BILL ANALYSIS �
AB 664
Page 1
Date of Hearing: April 27, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 664 (Ammiano) - As Amended: April 25, 2011
SUBJECT : Infrastructure financing districts: America's Cup
district.
SUMMARY : Revises the special statute that controls how local
officials can form, finance, and operate an infrastructure
financing district (IFD) along the San Francisco waterfront, at
the America's Cup district. Specifically, this bill :
1)Defines various terms for the purposes of an IFD created in
the waterfront area of San Francisco, including the following:
a) "America's Cup district" means a waterfront district
that includes the waterfront area in the City and County of
San Francisco designated as America's cup venues, excluding
the Rincon Point-South Beach Redevelopment Project Area;
b) "America's Cup enhanced financing plan" means an
infrastructure district financing plan for an America's Cup
district that contains provisions identical to those
authorized for a Pier 70 district;
c) "ERAF" as the Educational Revenue Augmentation Fund;
d) "America's Cup ERAF-secured debt" means the debt that is
secured by and will be repaid from the ERAF share and is
incurred to finance, an America's Cup district enhanced
financing plan;
e) "America's Cup ERAF share" as the county ERAF portion of
incremental tax revenue committed to an America's Cup
district enhanced financing plan; and,
f) "Cruise terminal project" means all phases of the Port
of San Francisco's public works project to build new cruise
terminal facilities at Pier 27 in San Francisco and
includes any public access and public open space
improvements on Pier 27.
2)Specifies that the America's Cup ERAF share produced in the
AB 664
Page 2
America's Cup District shall only be used to finance the
following:
a) Construction of the Port of San Francisco's cruise
terminal project at Pier 27;
b) Planning and design work that is directly related to the
Port's Pier 27 cruise terminal project; and,
c) Planning, design, and construction of improvements to
publicly-owned waterfront lands held by trustee agencies,
such as the National Park Service and the California State
Parks, and used a public spectator viewing sites for
America's Cup related events.
3)Requires that an America's Cup enhanced financing plan provide
that the proceeds of ERAF-secured debt are restricted for use
to finance directly, reimburse the Port for its costs related
to, or refinance other debt incurred, in the construction of
the Port's cruise terminal project.
4)Requires 20% in the aggregate of the America's Cup ERAF share
allocated to the Port be set aside to finance costs of
improvement to federally or state owned waterfront lands
approved by trustee agencies for the purpose of public
spectator viewing sites for America's Cup related events.
5)Requires the San Francisco Board of Supervisors (Board),
before any debt can be issued for the America's Cup District,
to submit a fiscal analysis to the California Infrastructure
and Economic Bank (I-Bank) for review and approval.
6)Authorizes the I-Bank to circulate the fiscal analysis to
other state agencies, including, but not limed to, the
Department of Finance, the Department of Housing and Community
Development, and the Governor's Office of Planning and
Research, and solicit their comments and recommendations.
7)Requires I-Bank within 30 days from receipt of the fiscal
analysis, after considering the comments and recommendations,
to take one of the following actions:
a) Approve the fiscal analysis if the I-Bank can make the
finding that the economic activity proposed to occur as a
AB 664
Page 3
result of hosting the America's Cup even in California
would result in an amount of revenue to the General Fund
with a net present value that is greater than the amount of
property tax increment that would be diverted from ERAF
over the term of the America's Cup District, or,
b) Return the fiscal analysis to the Board with specific
recommendations for changes that would allow the I-Bank to
approve the fiscal analysis.
8)Specifies that if the approved plan allocates to an America's
Cup district, as applicable, 100% of the incremental tax
revenue of San Francisco, then the IFD shall not make a
payment to ERAF, but if the plan allocated less than 100% of
the incremental tax revenue of San Francisco to an America's
Cup district, as applicable, then the IFD shall pay a
proportionate share of the incremental tax revenue into ERAF.
9)Declares that it implements IFD statutes and constitutional
provisions.
10)Declares that the property tax increment revenues received
under provisions of this measure are not "proceeds of taxes."
EXISTING LAW :
1)Clarifies that an IFD can be formed on urban waterfront
property.
2)Clarifies that IFDs can be used to finance public
infrastructure projects on public trust lands.
3)Specifies that if all of the land within a proposed IFD
belongs to a public agency, that agency is a landowner and
will be allowed to vote on issues relating to the district.
4)Waives the requirement for an election to form the IFD if all
of the land within the proposed IFD is publicly owned.
5)Authorizes environmental remediation work as a type of project
that is eligible for IFD spending in San Francisco.
6)Adds, for the purposes of San Francisco, five more examples to
the statutory list of activities whose costs are eligible to
be covered by an IFD: a) seismic and life-safety
improvements; b) landmark rehabilitation; c) structural work
AB 664
Page 4
on piers; seawalls, and wharves; d) hazardous material
remediation; and, e) storm water management facilities, other
utility infrastructure, or public access improvements.
