creating an IRFD a "city" to mean a
"city, county, city and county, or joint powers authority,
where that entity is acting as the military base reuse
authority."
3)Builds upon existing IFD law to grant new powers and authority
for IRFDs, as follows:
a) Allows IRFDs to be created and exist for 40 years (IFDs
are 30 years);
b) Allows an IRFD to utilize any powers under the Polanco
Redevelopment Act (Act), and finance any action necessary
to implement that Act;
c) Allows an IRFD to finance any project that implements a
sustainable communities strategy, as specified:
d) Expands the types of facilities that an IRFD can
finance, including capital facilities or projects of
communitywide significance including:
i) Watershed lands;
ii) Flood management and bypasses;
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iii) Habitat restoration;
iv) Brownfields restoration and other environment
mitigation;
v) Purchase of land and property for development
purposes and related site improvements;
vi) Acquisition, construction or repair of housing for
rental or purchase, including multipurpose facilities;
vii) Acquisition, construction, or repair of commercial
or industrial structures for private use; and,
viii) The repayment of the transfer of funds to a military
base reuse authority pursuant to provisions in the
Military Base Reuse Authority Act.
e) Allows a city to form an IRFD to finance a project or
projects on a former military base, as specified, only if
the project is consistent with the authority reuse plan and
is approved by the military base reuse authority, if
applicable; and,
f) Allows an IRFD to finance any project or portion of a
project that is located in, or overlaps with, any
redevelopment project area or former redevelopment project
area or former military base.
4)Allows an IRFD to be divided into project areas, each of which
may be subject to distinct limitations, and allows the
legislative body to, at any time, add territory to an IRFD or
amend the infrastructure financing plan for the IRFD by
conducting the same procedures for the formation of a district
or approval of bonds, as specified.
5)Allows bond issuances of an IRFD to be sold at a negotiated
sale and prohibits any negotiated sale of bonds to bond
issuances that do not exceed $5 million.
6)States that any debt or obligation of an IRFD shall be
subordinate to an enforceable obligation of a former
redevelopment agency, as specified.
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7)Allows, in the case of dwelling units located on a former
military base that are destroyed or removed in connection with
a base reuse plan, replacement units to be located anywhere
within the territory of the former military base consistent
with the base reuse plan, local general plan, and
infrastructure financing plan, as applicable.
8)States, in the case of an affected taxing entity that is a
special district that provides fire protection services and
where the county board of supervisors is the governing
authority or has appointed itself as the governing board of
the district, that the IRFD plan shall be adopted by a
separate resolution approved by the district's governing
authority or governing board.
9)Requires the legislative body, no later than June 30 of each
year after the adoption of an infrastructure financing plan,
to post an annual report in an easily identifiable and
accessible location on the legislative body's Internet
Website, and requires the annual report to contain a summary
of the IRFD's expenditures, a description of the progress made
toward the district's adopted goals, and an assessment of the
status regarding completion of the IRFDs projects.
10)Provides for the following definitions:
a) "City" means a city, county, city and county, or joint
powers authority, where the entity is acting as the
military base reuse authority, as specified;
b) "Legislative body" means the city council, board of
supervisors, or joint powers authority that is acting as
the military base reuse authority, as specified;
c) "Project area" means a defined area within a district in
which the activities of the district share a common purpose
of goal and an overall financing plan; and,
d) "Net available revenue" means period distributions to
the city from the Redevelopment Property Tax Trust Fund,
that are available to the city after all preexisting legal
commitments and statutory obligations funded from that
revenue, as specified.
11)States the intent of the Legislature to establish a long-term
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permanent program that provides local governments with tools
and resources for specified purposes, including, but not
limited to, public infrastructure, affordable housing,
economic development and job creation, and environmental
protection and remediation, in a manner that encourages local
cooperation and includes appropriate protections for state and
local taxpayers.
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.
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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
families of low- and moderate-income.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill creates Infrastructure and Revitalization Financing
Districts (IRFDs), modeled after existing law which allows
cities and counties to create Infrastructure Financing
Districts (IFDs). According to the author, one of the broader
purposes of IRFDs is to authorize a military base reuse
authority to form an IRFD in order to assist local agencies in
addressing issues related to the adverse economic impacts of
military base closure and realignment. As such, this bill
broadens the type of projects that IRFDs may finance (versus
existing IFDs) to include capital facilities and projects of
communitywide significance for watershed lands, flood
management and bypasses, habitat restoration, and brownfields
restoration and other environmental mitigation. The life of
an IRFD would be 40 years, as opposed to the 30-year life of
IFDs under existing law. The establishment of an IRFD would
maintain the same voter approval requirements as existing law
for IFDS (two-thirds vote of the local voters to form the
district and authorize the issuance of bonds).
