BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 614
Author: Wolk (D), et al.
Amended: 8/18/14
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 55-23, 8/20/14 - See last page for vote
SUBJECT : Local government: jurisdictional changes:
infrastructure financing
SOURCE : Author
DIGEST : This bill allows a local agency, until January 1,
2025, to use tax increment financing in a newly formed or
reorganized district to fund infrastructure improvements in
disadvantaged unincorporated communities.
Assembly Amendments delete the Senate version dealing with
irrigation districts' elected boards. This bill currently deals
with funding local agencies infrastructure.
ANALYSIS :
Existing law:
1. Establishes the procedures for the organization and
reorganization of cities, counties, and special districts
under the Cortese-Knox-Hertzberg Local Reorganization Act of
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2000 (CKH Act).
2. Requires a local agency, when submitting an application for
a change of organization or reorganization, to include a plan
for providing services within the affected territory, as
follows:
A. Description of the services, including the level and
range of those services, to be extended to the affected
territory;
B. Indication of when those services can feasibly be
extended to the affected territory;
C. Indication of any improvement or upgrading of
structure, roads, sewer or water facilities, or other
conditions the local agency would impose or require within
the affected agency if the change of organization or
reorganization is completed; and
D. Information as to how the services will be financed.
1. Prohibits, in specified circumstances, a local agency
formation commission (LAFCO) from approving an annexation to
a city of any territory greater than 10 acres, or as
determined by LAFCO policy, where there exists a
disadvantaged unincorporated community that is contiguous to
the area of proposed annexation, unless an application to
annex the disadvantaged unincorporated community to the
subject city has been filed with the executive officer.
2. Requires the LAFCO, in determining the sphere of influence
of each local agency and in the written statement of its
determinations for a municipal service review, to include
specified information regarding disadvantaged unincorporated
communities, beginning on or after July 1, 2012.
3. Authorizes cities and counties to create infrastructure
financing districts (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
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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 a two-thirds voter approval of the formation of the
IFD and the issuance of bonds, and requires majority voter
approval for setting the IFD's appropriations limits.
This bill:
1. Allows a local agency, until January 1, 2025, to include in
its resolution of an application for change of organization
or reorganization an annexation development plan to improve
or upgrade infrastructure in a disadvantaged unincorporated
community through the formation or reorganization of a
special district.
2. Requires an annexation development plan to include
information that demonstrates that the formation or
reorganization of the special district will provide all of
the following:
A. The necessary financial resources to improve or
upgrade structures, roads, sewer, or water facilities or
other infrastructure. The annexation development plan
shall also clarify the local entity that shall be
responsible for the delivery and maintenance of the
services identified in the application;
B. An estimated time frame for constructing and
delivering the services identified in the application; and
C. The governance, oversight, and long-term maintenance
of the services identified in the application after the
initial costs are recouped and the tax increment financing
terminates.
1. Allows a LAFCO to approve the proposal for a change of
organization or reorganization, if a local agency includes a
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plan pursuant to #1 and #2 above, to include the formation of
a special district or reorganization of one or more existing
special districts with the consent of each special district's
governing body.
2. Specifies that the district can be, but are not limited to,
a community services district, municipal water district, or
sanitary district to provide financing to improve or upgrade
structures, roads, sewer, water facilities, or other
infrastructure needs to serve a disadvantaged unincorporated
community.
3. Requires the LAFCO to include in its resolution making
determinations a description of the annexation development
plan, including, but not limited to, an explanation of the
proposed financing mechanism, as specified, including, but
not limited to, any planned debt issuance associated with
that annexation development plan.
4. Requires the formation of a special district to be in
conformity with the requirements of the principal act of the
proposed district and all required formation proceedings.
5. Provides that the LAFCO is not precluded from considering
any other options or exercising its powers as defined in
existing law.
6. Allows a local agency's plan for financing services that is
included with a resolution of application for a change of
organization, consented to by each affected agency, to
include a tax increment financing plan, pursuant to the
authority granted by this bill.
7. Authorizes the local agency that files the resolution of
application for a change of organization or reorganization,
and one or more other local agencies that will improve or
upgrade structures to serve a disadvantaged unincorporated
community, to agree on an annexation development plan for
financing services and structures.
8. Authorizes the annexation development plan to contain a
provision that taxes levied upon taxable property in the area
included within the territory each year by or for the benefit
of the local agency and one or more other consenting local
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agencies that consent to the plan, be divided as follows:
A. Requires that portion of the taxes that would have
been produced by the rate upon which the tax is levied
each year by or for each consenting local agency, prior to
the effective date of the certification of completion, and
that portion of taxes by or for each school entity is
allocated to the respective consenting local agencies and
school entities as taxes by or for the consenting local
agencies and school entities on all property paid; and
B. Requires that portion of levied taxes each year
specified in the adopted annexation development plan for
the city and each consenting local agency that has agreed
to participate, in excess of the amount specified in #A,
above, is allocated into a special fund of a special
district formed or reorganized to finance the
infrastructure improvements to serve the disadvantaged
unincorporated community.
1. Requires the plan to specify a date upon which the division
of taxes described in #10, above, shall terminate.
2. Allows the annexation development plan to include a
provision for the issuance of indebtedness. Requires any
indebtedness to be issued in conformity with existing law
which governs the issuance of general obligation bonds for
local agencies or the principal act of the special district.
3. Prohibits any annexation development plan adopted pursuant
to this bill to result in the reduction of property tax
revenues allocated to any school entity as defined by
existing law.
4. Defines terms as follows:
A. "Local agency" to mean a city, county, and special
district.
B. "Consenting local agency" to mean a local agency that
has adopted a resolution of its governing body consenting
to the annexation development plan.
