BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 142 HEARING: 4/17/13
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 4/1/13 TAX LEVY: No
CONSULTANT: Weinberger
PUBLIC TRANSIT ASSESSMENT DISTRICTS
Allows transit operators to levy special benefit
assessments to finance transit projects.
Background and Existing Law
Several state laws allow local officials to levy benefit
assessments on real property to pay for public works and
public services. Proposition 218 (1996) requires owners of
real property to approve benefit assessments in a weighted
ballot election. Property owners vote in proportion to
their proposed assessments, which reflect how much their
property benefits from the proposed public works or public
services. The Legislature translated the new
constitutional limits on benefit assessments into statutory
procedures for notice, hearing, and protests (SB 919,
Rainey, 1997) and imposed additional requirements to
enhance the confidentiality and impartiality of benefit
assessment ballot proceedings (SB 1477, Lewis, 2000).
State law allows the Santa Clara Valley Transportation
Authority to levy benefit assessments to pay for public
rail rapid transit facilities (AB 935, Diaz, 2003). To
levy an assessment, the Authority must comply with the
notice, hearing, and protest provisions required by
Proposition 218 and its implementing statutes (AB 2817,
Salinas, 2004).
Officials from other local governments that operate transit
systems want the Legislature to grant them similar
authority to levy benefit assessments.
Proposed Law
Senate Bill 142 allows the governing board of a transit
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district, municipal operator, or other public agency
operating or contracting for the operation of transit,
commuter rail, or intercity rail services (an "operator")
to levy a special benefit assessment on real property to
finance the acquisition, construction, development, joint
development, operation, maintenance, or repair of one or
more eligible transit projects. An operator other than a
transit district, city, or county may implement a special
benefit district only if the action is consistent with the
general or specific plans of the city or county within
which the special benefit district is to be created. SB
142 requires an operator's governing board, in levying a
benefit assessment, to comply with specified notice,
protest, and hearing procedures in the Proposition 218
Omnibus Implementation Act.
Definitions . SB 142 defines the following terms:
"Benefit district" means a special benefit assessment
district established pursuant to the bill's provisions, the
area of which must not lie more than one mile from the
center point of any transit station or proposed transit
station.
"Board" means the governing board of the operator.
"Eligible transit project" means transit stations and rail
facilities and associated services, but excludes operating
costs of rail or transit services.
"Legal representative" means:
An official of a corporation owning real property
in the benefit district.
A guardian, conservator, executor, or administrator
of the estate of the holder of title to real property
in the benefit district who is all of the following:
o The person is appointed under the laws of
this state.
o The person is entitled to the possession
of the estate's real property.
o The person is authorized by the
appointing court to exercise the particular
right, privilege, or immunity which he or she
seeks to exercise.
"Operator" means a transit district, municipal operator, or
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other public agency operating or contracting for the
operation of transit, commuter rail, or intercity rail
services.
"Rail" means rail transit, commuter rail, or intercity
rail.
"Rail facilities" means land, buildings, and equipment, or
any interest therein, whether or not the operation thereof
produces revenue, which has, as its primary purpose, the
operation of the rail system or the providing of services
to the passengers of the rail system, but does not mean any
land, buildings, or equipment, or interest therein, which
is used primarily for the production of revenue not arising
from the operation of the rail system.
"Transit station" means a rail station or a bus transfer
station, which state law defines as an arrival, departure,
or transfer point for the area's intercity, intraregional,
or interregional bus service having permanent investment in
multiple bus docking facilities, ticketing services, and
passenger shelters.
Resolution of intention . SB 142 allows an operator's board
to adopt a resolution, by a 2/3-vote, providing for notice
and hearing on its intention to establish one or more
special benefit districts and levy a special benefit
assessment. The resolution may provide that the proposed
benefit district will contain separate zones, which may
consist of either contiguous or noncontiguous areas of land
within the operator's service area. The proposed benefit
district and each proposed zone must be adjacent to, or in
the vicinity of, one or more transit stations or proposed
transit stations. The boundaries of the benefit district
and of each zone must reflect, as accurately as possible,
the areas in which special benefits are conferred by reason
of the proximity and operation of one or more transit
stations.
SB 142 requires a resolution to state:
The maximum and minimum rate of assessment.
The amount of the special benefit assessment and
the purposes for which it is to be levied.
The estimated cost of accomplishing the purposes,
and the dates or approximate intervals at which the
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assessment shall be levied.
That the exterior boundaries of the benefit
district are set forth on a map on file with the
operator, which governs the extent of the benefit
district and any zones.
The name of the Benefit District and any zones, as
designated by the board.
SB 142 requires that a copy of the resolution must be
included with the notice given pursuant to the Proposition
218 Omnibus Implementation Act.
SB 142 requires an operator's board to publish a notice
stating the time and place of the hearing, and setting
forth the boundaries and purpose of the proposed benefit
district, pursuant to a specified statute.
