BILL ANALYSIS Ó
SB 63
Page 1
SENATE THIRD READING
SB
63 (Hall)
As Amended June 1, 2015
Majority vote
SENATE VOTE: 36-2
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Local |9-0 |Maienschein, | |
|Government | |Gonzalez, Alejo, | |
| | |Chiu, Cooley, Linder, | |
| | |Low, Mullin, Waldron | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Holden, Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
SB 63
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| | | | |
| | | | |
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SUMMARY: Allows cities and counties to create Seaport
Infrastructure Financing Districts (SIFDs), and allows SIFDs to
finance port or harbor infrastructure, under specified
conditions. Specifically, this bill:
1)Defines an SIFD to mean an Enhanced Infrastructure Financing
District (EIFD) that finances port or harbor infrastructure.
2)Amends EIFD law, as follows:
a) Allows an EIFD to finance port or harbor infrastructure
(SIFD);
b) Specifies that in the case of an SIFD, the legislative
body shall designate and direct the harbor agency, except
as provided, to prepare the infrastructure financing plan
required in EIFD law;
c) Specifies that State Lands Commission (SLC) approval is
needed to issue bonds to finance the infrastructure
financing plan for an SIFD;
d) 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;
e) Requires, if the public financing authority (PFA) adopts
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a resolution proposing initiation of proceedings to issue
bonds for port or harbor infrastructure, the PFA, before
submitting the proposal to the voters, to submit the
proposal, with specified information, to the affected
harbor agency;
f) Requires the proposal to be considered by the SLC, if
the harbor agency grants preliminary approval;
g) Requires, if the SLC votes in favor of the issuance of
the bonds, the PFA to proceed with the submission of the
proposal to the voters; and,
h) Requires a two-thirds vote of the voters voting on the
proposition in favor of issuing the bonds, for an SIFD.
3)Expands the definition of "port or harbor infrastructure" in
existing law contained in the Harbors and Navigation Code to
include any capital improvement that improves environmental
quality.
4)Adds, to the Harbors and Navigation Code, the following
requirements for an SIFD:
a) Specifies, upon receipt of a resolution from the PFA,
that the harbor agency shall have 60 days to consider the
proposal. Requires, during this time, that the harbor
agency's governing body to act at a duly noticed meeting to
either vote to give preliminary approval of the proposal,
or disapprove the proposal and return it to the PFA;
b) Allows a harbor agency to give preliminary approval only
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if it makes all of the following affirmative findings:
i) The harbor agency has prepared an infrastructure
financing plan;
ii) The improvements to the harbor agency's property to
be financed through the proceeds of an SIFD are solely
for the support of port or harbor infrastructure;
iii) All publicly owned property that is leased to
private parties within the boundaries of the SIFD has
been reported by the harbor agency to the local county
assessor to facilitate possessory interest taxation;
iv) If the harbor agency is acting on granted lands, all
of the projects and uses proposed in the SIFD are
consistent with the state tidelands trust and the
conditions of the harbor agency grant; and,
v) If the harbor agency was formed pursuant to this
bill's provisions, all of the projects and uses proposed
in the SIFD are consistent with its charter and the
statewide interests in the operation of harbors and
ports.
c) Prohibits the harbor agency from granting preliminary
approval, unless both of the following apply:
i) The SIFD will operate independently of any other
prior or concurrent agreements between the harbor agency
and the PFA, or the local governments that make up the
PFA; and,
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ii) No transfers of funds or obligations, or future
transfers of funds or obligations contingent on the
approval of the SIFD, its financing, or projects within
the SIFD, are created between the harbor agency and the
PFA, or the local governments that make up the PFA.
d) Defines "transfers of funds or obligations" to include
any direct or indirect transfer of harbor agency resources
to the PFA, or the local governments that make up the PFA,
except for any of the following, if agreed to between the
harbor agency and the PFA in writing:
i) Harbor agency reimbursements of a PFA for its direct
administrative costs of establishing an SIFD;
ii) PFA expenses for underwriting the bond issuance for
the identified projects in the SIFD; and,
iii) Any other administrative expenses or direct
operating expenses that are incurred as the direct result
of creating the SIFD that are identified by both parties
at the time of preliminary approval and in advance of the
expense being incurred by the PFA.
e) Requires, if the harbor agency votes to give preliminary
approval to the proposal, the harbor agency to immediately
forward its preliminary approval to the SLC for its
consideration. Requires the SLC to consider the proposal
and either grant or deny final approval.
f) Requires the SLC, prior to granting final approval, to
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do both of the following:
i) Review the infrastructure financing plan prepared by
the harbor agency; and,
ii) Review the findings of the harbor agency made in its
preliminary approval.
