BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 628
                                                                  Page  1

          Date of Hearing:   July 3, 2013

               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
                                   Ed Chau, Chair
                     SB 628 (Beall) - As Amended:  June 17, 2013

           SENATE VOTE  :   24-11
           
          SUBJECT  :   Infrastructure financing: transit priority projects.

           SUMMARY  :   Authorizes a city or a county to create an  
          infrastructure financing district (IFD) to implement a transit  
          priority project without having to hold an election and requires  
          the city or county to use 25% of the resulting revenues for  
          affordable housing.  Specifically,  this bill  :   

          1)Allows an IFD to finance any project that implements a transit  
            priority project.

          2)Provides that for an IFD proposed to implement a transit  
            priority project, an election is not required to form the IFD,  
            issue bonds, or establish or change the appropriations limit  
            pursuant to existing IFD law.

          3)Requires that at least 25% of all revenues derived from the  
            property tax increment of the IFD be used for the purpose of  
            increasing, improving, and preserving the supply of lower- and  
            moderate-income housing available in the district at an  
            affordable housing cost, and occupied by persons and families  
            of low or moderate income, lower-income households, very low-  
            income households, and extremely low-income households.

          4)Requires that the provisions of the bill be implemented in  
            accordance with the section of Community Redevelopment Law  
            (CRL) that required a 20% set-aside from tax increment  
            proceeds to increase, improve, and preserve the community's  
            supply of affordable housing, and all other applicable  
            affordable housing provisions of the CRL, to the extent that  
            those provisions are not inconsistent with the provisions of  
            this bill.

          5)Allows an IFD to provide for the receipt of tax increment  
            funds for purposes of a project subject to the bill's  
            provisions, provided that the local government with land use  
            jurisdiction has adopted an ordinance that requires the  








                                                                  SB 628
                                                                  Page  2

            replacement of dwelling units that house extremely low-, very  
            low-, or low-income households, upon their removal from the  
            district, as specified, within two years of their  
            displacement.

          6)Makes findings and declarations related to the need for  
            California local governments to have a sustainable funding  
            source to accommodate transportation and land use planning and  
            to develop projects that are consistent with the state's  
            climate, air quality, and energy conservation goals, and for  
            the need to expedite the process for local governments to  
            create IFDs to implement transit priority projects.

          7)Declares the intent of the Legislature that the development of  
            transit priority projects throughout the state be  
            environmentally conscious and sustainable, and that related  
            construction meet or exceed the requirements of the California  
            Green Building Standards Code.

           EXISTING LAW  

          1)Authorizes cities and counties to create IFDs and issue bonds  
            to pay for community-scale public works, including highways,  
            transit facilities, water systems, sewer projects, flood  
            control, child care facilities, libraries, parks, and solid  
            waste facilities (Government Code Section 53395, et seq.).

          2)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  
            (Government Code Section 53395.14).

          3)Requires a city or county to develop an infrastructure plan,  
            send copies to every landowner, consult with other local  
            governments, and hold a public hearing in order to form an IFD  
            (Government Code Section 53395.10, et seq).

          4)Requires local officials, when forming an IFD, to find that  
            its public facilities are of communitywide significance and  
            provide significant benefits to an area larger than the IFD  
            (Government Code Section 53395.3).

          5)Requires every local agency that will contribute its property  
            tax increment revenue to the IFD to approve the plan  
            (Government Code Section 53395.19).








                                                                  SB 628
                                                                  Page  3


          6)Requires two-thirds voter approval for the formation of an IFD  
            and for the issuance of bonds (Government Code Sections  
            53395.24 and 53397.6).

          7)Requires majority voter approval for setting an IFD's  
            appropriations limits.

          8)Specifies that public agencies that own land within a proposed  
            IFD may not vote on issues regarding the district (Government  
            Code Section 53395.1).

          9)Authorizes IFDs to issue a variety of debt instruments,  
            including bonds, certificates of participation, leases, and  
            loans (Government Code Section 53395.1).

          10)Requires any IFD that constructs dwelling units to set aside  
            not less than 20% of those units to increase and improve the  
            community's supply of low- and moderate-income housing  
            available at an affordable housing cost to persons and  
            families of low and moderate income (Government Code Section  
            53395.3).

          11)Requires the city or county to do all of the following if any  
            dwelling units are proposed to be removed or destroyed in the  
            course of private development or public works construction  
            within the area of the IFD:

             a)   Within four years of removal, cause or require the  
               construction or rehabilitation, for rental or sale to  
               persons or families of low or moderate income, of an equal  
               number of replacement dwelling units at affordable housing  
               cost within the IFD if the dwelling units removed were  
               inhabited by persons or families of low or moderate income.

             b)   Within four years of removal, cause or require the  
               construction or rehabilitation, for rental or sale to  
               persons of low or moderate income, of at least 20% of the  
               total dwelling units removed at affordable housing cost  
               within the IFD if the dwelling units removed or destroyed  
               were not inhabited by persons of low or moderate income.

             c)   Provide relocation assistance to persons displaced by  
               any public or private development occurring within the IFD.









