BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 243
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          ASSEMBLY THIRD READING
          AB 243 (Dickinson)
          As Introduced  February 6, 2013
          Majority vote 

           LOCAL GOVERNMENT    6-3         APPROPRIATIONS      12-5        
           
           ----------------------------------------------------------------- 
          |Ayes:|Levine, Alejo, Bradford,  |Ayes:|Gatto, Bocanegra,         |
          |     |Gordon, Mullin, Atkins    |     |Bradford,                 |
          |     |                          |     |Ian Calderon, Campos,     |
          |     |                          |     |Eggman, Gomez, Hall,      |
          |     |                          |     |Holden, Pan, Quirk, Weber |
          |     |                          |     |                          |
          |-----+--------------------------+-----+--------------------------|
          |Nays:|Achadjian, Melendez,      |Nays:|Harkey, Bigelow,          |
          |     |Waldron                   |     |Donnelly, Linder, Wagner  |
          |     |                          |     |                          |
           ----------------------------------------------------------------- 

           SUMMARY  :  Creates infrastructure and revitalization financing  
          districts (modeled after infrastructure financing districts in  
          existing law), broadens the range of projects and facilities  
          they can finance, lowers the voter approval threshold necessary  
          to form a district and issue bonds to 55%, and extends the life  
          of districts to 40 years.  Specifically,  this bill  :  

          1)Creates infrastructure and revitalization financing districts  
            (IRFDs), separate and apart from existing law that establishes  
            infrastructure financing districts (IFDs).  
             
          2)Builds upon existing IFD law to grant new powers and authority  
            for IRFDs to broaden the range of projects and facilities that  
            IRFDs can finance, including:  
           
             a)   Watershed lands used for the collection and treatment of  
               water for urban uses;

             b)   Levees and bypasses for flood management;

             c)   Habitat restoration;

             d)   Brownfield restoration and other environmental  
               mitigation; 








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             e)   Land and property purchases for development purposes and  
               site related improvements;

             f)   Acquisition, construction, or repair of housing for  
               rental or purchase, including multipurpose facilities;

             g)   Acquisition, construction, or repair of commercial or  
               industrial structures for private use; and, 

             h)   Repayment of the transfer of funds to a military base  
               reuse authority pursuant to the Military Base Reuse  
               Authority Act, as specified.

          3)Authorizes an IRFD to utilize the powers under the Polanco Act  
            in order to finance environmental remediation and brownfield  
            restoration. 

          4)Authorizes an IRFD to finance any project that implements the  
            provisions of a sustainable communities strategy. 

          5)Specifies that a city may form an IRFD to finance a project or  
            projects on a former military base so long as the project is  
            consistent with the authority reuse plan and is approved by  
            the military base reuse authority. 

          6)Removes the voter threshold for the issuance of debt by an  
            IRFD if the project to be financed is on land of a former  
            military base that is publicly owned.

          7)Removes the restriction that an IRFD may not overlap with any  
            redevelopment project area.

          8)Requires that any debts of an IRFD be subordinate to an  
            enforceable obligation of a former redevelopment agency if the  
            IRFD and the redevelopment area overlap. 

          9)Expands the timeline for which an IRFD can collect tax  
            increment from 30 to 40 years. 

          10)Prohibits an IRFD from issuing debt with a final maturity  
            more than 30 years from the creation of an IRFD.   
             
          11)Reduces the vote threshold for creating an IRFD and issuing  








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            bonds from a two-thirds voter approval to 55% voter approval. 

          12)Requires the legislative body to post an annual report in an  
            easily identifiable and accessible location on the legislative  
            body's Internet Web site, no later than June 30 of each year  
            after the adoption of an infrastructure financing plan, and  
            include all of the following:

             a)   A summary of the IRFD's expenditures;

             b)   A description of the progress made towards the IRFD's  
               adopted goals; and,

             c)   An assessment of the status regarding completion of the  
               IRFD's public works projects.

