BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 33|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 33
Author: Wolk (D), et al.
Amended: 3/6/13
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 4-1, 3/13/13
AYES: Wolk, Beall, DeSaulnier, Liu
NOES: Knight
NO VOTE RECORDED: Emmerson, Hernandez
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Infrastructure financing districts: voter approval:
repeal
SOURCE : Author
DIGEST : This bill revises and recasts provisions for local
governments to use Infrastructure Financing Districts (IFDs).
ANALYSIS : Cities and counties can 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. To
repay the bonds, IFDs divert property tax increment revenues
from other local governments, but not schools, for 30 years (SB
308, Seymour, Chapter 1575, Statutes of 1990).
This bill provides for the following changes:
CONTINUED
SB 33
Page
2
1.Voter approval . After preparing an infrastructure financing
plan, local officials must get voter approval to:
Form the IFD, which requires 2/3-voter approval.
Issue bonds, which requires 2/3-voter approval.
Set the appropriations limit, which requires
majority-voter approval.
This bill repeals the voter approval requirements to form an
IFD, issue IFD bonds, and set the IFD's appropriations limit.
1.Formation . Under current law, local officials must get
2/3-voter approval to form an IFD.
This bill specifies how local officials must form an IFD. The
clerk of a local government interested in proposing to form an
IFD must post a copy of the resolution of intention on the
local government's Internet Web site. At the end of a public
hearing, the local government's legislative body may adopt a
resolution, based upon a finding that the goals of the IFD are
consistent with the general plan, and the financing programs
are an efficient way to implement the IFD's goals. The
resolution establishing an IFD also creates an IFD's governing
board, a public financing authority. The public financing
authority must designate and direct an engineer or appropriate
official to prepare an infrastructure financing plan.
2.Public financing authority . This bill adds and defines the
public financing authority as the legislative body of the
infrastructure financing district. The authority must be
comprised of five people: three must be members of the city
council or board of supervisors that established the IFD and
two must be public members appointed by the three members of
the city council or board of supervisors.
3.Infrastructure financing plan . Current law requires an IFD's
financing plan to be consistent with the local government's
general plan and include all of the following:
A map and description of the proposed district;
A description of the public facilities;
A finding that public facilities provide significant
benefits to a larger area than the district; and,
A financing section.
CONTINUED
SB 33
Page
3
This bill requires the financing plan to include three
additional elements:
The district's proposed goals of financing public
facilities;
The district's proposed goals to assist transit priority
project development; and,
The creation of the public accountability committee.
This bill prohibits an infrastructure financing plan from
being implemented until the public accountability
committee, as defined, is created. The public financing
authority must forward a copy of the plan to the local
government's legislative body to review and approve the
financing section of the plan. The plan cannot take effect
until approved by the legislative body.
1.Types of projects . IFDs are authorized to finance different
types of projects, including:
The purchase, construction, expansion, improvement,
seismic retrofit, or rehabilitation of any real or tangible
property, and associated planning and design work of that
property.
The purchase of a property, as long as construction has
been completed.
Highways, sewage treatment, water treatment, flood
control, libraries, child care facilities, parks, and
open-space.
This bill expands the list of authorized projects to include
levees, watershed lands, and habitat restoration.
Currently, an IFD cannot finance routine maintenance, repair
work, or costs of ongoing operation or services.
This bill repeals this prohibition. This bill prohibits an
IFD from compensating members of the local government's
legislative body or members of the public financing authority.
1.Fire district approval . Before an IFD can divert property tax
increment from another taxing entity, every local agency that
CONTINUED
SB 33
Page
4
will contribute its property tax increment revenue to the IFD
must approve the infrastructure financing plan. Some special
districts are governed ex officio by county boards of
supervisors or city councils. In the case of a special
district that provides fire protection services where the
county board of supervisors is the governing authority, this
bill requires the special district to act on an IFD's plan by
adopting a separate resolution.
2.Bond terms . The terms of IFDs' bonds can't be more than 30
years.
This bill extends the maximum term of IFDs' bonds from 30
years to 40 years.
3.Accountability . Current IFD law is silent on fiscal
protections, project management, or reporting measures.
This bill requires that local officials' resolution of
intention to form an IFD must state the goal and need of the
district and that the resolution be posted on the legislative
body's Internet Web site. This bill clarifies that IFDs can't
be used to compensate the members of the legislative body.
This bill requires the public financing authority to mail an
annual report to landowners in the district and each affected
taxing entity. The report must also be posted on the
legislative body's website. The report must include:
A summary of the IFD's expenditures.
A progress report of the IFD's adopted goals.
An assessment of the status of the IFD's public works
projects.
