BILL ANALYSIS                                                                                                                                                                                                    



                                                                      SB 63  


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          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 63  
          (Hall) - As Amended June 1, 2015


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:  This bill would authorize cities and counties to  
          establish Seaport Infrastructure Financing Districts (SIFDs) to  
          finance seaport or harbor infrastructure projects.   
          Specifically, this bill:


          1)Defines an SIFD as an Enhanced Infrastructure Financing  








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            District (EIFD) that finances seaport or harbor infrastructure  
            created in accordance with the EIFD law.



          2)Adds seaport or harbor infrastructure to the list of projects  
            that may be financed using EIFD law, and expands the  
            definition of seaport or harbor infrastructure to include any  
            capital improvement that improves environmental quality. 



          3)Requires the city or county that initiates the formation of an  
            SIFD to designate and direct the harbor agency, rather than  
            the city engineer, to prepare an infrastructure financing  
            plan.



          4)Requires and SIFD public finance authority to submit any  
            proposals for issuing bonds for seaport or harbor  
            infrastructure to the affected harbor agency and the State  
            Lands Commission (SLC) for review and approval pursuant to a  
            prescribed process.



          5)Requires the harbor agency to reimburse the SLC, for its  
            administrative costs of considering the proposal, from bond  
            proceeds, if any.



          6)Requires an SIFD public finance authority, upon receipt of  
            final approval from the SLC, to submit the proposal for  
            issuing bonds to the voters.  The SIFD bonds may be issued if  
            two-thirds of the voters approve the proposition.










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          7)Specifies that an entity paying possessory interest taxes on  
            state-owned land is deemed a "landowner" for purposes of  
            voting on an SIFD bond proposal, if there are fewer than 12  
            registered voters within the SIFD, as specified.



          8)Ensures that an SIFD's financing activities comply with the  
            Public Trust Doctrine.



          9)Specifies that this bill does not apply to the Stockton Port  
            District or to a river port district.
          FISCAL EFFECT:


          1)Ongoing intermittent costs, unknown, but potentially in the  
            range of $100,000 to $150,000 in any given year, to the State  
            Lands Commission (SLC). These costs would be fully reimbursed  
            by harbor agencies from the proceeds of bonds issued for SIFD  
            proposals.  Staff notes that costs for review and approval of  
            SIFD bond issuance proposals would likely depend on the number  
            of proposals presented to SLC for review, and the scope and  
            complexity of the proposals.  Submission of proposals is  
            likely to be intermittent, and many of activities required by  
            this bill are within SLC's purview and could be absorbable  
            within existing resources. Other activities would require  
            outside expertise or specialized training of SLC staff.


          2)Negligible state costs related to the diversion of property  
            tax increment for SIFD purposes because the school share of  
            tax increment cannot be redirected to fund EIFD projects.  As  
            such, there would be no backfill of property tax revenues from  
            the General Fund.










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          COMMENTS:


          1)Purpose.  According to the author, "California's ports and  
            harbors are major contributors to the state's economy,  
            employing tens of thousands of workers, investing billions in  
            local and state businesses and creating hundreds of millions  
            in state and local tax revenues.  Currently, our ports are  
            losing market share to competitors outside of the state  
            partially because other jurisdictions are subsidizing their  
            infrastructure improvements."


            Last year the state of California revamped its public  
            financing tools to provide for EIFDs, in the wake of the  
            elimination of redevelopment agencies.  EIFDs can provide  
            reinvestment financing to projects which span a wide range of  
            public infrastructure and private development projects,  
            including highways and transit infrastructure.  SB 63 adds  
            seaports to the list of EIFD-approved projects.  


          2)Background.  Existing law authorizes cities and counties to  
            form Infrastructure Financing Districts (IFDs) and divert  
            property tax increment revenues from participating local  
            agencies to finance public capital facilities of communitywide  
            significance. IFDs retain property tax increment revenues from  
            participating local taxing agencies to directly finance  
            projects or to pay debt service on bonds issued to finance  
            projects.  School district property tax revenues may not be  
            diverted for IFD purposes, and each local agency in the IFD  
            must agree to divert property tax increment to the IFD.   
            Formation of a district and issuance of IFD bonds required  
            approval by 2/3 of affected voters in an election.










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            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 EIFDs, which augment the tax increment financing powers  
            that are available to local government under the IFD statutes.  
             SB 628 removed the voter-approval requirement that was  
            required to form an IFD, authorized an EIFD public finance  
            authority to issue bonds upon the approval of 55 percent of  
            the voters, and expanded the types of projects that could be  
            financed. EIFDs can finance public capital facilities or other  
            specified projects of communitywide significance that provide  
            significant benefits to the district or the surrounding  
            community.

            Existing law also authorizes the formation of Port  
            Infrastructure and Financing Authorities, which allows two or  
            more local agencies that operate ports or harbors (harbor  
            agencies) to form a joint powers authority to finance  
            specified port and harbor infrastructure projects.  These  
            authorities are intended to improve access to ports by  
            allowing for the financing of roads and rail lines, piers,  
            docks, channel improvements, breakwaters, warehouses and  
            storage facilities, parks and recreation facilities,  
            remediation, drainage, wastewater and electric facilities, and  
            other projects.  Port or harbor infrastructure projects may be  
            privately operated, but all projects must have a primary or  
            predominant use that is of direct benefit to the port or  
            harbor.


          3)Public Trust Doctrine. 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  








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            activities.  In general, the public trust doctrine provides  
            that public trust lands (filled and unfilled tide and  
            submerged lands and the beds of lakes, streams, and other  
            navigable waterways) are to be held in trust by the state for  
            the benefit of the people of California.  The SLC administers  
            public trust lands not granted to local agencies and oversees  
            the activities of local grantees, such as harbor agencies.


            California has 11 public ports and one private port, and the  
            SLC administers the activities of seven harbor district  
            grantees.  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 a possessory interest, so harbor and port  
            tenants pay a possessory interest tax in lieu of a property  
            tax.








          1)Prior  
          Legislation:4) SB 628 (Beall), Chapter 785, Statutes of 2014, authorizes the  
            formation of EIFDs governed by a public finance authority to  
            finance public capital facilities or other specified projects  
            of communitywide significance using property tax increment  
            revenues from local agencies that volunteer to participate in  
            the district. 





          Analysis Prepared by:Jennifer Swenson / APPR. / (916)  
          319-2081








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