          13)Identifies an IRFD as a "local agency" for the purposes of  
            the Polanco Act. 

          14)Allows bonds issuances of an IRFD to be sold at a negotiated  
            sale.

          15)Prohibits any negotiated sale of bonds of an IRFD from  
            exceeding $5 million.

          16)Defines the following terms:

             a)   "Project area" means a defined area within an IRFD in  
               which the activities of the district share a common purpose  
               or goal and an overall financing plan;

             b)   "Net available revenue" means periodic 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 are made, as specified.  Net available revenue  
               shall only include revenue remaining after all current  
               distributions, including, but not limited to, payment of  
               enforceable obligations, all distributions to other taxing  
               entities, and applicable administrative fees, have been  
               made; and,

             c)   "Public works" means public facilities or any other  
               facilities, as specified, that are to be financed in whole  








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               or in part by the IRFD.

          17)Allows a military base reuse IRFD to construct replacement  
            housing anywhere on the former base consistent with the base  
            reuse plan, infrastructure financing plan, and local general  
            plan, as applicable.

          18)Allows an IRFD to be divided into project areas, each of  
            which may be subject to distinct limitations, and allows a  
            legislative body to, at any time, add territory to a district  
            or amend the infrastructure financing plan for the IRFD by  
            conducting the same procedures for the formation of an IRFD or  
            approval of bonds, as specified.

          19)Allows the legislative body of the city forming the IRFD to  
            choose to dedicate any portion of its net available revenue to  
            the IRFD through the financing plan, as specified.

          20)Requires, if applicable, the infrastructure financing plan to  
            also include a specification of the maximum portion of the net  
            available revenue of the city proposed to be committed to the  
            IRFD for each year during which the district will receive  
            revenue.

          21)Provides, 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 infrastructure financing plan shall be  
            adopted by a separate resolution approved by the district's  
            governing authority or governing board.

          22)States the intent of the Legislature to establish long-term,  
            targeted programs that provide 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 tax payers.

           EXISTING LAW  :

          1)Authorizes cities and counties to create IFDs and issue bonds  








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            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  
            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.








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           COMMENTS  :  This bill broadens the purposes of infrastructure  
          financing districts (IFDs) and renames them Infrastructure and  
          Revitalization Financing Districts (IRFDs).  The bill also  
          broadens the types of projects that IRFDs may finance,  
          eliminates the existing prohibition on establishing IFDs in  
          former redevelopment areas, and allows cities or counties to  
          dedicate their share of freed-up former redevelopment tax  
          increment revenue to an IRFD financing plan.  In order to form  
          an IRFD and issue bonds, a 55% voter approval threshold is  
          required, thus lowering from existing law which requires a  
          two-thirds vote to both form an IFD and issue bonds.  

          This bill also extends the life of an IRFD to 40 years (existing  
          law for IFD is 30 years), and requires IRFDs to prepare and  
          publish annual reports.  This bill is author-sponsored.

          According to the author, "the elimination of redevelopment  
          agencies has removed a major tool used by local governments to  
          remedy blight, provide affordable housing, and spur local  
          economic development.  This fact has stepped up the efforts by  
          local officials to search for alternative ways to raise the  
          capital they need to invest in public works projects such as  
          transit facilities, infill development, or clean water.  IFDs  
          are one existing way to do this.  Unfortunately, current law  
          governing IFDs makes their formation cumbersome, and difficult,  
          particularly because a two-thirds vote of local voters is  
          necessary to form the district."

          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  








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          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.  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. 

          This bill is substantially similar to AB 2144 (John A. Pérez) of  
          2012 which passed the Assembly Local Government Committee on  








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          April 24, 2012, on a 6-3 vote.

          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.  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:  The Howard Jarvis Taxpayers Association  
          argues that "any long term financial obligation including bond  
          debt that will be passed on to other generations over 30 years  
          should be subject to a two-thirds vote of local residents."

           
          Analysis Prepared by  :    Debbie Michel / L. GOV. / (916)  
          319-3958 


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