C. "Territory" to mean all or part of the land that is
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included in the resolution of application for change of
organization or reorganization filed by the local agency.
D. "Certificate of completion" to mean the document
prepared by the [LAFCO] executive officer and recorded
with the county recorder that confirms the final
successful completion of a change of organization or
reorganization.
E. "Disadvantaged unincorporated community" to mean
inhabited territory with 12 or more registered voters, or
as determined by LAFCO policy, that constitutes all or a
portion of a disadvantaged community, which is defined in
the Water Code to mean a community with an annual median
household income that is less than 80% of the statewide
annual median household income.
5. Allows a consenting local agency to advance funds to the
special district that is formed or reorganized, as specified,
and requires the special district to use those advanced funds
solely for the purposes specified in the annexation
development plan. Requires the special district to repay the
consenting local agency with revenue from the taxes received,
as specified.
6. Prohibits any plan adopted pursuant to this bill's
provisions from including any portion of a redevelopment
project area which is or has been previously created pursuant
to existing law.
7. States that it is the intent of the Legislature to provide
additional options for financing infrastructure that can be
considered by local agencies and the LAFCO when evaluating
the proposal for an annexation of a disadvantaged,
unincorporated community.
8. Makes other technical and conforming changes.
Comments
This bill adds new provisions within the change of organization
or reorganization process in the CKH Act that require a local
agency to submit a plan for providing services and how those
services will be financed. This bill allows a local agency to
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include in resolution of application a plan to use tax increment
financing in a new or reorganized special district to provide
infrastructure in a disadvantaged unincorporated community.
This bill includes the tax increment allocation established in
existing IFD law, but relies on requirements in the CKH Act for
a change of organization or reorganization for notification,
hearings, protest, and overall voter involvement. The
availability of tax increment financing under this bill is
limited to proposals for a change of organization or
reorganization by a local agency that will create a special
district or reorganize one or more existing special districts in
order to provide infrastructure to a disadvantaged
unincorporated community, which may include improving or
upgrading structures, roads, sewer, water facilities, or other
infrastructure needs.
SB 244 (Wolk, Chapter 513, Statutes of 2011) took a two-pronged
approach in establishing new requirements for local officials to
consider disadvantaged communities. First, SB 244 established a
process for the identification of service deficiencies in
disadvantaged communities through the LAFCO planning process,
therefore adding new duties to LAFCOs in the preparation of
municipal service reviews and when reviewing and updating a city
or a special district's sphere of influence, starting after July
1, 2012. Second, SB 244 required each city or county to update
the land use element of its general plan to address the presence
of these types of communities, and for each identified
community, the city or county is required to do an analysis of
water, wastewater, stormwater drainage, and structural fire
protection needs or deficiencies. SB 244 also prohibits a
LAFCO, in specified circumstances, from approving an annexation
to a city of any territory greater than 10 acres where there
exists a disadvantaged inhabited community that is contiguous to
the area of proposed annexation, unless the annexation
application includes a separate application to annex the
disadvantaged unincorporated inhabited territory to the subject
city.
Related legislation . AB 1521 (Fox) changes the way that growth
in the vehicle license fee adjustment amount is calculated to
include the growth of assessed valuation including in an annexed
area.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/20/14)
California Association of Local Formation Commissions
California Special Districts Association
City of Rancho Cordova
League of California Cities
OPPOSITION : (Verified 8/20/14)
California Taxpayers Association
ARGUMENTS IN SUPPORT : The author notes that, "According to
U.S. [United States] Census data, approximately 1 million of
Californians live in disadvantaged, unincorporated communities.
Residents of these areas often live without the basic features
of a safe and healthy environment, such as access to clean
water, sewage lines, storm drains, streetlights, sidewalks, and
safe housing. These communities are systematically underserved
in the overall allocation of public resources and are frequently
left out of local planning processes.
"To address infrastructure deficits in disadvantaged
unincorporated communities, SB 244 (Wolk, 2011) requires cities
and counties to identify and include these communities in their
long-range planning. LAFCOs are prohibited from approving
specific annexations unless the contiguous disadvantaged
unincorporated community is also annexed. Local governments
currently lack financial tools necessary to fund the
infrastructure upgrades that are necessary when cities annex
these communities.
"SB 614 allows local agencies to include tax-increment financing
as part of their plan to annex disadvantaged unincorporated
communities. By agreeing to form a special district as part of
the annexation process, local agencies may use tax-increment
financing to improve or upgrade structures, roads, sewer or
water facilitates, or other infrastructure to serve the
community."
ARGUMENTS IN OPPOSITION : The California Taxpayers
Association, in opposition to this bill, argues that this bill
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"creates a backdoor procedure to use tax increment financing
without the creation of an infrastructure financing district,
which requires a vote of the people. Should local governments
wish to fund new development with tax increment financing, they
can already do so by creating an infrastructure financing
district with approval from their constituents." Supporters of
this bill argue that the CKH Act already includes requirements
that will provide for a public process and voter involvement.
The Legislature may wish to consider if that is sufficient,
absent separate voter requirements pursuant to IFD law.
ASSEMBLY FLOOR : 55-23, 8/20/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez,
Chesbro, Cooley, Dababneh, Daly, Dickinson, Eggman, Fong,
Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hall,
Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal,
Medina, Mullin, Muratsuchi, Nazarian, Pan, Perea, John A.
Pérez, V. Manuel Pérez, Quirk, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Waldron, Weber,
Wieckowski, Williams, Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Conway, Dahle, Donnelly, Fox,
Beth Gaines, Gorell, Hagman, Harkey, Jones, Linder, Logue,
Maienschein, Mansoor, Melendez, Nestande, Olsen, Patterson,
Quirk-Silva, Wagner, Wilk
NO VOTE RECORDED: Grove, Vacancy
AB:k 8/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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