BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1199 (Ammiano)
Hearing Date: 08/12/2010 Amended: 01/04/2010
Consultant: Mark McKenzie Policy Vote: L Gov 5-0
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BILL SUMMARY: AB 1199 would allow the City and County of San
Francisco (SF) to form an infrastructure financing district
(IFD) that includes specified waterfront property, and divert
property tax increment to leverage financing for development.
Among other things, this bill would:
Require SF officials to prepare a detailed infrastructure plan
for the proposed waterfront IFD, as specified, which includes
a financing section that provides for: allocation of tax
increment revenues, sources of financing, dates of
effectiveness of increment diversion, and analyses of costs
and revenues to SF and the projected overall fiscal impact of
the IFD.
Prohibit the formation of a Pier 70 IFD until January 1, 2014.
Authorize equal portions of tax increment revenue from SF and
the Educational Revenue Augmentation Fund (ERAF) to be
allocated to the IFD, and allow other local taxing entities to
contribute. If other entities opt not to participate, SF
would contribute an additional amount equal to the amounts
that would have been contributed by other taxing entities.
Extend the authorized duration of the diversion of property
tax increment to 45 years.
Require 20 percent of the tax increment revenues to be used
for shoreline restoration, removal of bay fill, or waterfront
public access to, or environmental mediation of, the SF
waterfront.
Specify that any increment amounts that exceed amounts
dedicated to ERAF-secured debt would be paid into the ERAF,
beginning in the 21st year after the initial issuance of
ERAF-secured debt.
Authorize the owners of land contiguous to the border of an
IFD to request that their property be added to the IFD, as
specified.
Expand to the list of authorized expenditures to include
removal of bay fill, shoreline restoration, and other repairs
and improvements of maritime facilities.
Specify that no election is required for the formation of a SF
waterfront IFD.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Diversion of tax increment unknown, potentially
significant property General
tax increment diversion from ERAF to the
SF waterfront IFD for 45 years. Costs
could
be negligible if it is assumed that
development
would not occur absent this bill (see
staff comments)
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STAFF COMMENTS: SUSPENSE FILE.
Page 2
AB 1199 (Ammiano)
Existing law allows cities and counties to form infrastructure
financing districts (IFDs), issue bonds to pay for community
scale public works, and authorize the diversion of property tax
growth (increment) from other local entities, except schools,
for 30 years to repay the bonds. The requirements to form IFDs
can be cumbersome, however, and formation and bond issuance
authority require two-thirds voter approval. The Community
Redevelopment Law allows local governments to form redevelopment
areas (RDAs) in urban areas as a tool to remove blighted
conditions by diverting all property tax increment, including
the schools' share. RDAs must use at least 20 percent of the
tax increment for affordable housing, and those formed after
1993 may divert the increment for up to 45 years. Any property
tax revenues diverted from schools must be backfilled by the
state General Fund. Due to legislation passed in 2005 (SB 1085
(Migden), Chapter 213 of 2005), there are special rules that
apply to an IFD formed in San Francisco (SF) in specified
waterfront properties. Specifically, a SF waterfront IFD may:
waive the election requirements if all of the proposed land in
an IFD is publicly owned; use other types of debt instruments;
divert property tax increment for 40 years; and finance other
types of projects, such as environmental remediation and seismic
safety projects.
The Port of San Francisco manages over seven miles of San
Francisco's waterfront that extend from Fisherman's Wharf to
Candlestick Point, including public trust tidelands. 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 along the entire corridor is $1.9 billion. To generate the
money needed to pay for seismic safety improvements, building
rehabilitation, remediation of hazardous materials, public open
space, and other projects, Port officials plan to use local
general obligation bonds, revenue bonds, and $265 million in IFD
bonds.
Staff notes that assessed valuation of Port property tends to be
low on an historical basis, because much of the property is
leased on an interim basis, in accordance with public trust
rules for interim leasing (a short lease term results in a
lesser possessory interest). According to data from the San
Francisco Assessor and Port of San Francisco, the ten-year
cumulative share of property tax attributable to ERAF is about
$20.5 million (1996-2005, inclusive). The ERAF share of the
property tax in this area is about 25% of the total; San
Francisco receives about 65%, with the remaining going to
several other local entities. According to sponsors of the
bill, the ERAF share is expected to reach approximately $3.9
million in the Pier 70 area, when fully developed and built out.
The SF waterfront IFD would retain any growth in the property
tax increment for up to 45 years in order to finance the
development of these projects, which would include environmental
remediation, historic preservation, seismic retrofit of
buildings constructed on Bay fill, and new infrastructure.
Page 3
AB 1199 (Ammiano)
AB 1199 could result in a General Fund cost to backfill any
property tax increment shifted from ERAF to the proposed SF
waterfront IFD. Staff notes that the magnitude of this
potential cost is unknown because it is unclear how much
economic activity would occur in the absence of the bill.
Evidence suggests that development would not occur in this area
without a substantial funding source that is currently
unavailable as the site has not attracted investment over the
past 40 years. Although unlikely, to the extent that
development would occur by means other than diversion of ERAF
increment revenues, this bill creates a substantial diversion of
tax increment that would otherwise flow to the ERAF, resulting
in a General Fund loss for the 45-year life of the SF IFD. Any
diversion of increment would be gradual, however, and not likely
to begin for 7-10 years because any development that would
result in an increase in assessed property values in the Pier 70
area would not occur until rezoning, environmental cleanup, and
CEQA requirements are accomplished. Full build-out of the area
(when the ERAF share of tax increment is anticipated to be $3.9
million) would not occur for 10-15 years. Furthermore, sponsors
note that to the extent that this bill promotes economic
development that could not happen without the diversion of ERAF
increment, there could be offsetting future state and local
revenue gains of an unknown magnitude.
Staff notes that this bill is identical to AB 1176 (Ammiano),
which was vetoed by the Governor last year. The veto message
did not indicate any objection to specific provisions of the
bill, and is reprinted here:
For some time now I have lamented the fact that major
issues are overlooked while many unnecessary bills come to
me for consideration. Water reform, prison reform, and
health care are major issues my Administration has brought
to the table, but the Legislature just kicks the can down
the alley.
Yet another legislative year has come and gone without the
major reforms Californians overwhelmingly deserve. In
light of this, and after careful consideration, I believe
it is unnecessary to sign this measure at this time.