                                                                  SB 628
                                                                  Page  4

             d)   Ensure that removal of any dwelling units occupied by  
               persons or families of low or moderate income not take  
               place until there are suitable housing units, at comparable  
               cost to the units from which the persons or families were  
               displaced, available and ready for occupancy by the  
               residents of the units at the time of their displacement. 

            (Government Code Section 53395.5)

          12)Defines a transit priority project to a) contain at least 50%  
            residential use, based on total building square footage and,  
            if the project contains between 26% and 50% nonresidential  
            uses, a floor area ratio of not less than 0.75; b) provide a  
            minimum net density of at least 20 dwelling units per acre;  
            and, c) be within one-half mile of a major transit stop or  
            high-quality transit corridor included in a regional  
            transportation plan (Public Resources Code 21155).

          13)Defines "persons and families of low or moderate income" to  
            mean persons and families whose income does not exceed 120% of  
            area median income, adjusted for family size by the Department  
            of Housing and Community Development (HCD) in accordance with  
            adjustment factors adopted and amended from time to time by  
            the United States Department of Housing and Urban Development  
            pursuant to Section 8 of the United States Housing Act of 1937  
            (Health and Safety Code Section 50093).

          14)Defines "lower income households" to mean persons and  
            families whose income does not exceed the qualifying limits  
            for lower-income families as established and amended from time  
            to time pursuant to Section 8 of the United States Housing Act  
            of 1937.  The limits shall be published by HCD in the  
            California Code of Regulations as soon as possible after  
            adoption by the Secretary of Housing and Urban Development  
            (Health and Safety Code Section 50079.5).

          15)Defines "extremely low income households" to mean persons and  
            families whose incomes do not exceed the qualifying limits for  
            extremely low-income families as established and amended from  
            time to time by the Secretary of Housing and Urban Development  
            and defined in Section 5.603(b) of Title 24 of the Code of  
            Federal Regulations (Health and Safety Code Section 50106).

           FISCAL EFFECT  :  None









                                                                  SB 628
                                                                  Page  5

           COMMENTS  :   

           Background:  Existing law authorizes a city or county to create  
          an Infrastructure Financing District (IFD) and through the IFD  
          issue bonds to pay for community-scale public works, including  
          transit facilities, highways, water systems, sewer projects,  
          flood control, child care facilities, libraries, parks, and  
          solid waste facilities. The city or county repays the bonds by  
          capturing a portion of the increase in property taxes that is  
          generated within the IFD, generally referred to as the tax  
          increment. 

          Under an IFD, tax increment is diverted for 30 years from the  
          host city or county and other local governments, excluding  
          schools, but only if the other local governments agree to the  
          diversion.  Each IFD must have a detailed infrastructure  
          financing plan, and the voters of the jurisdiction must approve  
          with a two-thirds vote the formation of the district and the  
          issuance of bonds and with a majority vote set a limit as to the  
          funds it will appropriate.

          With respect to housing, existing IFD law requires that:

           If the IFD removes or destroys any housing units occupied by  
            low- or moderate-income persons, then the IFD must within four  
            years ensure the construction or rehabilitation of an equal  
            number of replacement units in the district's territory for  
            persons of low- or moderate-income.  

           If an IFD removes or destroys any affordable housing units  
            that are not occupied by persons of low or moderate incomes,  
            then the IFD must within four years ensure the construction or  
            rehabilitation of replacement units equal to 20% of the number  
            it destroyed.  

          The IFD must also provide relocation assistance and ensure that  
          there are suitable replacement housing units at comparable costs  
          for persons or families of low or moderate income before  
          removing or destroying those units. 

          SB 375 (Steinberg), Chapter 728, Statutes of 2008, required the  
          Air Resources Board (ARB), by September 30, 2010, to provide  
          each region that has a metropolitan planning organization (MPO)  
          with a greenhouse gas emission reduction target for the  
          automobile and light truck sector for 2020 and 2035,  








                                                                  SB 628
                                                                  Page  6

          respectively.  Each MPO, in turn, must include within its  
          regional transportation plan a sustainable communities strategy  
          (SCS) designed to achieve the ARB targets for greenhouse gas  
          emission reduction.  Each MPO must submit its SCS to ARB for  
          review. ARB must accept or reject the MPO's determination that  
          the SCS submitted would, if implemented, achieve the greenhouse  
          gas emission reduction targets.

          SB 375 also created and defines a "transit priority project" as  
          one that:

           Is located within one-half mile of an existing or planned  
            major transit stop or high-quality transit corridor included  
            in the regional transportation plans;
           Is consistent with the general plan land use designation,  
            density, building intensity, and applicable policies specified  
            for the project area in its SCS, for which ARB has accepted an  
            MPO's determination that the SCS would, if implemented,  
            achieve the greenhouse gas emission reduction targets;
           Contains at least 50% residential use, based on total building  
            square footage and, if the project contains between 26% and  
            50% nonresidential uses, a floor area ratio of not less than  
            0.75; and
           Provides a minimum net density of at least 20 dwelling units  
            per acre.
           