7)Clarifies that if an IFD includes tideland and submerged
lands, whether filled or unfilled, and finances facilities
located on these lands, these facilities must serve and
promote uses and purposes consistent with the public trust.
8)Specifies that facilities built by an IFD on tideland or
submerged lands are public trust assets subject to the
administration and control of the trust grantee of the public
lands on which they are constructed.
9)Clarifies that if the facilities built on the trust lands are
capitol facilities and are not owned
by the public agency administering the public trust land, but
are owned and operated by another entity that has a license
from or an agreement with the public entity, then those
facilities would not become public trust assets.
10)Requires that the proposed infrastructure financing plan for
Pier 70 to include all of the following:
a) A map and legal description of the proposed district
that may include all or a portion
of the district designated by the Board in its resolution of
intention;
b) A description of the public facilities required to serve
the development proposed in the district, including those
to be provided by the private sector, those to be provided
by governmental entities without assistance under this
chapter, those public improvements and facilities to be
financed with assistance from the proposed district, and
those to be provided jointly; and,
c) A financing section that shall contain all of the
following:
i) A statement that specifies the maximum portion of
the incremental tax revenue of
San Francisco and of any affected taxing entity proposed to
be committed to the district;
AB 664
Page 5
ii) A limitation on the use of levied taxes allocated to
and collected by the district providing that no less than
20% of that amount must be expended on shoreline
restoration, removal of bay fill, or waterfront public
access to, or environmental remediation of, the San
Francisco waterfront;
iii) A projection of the amount of incremental tax
revenues expected to be received by the district,
assuming a period of 45 years from the base year of the
infrastructure financing plan;
iv) Projected sources of financing public facilities to
be assisted by the district, including debt to be repaid
with incremental tax revenues;
v) A limitation on the number of dollars of taxes that
may be divided and allocated to the district. Taxes
shall not be divided or be allocated to the district
beyond this limitation, except by amendment of the
infrastructure financing plan pursuant to the procedures
in this subdivision;
vi) A date on which the effectiveness of the
infrastructure financing plan and all tax allocation to
the district will end and a time limit on the district's
authority to repay indebtedness with incremental tax
revenues received under this chapter, not to exceed 45
years from the date of the Board's resolution of intent
to issue bonds to be repaid with incremental tax revenues
under this chapter;
vii) An analysis of the costs to San Francisco of
providing facilities and services to the district while
the area is being developed and after the area is
developed and of the tax, fee, charge, and other revenues
expected to be received by San Francisco as a result of
expected development in the district;
viii) An analysis of the projected fiscal impact of the
district and the associated development upon any affected
taxing entity; and,
ix) A statement that the district will maintain
accounting procedures in accordance with procedures
AB 664
Page 6
established for local governments overseeing trusting
lands.
11)States that for Pier 70 IFD, the financing plan may contain a
provision that allocates a portion of the incremental tax
revenues of San Francisco and of other designated affected
taxing entities to the Pier 70 IFD.
12)Prohibits a Pier 70 IFD plan from being formed for at least
three full fiscal years after the effective date of this bill.
13)Prohibits any new debt secured by the ERAF share to be issued
after the 20th year in which the IFD first incurs debt.
14)States that beginning in the 21st year after the IFD first
incurs debt; it may collect only the amount of ERAF share
necessary to meet ERAF-secured debt (payment and coverage)
requirements.
15)Requires the dollar amount for the ERAF-secured debt to be
specified in a schedule stating the amount of ERAF share
required annually to meet the debt requirements until all
ERAF-secured debt is paid in full.
16)Requires that all ERAF share above the annual debt
requirements be paid into the state ERAF beginning in the 21st
year after the district first incurs debt.
17)Provides that the portion of incremental tax revenue of San
Francisco to be allocated to the Pier 70 IFD must be equal to
the portion of the incremental tax revenue of the county ERAF
proposed to be committed to the Pier 70 IFD.
FISCAL EFFECT : Unknown
COMMENTS :
1)Under the Burton Act (Chapter 1333, Statutes of 1968), the
state conveyed certain state tidelands along the San Francisco
waterfront, generally extending from Fisherman's Wharf to
Candlestick Point, to the City and County of San Francisco,
through its Port, in 1969 in trust for public trust and Burton
Act trust purposes, subject to the obligation on the part of
the City and County San Francisco to assume $55 million in
state debt obligations then existing relating to the
waterfront properties.
AB 664
Page 7
2)The San Francisco waterfront is a valuable public trust asset
of the state and provides special maritime, navigational,
recreational, cultural, and historical benefits to the people
of the region and the state. The Port of San Francisco has
estimated 10-year capital plan liabilities of $1.9 billion to
bring its existing facilities, including facilities listed or
eligible for listing on the National Register of Historic
Places, to a level of compliance with current codes.
