BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 229
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 229 (John A. Pérez)
          As Amended  August 12, 2013
          Majority vote
           
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          |ASSEMBLY:  |71-3 |(May 9, 2013)   |SENATE: |30-6 |(August 22,    |
          |           |     |                |        |     |2013)          |
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           Original Committee Reference:    L. GOV.  

           SUMMARY  :  Creates infrastructure and revitalization financing  
          districts (modeled after infrastructure financing districts  
          (IFDs) 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.  

           The Senate amendments  :

          1)Clarify that "net available revenue" shall not include any  
            funds deposited by the county auditor-controller into the  
            Redevelopment Property Tax Trust Fund or funds remaining in  
            the Redevelopment Property Tax Trust Fund, prior to  
            distribution, and shall not include any moneys payable to a  
            school district that maintains kindergarten or grades 1 to 12,  
            inclusive, or a community college district, or the Educational  
            Revenue Augmentation Fund (ERAF), as specified.

          2)Clarify the term "overlapping" with respect to an  
            Infrastructure and Revitalization Financing District (IRFD)  
            financing 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, and  
            provide that the successor agency to the former redevelopment  
            agency shall receive a finding of completion, as specified,  
            prior to the IRFD financing any project or portion of a  
            project in the overlapping area.

          3)Clarify the division of taxes allocated to the IRFD shall not  
            include any taxes required to be deposited by the county  
            auditor-controller into the Redevelopment Property Tax Trust  
            Fund.









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          4)Add chaptering out language to rectify the conflict with SB  
            470 (Wright).

          5)Add co-authors.

          6)Make technical changes.

           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  








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            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.

           AS PASSED BY THE ASSEMBLY  , this bill:  

          1)Created infrastructure and revitalization financing districts  
            (IRFDs), separate and apart from existing law that establishes  
            IFDs.  

           2)Defined, 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)Built 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;  

                iii)   Habitat restoration;  

                iv)    Brownfields restoration and other environment  
                 mitigation;  

                v)     Purchase of land and property for development  
                 purposes and related site improvements;  









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                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)Allowed 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)Allowed 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)Stated that any debt or obligation of an IRFD shall be  
            subordinate to an enforceable obligation of a former  
            redevelopment agency, as specified.  

           7)Allowed, 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)Stated, in the case of an affected taxing entity that is a  
            special district that provides fire protection services and  








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            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)Required 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 IRFD's projects.  
                 
          10)Provided 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)Stated 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.
           
           FISCAL EFFECT  :  According to the Senate Appropriations  








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          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           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).

          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), as long as the successor agency to the former  
          redevelopment agency has received a finding of completion from  
          the Department of Finance prior to the IRFD financing any  
          project or portion of a project in the overlapping area.   
          Additionally, this bill clarifies that the division of taxes  
          allocated to the IRFD shall not include any taxes required to be  
          deposited by the county auditor-controller into the  
          Redevelopment Property Tax Trust Fund, in order to ensure that  
          all debts of the former redevelopment agency (RDA) are not  
          included in the division of taxes.  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  








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          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  
          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.

          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  
          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.  

          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  








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          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 

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          0001767