The bill also allows IRFDs to purchase land and property for
development purposes, acquisition, construction or repair of
housing, the clean-up of brownfields using the powers of the
Polanco Redevelopment Act, and explicitly allows a city to
form an IRFD to finance projects on a former military base, as
long as the project is consistent with the authority's reuse
plan. Additionally, this bill allows an IRFD to finance any
project that overlaps with any redevelopment project area or
former redevelopment project area (current IFD law prohibits
this overlap).
AB 229 is author-sponsored.
2)According to the author, "Military base closure and
realignment creates significant adverse economic hardships on
many California communities. The Legislature has adopted a
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number of statutes to assist local agencies in addressing
issues related to the adverse economic impacts of military
base closure and realignment.
"Closure of military bases can pose significant economic,
environmental, and land-use problems such as toxic waste
clean-up, loss of business, and reduction in tax revenues.
Base closure can also present opportunities for business
relocation, economic development, and land reuse that cannot
be addressed by either the state's governmental taxing
agencies or private investment alone. Unlike cities and
counties, military base reuse authorities do not have the
financing tools necessary to respond to the infrastructure and
economic development requirements of a post-redevelopment
world."
3)Currently, cities and counties can create IFDs and issue bonds
to pay for community scale public works, including 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 a period of 30
years. IFDs, however, 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
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.
Public officials continue to search for ways to raise the
capital they need to invest in public work 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 used property tax increment
financing to eradicate blight, state law did not require voter
approval. When local officials use IFDs to capture tax
increment revenues, state law requires a two-thirds approval.
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When appropriately used, redevelopment provided a financing
mechanism for a variety of community development activities,
including infill development, infrastructure development,
economic development, military base reuse, and brownfield
cleanup. Tax increment provided a source of funding for
affordable housing production and rehabilitation.
Redevelopment, as a tool, influenced land use decisions in
economically disadvantaged project areas. Because of the
dissolution of redevelopment agencies, questions have been
raised in both the Legislature and in local communities about
potential future tools for local agencies.
4)Property contaminated by hazardous substances is common in
urban areas in the state and often is a major impediment to
development. In 1990, to give redevelopment agencies
additional encouragement in addressing brownfield properties,
the Legislature enacted the Polanco Redevelopment Act. This
Act allowed a redevelopment agency, subject to certain
restrictions, to take any actions that the agency determines
are necessary to address a release of hazardous substances on,
under, or from property within its project area. In return,
the agency, the developer of the property, and subsequent
owners received limited immunity from further cleanup
liability.
This bill authorizes an IRFD to utilize the provisions of the
Act and to fund activities related to the Act.
5)Last year the Legislature saw several proposals to broaden the
scope and powers of IFDs as well as bills to reduce the voter
threshold needed to establish IFDs, in order to create a more
workable tool for local agencies in light of the dissolution
of redevelopment agencies. Most of these measures were vetoed
by the Governor, who noted that "expanding the scope of IFDs
is premature?[and] would likely cause cities to focus their
efforts on using the new tools provided?instead of winding
down redevelopment."
This legislative session is no different - there are multiple
IFD-related proposals pending in both the Senate and the
Assembly. The Committee may wish to discuss each of these
measures and their individual merits, but also contemplate
whether a more comprehensive approach is necessary. As well,
the Committee may wish to ask the authors of such bills to
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discuss their efforts with the Governor's Office in order to
reach a different fate this year.
6)Support arguments : Supporters argue that this bill will
create positive impacts for local jurisdictions and the state
by allowing for a usable financing mechanism to help spur
investments and fund critically need infrastructure and public
works projects.
Opposition arguments : CalTax argues that the Legislature
"should continue winding down redevelopment agencies?once this
is done, a more thoughtful approach should be considered that
maintains budget savings associated with the elimination of
these agencies."
REGISTERED SUPPORT / OPPOSITION :
Support
California Special Districts Association
Cities of Alameda, Concord, Coronado, Oakland and West
Sacramento
Construction Employers' Association
Mayor Ed Lee, City of San Francisco
The Non-Profit Housing Association of Northern California
Opposition
CalTax
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958