BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 485 HEARING: 6/22/11
AUTHOR: Ma FISCAL: No
VERSION: 5/5/11 TAX LEVY: No
CONSULTANT: Lui
INFRASTRUCTURE FINANCING DISTRICTS
Makes it easier for cities and counties to use
infrastructure financing districts for transit oriented
development projects.
Background and Existing Law
Federal, state, and local agencies have invested billions
of dollars in mass transit projects and programs. Some
communities have created transit villages, which are areas
of denser residential and commercial development within
walking distance of transit stations.
However, local agencies are often hard-pressed to subsidize
public works, like parks, lighting, or landscaping, which
are necessary to attract private investment, new
businesses, and residents. Transit-oriented development
competes with other local priorities. The San Francisco
Bay Area Rapid Transit District (BART) wants to encourage
more intense development around its stations by linking
transit development with property tax increment financing.
Proposed Law
Assembly Bill 485 allows local officials to divert property
tax increment revenues to pay for public facilities and
amenities within transit village development districts.
I. Transit Village Plans . The Transit Village Development
Planning Act allows cities and counties to adopt transit
village plans that identify areas where local officials
want to encourage neighborhoods centered on transit
stations and to grant density bonuses, among other
characteristics (AB 3152, Bates, 1994). To qualify, a
transit village plan (TVP) must demonstrate five public
benefits, from a list of 13 benefits (AB 1320, Dutra,
AB 485 - 5/5/11 -- Page 2
2004).
Assembly Bill 485 requires that one of the five
demonstrable public benefits of a transit village plan be
either an increased stock of affordable housing or
live-travel options for transit-needy groups. If an IFD is
used to implement a TVP, the TVP must also include how
affordable housing requirements will be implemented.
II. Infrastructure Financing Districts and transit
facilities . A city or county may create an Infrastructure
Financing District (IFD) 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, the IFD can divert property tax
increment revenues from other local governments (not
schools or community colleges) up to 30 years; local
governments must consent to the diversion. Each IFD must
have a detailed infrastructure financing plan (SB 308,
Seymour, 1990).
After preparing an infrastructure financing plan, state law
requires local officials must get voter approval to:
Form the IFD, which requires 2/3-voter approval.
Issue bonds, which requires 2/3-voter approval.
Set the appropriations limit, which requires
majority-voter approval.
If an infrastructure financing district implements a
transit village plan, Assembly Bill 485 removes the
2/3-vote requirement to form the IFD, the 2/3-vote
requirement to issue bonds, and the majority vote to set
the appropriations limit.
AB 485 adds to IFD law, the definition of a "transit
facilities," as any publicly owned facility and amenity
necessary to implement a transit village plan adopted under
the Transit Village Development Planning Act.
III. Infrastructure Financing Districts and affordable
housing . If a city, county, or city and county finance any
portion of an IFD, Assembly Bill 485 requires the transit
village plan to include an increased stock of affordable
housing or live-in travel options for transit-needy groups.
The bill requires that the 20% of the IFD's property tax
AB 485 - 5/5/11 -- Page 3
increment revenues increase, improve, and preserve housing
that is affordable and occupied by moderate-, low-, very
low-, and extremely-low income households. The amount of
very low, low-, and moderate-income housing must comply
with the Community Redevelopment Law and the adopted
transit village plan.
AB 485 requires that the housing units constructed under
the 20% affordable housing requirement remain available at
an affordable cost and occupied by moderate-, low-, very
low-, and extremely-low income households for the longest
feasible time: at least 55 years for rental units and 45
years for owner-occupied units.
If dwelling units have been destroyed or removed, AB 485
requires the city, county, or city and county to
rehabilitate, develop, or construct an equal number of
replacement dwelling units. The replacement housing must
have an equal or a larger number of bedrooms as the
destroyed or removed unit and must be at an affordable cost
to low- or moderate-income individuals and families.
IV. Fire district approval . Before an IFD can divert
property tax increment revenues from another taxing entity,
every local agency that will contribute its property tax
increment revenue to the IFD must approve the
infrastructure financing plan. Some special districts are
governed ex officio by county boards of supervisors or city
councils. In the case of a special district that provides
fire protection services where the county board of
supervisors is the governing authority, Assembly Bill 485
requires the special district to act on an IFD's plan by
adopting a separate resolution.
V. State goals . The Legislature passed the Sustainable
Communities and Climate Protection Act (SB 375, Steinberg,
2008), which requires:
The Air Resources Board to set regional targets for
automobiles' and light trucks' greenhouse gas emission
reductions.
A regional transportation plan to meet greenhouse
gas emission reduction targets, and the California
Transportation Commission to maintain guidelines for
travel demand models.
Cities and counties to revise their housing
elements every eight years in conjunction with the
AB 485 - 5/5/11 -- Page 4
regional transportation plan.
The Act relaxes CEQA requirements for housing developments
that are consistent with a Sustainable Communities Strategy
(SB 375, Steinberg, 2008). The sustainable communities
strategy and the Global Warming Solutions Act (AB 32,
Nu�ez, 2006) promote dense, walkable communities, mass
transit, and greenhouse gas emission reductions.
Assembly Bill 485 declares that transit village development
districts provide a new tool for achieving the sustainable
communities strategy and meeting the State Air Resource's
Board target for greenhouse gas reductions. The bill also
expresses the Legislature's intent to make transit villages
sustainable and environmentally conscious, and that related
construction meets or exceeds the Green Building Standard
Code's requirements.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Urban planners, transit agencies,
and many local governments tout transit-oriented
development (TOD) as a tool that helps communities deal
with adverse effects of urbanization: traffic gridlock,
loss of open space, and increased environmental pollution.
Local communities can create mixed-used communities,
blending residential and commercial properties together, by
clustering development around mass transit hubs. The
public sector invests in transit as part of the wider
strategy to improve air quality, save energy, decrease
traffic congestion, and promote compact development. When
communities encourage transit agencies to build expensive
systems, but fail to provide mechanisms to finance them or
to finance the dense development that accompanies transit
stations, there are social, physical, and fiscal losses.
Some communities may not encourage dense development around
transit because of the lack of incentives to pay for the
public works that support new residents and businesses. AB
485 allows cities and counties to reap the positive fiscal
benefits of new construction inside transit villages. The
bill gives local officials a tailored fiscal tool to spur
private investors and developers to invest in TODs.
AB 485 - 5/5/11 -- Page 5
Legislators and voters who have elected their local
representatives should let local officials do their job:
setting local priorities for spending local revenues.
2. No vote required . When Governor Deukmejian signed the
1990 Seymour bill that created IFDs, there was a political
agreement that local officials should get 2/3-voter
approval before they could issue IFD bonds. The California
Constitution requires 2/3-voter approval before cities or
counties can issue long-term debt backed by local general
purpose revenues; school districts need 55%-voter approval.
General obligation bonds need 2/3-voter approval. The
courts have explained that cities need 2/3-voter approval
before they dedicate portions of their general funds to pay
for bonds. That's why local limited obligation bonds need
2/3-voter approval. But the Constitution is silent on
IFDs. Redevelopment agencies can borrow money without
voter approval by issuing tax allocation bonds backed by
other local governments' diversion of property tax
increment revenues. Similarly, IFDs' tax increment bonds
are backed tax increment revenues from local governments
(but not schools) that consent to diverting their revenues.
IFDs' tax increment bonds are not like local agencies' own
limited obligation or general obligation bonds. AB 485
repeals the statutory requirement for 2/3-voter approval on
IFDs' bonds. Since the vote requirement is not
Constitution-bound, the Committee may wish to consider what
voter approval (if any) local officials should seek before
issuing IFD bonds.
3. IFDs vs. redevelopment . Albert Einstein said that the
only reason for time is so that everything doesn't happen
at once. When Governor Brown proposed the elimination of
redevelopment in this year's Budget, the world of IFDs and
redevelopment intertwined. In the 1990 political
compromise that resulted in IFDs, legislators drew clear
distinctions with redevelopment projects. The land use key
to redevelopment was blight, but IFDs don't have to
demonstrate blight. The fiscal key to redevelopment was
access to the schools' share of property tax increment
revenues, but IFDs can't touch any school funds. The
housing key to redevelopment was that 20% of their property
tax increment revenues must be set aside to support
affordable housing, but because IFDs have no state subsidy,
IFDs only need to replace destroyed housing and provide
relocation assistance. If redevelopment activities stop or
AB 485 - 5/5/11 -- Page 6
decline, IFDs may become more important. Regardless of
what happens with redevelopment, AB 485 uses IFDs to
incentivize the types of development promoted by the
state's sustainable communities strategy and transit
village project goals.
4. No state subsidy . When redevelopment agencies divert
property tax increment revenues from schools, the State
General Fund backfills school coffers. That diversion
indirectly creates a state subsidy for redevelopment
projects. Unlike redevelopment agencies that capture the
schools' share of property tax increment revenues,
infrastructure financing districts don't benefit from state
subsidies. By diverting property tax increment revenues
only from local governments that are willing to give up a
share of their revenues, IFDs rely on locally generated
revenues and not a State General Fund subsidy.
5. Try, try again . AB 485 is not the first attempt to
encourage transit village planning. AB 485 is similar to
AB 1221 (Ma, 2008), AB 338 (Ma, 2009), and AB 987 (Ma,
2010):
AB 987 (2010) expanded the maximum size of a
transit village development district from the total
area within -mile of the exterior boundary of the
parcel on which a transit station is located to the
total area within -mile of a transit station's main
entrance. Governor Schwarzenegger signed AB 987.
AB 338 (2009) would have waived the voter-approval
requirements for setting up Infrastructure Financing
Districts and issuing IFD bonds. Governor
Schwarzenegger vetoed the measure because it "would
undermine the rights of voters to approve or reject
proposals to redirect their tax dollars and incur
public debt." Governor Schwarzenegger highlighted
that because IFDs don't need to find "blight" like
RDAs do, "elections are the sole basis of public input
and fiscal discipline in the creation of an IFD."
AB 1221 (Ma, 2008) would have linked IFDs to
transit village development and expanded the planning
area. Governor Schwarzenegger vetoed AB 1221, citing
the delayed Budget and stating that he didn't consider
the bill to be a statewide priority.
6. Related bills . AB 485 is not the only bill this year
seeking to update the IFD financing mechanism.
AB 485 - 5/5/11 -- Page 7
AB 664 (Ammiano, 2011) allows San Francisco to use
IFD revenues along its waterfront to support the
America's Cup venue.
AB 910 (Torres, 2011) expands the list of projects
that IFDs can finance to include affordable housing
facilities, economic development, and transit village
projects. For projects the finance affordable
housing, economic development, and transit villages,
the bill also removes the vote requirement to form a
district, issue bonds, and set the appropriations
limits.
SB 214 (Wolk, 2011) removes the vote requirement to
issue bonds, form an IFD, and to set the
appropriations limit. SB 214 requires annual
construction progress reports, prohibits big-box
subsidies, and promotes the use of IFDs for
environmental protection and disadvantaged
communities.
SB 310 (Hancock, 2011) removes the vote requirement
to form a district, issue bonds, and set the
appropriations limit. SB 310 seeks to use IFDs for
transit priority projects.
Assembly Actions
Assembly Local Government Committee:6-3
Assembly Floor: 47-29
Support and Opposition (6/16/11)
Support : California Association of Realtors; California
Transit Association; Greenbelt Alliance; Metropolitan
Transportation Commission; San Francisco Bay Area Rapid
Transit District; Santa Clara Valley Transportation
Authority.
Opposition : California Taxpayers Association; City of
Lakewood; Howard Jarvis Taxpayers Association.