If an IFD fails to submit the annual report to its landowners
or taxing entities, or the report is not put on the
legislative body's Internet Web site, it can't spend any funds
to construct public works projects until the report is
submitted. If an IFD fails to produce evidence of progress
made towards an IFD's adopted goals for five consecutive
years, the IFD is prohibited from spending any funds to
construct any new public works projects. Any excess property
tax increment revenues that had been allocated for new public
works must be re-allocated to the affected axing entities.
However, the IFD may complete any public works projects that
CONTINUED
SB 33
Page
5
it has started.
This bill creates a public accountability committee to conduct
an annual independent financial review and audit. Revenues of
the public financing authority will pay for audit costs. The
committee membership must be comprised of a representative
from each of the affected taxing entities, from the public
financing authority, and one or more public members. The
legislative body of the affected taxing entity and public
financing authority shall appoint members to the committee.
1.Redevelopment project areas . Currently, an IFD can't overlap
with a redevelopment project area.
This bill repeals that statutory prohibition.
2. Big box retailers and vehicle dealers . State law prohibits
a community from giving financial assistance, direct
below-market property deals or cuts in fees, to a big box
retailer or vehicle dealer that relocates in the same market
area (SB 114, Torlakson, Chapter 781, Statutes of 2003).
That law applies to counties, cities, and redevelopment
agencies.
This bill prohibits IFDs from providing financial assistance
to big box retailers or vehicle dealers to relocate from one
local agency to another in the same market area.
3. Disadvantaged communities . State law defines disadvantaged
communities as those with median household incomes less than
80% of the statewide average. Severely disadvantaged
communities have median household incomes less than 60% of
the statewide average. Many disadvantaged communities lack
adequate public services and facilities like clean water,
sewers, paved streets, storm drains, and street lights.
Advocates want legislators to require local officials to
include disadvantaged communities in their long-range
planning for land use and public facilities.
This bill declares that it is in the public interest for IFDs
to finance public works for disadvantaged communities.
4. Polanco Act . The Polanco Redevelopment Act encourages
cleanup and development of brownfields, properties
CONTINUED
SB 33
Page
6
contaminated by hazardous waste. The Act authorizes
redevelopment agencies to conduct a cleanup and to recover
the costs of that cleanup from responsible parties.
Redevelopment agencies that conduct these cleanups, and
individuals that enter into redevelopment agreements with the
agency, immune from future cleanup liability.
This bill allows IFDs to finance necessary actions to
clean-up brownfield sites under the Polanco Act.
5. Sustainable Communities Strategy . The Sustainable
Communities and Climate Protect Act requires the Air
Resources Board to set regional targets for automobiles and
light trucks' greenhouse gas emission reductions, requires a
regional transportation plan to include a Sustainable
Communities Strategy to meet targets for greenhouse gas
emission reduction, requires the California Transportation
Commission to maintain guidelines for travel demand models,
requires cities and counties to revise their housing elements
every eight years in conjunction with the regional
transportation plan, and relaxes CEQA requirements for
housing developments that are consistent with a Sustainable
Communities Strategy (SB 375, Steinberg, Chapter 728,
Statutes of 2008).
This bill authorizes IFDs to finance any project, like a
transit priority project or regional transportation plan,
that implements or is consistent with a sustainable
communities strategy or alternative planning strategy.
6. Joint-powers authority . This bill authorizes a public
financing authority to enter into a joint powers agreement,
only to exercise power other than taxing authority.
7. Definitions . This bill defines "infrastructure financing
district" as a legally constituted public and corporate
government entity separate and distinct from the city that
established it. The bill provides that an IFD is a local
agency subject to California's open and public meeting law,
the Ralph M. Brown Act.
The bill defines "public capital facilities of communitywide
significance" as facilities that benefit all areas within
the district or serve or are made available to those areas.
CONTINUED
SB 33
Page
7
Comments
According to the Senate Governance and Finance Committee
analysis, this bill updates an existing financing mechanism for
public works projects, while incorporating rigorous
accountability measures to ensure local government diligence,
positive project results, and healthier community development.
This bill recognizes the potential for infrastructure financing
districts to implement SB 375's (Steinberg, 2008) sustainable
communities strategy and the benefits of rehabilitating
brownfields from hazardous waste. Local officials use tax
increment financing to divert part of the property tax revenue
stream to a separate IFD. A local government must consent and
opt-in to the IFD's formation; if an agency doesn't want to
participate, its tax increment revenue shares aren't touched.
Although IFDs don't raise taxes or generate new revenue, the
Legislature required voter approval of IFDs' plans, bonds, and
appropriations limits. This bill removes the voter-approval
requirement, but still requires annual, independent audits and
empowers local decision making. Legislators and voters who have
elected their local representatives should let local officials
do their job-setting local priorities for spending local
revenues.