g) Requires the SLC to make all of the following findings
prior to granting final approval:
i) The state's interests in its tidelands and its ports
and harbors are furthered by the funding of the SIFD;
ii) The principal purposes of the SIFD are to further
port and harbor infrastructure;
iii) The execution of the financing section of the
infrastructure finance plan is more likely than not to
result in the outcomes proposed;
iv) No revenues shall be made available to local
governments as a result of the approval of the SIFD from
state revenues, revenues derived from granted lands, or
from ports or harbors created, as specified;
v) The harbor agency and the PFA participating in the
SIFD have each completed all procedural requirements,
financial due diligence, and made all findings required,
as specified;
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vi) All of the projects and uses proposed in the SIFD
are consistent with the state tidelands trusts and the
conditions of any grants, if applicable, and the
statewide interests in the operation of harbors and
ports; and,
vii) No agreements by the harbor agency that may control
the discretion of the harbor agency to maintain its port
or harbor operations or to cede any such control to the
discretion of a third party were made as a condition of
participation in the SIFD.
h) Requires the SLC to be reimbursed by the harbor agency
for its direct administrative costs of considering an SIFD
proposal from the proceeds of the bonds issued, if any, for
the identified projects in the SIFD.
i) Provides that all permanent fixtures and capital
improvements to the real property of a harbor agency that
administers public trust tidelands made pursuant to an
SIFD's approved infrastructure financing plan shall be a
trust asset once completed, and specifies that this
provision does not apply to fixtures and improvements
otherwise agreed as nonpermanent in a lease between the
harbor agency and a private tenant.
j) Requires, if a harbor agency administering granted
public trust property is a department of a local
governmental body, any negotiations between the two
entities with respect to any infrastructure financing,
operations, or any other activity requiring action by the
harbor agency to be undertaken at arm's length in
recognition of the duties of the harbor agency to
effectuate statewide interests.
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aa) States that the SLC shall 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 an
SIFD is consistent with the state's interests in its
tidelands and submerged lands.
bb) States that a harbor agency that manages granted state
tidelands retains its status as a trustee whether or not it
is located within an SIFD.
cc) States that nothing grants any authority to any PFA, or
the local governments that compose the PFA, in any manner
whatsoever to manage, direct, control, or exercise
jurisdiction over a harbor agency and its management of
port or harbor infrastructure.
dd) Specifies that the provisions of the bill do not apply
to the Stockton Port District or to a river port district.
5)Makes a number of findings and declarations, including the
intent of the Legislature to assert the state's plenary power
over the financing of port or harbor infrastructure by harbor
agencies as matters of statewide concern and to authorize the
use of tax increment financing, to support investment of tax
revenues in port and harbor infrastructure.
EXISTING LAW:
1)Defines "port or harbor infrastructure" to mean any of the
following, if its primary or predominant use is of direct
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benefit to the port or harbor:
a) Streets, roads, highways, bridges, sidewalks, curbs,
gutters, tunnels, subways, alleyways, viaducts, pipelines,
rail lines, or other facilities for the transportation or
movement of people, vehicles, equipment, or goods;
b) Piers, docks, wharves, slips, quays, platforms, decks,
cranes, or other facilities for the mooring, docking,
loading, or unloading of vessels;
c) Lands, tidelands, submerged lands, easements, port
access routes, channel improvements, rights-of-way, dredge
disposal sites, safety zones, breakwaters, levees,
bulkheads, or walls of rock or other material to protect
property or traffic;
d) Parking, warehouse, or storage facilities;
e) Parks, recreation, or open space facilities;
f) Remediation;
g) Water, wastewater, drainage, electric, or
telecommunication systems or facilities;
h) Buildings, structures, facilities, improvements, or
equipment necessary or convenient to any of paragraphs (a)
to (g), inclusive, or to the operation of a port or harbor;
and,
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i) Public improvements authorized, pursuant to the
Improvement Act of 1911, the Improvement Bond Act of 1915,
and the Mello-Roos Community Facilities Act of 1982.
2)Allows cities and counties to create 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 are not authorized to divert
property tax increment revenues from schools.
3)Allows local officials to create EIFDs, which augment the 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.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Ongoing intermittent costs, unknown, but potentially in the
range of $100,000 to $150,000 in any given year, to the 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
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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.
COMMENTS:
1)Background on IFDs and EIFDs. Existing law allows cities and
counties to create 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 are not authorized to divert property
tax increment revenues from schools (SB 308 (Seymour), Chapter
1575, Statutes of 1990).
Local officials can also create EIFDs, which augment the 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 (SB 628 (Beall), Chapter 785, Statutes of 2014).
2)Bill Summary. This bill allows cities and counties to create
SIFDs in order to finance port or harbor infrastructure. The
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bill requires the PFA to submit the proposal to the affected
harbor agency for its preliminary approval and requires the
harbor agency to make a number of findings, and once approved
by the harbor agency, requires the proposal to be considered
by the SLC. The SLC is required to review the infrastructure
financing plan prepared by the harbor agency, and review the
findings of the harbor agency made in its preliminary
approval, and prior to the SLC granting final approval, the
bill requires the SLC to make various findings, including that
the state's interests in its tidelands and its ports and
harbors are furthered by the funding of the SIFD, and that all
of the projects and uses proposed in the SIFD are consistent
with the state tidelands trust and conditions of any grants.
Once the SLC gives its final approval, SLC will forward the
approval to the PFA for further action.
The bill specifies that, for purposes of the vote necessary
within the territory of the SIFD to approve the issuance of
bonds, that an entity paying possessory interest tax on
state-owned land, that the term "landowner" means that entity
that is paying the possessory interest tax. SB 63 specifies
that a two-thirds vote is necessary for an SIFD to issue
bonds, and then makes a number of findings and declarations.
This bill is sponsored by the Pacific Merchant Shipping
Association.
3)Possessory Interest. According to the "Assessment of Taxable
Possessory Interests" manual contained in the Assessors'
Handbook, published by the Board of Equalization in December
2002 (and reprinted in January 2015), "The most common example
of a possessory interest is the interest created by a lease.
The tenant's (or lessee's) right to possession of the property
is called the leasehold interest. The landlord's (or
lessor's) right to receive rents during the term of the lease
and to regain possession of the property when the lease
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terminates is called the leased fee interest. In the case of
privately owned real property, both the tenant's and the
landlord's interest are taxable, and typically both interests
are valued and assessed in the aggregate to the landlord or
the fee owner. It is not necessary, or administratively
feasible, for the assessor to separately assess the value of
the leasehold (i.e. possessory) interest and the value of the
leased fee (i.e. nonpossessory interest); instead, the
assessor typically makes a single assessment of the entire
taxable interest in the real property."
"A 'taxable possessory interest' is a possessory interest that
is separately taxable to the possessor. For introductory
purposes, a taxable possessory interest can be defined as the
taxable interest held by a private possessor in publicly owner
real property. The public owner may be the United States of
America and its administrative instrumentalities; the state of
California; or one of California's local jurisdictions, which
include counties, cities, and special districts. With a
taxable possessory interest, since the underlying fee simple
interest held by the public owner is almost always tax exempt,
it is necessary to separately value the possessory interest
held by the private possessor.
"The legal basis for the taxation of taxable possessory
interests is found in the general mandate of the California
Constitution, Article XIII, Section 1, that all property is
taxable unless otherwise proved by the California Constitution
or federal law. 'Property' as defined in sections 103 and 104
of the Revenue and Taxation Code, includes 'all matters and
things, real, personal and mixed, capable of private
ownership,' and 'real estate,' or 'real property,' includes
'the possession of, claim to, ownership of, or right to
possession of land and improvements.' There is also
statutory, regulatory, and judicial authority for the
assessment, under specified conditions, of the private,
beneficial right to the possession of publicly owned real
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property."
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. This
bill allows 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.
4)Author's Statement. 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.
"Most of California's ports operate under a landlord-tenant
model where the public agency leases a marine terminal to a
private company to conduct business. As a result, port
infrastructure is generally financed entirely through revenue
bonds backed by private user fees and other lease revenues and
there is local taxpayer participation. Port tenants do
however pay possessory interest taxes on the value of their
leases on public property.
"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,
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including highways and transit infrastructure. EIFDs are
formed by local governments and their bond underwriting
approvals are subject to local voter approvals.
Unfortunately, seaports are not included in the listed
categories of approved infrastructure for EIFD financing. SB
63 adds seaports to the list of EIFD-approved projects and
allows for access to new and vital seaport infrastructure
financing. This will enable California seaports to compete
with competitors outside of the state, allowing them to
continue to provide to California's economy."
5)Arguments in Support. Supporters argue that this bill will
allow an important change to EIFDs that will allow ports to
have access to new forms of financing to support critical
infrastructure improvements.
6)Arguments in Opposition. None on file.
7)Conflicting Legislation. This bill conflicts with provisions
in AB 313 (Atkins) of the current legislative session.
Amendments may be needed to resolve the conflict.
Analysis Prepared by:
Debbie Michel / L. GOV. / (916) 319-3958 FN:
0001397
SB 63
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