BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 63 |Hearing |4/15/15 |
| | |Date: | |
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|Author: |Hall |Tax Levy: |No |
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|Version: |4/7/15 |Fiscal: |Yes |
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|Consultant|Weinberger |
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SEAPORT INFRASTRUCTURE FINANCING DISTRICTS
Authorizes cities and counties to establish Seaport
Infrastructure Financing Districts.
Background
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, IFDs can divert
property tax increment revenues, which are revenues generated
from increases in property values within the IFD above property
values in the base-year when the IFD was formed. However, IFDs
can't divert property tax increment revenues from schools (SB
308, Seymour, 1990).
Until 2011, the Community Redevelopment Law allowed local
officials to set up redevelopment agencies (RDAs), prepare and
adopt redevelopment plans, and use property tax increment
revenues to finance redevelopment activities. After state law
dissolved RDAs in 2011, local officials sought other ways to use
tax increment financing to raise the capital they need to invest
in public works projects. Last year, legislators enacted SB 628
(Beall, 2014) to allow local officials to create Enhanced
Infrastructure Financing Districts (EIFDs), which augment the
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tax increment financing powers that are available to local
government under the IFD statutes. City or county officials can
create an EIFD, which is governed by a public finance authority,
to finance public capital facilities or other specified projects
of communitywide significance that provide significant benefits
to the district or the surrounding community.
Some local officials want legislators to modify the EIFD
statutes and enact additional statutory provisions to allow
EIFDs to finance port and harbor infrastructure projects.
Proposed Law
Senate Bill 63 allows city and county officials to establish
Seaport Infrastructure Financing District (SIFDs). The bill:
Defines a SIFD as an enhanced infrastructure financing
district (EIFD) that finances port or harbor
infrastructure pursuant to specified statutes; and,
Declares that the statutes governing EIFDs also apply to
SIFDs, except that statutes enacted by the bill with
respect to SIFDs prevail if they conflict with any
provision of the EIFD statutes.
State law enumerates 15 categories of public capital projects
that fall within the definition of the types of projects that an
EIFD can finance. Senate Bill 63:
Adds "port or harbor infrastructure" to the list of
public capital facilities that an EIFD can finance.
Expands the statutory definition of "port or harbor
infrastructure" to include any capital improvement that
improves environmental quality, if the improvement's
primary or predominant use directly benefits a port or
harbor.
State law requires a city or county to begin the process of
forming an EIFD by adopting a resolution of intention to
establish an EIFD. After adopting the resolution of intention,
the city or county must provide public notice, as specified, and
direct an official to prepare an infrastructure financing plan.
Senate Bill 63 directs that a city or county must direct a
harbor agency to prepare an infrastructure financing plan for a
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SIFD.
State law allows an EIFD's public finance authority to initiate
proceedings to issue bonds by adopting a resolution of intention
that contains specified information about the proposed bond
issuance. The public finance authority must seek voter approval
of a proposal to issue bonds. Senate Bill 63 requires that if
the public finance authority governing an SIFD proposes to
initiate proceedings to issue bonds for port or harbor
infrastructure, it must submit the proposal for review and
approval by the affected harbor agency and the State Lands
Commission, pursuant to the following process:
A harbor agency, after receiving a public financing
authority's resolution proposing to issue bonds for a SIFD,
must consider the proposal within 60 days. During that
time, the harbor agency's governing body must act at public
meeting to either vote to give preliminary approval of the
proposal, or disapprove the proposal and return it to the
public financing authority. A harbor agency may give
preliminary approval only if it makes four specified
findings. The agency is prohibited from granting
preliminary approval unless:
o The seaport infrastructure financing district
will operate independently of any other prior or
concurrent agreements between the harbor agency and
the public financing authority, or the local
governments that make up the public financing
authority.
o No transfers of funds or obligations, as
defined, or future transfers of funds or obligations
contingent on the approval of the SIFD, its financing,
or projects within the district, are created between
the harbor agency and the public financing authority,
or the local governments that make up the public
financing authority.
If a harbor agency votes to give preliminary approval to
a proposal to issue bonds, it must immediately forward its
preliminary approval to the State Lands Commission for its
consideration
The State Lands Commission, after receiving a harbor
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agency's preliminary approval of a proposal to issue bonds
for a SIFD, must consider the proposal and either grant or
deny final approval. Before granting final approval, the
Commission must review the infrastructure financing plan
prepared by the harbor agency and the findings that the
harbor agency made in its preliminary approval. The
Commission cannot grant final approval unless it makes
seven specified findings.
If the Commission grants final approval, it must
immediately forward its approval to the public financing
authority for further action.
Senate Bill 63 prohibits a SIFD's public finance authority from
proceeding with a bond issuance unless the State Lands
Commission votes in favor of the authority's proposal to issue
bonds.