          Purpose of the bill:  SB 628 allows a city or county to form an  
          IFD to implement a transit priority project without an election.  
          The bill also requires that 25% of revenues from such IFDs be  
          used to increase, improve, and preserve the supply of affordable  
          housing within the territory of the IFD. Finally, the bill  
          requires IFDs formed to implement transit priority projects to  
          provide any required replacement housing within two years,  
          rather than the four years that is required under current IFD  
          law.

           Arguments in support:  According to the author's office,  
          increasingly transit-oriented projects are helping communities  
          deal with the negative impacts of growth and sprawl, such as  
          growing traffic gridlock, increased commute times and pollution.  
           These projects have been shown to be one of the most  
          cost-effective ways to reduce the emission of greenhouse gases.   
          The author's office notes that in essentially every  
          transit-oriented project there are critical components that have  
          very little or no source of funds, such as place making features  








                                                                  SB 628
                                                                  Page  7

          (pedestrian plazas, pocket parks, community facilities, etc.),  
          access improvements (additional bus access services, bicycle  
          facilities, parking, etc.) and affordable housing.  The sponsor,  
          BART, has completed a number of transit-oriented projects around  
          its stations in the San Francisco Bay Area.

          Proponents assert that this bill could be an important tool for  
          local jurisdictions as they develop sustainable communities'  
          strategies pursuant to SB 375, and related transit priority  
          projects.  The bill will assist in critical place-making  
          development around fixed rail stations, bus centers, and  
          high-speed rail stations, improving the livability of local  
          communities.

           Arguments in opposition:  The California Taxpayers Association  
          (CalTax) opposes this bill because it repeals the vote of the  
          people to establish an IFD and for that IFD to issue bonds.   
          CalTax points out that the California Constitution requires  
          two-thirds voter approval before a city or county can issue  
          long-term debt backed by general purpose revenues.  Proposition  
          13 added this requirement to the constitution to protect  
          property owners and to ensure that local spending is carefully  
          prioritized. CalTax further asserts that this bill creates a  
          funding gap for critical government services and drives the  
          demand for increasing local taxes. Rather than utilizing tax  
          increment financing, local government should use existing tools  
          to provide economic development in our communities.  

          Proposed amendments:  

          1. On page 4, starting on line 22, make the following change to  
          improve clarity:

               (c) (1) At least 25 percent of all revenues derived from  
               the property tax increment under this section shall be used  
               for the purposes of increasing, improving, and preserving  
               the supply of lower and moderate-income housing available  
               in the district at an affordable housing cost, as defined  
               in Section 50052.5 of the Health and Safety Code  , and  
               occupied  Units funded pursuant to this subsection shall be  
               restricted to occupancy by persons and families of low or  
               moderate income, as defined in Section 50093 of the Health  
               and Safety Code, lower income households, as defined in  
               Section 50079.5 of the Health and Safety Code, very low  
               income households, as defined in Section 50105 of the  








                                                                  SB 628
                                                                  Page  8

               Health and Safety Code, and extremely low income  
               households, as defined in Section 50106 of the Health and  
               Safety Code.

          2. On page 5, starting on line 1, make the following change to  
          ensure that there is no net loss of affordable housing units  
          within the IFD. This language is similar to language that  
          appears in SB 1 (Steinberg):

               (d) The district may provide for the receipt of tax  
               increment funds pursuant to this chapter for, purposes of a  
               project subject to this section, provided that the local  
               government with land use jurisdiction has adopted an  
               ordinance that does both of the following:
               (1) Prohibits the number of housing units occupied by  
               extremely low, very low, and low-income households,  
               including the number of bedrooms in those units, in the  
               district at the time the district is established from being  
               reduced during the effective period of the infrastructure  
               plan.
               (2)  an ordinance that requires  Requires the replacement of  
               dwelling units that house extremely low, very low, or  
               low-income households, upon their removal from the  
               district, pursuant to subdivision (a) of Section 33413,  
               within two years of their displacement.

           Related legislation:   SB 1 (Steinberg) provides for the creation  
          of new Sustainable Communities Investment Authorities to set up  
          a new system of tax increment financing that excludes the school  
          share of property taxes and relies on consensus among the local  
          agencies, to confer new revenue authority, and to retain all the  
          other powers that redevelopment agencies possessed under state  
          law, except it limits the areas that would qualify as project  
          areas.

           Double referral  : This bill was also referred to the Local  
          Government Committee, where it passed on June 26 by a vote of 6  
          to 3.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          San Francisco Bay Area Rapid Transit District (BART) (sponsor)
          California Rural Legal Assistance Foundation








                                                                  SB 628
                                                                  Page  9

          California Transit Association
          City of Burbank
          San Francisco Bay Area Rapid Transit District
          Santa Clara Valley Transportation Authority
          Western Center on Law and Poverty
          
            Opposition 
           
          CalTax
          Howard Jarvis Taxpayers Association

           Analysis Prepared by  :    Anya Lawler / H. & C.D. / (916)  
          319-2085