Realizing the goals of the Port's waterfront land use plan,
the Bay Conservation and Development Commission special area
plan and the Port's capital plan and removal of the
deteriorating conditions along the San Francisco waterfront
are matters of statewide significance.
3)For several years, local officials were reluctant to form IFDs
because they worried about the constitutionality of using tax
increment revenue from property that was not within the
redevelopment project area. When a 1998 Attorney General's
opinion allayed those concerns, the City of Carlsbad formed an
IFD in 1999 to fund the public works for a new hotel located
adjacent to the Legoland theme park. That small project is
the only example of local officials' use of the 1990 IFD law.
San Francisco's proposal to set up large IFDs may attract more
attention and the appellate courts may be asked to determine
whether it is constitutional to divert property tax increment
to IFDs.
4)In 2005, the Legislature adopted SB 1085 (Migden), Chapter
213, Statutes of 2005, authorizing the Port of San Francisco
to enact infrastructure financing districts to finance
specified waterfront improvements. Due to the extraordinary
unfunded capital plan liabilities on the Port's property, the
City and County of San Francisco is seeking to make various
changes to San Francisco's IFD law to authorize the use of IFD
moneys on a more diverse group of projects.
5)In February 2010, the BMW ORACLE Racing Team, sailing for the
Golden Gate Yacht Club, won the 33rd America's Cup, off the
coast of Valencia, Spain. On December 31, 2010, the team
designated the City and County of San Francisco to host the
34th America's Cup sailing regatta. The team anticipates
holding the 34th America's Cup match in San Francisco Bay in
2013, with preliminary races worldwide beginning in 2011 and
in San Francisco Bay in 2012.
AB 664
Page 8
6)The Port of San Francisco is currently conducting
environmental review under the California Environmental
Quality Act (CEQA) of the proposed 34th America's Cup Event at
locations on Port property and Golden Gate National Recreation
Area lands and proposed improvements to Pier 27 to build a
new, state-of-the-art primary cruise terminal for the Port.
As proposed, Pier 27 would serve as one of the central AC34
venues in the proposed America's Cup Village.
7)The bidding for the America's Cup was not unlike bidding for
other major worldwide sporting events such as the Olympics or
the World Cup. For America's Cup 34, the Event Authority will
use 9 piers and a 2 acre upland parcel, rent-free. The City
will fund the costs of compliance with CEQA and pay for all
transportation and public safety requirements. The City will
also fund the construction of the Pier 27 cruise terminal in
preparation for the America's Cup Village.
8)According to the Beacon Economics report on the 34th America's
Cup, the state is projected to receive $61 million in direct
tax benefits (in 2013 dollars) from the 34th America's Cup.
The City is expected to realize approximately $23 million in
tax proceeds (primarily hotel taxes). All of the City's
projected tax proceeds projected to accrue from the America's
Cup is expected to be spent covering City services (police,
fire, transportation) for the event. In addition, the City
has pledged its available property tax increment from future
Event Authority long-term development sites to offset the
costs of public improvements at those sites. In addition, the
City is funding the construction of a new cruise terminal at
Pier 27, currently estimated to cost $97 million. The
Committee may wish to ask the author to specify that the ERAF
monies authorized under this measure be used for the purpose
of overall maritime facilities in order to be consistent with
the general provisions of IFD law related to San Francisco.
9)This measure is similar to AB 1199 (Ammiano), Chapter 664,
Statutes of 2010, which revised the special statute that
controls how local officials can form, finance, and operate an
IFD along the San Francisco waterfront, at Pier 70, on land
that is under the jurisdiction of the Port of San Francisco.
10)Support Arguments: Supporters state that because of the
competitive nature of the process to land the America's Cup,
AB 664
Page 9
it is unlikely this development will occur but for the
investment of the state's ERAF funds. Renovation of these
facilities for America's Cup 34 is unlikely to pencil as a
private investment development opportunity, due to
extraordinary costs associated with environmental remediation,
historic preservation, repair and seismic retrofit of pier
structures in the Bay and new infrastructure. Bonding
capacity from these proposed IFDs will enable development to
move forward enabling America's Cup 34 to generate up to $60.9
million in tax revenue to the state in 2013.
Opposition Arguments: Opposition could argue that providing
state funding to pay for America's Cup is a large long-term
commitment of state funds when the state will only receive the
short-term benefits of the additional sales and use tax
dollars. Under this measure, the state would lose an
estimated $25,578,190 in ERAF funds over a 30 year period.
Moreover, as the bill is currently drafted ERAF funds could be
used to pay for costs related to the construction of the
cruise terminal and not just the underline pier
rehabilitation.
REGISTERED SUPPORT / OPPOSITION :
Support
Port of San Francisco
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958