California Legislature—2015–16 Regular Session

Assembly Bill No. 2841

Introduced by Assembly Member Travis Allen

February 19, 2016

An act to add Chapter 4 (commencing with Section 1719.1) to Part 1 of Division 6 of the Harbors and Navigation Code, relating to seaport infrastructure financing.

LEGISLATIVE COUNSEL’S DIGEST

AB 2841, as introduced, Travis Allen. State infrastructure financing for seaports.

Existing law authorizes port or harbor infrastructure projects to be financed by an enhanced infrastructure financing district. Existing law requires that a harbor agency prepare an infrastructure financing plan for a seaport infrastructure financing district, defined as an enhanced infrastructure financing district that finances port or harbor infrastructure, and requires that the plan meet specified requirements. Existing law authorizes an enhanced infrastructure financing district to fund infrastructure projects through tax increment financing, pursuant to the infrastructure financing plan and the agreement of affected taxing entities.

Existing law, the Bergeson-Peace Infrastructure and Economic Development Bank Act establishes the Infrastructure and Economic Development Bank within the Governor’s Office of Business and Economic Development, and requires the bank to establish criteria, priorities, and guidelines for the selection of projects to receive financial assistance from the bank, including, but not limited to, any combination of grants, loans, and the proceeds of bonds issued by the bank.

This bill would authorize a harbor agency, as defined, to prepare a proposed financing plan to be submitted to the bank to finance infrastructure development or equipment, and would require the plan to include specified information including the state fiscal and economic impacts, including increased jobs and tax revenues and state fund savings, estimated to result from the proposed project. The bill would require the bank to consider a project proposal and to approve the financing of it if the project meets specified requirements, including that the State Lands Commission has verified that the proposed project is consistent with the state tidelands trust and any conditions of a grant of trust lands to a harbor agency and a finding by the bank that the project is more likely than not to result in the estimated state fiscal and economic impacts. The bill would limit the amount of financing provided, as specified, and would authorize the bank to provide the financing only upon an appropriation of funds for that purpose.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

The Legislature finds and declares all of the
following:

(a) The primary purpose of this act is to encourage the
development and growth of, and to encourage and help finance
the further investment in, and subsequent increased use of,
California’s public port facilities and the introduction of
zero-emission and near-zero-emission equipment and supporting
infrastructure at California’s public port facilities.

(b) The statewide interest in the need to continually invest in
California’s public port infrastructure is predicated on the fact that
California’s public seaports and the international trade that they
facilitate are critical components of the state economy, directly or
indirectly employing millions of Californians, contributing billions
of dollars in economic activity, and generating significant local
and state tax revenues as a result of this activity. As such, our ports
must be given the ability to successfully compete for cargo volume,
attract new trade, and continue to grow.

(c) The development, improvement, expansion, and maintenance
of the state’s public ports and port infrastructure facilities, and the
utilization of public port facilities for the export and import of
cargo to or from distribution, manufacturing, fabrication, assembly,
processing, transloading, and warehousing sites in California are
matters of statewide significance that are essential to the growth
of the state’s economic well-being and the ability of those
businesses and workers associated with trade-related industries to
continue to compete cost-effectively on a regional, national, and
global scale.

(d) In addition to the vast matters of statewide significance in
the economic impacts derived from all of California’s public ports,
the state’s interest in the reduction of mobile source emissions
from the freight sector and supply chain, including those emissions
from sources that operate at ports, are also matters of statewide
significance. In consideration of these environmental matters, the
state has a paramount interest in creating incentives that will
precipitate early investment by the industry in the newest
generation of zero-emission and near-zero-emission equipment
and supporting infrastructure at marine terminals and port facilities.
Due to the costs of those investments over and above the use of
traditional equipment, this is an infrastructure need that cannot be
met by private investment alone, and therefore public financing
mechanisms and the implementation of public-private partnerships
are required to support this new investment.

SEC. 2.  

Chapter 4 (commencing with Section 1719.1) is added
to Part 1 of Division 6 of the Harbors and Navigation Code, to
read:

 

Chapter  4. State Infrastructure Financing for Seaports

 

1719.1.  

(a) The Legislature finds and declares all of the
following:

(1) It is equitable and in the public interest to provide alternative
procedures for financing public works and services needed to
support new commercial, environmental, and industrial
development in the state’s seaports and harbors that would generate
significant new employment opportunities and economic
development, increase state and local tax revenues, enhance seaport
competitiveness in the international trade community, reduce
congestion and delay in the supply chain, and result in improved
environmental quality.

(2) Except as authorized in this part, seaports and harbors in
California generally do not levy or expend any funds generated
by local taxes, as most of their operations are funded directly
through fees, tariffs, leases, and other revenue the seaports and
harbors generate from their users and tenants, in addition to the
occasional state or federal grant.

(3) There is significant opportunity for development and
investment in our state’s seaports and harbors and in their transition
to operations that are characterized by the use of new zero-emission
and near-zero-emission equipment and supporting infrastructure.
However, the state lacks the public infrastructure funding necessary
to support all of the new development and investment that are
demanded.

(4) In addition to a lack of public infrastructure funding, our
state’s waterfront has infrastructure and environmental needs that
cannot be met by private investment alone, and therefore creative
public financing mechanisms need to be developed. The absence
of practical and equitable methods for state financing of public
works, like the development of seaport infrastructure that is a
matter of statewide significance, leads to a declining standard of
seaport infrastructure, a failure to construct new public structures
and facilities needed to support new commercial and industrial
development in our seaports and harbors, increased congestion,
and a lack of tools to facilitate environmental improvements,
including the transition to zero-emission and near-zero-emission
equipment and supporting infrastructure.

(5) The seaports and harbors of California are valuable assets
of the state that provide special maritime, navigational, recreational,
cultural, and historical benefits to the people of the state and the
management and development of these seaports and harbors may
not be subjugated. This in turn means that the management of the
financial health, land use planning, waterfront assets, and
environmental infrastructure in all of California’s public ports are
matters of statewide significance. This chapter will help to
remediate these conditions that will otherwise result in
underinvestment in the state’s seaports and harbors by providing
a new financing mechanism, through the use of leveraged future
tax increment revenues, to facilitate matters of statewide
importance and further the purposes of the public trust.

(b) The Legislature further finds and declares all of the
following:

(1) The ability to capture future tax increment revenues to
finance needed seaport and harbor infrastructure projects will
provide direct benefits to the state. When harbor agencies are better
funded to further the objectives of the state, the state’s seaports
and harbors, and the public trust and enjoyment of those trust lands
by the people of the state, the state’s economy and environment
will also be improved.

(2) A seaport frequently generates large state tax benefits
directly and indirectly as a result of the economic activity that is
generated from its maritime operations and other economic
development efforts.

(3) Investments by a seaport and its industry partners in
environmental improvements generate long-term state benefits
and reduction in public costs with respect to the reduction of
greenhouse gases, criteria pollutants, projected public health
impacts, and overall improvements in the quality of life of
Californians.

(4) The potential for increases in state tax revenues and
decreases in costs to the state that will result from the improvement
of seaport and harbor infrastructure and investment in
environmental improvements should be incentivized and leveraged
through state financing, whenever possible, which supports the
state’s significant interest in the successful operation of its seaports
and harbors.

1719.2  

It is the intent of the Legislature that seaport
infrastructure financing be developed pursuant to this chapter in
a manner that improves public port assets, infrastructure, and
operations and achieves the public goals of improving the state’s
waterborne commerce, enhancing economic prosperity, and
financing the costs of environmental mitigation and improvement.

1719.3.  

For purposes of this chapter, the following terms have
the following meanings:

(a) “Bank” means the Infrastructure and Economic Development
Bank, as established pursuant to Section 63021 of the Government
Code.

(b) “Project” has the same meaning as defined in Section 63010
of the Government Code.

1719.4.  

A harbor agency may prepare a proposed financing
plan for a project to be submitted to the bank as provided in Section
63041 of the Government Code, for consideration pursuant to the
terms of this chapter.

1719.5.  

In addition to the requirements of Section 63041 of
the Government Code, a proposed financing plan for a project
submitted to the bank pursuant to Section 1719.4 shall include all
of the following information:

(a) The infrastructure development or equipment purchase to
be financed through the proceeds of the proposed financing.

(b) (1) If the harbor agency is acting on granted lands, a finding
that the project to be financed is consistent with the state tidelands
trust and the terms and conditions of any grant of trust lands to the
harbor agency. A copy of this finding shall be forwarded by the
harbor agency to the State Lands Commission.

(2) If the harbor agency was formed pursuant to this code, a
finding that the project to be financed is consistent with its charter
and the statewide interests in the operation of harbors and ports.

