BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 628 HEARING: 4/17/13
AUTHOR: Beall FISCAL: No
VERSION: 4/10/13 TAX LEVY: No
CONSULTANT: Lui
INFRASTRUCTURE FINANCING DISTRICTS
[REVISED]
Makes it easier for cities and counties to use
infrastructure financing districts for specified projects.
Background and Existing Law
Cities and counties can 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. To repay the bonds, an
IFD diverts property tax increment revenues from local
governments -- but not schools -- for 30 years (SB 308,
Seymour, 1990).
To form an IFD, the city or county must develop an
infrastructure plan, send copies to every landowner,
consult with other local governments, and hold a public
hearing. Every local agency that will contribute property
tax increment revenue to the IFD must approve the plan.
Once the other local officials approve, the city or county
must then get the voters' approval.
As defined in state law, a transit priority project
contains at least 50% residential use, provides a minimum
net density of 20 dwelling units per acre, and is within -
mile of a major transit stop or a high-quality transit
corridor.
Federal, state, and local agencies have invested billions
of dollars in mass transit projects and programs. As
public officials continue to search for ways to raise the
capital needed to invest in public works projects,
transit-oriented development competes with other local
funding priorities. The San Francisco Bay Area Rapid
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Transit District (BART) wants to encourage more intense
development around its stations by linking transit
development with property tax increment financing.
Proposed Law
Senate Bill 628 authorizes local officials to use an
infrastructure financing district to finance any project
that implements a transit priority project, regional
transportation plan, or other project that implements or is
consistent with a sustainable communities strategy or
alternative planning strategy.
I. Voter approval for specified projects . Currently,
state law requires local officials, after preparing an
infrastructure financing plan, to obtain 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.
If an IFD proposed to implement a transit priority project
(TPP), regional transportation plan, or any other project
consistent with a sustainable communities strategy or
alternative planning strategy, Senate Bill 628 removes the
2/3-vote requirement to form the IFD, the 2/3-vote
requirement to issue bonds, and the majority vote to set
the appropriations limit.
II. Affordable housing . If an IFD constructs any housing,
existing law requires that at least 20% of those units be
affordable to persons and families of low- and
moderate-income, as defined in state law. If any dwelling
units are proposed to be removed or destroyed, the IFD
must, within four years of the removal or destruction,
require the construction or rehabilitation of an equal
number of replacement units, for rental or sale, in the
district's territory, to persons or families of low- or
moderate-income. The IFD must also provide relocation
assistance and ensure that there are suitable housing
units, at comparable costs, for persons or families of low-
or moderate-income before removing or destroying those
units.
SB 628 -- 4/10/13 -- Page 3
Senate Bill 628 requires that an IFD that finances any
project that implements a TPP, regional transportation
plan, or any other project consistent with a sustainable
communities strategy or alternative planning strategy, at
least 20% of all property tax increment revenues must be
used to increase, improve, and preserve housing that is
affordable and occupied by moderate-, low-, lower-, very
low-, and extremely-low income households.
III. State's goals . The Sustainable Communities and
Climate Protection Act requires:
The Air Resources Board to set regional targets for
automobiles and light trucks' greenhouse gas emission
reductions.
A regional transportation plan to meet greenhouse
gas emission reduction targets, and the California
Transportation Commission to maintain guidelines for
travel demand models.
Cities and counties to revise their housing
elements every eight years in conjunction with the
regional transportation plans.
The sustainable communities strategy and the Global Warming
Solutions Act (AB 32, Nuñez, 2006) promote dense, walkable
communities, mass transit, and greenhouse gas emission
reductions. Senate Bill 628 makes legislative findings and
declarations to support its purpose in helping the state
meet its climate, and energy conservation plans.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Urban planners, transit agencies,
and many local governments tout transit-oriented
development (TOD) as a tool to address the adverse effects
of urbanization: traffic gridlock, loss of open space, and
increased environmental pollution. Local agencies can
create mixed-use communities, blending residential and
commercial properties, by clustering development around
mass transit hubs. The public sector invests in transit as
part of the wider strategy to improve air quality, decrease
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traffic congestion, and promote compact development. When
communities encourage transit agencies to build expensive
systems, but fail to provide mechanisms to finance them or
to finance the dense development that accompanies transit
stations, there are social, physical, and fiscal losses.
Some communities may not encourage dense development around
transit because of the lack of incentives to pay for the
public works that support new residents and businesses. SB
628 gives local officials a tailored fiscal tool to spur
private investors and developers to invest in TODs.
Legislators and voters who have elected their local
representatives should let local officials do their job:
setting local priorities for spending local revenues.
2. Not fiscally feasible ? Diverting 20% of an IFD's
property tax increment revenues won't produce much money
for affordable housing. Statewide, cities get 10[ out of
each property tax dollar, counties get 17[, districts get
20[, and schools get 53[. If this statewide allocation
existed in a hypothetical city that formed an IFD, but
couldn't get the county and special districts to allow the
diversion of their property tax increment revenues, then
the city would get just 10% of the incremental dollars.
