BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 485|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 485
Author: Ma (D)
Amended: 6/29/11 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 7/6/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
ASSEMBLY FLOOR : 47-29, 5/16/11 - See last page for vote
SUBJECT : Infrastructure financing
SOURCE : Bay Area Rapid Transit
DIGEST : This bill allows local officials to divert
property tax increment revenues to pay for public
facilities and amenities within transit village development
districts.
ANALYSIS : 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.
This bill allows local officials to divert property tax
increment revenues to pay for public facilities and
amenities within transit village development districts.
CONTINUED
AB 485
Page
2
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], Chapter 780, Statutes of
1994). To qualify, a transit village plan (TVP) must
demonstrate five public benefits, from a list of 13
benefits (AB 1320, �Dutra], Chapter 42, Statutes of 2004).
This bill requires that one of the five demonstrable public
benefits of a transit village plan must be either an
increased stock of affordable housing or live-travel
options for transit-needy groups. The TVP must include
provisions to implement mixed-housing types within one-half
mile of a transit station.
Bond terms . The terms of Infrastructure Financing
District's (IFDs') bonds can't exceed 30 years. This bill
extends the maximum term of IFDs' bonds from 30 years to 40
years.
Infrastructure Financing Districts and transit facilities .
A city or county may create an 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) for up to 30 years; local
governments must consent to the diversion. Each IFD must
have a detailed infrastructure financing plan (SB 308
�Seymour], Chapter 1575, Statutes of 1990).
After preparing an infrastructure financing plan, state law
requires local officials to obtain voter approval to:
1. Form the IFD, which requires two-thirds-voter
approval.
2. Issue bonds, which requires two-thirds-voter approval.
3. Set the appropriations limit, which requires
majority-voter approval.
CONTINUED
AB 485
Page
3
If an infrastructure financing district implements a
transit village plan, this bill removes the two-thirds-vote
requirement to form the IFD, the two-thirds-vote
requirement to issue bonds, and the majority vote to set
the appropriations limit.
This bill defines "transit facilities," as any publicly
owned facility and amenity necessary to implement a transit
village plan adopted under the Transit Village Development
Planning Act.
Infrastructure Financing Districts and affordable housing .
If an IFD finances a transit village project, this bill
requires the transit village plan to include an increased
stock of affordable housing or live-in travel options for
transit-needy groups. This bill requires IFDs that finance
transit villages to set aside 20 percent of all property
tax increment revenues to 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.
This bill requires that the housing units constructed under
the 20 percent affordable housing requirement must 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, this bill
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 units and must be at an affordable
cost to low- or moderate-income individuals and families.
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
CONTINUED
AB 485
Page
4
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, this bill requires
the special district to act on an IFD's plan by adopting a
separate resolution.
State's goals . The Sustainable Communities and Climate
Protection Act (Act) requires:
1. The Air Resources Board to set regional targets for
automobiles and light trucks' greenhouse gas emission
reductions.
2. A regional transportation plan to meet greenhouse gas
emission reduction targets, and the California
Transportation Commission to maintain guidelines for
travel demand models.
3. Cities and counties to revise their housing elements
every eight years in conjunction with the regional
transportation plans.
The Act relaxes California Environmental Quality Act
requirements for housing developments that are consistent
with a Sustainable Communities Strategy (SB 375
�Steinberg], Chapter 728, Statutes of 2008). The
sustainable communities strategy and the Global Warming
Solutions Act (AB 32 �Nu�ez], Chapter 488, Statutes of
2006) promote dense, walkable communities, mass transit,
and greenhouse gas emission reductions.
This bill declares that transit village development
districts provide a new tool for achieving the sustainable
communities strategy and meeting the Air Resources Board
target for greenhouse gas reductions. This 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.
Accountability . The current IFD law is silent on fiscal
protections, project management, or reporting measures.
This bill requires that local officials' resolution of
intention to form an IFD must state the goal and need of
CONTINUED
AB 485
Page
5
the district and that the resolution be posted on the
legislative body's Internet Web site. This bill clarifies
that IFDs can't be used for maintenance, services, or to
compensate the members of the legislative body. This bill
requires the legislative body to mail an annual report to
landowners in the district and each affected taxing entity.
