BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 673 HEARING: 4/24/13
AUTHOR: DeSaulnier FISCAL: Yes
VERSION: 4/15/13 TAX LEVY: No
CONSULTANT: Lui
COST-BENEFIT ANALYSIS OF PROPOSED DEVELOPMENT PROJECTS
Requires a city or county to have a cost-benefit analysis
prepared for any proposed retail or commercial facility
that receives $1 million or more in subsidies.
Background and Existing Law
To attract vital sales tax dollars, cities and counties
compete to attract land uses that generate local revenues,
like retail centers, and resist land uses that need
expensive public services and do not raise revenues. This
fiscalization of land use distorts local land use decisions
by emphasizing sales tax revenues but discounts traffic
problems, air quality, open space, and affordable housing.
Some retailers ask local officials for subsidies as
inducements to locate in their communities. Placing fewer
demands on public services compared to the resulting sales
tax revenues, these companies ask local officials to spend
public dollars to gain more sales tax revenues. Some
companies are aggressive, playing one community off of
another, hoping to attract higher subsidies. State law
bans counties and cities from subsidizing big box retailers
or vehicle dealers to relocate within the same market area
(SB 114, Torlakson, 2003).
In efforts to promote dense, walkable communities, mass
transit, and greenhouse gas emission reductions, the
Legislature enacted the Sustainable Communities and Climate
Protection Act (SB 375, Steinberg, 2008) and the Global
Warming Solutions Act (AB 32, Nu�ez, 2006).
Many local governments rely on analyses to allocate scarce
public resources to promote economic development. A
cost-benefit analysis quantifies the cost effectiveness of
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different alternatives to see whether the benefits outweigh
the costs. A fiscal impact analysis compares a proposed
development's estimated and projected tax revenues with its
projected service demands. Although some local governments
require fiscal studies from project applicants, state law
does not require a local government to cause a project
applicant to provide a cost-benefit analysis of the
proposed development and does not specify criteria to be
included in a cost-benefit analysis.
Proposed Law
Senate Bill 673 requires a city, county, or city and
county, including a charter city, to have a cost benefit
analysis prepared before approving or disapproving a permit
for construction of a retail or other commercial facility
project estimated to receive over $1 million in subsidies.
The bill defines "subsidy" as any contribution made by the
state or local government to a project considered to be in
the interest of the public, including tax credits,
low-interest loans, state or federal grants, land donations
or acquisitions, or remediation or environmental cleanup
activity.
I. The cost-benefit analysis . SB 673 authorizes a city,
county, or city and county to prepare the cost-benefit
analysis or contract for its preparation with a private
entity, other than the permit applicant, or a public
entity. The private entity or public agency must be
qualified by education, training, and experience to conduct
cost-benefit analyses.
SB 673 requires the development project applicant to pay
the city, county, or city and county, for the costs of
preparing or contracting for the cost-benefit analysis.
SB 673 requires the cost-benefit analysis to include:
A projection of public costs, resulting from the
proposed development's construction and operation, and
the incidence of those costs;
A projection of the public revenues from the
proposed development's construction and operation, and
the incidence of those revenues;
The cost of subsidies provided by a city, county,
or city and county;
An assessment of the proposed development's
construction and operation impact on the city, county,
SB 673 -- 4/15/13 -- Page 3
or city and county's ability to implement its general
plan goals;
An assessment of whether the proposed development's
construction and operation will be consistent with
policies specified for the project area's sustainable
communities strategy or alternative planning strategy.
An assessment of whether the development would
require housing demolition, or would decrease or
negatively impact extremely low, very low, low-, or
moderate-income housing creation;
An assessment of whether the development would
destroy or demolish parks, green space, playgrounds,
child care facilities, or community centers;
An assessment on whether the development would
create adverse or positive economic impact or blight;
An assessment of whether the proposed development
would adversely impact a state transportation
facility, and the extent it would degrade the
facility's service; and ,
An assessment of any available measures to mitigate
any material adverse economic impact, as identified by
the applicant.
Senate Bill 673 contains three legislative findings and
declarations to support its purpose. The bill also
provides that the review and regulation of retail and
commercial facilities is a matter of statewide concern, so
charter cities must comply with requirements set forth in
the bill.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . State law does not require local
governments to ask a developer for a cost-benefit analysis
of a proposed project. If they do, the analysis may
contain inflated financial projections, and some local
governments may make decisions based on unreliable promises
of increased tax revenue. Often times, traffic,
open-space, and environmental impacts are given less
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consideration than potential tax proceeds. SB 673 helps
communities and local decision-makers understand the costs
and benefits of future development. In specifying that a
cost-benefit analysis should also consider impacts on
sustainable communities strategy or alternative planning
strategy policies, the bill creates a mechanism to
encourage local governments' compliance with the state's
goal to reduce greenhouse gas emissions. By providing
local officials with an independent cost-benefit analysis
for commercial and retail projects that will receive $1
million or more in subsidies, SB 673 protects taxpayer
funds and ensures that cities and counties have the
appropriate information to make informed planning
decisions.
2. Local discretion or state mandate ? Local officials can
already negotiate with a project applicant to pay for an
independent financial analysis. Cities and counties also
can adopt ordinances requiring fiscal or cost benefit
analysis for specified types of projects. Should the
Legislature impose uniform criteria on financial analyses
for all 482 cities and 58 counties, given that cities and
counties have existing authority to require the preparation
of a financial analysis in a manner that reflects local
needs?
3. Uncertainty . Almost no one disputes the wisdom of
knowing about a project's environmental effects before
local officials make a decision. That's why CEQA requires
public officials to prepare EIRs on projects that may have
significant, adverse environmental effects. But many
builders complain about CEQA and EIRs. They say that
opponents who can't convince public officials to deny
projects turn around and file lawsuits over procedural
problems. Could SB 673 increase litigation targeting the
prepared cost-benefit analysis?
4. About charter cities . The California Constitution lets
charter cities control their municipal affairs. The 120
charter cities must follow statewide laws only for issues
of statewide concern when the Legislature has fully
occupied the field. Although SB 673 inserts specific
declarations that the Legislature considers the review and
regulation of retail and commercial facilities a matter of
statewide concern, the courts -- not the Legislature --
ultimately determine what constitutes a municipal affair
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and what's an issue of statewide concern. For projects
that receive no state subsidies, what's the statewide
concern to regulate local retail and commercial facilities?
5. Related bills . SB 673 is not the first bill seeking to
require local governments to conduct analyses on specific
types of proposed developments.
SB 469 (Vargas, 2011) would have required cities
and counties to have economic impact reports on
permits for superstores. Governor Brown vetoed the
measure, citing local governments existing ability to
assess whether these projects are in a community's
best interests.
Governor Schwarzenegger vetoed SB 1056 (Alarc�n,
2004) and SB 1523 (Alarc�n, 2006), which would have
required a city or county, including a charter city,
to have an economic impact report prepared, prior to
approving a superstore development.
SB 1641 (Alarc�n, 2004) would have required a city
or county to contract with a private entity or public
agency to prepare a business impact report on a
proposed big box retail development. The bill died in
the Senate Local Government Committee.
Support and Opposition (4/18/13)
Support : Unknown.
Opposition : American Council of Engineering Companies -
California; Building Owners and Managers Association of
California; California Association for Local Economic
Development; California Building Industry Association;
California Business Properties Association; California
Chamber of Commerce; City of Vista; Construction Employers
Association; International Council of Shopping Centers;
League of California Cities; National Association of
Industrial Office Parks of California -- the Commercial
Real Estate Development Association.