(c) The state fiscal and economic impacts forecast required by
Section 1719.6.

1719.6.  

(a) A harbor agency shall adopt a resolution setting
forth estimates of the state fiscal and economic impacts that will
result from the project, including, but not be limited to, the
following:

(1) The total direct and indirect state tax revenues generated by
the impact of the infrastructure development or equipment purchase
to be financed through the bank.

(2) The total direct and indirect state general fund and special
fund expenditure savings generated by the impact of the
infrastructure development or equipment purchase to be financed
through the bank.

(3) The total local tax and user fee revenues generated by the
infrastructure development or equipment purchase to be financed
through the bank.

(4) The total jobs created by the infrastructure development or
equipment purchase to be financed through the bank, including
the specific impact of the financing on the employment of
California residents.

(b) (1) Prior to making findings upon which the resolution may
be based, a harbor agency shall obtain an economic impact report
that shall be completed by a third-party economist, based on a
published economic impact methodology. The published economic
impact methodology shall be incorporated into the findings of a
peer review conducted pursuant to paragraph (2), and shall be
adopted in a public meeting of the harbor agency with a finding
that the guidelines and methodology were developed in a manner
consistent with this section.

(2) The economic impact report and the economic methodology
to be adopted under this subdivision shall be peer reviewed and
evaluated by an independent party that is without any financial
association with the third party that completed the economic impact
report guidelines and economic methodology. The peer review
shall evaluate the adequacy of the guidelines and make specific
recommendations regarding the methodologies, which should be
incorporated into the peer review by the harbor agency upon
adoption.

(3) A harbor agency may adopt guidelines for study preparation
previously developed by a third party for another harbor agency
under this section as long as the final guidelines are adopted
pursuant to paragraph (1).

(c) This section shall not require a harbor agency to prepare a
report or adopt a resolution except at its discretion prior to
submission of a proposed financing plan for a project.

1719.7.  

(a) Upon receipt of a proposed financing plan for a
project, the bank shall consider the project and approve, require a
modification of, or deny the proposed financing.

(b) When considering approval of financing for a project
submitted pursuant to this chapter, the bank shall do both of the
following:

(1) Review the proposed financing plan for the project prepared
by the harbor agency pursuant to Section 1719.4.

(2) Review the methodology and projections prepared for or by
the harbor agency pursuant to Section 1719.6.

1719.8.  

The bank shall approve financing for a project if, after
conducting its own evaluation of a harbor agency’s methodology,
it can make the finding that the execution of the project is more
likely than not to result in the outcomes projected by the harbor
agency pursuant to Section 1719.6.

1719.9.  

The bank shall not approve financing for a project if
the State Lands Commission objects to a finding made by a harbor
agency pursuant to paragraph (1) of subdivision (b) of Section
1719.5.

1719.10.  

Once financing for a project is approved, the bank
shall submit a request to the Assembly Budget Committee and the
Senate Committee on Budget and Fiscal Review for an
appropriation in the following fiscal year in an amount equal to or
less than the total estimated state tax revenues and state general
fund savings approved by the bank pursuant to Section 1719.8.

1719.11.  

The financing of the project shall be underwritten by
the bank only upon an appropriation by the Legislature of funds
for that purpose.

1719.12.  

The harbor agency shall reimburse the administrative
expenses or direct operating expenses that are incurred by the bank
as the direct result of the consideration, review, and processing of
the proposed financing of a project pursuant to this chapter.

1719.13.  

To the extent that any provision of this chapter
conflicts with any provision of Chapter 2.99 (commencing with
Section 53398.50) of Part 1 of Division 2 of Title 5 of the
Government Code with respect to a seaport infrastructure financing
district, this chapter shall prevail.

1719.14.  

(a) All permanent fixtures and capital improvements
to the real property of a harbor agency that administers public trust
tidelands financed pursuant to this chapter shall be a trust asset
once completed. This does not apply to fixtures and improvements
otherwise agreed as nonpermanent in a lease between the harbor
agency and a private tenant.

(b) Nothing in this chapter shall prohibit a harbor agency from
submitting a proposed financing plan for a project on behalf of a
tenant or for the purchase of equipment to be owned and operated
by a tenant, if the assets are owned, maintained, and used
exclusively in California and, upon the cessation of the lease,
ownership and control of the assets shall revert to the harbor agency
on terms enforceable by contract between the harbor agency and
the tenant.