The report must also be posted on the legislative body's
Web site. The report must include:
1. A summary of the IFD's expenditures.
2. A progress report of the IFD's adopted goals.
3. An assessment of the status of the IFD's public works
projects.
If the IFD fails to submit the annual report to its
landowners or taxing entities, or the report is not put on
the legislative body's Internet Web site, the IFD can't
spend any funds to construct public works projects until
the report is submitted. If the IFD fails to show progress
for five consecutive years, it can't spend any funds to
construct any new public works projects. Any excess
property tax increment revenues that may have been
allocated to the new public works projects would be
re-allocated according to the adopted formula.
Comments
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.
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
CONTINUED
AB 485
Page
6
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. This bill allows
cities and counties to reap the positive fiscal benefits of
new construction inside transit villages. This bill gives
local officials a tailored fiscal tool to spur private
investors and developers to invest in TODs.
When Governor Deukmejian signed the 1990 Seymour bill that
created IFDs, there was a political agreement that local
officials should get two-thirds-voter approval before they
could issue IFD bonds. The California Constitution
requires two-thirds-voter approval before cities or
counties can issue long-term debt backed by local general
purpose revenues; school districts need 55 percent-voter
approval. General obligation bonds need two-thirds-voter
approval. The courts have explained that cities need
two-thirds-voter approval before they dedicate portions of
their general funds to pay for bonds. That is why local
limited obligation bonds need two-thirds-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. This bill repeals the statutory
requirement for two-thirds-voter approval on IFDs' bonds.
Related Legislation
This bill is not the only bill this year seeking to update
the IFD financing mechanism.
CONTINUED
AB 485
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/11/11)
Bay Area Rapid Transit (source)
California Transit Association
Greenbelt Alliance
Metropolitan Transportation Commission
Santa Clara Valley Transportation Authority
OPPOSITION : (Verified 7/11/11)
California Association of Realtors
California Taxpayers Association
City of Lakewood
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : According to the author's office,
this bill helps resolve this dilemma of transit village
CONTINUED
AB 485
Page
8
funding scarcity by making available a new funding tool to
communities and transit districts that choose to pursue
TOD. This bill allows local communities to use tax
increment financing (TIF) so they can finance current
improvements that will create future gains in property tax
revenues. The author's office points out that when a TOD
project is completed there is an increase in the value of
the surrounding areas that often spurs new investment.
This increased site value and investment creates additional
taxable property that can increase incoming tax revenues to
local communities. The increase in TIF would be used to
finance the debt issued to pay for the project. This bill
also requires that 20 percent of the collected TIF go
towards funding affordable housing in the transit district.
ARGUMENTS IN OPPOSITION : The California Taxpayers
Association states in their opposition:
"Eliminating voter approval for infrastructure financing
removes the people from the decision process of what
their communities will look like, how bonds are issued,
and how property tax revenues are spent. Tax increment
financing also produces unfavorable results for local
school districts and public safety, since property taxes
are earmarked for specific purposes.
"It should also be noted that this bill is inconsistent
with Governor Brown's efforts to eliminate tax-increment
financing through redevelopment agencies and his
philosophical belief in the social contract -
policymakers should seek the consent of the governed on
public financing concerns."
ASSEMBLY FLOOR : 47-29, 5/16/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Butler, Charles
Calderon, Campos, Carter, Cedillo, Chesbro, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Gatto,
Gordon, Hall, Hayashi, Roger Hern�ndez, Hill, Hueso,
Huffman, Lara, Bonnie Lowenthal, Ma, Mendoza, Mitchell,
Monning, Perea, Portantino, Skinner, Solorio, Swanson,
Torres, Wieckowski, Williams, Yamada, John A. P�rez
NOES: Achadjian, Bill Berryhill, Buchanan, Conway, Cook,
CONTINUED
AB 485
Page
9
Donnelly, Fletcher, Beth Gaines, Garrick, Grove, Hagman,
Halderman, Harkey, Huber, Jeffries, Jones, Knight, Logue,
Mansoor, Miller, Morrell, Nestande, Nielsen, Olsen, Pan,
Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Galgiani, Gorell, Norby, V. Manuel P�rez
AGB:kc 7/13/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED