BILL ANALYSIS �
AB 294
Page 1
Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 294 (Holden) - As Amended: April 8, 2013
SUBJECT : Local-State Joint Investment Partnership Pilot
Program.
SUMMARY : Creates the Local-State Joint Investment Partnership
Pilot Program to allow local governmental entities, upon
approval by the Infrastructure and Economic Development Bank, to
reallocate specified Educational Revenue Augmentation Fund
(ERAF) payments in order to fund public works projects.
Specifically, this bill :
1)Creates, in state government, the Local-State Joint Investment
Partnership Pilot Program (Program).
2)Allows only a local governmental entity, including but not
limited to, an infrastructure financing district (IFD), but
excluding a city or county, to file an application for
financing a public works project with, and for approval by,
the Infrastructure and Economic Development Bank (I-Bank)
pursuant to the Program.
3)Authorizes the following public works to be financed by the
I-Bank, for the Program:
a) City streets, county highways, and state highways;
b) Sewage collection and treatment;
c) Water treatment and distribution;
d) Facilities for the collection and treatment of water for
urban uses;
e) Drainage, water supply and flood control;
f) Educational facilities;
g) Park and recreational facilities;
h) Solid waste collection and disposal;
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i) Public transit;
j) Power and communications; and,
aa) Brownfield cleanup that promotes infill housing
development and other related infill development consistent
with regional and local plans.
4)Requires an application for financing filed with the I-Bank
pursuant to the Program to include all of the following
information in a manner prescribed by the I-Bank:
a) An economic analysis of the project;
b) A description of how the project will further local and
statewide policy objectives;
c) A description of all local resources available to invest
in the project and an analysis of the reduced scope or
feasibility of the project based on the investment of only
those local resources;
d) The annual amount of property taxes otherwise allocated
to ERAF, from the tax rate areas within the territorial
jurisdiction of the applicant, that the applicant proposes
to reallocate to finance the project, and whether the
applicant proposes to issue debt to fund the project; and,
e) A demonstration, to a reasonable probability, that the
project would result in an amount of tax revenue to the
state General Fund with a net present value that is greater
than the net present value of the amount of property tax
increment revenues that would be reallocated from ERAF over
the term of the project, taking into consideration all
pertinent data.
5)Allows the I-Bank to circulate an application for financing to
other state agencies, including, but not limited to, the
Department of Finance, the Department of Housing and Community
Development, and the Office of Planning and Research.
6)Allows the I-Bank to establish a process for the public to
comment on an application for financing.
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7)Requires the legislative body of the applicant to reimburse
the I-Bank for the reasonable cost of the I-Bank's review of
its application for financing.
8)Provides, for purposes of the bill, that "public works
project" means the entire plan for developing the public works
as specified in the bill, within a specified geographical
area, as set forth by the applicant.
9)Allows, after January 1, 2014, the I-Bank to approve up to a
maximum of 25 applicants for financing.
10)Prohibits the I-Bank from approving an application for
financing unless it determines that approving a public works
project proposed in an application is necessary either to make
the project financially feasible or to significantly enhance
the scope and potential benefits of the project.
11)Requires the I-Bank, in reviewing the economic analysis
including in the application for financing, to consider the
increase in state General Fund tax revenues that would occur
because of the proposed economic activity.
12)Allows the I-Bank, in making its decision to approve an
application for financing, to give weight to any established
state policy objective or benefit identified by a state agency
reviewing the application.
13)States that the I-Bank shall only approve financing that
reallocates tax revenue that would otherwise be allocated to
ERAF from each affecting taxing entity making the application,
and the reallocation shall be made in proportion to the
percentage share of property taxes that each affected taxing
entity would otherwise contribute to ERAF.
14)Requires the I-Bank, in order to approve an application for
financing under the Program, to issue a written statement that
establishes, but is not limited to, the total amount of tax
revenue that would have been directed to ERAF that is
reallocated to finance specific public works projects proposed
in the application, the amount of each affected taxing
agency's payment to ERAF that is paying reallocated, and the
duration of those reallocations. Requires the I-Bank to
transmit the statement to the county tax collector or the
official responsible for the allocation of property tax
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revenues within the county.
15)Requires the county tax collector or the official responsible
for the allocation of tax revenues within the county, upon
receiving the I-Bank's written statement, to direct the tax
revenues as prescribed in the I-Bank's statement.
16)Requires each applicant, on or before December 31, 2016, and
annual thereafter, that has received financing pursuant to the
Program, to provide a report to the I-Bank that includes all
of the following information for that fiscal year:
a) The amount of money that the county auditor reallocated
from ERAF for financing under the Program;
b) The purposes for which the allocated money was used;
and,
c) The actions taken during the fiscal year to implement
the applicant's project.
17)Requires the I-Bank, on or before March 1, 2017, and annually
thereafter, to provide a report to the Joint Budget Committee
that includes all of the following information for the
preceding fiscal year:
a) The name, location, and general description of each
application for financing approved under the Program;
b) The total amount of money that county auditors
reallocated from ERAF under the Program; and,
c) An evaluation to the extent to which the implementation
of the approved financing has achieved the purposes and
intent of the Program, and allows the I-Bank to solicit
advice and assistance from other state entities in
preparing this evaluation.
18)Sunsets the bill's provisions on January 1, 2025.