SB 142 allows a board to levy an assessment in accordance
with the resolution if a majority does not protest the
imposition of an assessment.
Petitions for exclusion or reduction . SB 142 allows a
property owner, or an owner's legal representative, to file
a petition with an operator's board requesting that the
board exclude his or her property from a benefit district
on the grounds that the property is not benefited.
Similarly, the bill allows a property owner, or an owner's
legal representative, to file a petition with an operator's
board requesting that the board reduce an assessment on the
grounds that the assessment exceeds the benefit to the real
property.
SB 142 requires that:
Petitions for exclusion or reduction must contain
specified information.
The board must provide notice, pursuant to
specified requirements, of each hearing upon a
petition for exclusion or reduction.
The board or its appointed hearing officer must
hear:
o The petition for exclusion or reduction.
o All evidence or proof that may be
introduced by or on behalf of the petitioners.
o All objections to the petition that may
be presented in writing by any person, including
the authority.
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o All evidence or proof that may be
introduced in support of objections to the
petition.
The person filing the petition must pay the
operator's expenses of giving the notice and of the
hearing.
SB 142 requires an operator's board to deny a petition if
the petitioner has not shown by a preponderance of the
evidence that in an exclusion petition the real property is
not benefited or in a reduction petition that the
assessment exceeds the benefit to the property. After a
hearing on an exclusion or reduction petition, an
operator's board, by resolution, must take one of the
following actions:
Order the exclusion of all or any part of the real
property described in the petition upon a finding that
the property will not be benefited by the operations
of the operator in the vicinity of the benefit
district.
Order a change in the benefit assessment to all or
any portion of the real property described in the
petition to provide that it not exceed the amount of
benefit derived by the operations of the operator in
the vicinity of the benefit district.
Confirm the assessment on the real property subject
to the petition as correctly reflecting the amount of
benefit to the real property.
Bonds . If an operator's board deems it necessary to incur
a bonded indebtedness to acquire, construct, develop,
complete, operate, maintain, or repair one or more eligible
transit facilities located within the benefit district, SB
142 allows the board to provide, by resolution, that the
bonded indebtedness will be payable from special benefit
assessments levied within the benefit district. SB 142
requires a board to adopt the resolution by a 2/3-vote, and
requires that the resolution must contain declarations and
statements relating to:
The purpose for which the debt is to be incurred.
Estimated costs and the amount of principal of the
indebtedness.
Maps showing the boundaries of the benefit district
and any zones.
Compliance with Constitutional and statutory
requirements for approving benefit assessments.
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The extent to which an operator's revenues are to
be used for bond-related payments.
The time and place set for hearing on the proposed
issuance of the bonds.
The maximum term of the proposed bonds, which must
not exceed 40 years.
The maximum annual interest rate, which must not
exceed 12%.
The priority of special benefit assessment revenues
pledged to the bonds.
SB 142 prohibits an operator from pledging any portion of
its general fund revenues to pay any part of any bonded
indebtedness incurred under the bill's provisions, unless
required by the California Constitution.
SB 142 specifies requirements for providing notice of, and
conducting, a hearing on the issuance of bonds payable from
special benefit assessments.
SB 142 requires that an operator's board must, by
resolution adopted by a 2/3 vote, make a final and
conclusive determination of whether to incur the bonded
indebtedness. The resolution must state the amount of the
proposed debt, the purposes for which it is to be incurred,
and the estimated cost of accomplishing the purposes.
SB 142 specifies:
The rates at which special assessments to pay
bonded indebtedness must be levied.
That bonds issued pursuant to the bill's provisions
must bear interest at an annual rate or rates not
exceeding 12%
Requirements relating to call and redemption of the
bonds, the denomination of the bonds, and the form of
the bonds.
SB 142 allows an operator's board to sell bonds as the
board determines by resolution. The bill specifies the
manner in which bonds may be sold by competitive bid and
allows the board to sell bonds at a price below par.
SB 142 establishes rules governing the accrued interest and
premiums received on the sale of bonds
SB 142 specifies how an operator's board can provide for
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the issuance, sale, or exchange of refunding bonds to
redeem or retire any bonds issued by the operator.
SB 142 allows an operator's board, subject to specified
notice and hearing requirements, to change the purposes for
which any proposed debt is to be incurred, the estimated
cost, the amount of bonded debt to be incurred, or the
boundaries of the benefit district or zones. The board must
not change the boundaries to include any territory which
will not, in its judgment, be benefited by the action of
the operator.
Other provisions . SB 142 establishes rules for submitting
an assessment ballot for a parcel that has multiple owners.
The bill allows the legal representative of a corporation
or an estate owning real property in the benefit district
to act on behalf of the corporation or the estate.
