BILL ANALYSIS Ó AB 229 Page 1 ASSEMBLY THIRD READING AB 229 (John A. Pérez) As Amended April 8, 2013 Majority vote LOCAL GOVERNMENT 8-1 APPROPRIATIONS 16-1 ----------------------------------------------------------------- |Ayes:|Achadjian, Levine, Alejo, |Ayes:|Gatto, Harkey, Bigelow, | | |Bradford, Gordon, Mullin, | |Bocanegra, Bradford, Ian | | |Waldron, Atkins | |Calderon, Campos, Eggman, | | | | |Gomez, Hall, Holden, | | | | |Linder, Pan, Quirk, | | | | |Wagner, Weber | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Melendez |Nays:|Donnelly | | | | | | ----------------------------------------------------------------- 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 AB 229 Page 2 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; 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 AB 229 Page 3 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. 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 Web site, 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 AB 229 Page 4 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 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 AB 229 Page 5 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 families of low- and moderate-income. FISCAL EFFECT : According to the Assembly Appropriations Committee, there is a negligible state fiscal impact as IRFDs will only divert property tax increment revenues from other local governments, excluding school districts. COMMENTS : 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). AB 229 Page 6 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). This bill is author-sponsored. According to the author, "Military base closure and realignment creates significant adverse economic hardships on many California communities. The Legislature has adopted a 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." 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 AB 229 Page 7 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. 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. 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 (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. Last year the Legislature saw several proposals to broaden the AB 229 Page 8 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 Legislature 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 Legislature may wish to ask the authors of such bills to discuss their efforts with the Governor's Office in order to reach a different fate this year. 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 needed 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." Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958 FN: 0000347