The California Constitution requires 2/3-voter approval before
cities or counties can issue long-term debt backed by local
general purpose revenues; school districts need 55%-voter
approval. That's why local general obligation bonds need
2/3-voter approval. The courts have explained that cities need
2/3-voter approval before they dedicate portions of their
general funds to pay for bonds. That's why local limited
obligation bonds need 2/3-voter approval. However, because that
constitutional limit doesn't mention infrastructure financing
districts, local officials don't need voter approval before they
issue tax allocation bonds. When Governor Deukmejian signed the
1990 Seymour bill that created IFDs, there was a political
agreement that local officials should get 2/3-voter approval
before they could issue IFD bonds. That requirement is
statutory and not based on a constitutional limitation. There
is no constitutional requirement for IFDs to seek 2/3-voter
approval (or any voter-approval) before they issue bonds backed
by property tax increment revenues. This bill repeals the
statutory requirement for 2/3-voter approval on IFDs' bonds.
CONTINUED
SB 33
Page
8
Related Legislation
AB 229 (J. P�rez) creates Infrastructure and Revitalization
Financing Districts and authorizes its use, following a 2/3-vote
to form the district, a 2/3-vote to issue the bonds, and a
majority-vote for the appropriations limit, for projects like
flood management, environmental mitigation, and hazardous
cleanup.
AB 243 (Dickinson) creates Infrastructure and Revitalization
Financing Districts (IRFD) and reduces the 2/3-voter thresholds
to form an IRFD and issue bonds to 55%.
AB 294 (Holden) authorizes IFDs to use the county's Educational
Revenue Augmentation Fund portion of tax increment, after the
legislative body submits an economic analysis to the California
Infrastructure and Economic Development Bank for review and
approval.
AB 662 (Atkins) repeals the prohibition of an IFD on a former
redevelopment area.
AB 690 (Campos) renames IFDs as Jobs and Infrastructure
Financing Districts (JIDs), after a 55% voter-approval to create
a JID. The bill requires a job creation plan that ensures that
for every $1 million invested, 10 prevailing wage jobs are
created.
AB 709 (Nestande) requires the Salton Sea Authority to develop a
restoration plan for the Salton Sea ecosystem and submit it to
the Legislative Analyst for review. If the Legislative Analyst
determines the plan is financially feasible, the bill
appropriates funds from the Salton Sea Restoration Fund and
Proposition 84 to implement the plan.
SB 628 (Beall) removes the voter-approval requirements to create
an IFD and issue bonds for a transit priority project.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 4/8/13)
CONTINUED
SB 33
Page
9
California Building Industry Association
California Professional Firefighters
California Special Districts Association
California State Association of Counties
Cities of: Benicia, Emeryville, Goleta, Oakland, Palmdale, West
Sacramento, and Whitter
Counties of: San Joaquin and Yolo
East Bay Economic Development Agency
Economic Vitality Corporation of San Luis Obispo County
Emeryville Chamber of Commerce
Greater Eureka Chamber of Commerce
Inland Empire Economic Partnership
League of California Cities
Long Beach Area Chamber of Commerce
Los Angeles Area Chamber of Commerce
Los Angeles County Division, League of California Cities
Los Angeles County Economic Development Corporation
Marin county Council of Mayors and Councilmembers
North Bay Leadership Council
Orange County Business Council
Palm Desert Area Chamber of Commerce
Sacramento Area Council of Governments
Sacramento Metro Chamber of Commerce
San Diego Regional Economic Development Corporation
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
Tuolumne County Business Council
Yosemite Chamber of Commerce
OPPOSITION : (Verified 4/8/13)
California Federation of Republican Women
California Taxpayers Association
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : Supporters state that this bill
provides an improved mechanism to deliver much-needed
infrastructure projects and create jobs in California. This
bill offers an alternative form of property tax increment by
removing key impediments to IFDs, such as the vote requirements
to form and bond the IFD. With the elimination of redevelopment
agencies, IFDs provide the most useful tool currently available
to capture the property tax increase resulting from development
activity.
CONTINUED
SB 33
Page
10
ARGUMENTS IN OPPOSITION : The California Taxpayers Association
state that "Side-stepping the voters and allowing a local entity
to accrue debt means voters won't have a say in what their
communities look like, how bonds are issued, and how property
tax revenue is spent. By passing SB 33, the Legislature would
be paving the way for local government to increase property
taxes - particularly at a time when homeowners are still
recovering from the recession."
AGB:nl 4/10/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED