BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: AB 1199 HEARING: 4/7/10
AUTHOR: Ammiano FISCAL: No
VERSION: 1/4/10 CONSULTANT: Detwiler
SAN FRANCISCO'S INFRASTRUCTURE FINANCING DISTRICT
Background and Existing Law
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 divert property tax increment revenues from other
local governments for 30 years. However, IFDs can't divert
property tax increment revenues from schools (SB 308,
Seymour, 1990).
Forming an IFD is cumbersome. The city or county must
develop an infrastructure plan, send copies to every
landowner, consult with other local governments, and hold a
public hearing. Every local agency that will contribute
its property tax increment revenue to the IFD must approve
the plan. Once the other local officials approve, the city
or county must still get the voters' approval to:
Form the IFD (requires 2/3 voter approval).
Issue bonds (requires 2/3 voter approval).
Set the IFD's appropriations limit (majority voter
approval).
The 1968 Burton Act resulted in transferring the state
tidelands along San Francisco's waterfront to the City and
County of San Francisco which assumed $55 million in state
debt obligations. The Port of San Francisco wants to
promote development, but officials lack the public capital
to attract and retain private investors. The cost to
implement the Port's ten-year capital plan is $1.9 billion.
In 2008, San Francisco voters approved a charter amendment
to divert most of the Pier 70 area's hotel tax and payroll
tax revenues to fund historic preservation and
infrastructure costs. To generate the rest of the needed
money, Port officials plan to use local general obligation
bonds, revenue bonds, and IFD bonds.
AB 1199 -- 1/4/10 -- Page 2
In 2005, legislators passed special provisions that apply
just to IFDs in San Francisco (SB 1085, Migden, 2005). The
2005 legislation:
Waived the requirement for an election to form an
IFD if all of the land within the proposed IFD is
publicly owned.
Allowed San Francisco to extend the 30-year time
for an IFD to receive property tax increment revenues
for 10 more years.
Made environmental remediation, seismic safety,
hazardous material remediation, and other projects
specifically eligible for IFD financing.
Expanded the statutory "debt" definition to include
commercial paper.
Proposed Law
Assembly Bill 1199 repeals the special statute that
controls how local officials can form, finance, and operate
an infrastructure financing district (IFD) along the San
Francisco waterfront on land that is under the jurisdiction
of the Port of San Francisco. In addition to making
extensive legislative findings, Assembly Bill 1199 enacts a
new special statute governing the formation and activities
of IFDs along San Francisco's waterfront, including these
provisions:
I. Area . The Community Redevelopment Law restricts the
use of property tax increment financing to urbanized areas
where the property is blighted. Unlike redevelopment, the
statewide IFD statute doesn't require property in an IFD to
be blighted, but an IFD can't overlap a redevelopment
project area. The statute declares (but does not require)
that IFDs should include substantially undeveloped areas.
Assembly Bill 1199 applies only to land under the
jurisdiction of the Port of San Francisco. AB 1199 also
contains special provisions for a San Francisco waterfront
IFD in the 65-acre Pier 70 area.
II. Projects . The standard IFD statute allows an IFD to
finance capital facilities, listing eight examples. In
addition, the special San Francisco IFD statute allows an
IFD to pay for:
Environmental remediation
Planning and design work.
Seismic and life-safety improvements.
Building rehabilitation, restoration, and
AB 1199 -- 1/4/10 -- Page 3
preservation.
Structural repairs and improvements to piers,
seawalls, and wharves.
Hazardous material remediation.
Storm water management facilities, utilities, and
access improvements.
Assembly Bill 1199 allows a San Francisco waterfront IFD to
pay for:
Remediation of hazardous materials.
Seismic and life-safety improvements.
Rehabilitation, restoration, and preservation of
historic buildings.
Structural repairs and improvements to piers,
seawalls, and wharves.
Removal of bay fill.
Stormwater management facilities, utilities, or
open space improvements.
Shoreline restoration.
Repairs and improvements to maritime facilities.
Planning and design work directly related to public
facilities.
III. Infrastructure financing plan . The statewide IFD
statute requires local officials to prepare and adopt an
infrastructure financing plan that describes the affected
territory, describes the facilities to be financed, finds
that the facilities provide significant benefits, includes
a seven-part financing section, and plans for the
replacement of any housing. Assembly Bill 1199 requires
San Francisco officials to adopt a detailed infrastructure
plan for a proposed San Francisco waterfront IFD. The plan
must include:
A description of the proposed boundaries.
A description of the public facilities, including
their location and costs.
A financing section that:
o Allocates and limits the property tax
increment revenues.
o Limits the use of the property tax
increment revenues to uses within the IFD, and
requires at least 20% of the property tax
increment revenues be set aside for waterfront
purposes.
o A projection of property tax increment
revenues over 45 years.
AB 1199 -- 1/4/10 -- Page 4
o A projection of the funding sources that
will pay for the facilities.
o A limit on the property tax dollars to be
allocated to the IFD.
o A time limit for receiving property tax
increment revenues which cannot exceed 45 years.
o An analysis of the fiscal costs and
benefits to San Francisco.
o An analysis of the fiscal impact on the
affected taxing entities.
o A statement committing the IFD to comply
with the statutory accounting requirements for
tideland trust revenues.
For the Pier 70 IFD only, the "Pier 70 enhanced financing
plan" may allocate property tax increment revenues from San
Francisco and the other affected taxing entities. The
maximum amount of San Francisco's property tax increment
revenues allocated to the Pier 70 IFD must equal the amount
of property tax increment revenues of the Educational
Revenue Augmentation Fund (ERAF) that will be committed to
the Pier 70 IFD. Officials can't form the Pier 70 IFD for
at least three fiscal years after AB 1199's effective date.
Further, any debt secured by ERAF revenues can only last
for 20 years, based on limits and a schedule established in
consultation with the county auditor. Once the
ERAF-secured debt is paid, that share of property tax
revenues reverts to ERAF. Starting in the 21st year, any
excess property tax increment revenues of the Pier 70 IFD
must be paid into ERAF.
Officials must send the proposed infrastructure financing
plan and its environmental documents to the affected taxing
entities and other San Francisco officials.
AB 1199 prohibits the San Francisco Board of Supervisors
from diverting property tax increment revenues from another
taxing entity unless the other entity's governing body
adopts a resolution approving the proposed plan. If an
affected taxing entity doesn't agree to a diversion of its
property tax increment revenues, San Francisco must
allocate additional funds to make up the difference.
The bill requires the San Francisco Board of Supervisors to
hold a noticed public hearing on the infrastructure
financing plan and consider any objections,
AB 1199 -- 1/4/10 -- Page 5
recommendations, evidence, and testimony. The Board of
Supervisors can adopt the infrastructure financing plan by
ordinance which must also establish the waterfront IFD's
base year for calculating revenues. The board may divide
the waterfront IFD into separate project areas.
Landowners outside San Francisco's waterfront IFD may
petition to have their land included without an election.
A request by the owners of the Mirant site to include their
land in the Pier 70 IFD requires the approval of the State
Department of Finance. A landowner must agree that its
property's "shoreline band" will be improved and maintained
to standards of adjacent waterfront public access ways on
public land.
IV. Formation election . The statewide IFD statute
requires elections involving registered voters to form an
IFD, issue bonds, and set the appropriations limit.
However, if there are less than 12 registered voters,
landowners can vote, based on the number of acres they own.
The special San Francisco IFD statute waives the
requirement to conduct a formation election if all of the
land within a proposed IFD is publicly owned. Assembly
Bill 1199 allows the San Francisco Board of Supervisors to
form a waterfront IFD by ordinance; no election is
required.
V. Waterfront set aside . The Community Redevelopment Law
requires redevelopment officials to set aside and spend 20%
of their gross property tax increment revenues to increase,
improve, and preserve low- and moderate-income housing.
The statewide IFD statute doesn't require local officials
to set aside property tax increment revenues. Assembly
Bill 1199 requires San Francisco's waterfront IFD's
infrastructure plan to set aside at least 20% of the gross
property tax increment revenues to be spent for shoreline
restoration, removal of bay fill, or waterfront public
access to (or environmental remediation of) the waterfront.
VI. Tax increment time limits . The Community
Redevelopment Law allows redevelopment projects formed
after 1993 to receive property tax increment revenues for
up to 45 years. The statewide IFD statute allows IFDs to
receive property tax increment revenues for up to 30 years.
The special San Francisco IFD statute allows San Francisco
officials to extend the time limit for receiving property
AB 1199 -- 1/4/10 -- Page 6
tax increment revenues by an additional 10 years, for a
total of up to 40 years. Assembly Bill 1199 allows San
Francisco's waterfront IFD to receive property tax
increment revenues for up to 45 years.
VII. Property tax increment revenues . The statewide IFD
statute allows an IFD to divert property tax increment
revenues from other local governments that formally agree
to the diversion. An IFD cannot divert the schools' shares
of property tax increment revenues because the statute
excludes school entities from the definition of an
"affected taxing entity." Because the IFD statute predates
the creation of the Educational Revenue Augmentation Fund
(ERAF), it's not clear how county auditors should allocate
an IFD's property tax increment revenues. The ERAF statute
tells county auditors to divert property tax increment
revenues to redevelopment agencies before calculating other
local governments' ERAF contributions.
Assembly Bill 1199 directs the county auditor to divert San
Francisco's waterfront IFD's share of property tax
increment revenues before calculating other local
governments' ERAF contributions. The county auditor must
divert San Francisco's waterfront IFD's share of property
tax increment revenues in the same manner as redevelopment
agencies' property tax increment revenues. If the Pier 70
IFD's plan calls for allocating 100% of San Francisco's
property tax increment revenues, then the IFD will not make
a payment to ERAF. If the plan allocates less than 100% to
the Pier 70 IFD, then the IFD must pay a proportionate
share of its property tax increment revenues to ERAF.
VIII. Fiscal affairs . With an affected taxing entity's
permission, Assembly Bill 1199 allows a San Francisco
waterfront IFD to subordinate payments to the affected
taxing entity to the IFD's loans, bonds, or other debts.
To receive its property tax increment revenues, AB 1199
requires the San Francisco waterfront IFD to annually file
with the county auditor a detailed statement of
indebtedness and a detailed reconciliation statement. The
bill declares that it implements the IFD statutes and
constitutional provisions. AB 1199 declares that the
property tax increment revenues received under its
provisions are not "proceeds of taxes."
AB 1199 -- 1/4/10 -- Page 7
Comments
1. On the waterfront . With piers built on bay fill and
mud a century ago, the Port of San Francisco faces a big
price tag to restore its derelict industrial and commercial
properties to economic health. Public investment in these
trust lands has lagged for decades, requiring $1.9 billion
to carry out the Port's capital plan. Generating funds
from a mix of local general obligation bonds, revenue
bonds, and IFD bonds can stimulate private investors'
interest in waterfront development. The Legislature passed
special IFD legislation for San Francisco in 2005, but
further study convinced Port officials that they need more
changes before they can harness property tax increment
revenues to their economic development goals. AB 1199
replaces the 2005 special legislation with language that
clarifies the fiscal relationship between the waterfront
IFD and the allocation of property tax increment revenues.
But without the waterfront IFD's investments, the trust
land property would never generate the new property tax
revenues. The bill also gives San Francisco 15 more years
of property tax increment revenues which will increase its
bonding capacity and raise more investment capital.
2. Legislative history . AB 1199 is identical to the final
version of AB 1176 (Ammiano, 2009), an earlier version of
which passed the Senate Local Government Committee by the
vote of 5-0. Although no "no" votes were cast against last
year's bill, Governor Schwarzenegger vetoed AB 1176, saying
that other policy topics had priority. AB 1199 is also
similar to AB 2367 (Leno, 2008) which died on the Senate
Appropriations Committee's suspense file after passing the
Senate Local Government Committee by the vote of 3-1.
3. Double-referral . Although the Legislative Counsel
doesn't identify AB 1199 as a fiscal bill, the Senate Rules
Committee ordered a double-referral of the bill --- first
to the Senate Local Government Committee which has policy
jurisdiction over infrastructure financing districts, and
then to the Senate Appropriations Committee which has
become more assertive over bills that allocate property tax
increment revenues. Last year's bill also went to the
Senate Appropriations Committee.
Assembly Actions
AB 1199 -- 1/4/10 -- Page 8
Assembly Local Government Committee: 5-0
Assembly Appropriations Committee:12-5
Assembly Floor: 70-2
Support and Opposition (4/1/10)
Support : Port of San Francisco, City and County of San
Francisco, Dogpatch Neighborhood Association, GreenTrustSF
Central Waterfront, Neighborhood Parks Council,
Pier70sf.org, Potrero Boosters Neighborhood Association,
San Francisco Bay Conservation and Development Commission,
San Francisco Planning + Urban Research Association, San
Francisco Republican Party, San Francisco Tomorrow.
Opposition : Unknown.