State law requires a public finance authority to seek voter
approval of a proposal to issue bonds. If there are fewer than
12 registered voters within the EIFD, the vote on the proposed
bond issuance must be by the landowners in the EIFD. Senate
Bill 63 expands the definition of "landowner," for the purpose
of a vote to approve bonds for an SIFD, to include an entity
that is paying possessory interest tax on state-owned land.
State law allows an EIFD's public finance authority to issue
bonds if more than 55% of the voters voting on the proposition
vote in favor of issuing the bonds. Senate Bill 63 allows a
SIFD's public finance authority to issue bonds only if
two-thirds of the voters voting on the proposition vote in favor
of issuing the bonds.
The Public Trust Doctrine is common law doctrine that protects
the public's right to use California's waterways and waterfronts
for commerce, navigation, fishing, boating, natural habitat
protection, and other water-oriented activities. In general,
the public trust doctrine provides that filled and unfilled tide
and submerged lands and the beds of lakes, streams, and other
navigable waterways (i.e. public trust lands) are to be held in
trust by the state for the benefit of the people of California.
The State Lands Commission administers public trust lands not
granted to local agencies and oversees the activities of local
grantees, such as harbor agencies. Senate Bill 63 contains
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several provisions to ensure that SIFDs' financing activities
comply with the Public Trust Doctrine. Specifically, the bill:
Declares that all permanent fixtures and capital
improvements to the real property of a harbor agency that
administers public trust tidelands made pursuant to a
SIFD's approved infrastructure financing plan must be a
trust asset once completed, with specified exceptions.
Requires that, if a harbor agency administering granted
public trust property is a department of a local
governmental body, any negotiations between the harbor
agency and the local government body with respect to any
infrastructure financing, operations, or any other activity
requiring action by the harbor agency must be undertaken at
arm's length in recognition of the duties of the harbor
agency to effectuate statewide interests.
Requires that the State Lands Commission must retain
absolute discretion over the determination of whether or
not investment of local resources in port or harbor
infrastructure, the actions of a harbor agency, or any
other action taken by a SIFD is consistent with the state's
interests in its tidelands and submerged lands.
Declares that its provisions do not preclude the State
Lands Commission from enforcing the state's interests in
its tidelands.
Directs that a harbor agency that manages granted state
tidelands retains its status as a trustee whether or not it
is located within a SIFD and clarifies that its provisions
do not preclude the harbor agency from conducting its
duties as a trustee of state tidelands.
States that its provisions do not grant any authority to
any public financing authority, or the local governments
that compose the public finance authority, to manage,
direct, control, or exercise jurisdiction over a harbor
agency and its management of port or harbor infrastructure.
Senate Bill 63 contains extensive findings and declarations
relating to the necessity and benefits of increased public
investment in port and harbor infrastructure projects.
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State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . California's ports and harbors make
major contributions to the state's economy, creating jobs,
investing in businesses, and generating tax revenues. However,
California ports are losing market share to competitors outside
of the state partially because of subsidies that other
jurisdictions provide for port infrastructure improvements. SB
63 will provide ports with access to vital public financing
tools, through the formation of Seaport Infrastructure Financing
Districts SIFDs, which will augment their current reliance on
revenue bonds backed by fees or lease revenues. Using the
financing tools enacted by last year's Enhanced Infrastructure
Financing District (EIFD) legislation, SB 63 will facilitate
investments in California seaports that will save money, improve
economic competitiveness, and create jobs while also protecting
the environment.
2. Possessory interest tax increment . Port and harbor
facilities operate pursuant to long-term leases on state lands
that are exempt from property taxes. Private use of public
property may be taxed if those uses constitute possessory
interest, so harbor and port tenants pay a possessory interest
tax in lieu of a property tax. One of SB 63's purposes is to
allow local agencies to finance port and harbor improvements by
capturing possessory interest tax increment revenues that are
generated as a result of the financed improvements. However,
the bill relies on EIFDs' existing statutory language in
Government Code §53398.75 to define what tax increment revenues
can be captured. It is unclear whether this language is broad
enough to include possessory interest tax revenues. The
Committee may wish to consider amending SB 63 to clarify SIFDs'
statutory authority to divert possessory interest tax revenues.
3. What about special districts ? State law allows EIFDs to be
formed only by a city or a county. Special districts may
participate in EIFD financing as members of a joint powers
authority. Some smaller ports fall under the jurisdiction of
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special districts. If these districts want to capture increment
revenues from port improvements, SB 63 appears to require that
they must partner with a city or county. The Committee may wish
to consider amending SB 63 to allow a special district to form
an SIFD independently to finance improvement using possessory
interest tax revenues that would be allocated to that special
district.
Support and
Opposition (4/9/15)
Support : Pacific Merchant Shipping Association.
Opposition : Unknown.
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