19)Makes findings and declarations that the purpose of this act
is to create a pilot program whereby certain local
governmental entities, upon approval and oversight of the
I-Bank, are authorized to reallocate their payments directed
to ERAF to instead finance certain kinds of public works.
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EXISTING LAW :
1)Establishes the I-Bank for the purposes of financing public
infrastructure and private development.
2)Authorizes the I-Bank to issue tax-exempt and taxable revenue
bonds, provide financing to public agencies, provide credit
enhancements, acquire or lease facilities, and leverage state
and federal funds.
3)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.
4)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.
5)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.
6)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.
7)Requires that every local agency who will contribute its
property tax increment revenue to the IFD approve the plan.
8)Requires a two-thirds voter approval of the formation of the
IFD and the issuance of bonds.
9)Requires majority voter approval for setting the IFD's
appropriations limits.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill creates the Local-State Joint Investment Partnership
Pilot Program and allows IFDs, to apply for financing under
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the Program and once approved by the I-Bank, to reallocate
their ERAF payments to fund public works projects. The
Program would be limited to a maximum of 25 applicants and
requires the approved applicants to report back to the I-Bank
on the project. AB 294 also requires the I-Bank to report to
the Joint Legislative Budget Committee on the approved
applicants, the total amount of ERAF reallocated, and an
evaluation of the extent to which the implementation of the
approved financing has achieved the purposes and intent of the
program. This bill is author-sponsored.
2)According to the author, with the elimination of redevelopment
agencies, local governments have a deficiency of tools to
promote economic development and revitalize communities. The
author notes that the bill would allow the state to make
targeted infrastructure investments that will result in a net
gain of general fund revenue over the life of the investment.
The bill requires the I-Bank to make a finding that the
development to be financed would result in an amount of
revenue to the General Fund with a net present value that is
greater than the net present value of the amount of property
tax increment revenues that would be diverted from ERAF over
the term of the IFD, which, over time, the author notes "would
replace the state's share of Proposition 98 funding."
3)The I-Bank was created in 1994 to finance public
infrastructure and private development that promote a healthy
climate for jobs, contributed to a strong economy and improved
the quality of life in California communities. The I-Bank has
broad authority to issue tax-exempt and taxable revenue bonds,
provide financing to public agencies, provide credit
enhancements, acquire or lease facilities, and leverage state
and federal funds.
One of the I-Bank's programs, the Infrastructure State
Revolving Fund Program, provides low-cost loans up to $10
million per project to local municipal governments for a wide
variety of public infrastructure including city streets,
county highways, drainage, water supply and flood control,
educational facilities, environmental mitigation measures,
parks and recreational facilities, port facilities, power and
communications, public transit, sewage collection and
treatment, solid waste collection and disposal, water
treatment and distribution, defense conversion, public safety
facilities, state highways, and military infrastructure.
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Eligible applicants for this program include cities, counties,
special districts, assessment districts, joint powers
authorities and non-profit corporations formed on behalf of
local government.
4)According to the League of Cities and the California Special
Districts Association, in support, this bill is an innovative
approach at a time when such innovation is needed in order to
empower local agencies with a tool that can be used to foster
greater local-state collaboration while enhancing public
infrastructure and creating jobs.
5)Cal-Tax, in opposition, notes that "already a number of
counties have found that ERAF funds are insufficient in
financing schools. In 2012-13, the Legislature had to address
the insufficient ERAF by providing local governments with
one-time allocations from the state's General Fund?.rather
than utilizing tax increment or ERAF funds, local governments
should utilize existing tools to provide economic development
in our communities."
6)The Committee may wish to ask the author to discuss the
following questions about how the bill would be implemented:
a) This bill explicitly allows IFDs to file an application,
but excludes cities and counties. Does the author intend
to include special districts? If this is the case, the
language should be revised to explicitly authorize special
districts to apply.
b) This bill makes the I-Bank responsible for the ultimate
decision of the reallocation of ERAF payments. However,
the language is not clear about how far this reallocation
extends - is it just the jurisdiction's share, or more?
c) Although the bill does not specify this, if ERAF
payments are used for a different purpose instead of going
to schools, the assumption is that the state's General Fund
will be on the hook to backfill such a loss to schools.
The Committee may wish to discuss whether there should be a
cap placed on the total amount that the I-Bank could
approve for the pilot projects, in order to give certainty
about the fiscal hit the state will endure.
d) The Committee may wish to discuss whether the local
governmental entity applying for the Program should be
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required to split the funding for the project - a local
match - in order for the local governmental entity to have
some skin in the game as to the overall success of the
public works project.
7)Support arguments : The League of California Cities writes
that "recent legislation authorized the I-Bank to make an
investment in local infrastructure in the City and County
of San Francisco, related to the America's cup?[this bill] would
authorize up to 25 similar investments to occur in other areas
around the state."
Opposition arguments : CalTax argues that "before moving
forward with [this bill's] approach, the Legislature should
continue winding down redevelopment agencies?in the interim,
local governments should utilize voter-approved bond financing
to invest in infrastructure and economic development."
REGISTERED SUPPORT / OPPOSITION :
Support
California Special Districts Association
League of California Cities
Western Center on Law & Poverty (in concept)
Opposition
CalTax
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958