The property tax bill on a new $1 million improvement would
be $10,000 and the IFD would get the city's share of
$1,000. If the IFD had to set aside 20% for affordable
housing, that would produce $200 a year; the IFD's other
$800 a year would pay off the IFD's bonds. Will requiring
a 20% set-aside for affordable housing make a city or
county less likely to use an IFD to promote transit
priority projects or projects consistent with sustainable
communities strategies?
3. Timing is of the essence . Albert Einstein once said,
"The only reason for time is so that everything doesn't
happen at once." In 2011, when Governor Brown proposed to
eliminate redevelopment, the world of IFDs and
redevelopment intertwined. In response, Legislators turned
to IFDs as a possible alternative financing mechanism for
local development. However, the Governor vetoed several
IFD measures, saying that "expanding the scope of
infrastructure financing districts is premature and [could]
cause cities to focus their efforts on using the new tools
provided by the measure instead of winding down
redevelopment." Successor agencies continue to wind down
redevelopment.
SB 628 -- 4/10/13 -- Page 5
4. IFDs vs. Redevelopment . Absent redevelopment, many
local officials are searching for tools to finance and
attract development, but IFDs are very different than
former redevelopment agencies. When former redevelopment
agencies diverted property tax increment revenues from
schools, the State General Fund backfilled schools,
indirectly creating a state subsidy for redevelopment
projects. Unlike redevelopment agencies, infrastructure
financing districts don't touch schools' share of tax
increment and require opt-in of participating local
agencies. By diverting property tax increment revenues
only from those other local governments that willingly
allocate a share of their revenues to a project, IFDs rely
on locally generated revenues, not a State General Fund
subsidy. IFDs aren't like former redevelopment agencies
because they were created for a different purpose and
granted different powers.
5. Try, try again . SB 628 is not the first attempt to
encourage transit village planning. SB 628 is similar to
AB 1221 (Ma, 2008), AB 338 (Ma, 2009), and AB 987 (Ma,
2010), and AB 485 (Ma, 2011).
AB 485 (2011) would have waived the
voter-approval requirements for forming an IFD that
funded transit village developments. The bill was
gut and amended into a different form on the Senate
Floor.
AB 987 (2010) expanded the maximum size of a
transit village development district from the total
area within -mile of the exterior boundary of the
parcel on which a transit station is located to the
total area within -mile of a transit station's main
entrance. Governor Schwarzenegger signed AB 987.
AB 338 (2009) would have waived the
voter-approval requirements for setting up
Infrastructure Financing Districts and issuing IFD
bonds. Governor Schwarzenegger vetoed the measure
because it "would undermine the rights of voters to
approve or reject proposals to redirect their tax
dollars and incur public debt." Governor
Schwarzenegger highlighted that because IFDs don't
need to find "blight" like RDAs do, "elections are
the sole basis of public input and fiscal discipline
in the creation of an IFD."
AB 1221 (Ma, 2008) would have linked IFDs to
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transit village development and expanded the
planning area. Governor Schwarzenegger vetoed AB
1221, citing the delayed budget and stating that he
didn't consider the bill to be a statewide priority.
6. Related bills . SB 628 is not the only bill seeking to
update the IFD financing mechanism.
SB 33 (Wolk) waives the voter-approval requirements
to create an IFD, extends an IFD's life term, requires
annual, independent audits, and authorizes an IFD's
use for projects in disadvantaged communities,
hazardous cleanup, environmental mitigation, and flood
protection. It is on the Senate Floor.
AB 229 (J. Pérez) creates Infrastructure and
Revitalization Financing Districts and authorizes a
city, county, city and county, or JPA acting as the
military base reuse authority -- 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 -- to
finance projects like flood management, environmental
mitigation, and hazardous cleanup. It is set to be
heard on April 17 in the Assembly Local Government
Committee.
AB 243 (Dickinson) creates Infrastructure and
Revitalization Financing Districts (IRFD) and reduces
the 2/3-voter thresholds to 55% to form an IRFD and
issue bonds. It is set to be heard on April 17 in the
Assembly Local Government Committee.
AB 662 (Atkins) repeals the prohibition of an IFD
on a former redevelopment area. It is set to be heard
on April 17 in the Assembly Local Government
Committee.
AB 690 (Campos) establishes a Jobs and
Infrastructure Financing Districts (JIDs) in every
city and authorizes the issuance of revenue bonds to
finance specified projects. The bill eliminates
existing IFD law's replacement housing provisions. It
also requires a job creation plan that ensures that
for every $1 million invested, 10 prevailing wage jobs
are created. It is set to be heard on April 17 in the
Assembly Local Government Committee.
7. Double-referral . The Senate Rules Committee ordered a
double-referral of
SB 628, first to the Senate Governance and Finance
SB 628 -- 4/10/13 -- Page 7
Committee, which hears bills related to local governments'
powers, and then to the Senate Transportation and Housing
Committee, which hears bill related to transportation
policy.
Support and Opposition (4/11/13)
Support : San Francisco Bay Area Rapid Transit District;
California Transit Association; LeadingAge California.
Opposition : California Association of Realtors; California
Taxpayers Association; Howard Jarvis Taxpayers Association.