SB 142 requires that actions or proceedings to contest,
question, or deny the validity or legality of the formation
of any benefit district or zone, the issuance of any bonds,
or any related proceedings must begin within six months
from the date of the formation, or the formation of the
benefit district or zone, the issuance of the bonds, and
all related proceedings must held to be in every respect
valid, legal, and incontestable.
SB 142 grants an operator all powers necessary for,
incidental to, or convenient for, collecting, enforcing,
administering, or distributing a special benefit assessment
in accordance with state law.
SB 142 requires an operator to spend the revenue from a
special benefit assessment, or from bonds secured by such a
special benefit assessment, only to finance the project for
which it was levied. The bill prohibits that revenue from
being used for any other purpose or the payment of any
other expense including, a transit, transportation, or
operating expense.
SB 142 requires a board's secretary to certify to a county
assessor that an operator has imposed a special benefit
assessment and specifies information that must be provided
to the county assessor with the certification.
SB 142 requires a county to levy and collect special
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benefit assessments at the same time and in the same manner
as taxes are levied and collected. The bill allows the
county to deduct its reasonable expenses of collection and
requires the county to transmit the balance of the
assessments to the operator.
SB 142 declares that, in the event of conflict with any
other law, its provisions must prevail with respect to
benefit districts within an operator's service area.
SB 142 repeals specified statutes authorizing local
governments to levy ad valorem assessments on taxable land
within benefit districts to finance transit projects.
SB 142 contains legislative findings and declarations. The
bill declares an operator's board to be the conclusive
judge of the proportion of special and general benefits
produced by the eligible transit projects and of the
distribution of the special benefits among parcels of
property within a benefit assessment district
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . SB 142 provides transit operators
with a vital new funding tool for transit systems, helping
transit providers develop and maintain critical transit
infrastructure. Many transit operators face substantial
fiscal challenges in trying to keep pace with the growing
demand for transit services. The benefit assessments
authorized by SB 142 are commonly used to finance a wide
variety of public improvements. The bill's provisions are
closely modeled on statutes that already allow the Santa
Clara Valley Transportation Authority (VTA) to levy
assessments for transit projects. By helping to promote
transit-oriented development and foster greater public
transportation ridership, SB 142 will improve air quality,
mobility, and quality of life in local communities
throughout California.
2. Untested . While some transit districts levied ad
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valorem assessments on real property under outdated
statutes that SB 142 repeals, no California transit
district has levied special benefit assessments that meet
the constitutional requirements established by Proposition
218. The Santa Clara Valley Transportation Authority (VTA)
has never used its statutory authority to levy special
benefit assessments. Now other transit operators want to
expand this untested authority. Recent court rulings have
subjected common types of benefit assessments to heightened
scrutiny in determining their compliance with Propositions
218's requirements. Recent court decisions raise questions
about the methodology by which local governments
distinguish between general benefits from services funded
by assessments and the special benefits that such services
provide to specific parcels. Because special benefit
assessments for transit are untested, they may invite legal
challenges, creating fiscal uncertainty for governments
that use them to finance transit projects.
3. A BID alternative ? The courts have ruled that
assessments on businesses, as opposed to real property, are
not subject to Proposition 218's provisions. State law
allows local governments to create districts - commonly
called business improvement districts (BIDs) - that levy
benefit assessment on businesses to pay for improvements
and services that provide special benefits to those
businesses (SB 1424 (Mello, 1989), AB 3754 (Caldera, 1994),
and SB 1404 (Soto, 2004)). The pre-Proposition 218 ad
valorem assessments that the Southern California Rapid
Transit District levied to help finance construction of the
Red Line excluded residential properties. These
assessments were levied, instead, based on the economic
benefits conferred on commercial property resulting from
its proximity to the transit stations. To avoid potential
legal challenges under the provisions of Proposition 218,
transit operators may find it easier to levy assessments
that reflect the special economic benefits conferred on
businesses that are in close proximity to transit stations.
As an alternative to authorizing real property-based
special assessment districts, the Committee may wish to
consider amending SB 142 to allow transit operators to
establish business assessment districts around transit
stations to finance transit projects.
4. Go figure . While SB 142 largely replicates VTA's
benefit assessment statutes, it includes at least one
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significant difference. Current law authorizes the Santa
Clara Valley Transportation District to establish a benefit
assessment district with boundaries up to -mile from the
center of a rail station. SB 142 allows transit operators
to draw a benefit assessment district's boundaries up to
one mile from the center of a transit station. A benefit
assessment district with a -mile radius around a transit
station covers about 500 acres. Doubling the radius of a
circle quadruples the circle's area. A mile radius covers
more than 2000 acres, which would encompass hundreds of
city blocks. SB 142's proponents argue that special
benefits may be justified over such a large area around an
inter-city rail station. The Committee may wish to
consider whether SB 142 should be amended to allow benefit
districts to extend no more than -mile from a transit
station.
Support and Opposition (4/11/13)
Support : San Francisco Bay Area Rapid Transit District;
California Transit Association.
Opposition : Unknown.