BILL ANALYSIS Ó
AB 243
Page 1
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;
AB 243
Page 2
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
AB 243
Page 3
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
AB 243
Page 4
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
AB 243
Page 5
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.
AB 243
Page 6
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
AB 243
Page 7
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
AB 243
Page 8
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
FN: 0000348