BILL ANALYSIS Ó
AB 2144
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Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 2144 (John A. Pérez) - As Amended: April 16, 2012
SUBJECT : Local government: infrastructure and revitalization
financing districts.
SUMMARY : Expands the types of facilities and projects that can
be financed under the infrastructure financing district (IFD)
law, reduces the voter threshold for the creation of an IFD and
the issuance of bonds for the IFD, authorizes an IFD to utilize
the powers provided under the Polanco Redevelopment Act, and
renames IFD law to the Infrastructure and Revitalization
Financing District Act (IRFD). Specifically, this bill :
1)Adds the following to the types of public capital facilities
or projects of communitywide significance that an IRFD can
finance:
a) Levees and bypasses for flood management;
b) Habitat restoration;
c) Brownfield restoration and other environmental
mitigation;
d) Land and property purchases for development purposes and
site related improvements;
e) Acquisition, construction, or repair of housing for
rental or purchase, including multipurpose facilities;
f) Acquisition, construction, or repair of commercial or
industrial structures for private use; and,
g) Repayment of the transfer of funds to a military base
reuse authority that had been loaned to a member agency by
the reuse authority for capital projects related to the
development of the former base.
2)Authorizes an IRFD to utilize the powers under the Polanco
Redevelopment Act (Polanco Act) in order to finance
environmental remediation, and brownfield restoration.
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3)Authorizes an IRFD to finance any project that implements the
provisions of a sustainable communities strategy.
4)Removes the restriction that an IRFD may not purchase
facilities still under construction.
5)Specifies that a city may form an IRFD to finance a project or
projects on a former military base so long as the project is
consistent with the authority reuse plan and is approved by
the military base reuse authority.
6)Removes the voter threshold for the issuance of debt by an
IRFD if the project to be financed is on land of a former
military base that is publicly owned.
7)Removes the restriction that an IRFD may not overlap with any
redevelopment project area.
8)Requires that any debts of an IRFD be subordinate to an
enforceable obligation of a former redevelopment agency if the
IRFD and the redevelopment area overlap.
9)Expands the timeline for which an IRFD can collect tax
increment from 30 to 40 years.
10)Prohibits an IRFD from issuing debt with a final maturity
more than 30 years from the creation of IRFD.
11)Reduces the vote threshold for creating an IRFD and issuing
bonds from two-thirds voter approval to 55% voter approval.
12)Requires an annual report to be sent to each land owner and
affected taxing entity in the IFD that contains all of the
following:
a) A summary of the IFD's expenditures;
b) A description of the progress made towards the IFD's
adopted goals; and,
c) An assessment of the status regarding completion of the
IFD's public works projects.
13) Identifies an IRFD as a "local agency" for the purposes of
the Polanco Act.
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13)Renames IFDs as IRFDs.
14)States the intent of the Legislature to establish long-term,
targeted programs that provide local governments with tools
and resources for specified purposes including, but not
limited, to public infrastructure, affordable housing,
economic development and job creation, and environmental
protection and remediation, in a manner that encourages local
cooperation and includes appropriate protections for state and
local tax payers.
EXISTING LAW :
1)Authorizes cities and counties to create IFDs and to 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.
2)Allows an IFD to divert property tax increment revenues from
other local governments, excluding school districts, for up to
30 years, in order to pay back bonds issued by the IFD.
3)Requires that in order to form an IFD a city or county must
develop an infrastructure plan, send copies to every
landowner, consult with other local governments, and hold a
public hearing.
4)Requires, when forming an IFD, local officials to find that
its public facilities are of communitywide significance and
provide significant benefits to an area larger than the IFD.
5)Requires that every local agency that will contribute its
property tax increment revenue to the IFD to approve the plan.
6)Requires a two-thirds voter approval of the formation of the
IFD and the issuance of bonds.
7)Requires majority voter approval for setting the
appropriations limits of IFDs.
8)Specifies that public agencies that own land in a proposed IFD
may not vote on issues regarding the district.
9)Authorizes IFDs to issue a variety of debt instruments,
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including bonds, certificates of participation, leases, and
loans.
10)Requires any IFD that constructs dwelling units to set aside
not less than 20% of those units to increase and improve the
community's supply of low- and moderate-income housing
available at an affordable housing cost to persons and
families of low- and moderate-income.
11)Prohibits a local agency from providing any form of financial
assistance to a vehicle dealer or big box retailer, or a
business entity that sells or leases land to a vehicle dealer
or big box retailer, that is relocating from the territorial
jurisdiction of one local agency to the jurisdiction of
another local agency within the same market area.
12)Requires the regional transportation plan for specified
regions to include a sustainable communities strategy, as
specified, designed to achieve certain goals for the reduction
of greenhouse gas emissions from automobiles and light trucks
in a region.
FISCAL EFFECT : Unknown. This bill is keyed fiscal.
COMMENTS :
1)When appropriately used, redevelopment provided a financing
mechanism for a variety of community development activities,
including infill development, infrastructure development,
economic development, military base reuse, and brownfield
clean-up. Tax increment provided a source of funding for
affordable housing production and rehabilitation.
Redevelopment, as a tool, influenced land use decisions in
economically disadvantaged project areas. Because of the
dissolution of redevelopment agencies, questions have been
raised in both the Legislature and in local communities about
what is next for the future.
2)This bill takes the first step down the road of what comes
next by facilitating the formation and broadening the purposes
of "Infrastructure and Revitalization Financing Districts" -
the new term for IFDs - for use in economic development,
affordable housing, sustainable communities, military base
reuse, and brownfields clean-up and mitigation. The bill
reduces the voter-approval requirements for the formation of a
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district and the issuance of bonds from two-thirds to 55%, and
deletes the voter-approval requirement for publicly-owned land
on former military bases.
AB 2144 also broadens the types of projects that IRFDs may
finance to include housing, purchase of property for economic
development, acquisition, construction or repair of commercial
or industrial structures to facilitate economic development,
and the generation of funds to repay start-up financing
provided by local governments for military base reuse. The
bill provides that existing prohibitions on establishing IRFDs
in former redevelopment areas would be lifted, as long as no
existing redevelopment obligations are impaired.
3)According to the author's office, "AB 2144 facilitates the
formation and broadens the purposes of IFDs (renamed IRFDs) in
order to make them more useful local tools - in light of the
end of redevelopment - for economic development, affordable
housing, sustainable communities, military base reuse, and
brownfields cleanup and mitigation. IRFDs will encourage
local cooperation and include appropriate protections for
state and local taxpayers."
4)Cities and counties can create IFDs and issue bonds to pay for
community scale public works, including 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 a period of 30 years. IFDs,
however, are prohibited from diverting property tax increment
revenues from schools.
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
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.
5)Public officials continue to search for ways to raise the
capital they need to invest in public work projects, like
public transit facilities, infill development, or clean water.
One concept recognizes that expanded public structures can
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boost the value of nearby property. Higher property values
produce higher property tax revenues. Property tax increment
financing captures those property tax increment revenues.
When redevelopment officials used property tax increment
financing to eradicate blight, state law did not require voter
approval. When local officials use IFDs to capture tax
increment revenues, state law requires a two-thirds approval.
Recognizing these barriers, this bill reduces key impediments
to IRFDs, such as lowering the voting requirements to form the
IRFD and issue bonds, to 55%. In addition, the bill extends
the term of the IRFD bonds from 30 to 40 years, thus allowing
for a longer debt repayment period to lower monthly payments.
Additionally the bill contains provisions to increase
transparency by requiring IRFDs to annually report progress
and expenditures to its affected taxing entities and
landowners.
6)Since the creation of IFD law there have been multiple bills
that have tailored IFDs to meet specific local circumstances.
In 1999 the Legislature created a parallel law for IFDs to
stimulate development and international trade in the "border
development zone," about 400 square miles next to the Mexico
border ÝSB 207 (Peace), Chapter 773, Statutes of 1999].
However, San Diego officials have yet to use this authority.
In 2005, the Legislature passed SB 1085 (Migden), Chapter 213,
Statutes of 2005, which provided for changes and additions to
the IFD law to enable the City and County of San Francisco to
finance needed public infrastructure improvements to specified
waterfront properties. This authority was expanded even
further for San Francisco in AB 1199 (Ammiano), Chapter 664,
Statutes of 2010 and AB 644 (Ammiano), Chapter 314, Statutes
of 2011.
7)Property contaminated by hazardous substances is common in
urban areas in the state and often is a major impediment to
development. In 1990, to give redevelopment agencies
additional encouragement in addressing brownfield properties,
the Legislature enacted the Polanco Redevelopment Act. This
Act allowed a redevelopment agency, subject to certain
restrictions, to take any actions that the agency determines
are necessary to address a release of hazardous substances on,
under, or from property within its project area. In return,
the agency, the developer of the property, and subsequent
owners received limited immunity from further cleanup
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liability. This bill authorizes an IRFD to utilize the
provisions of the Act and to fund activities related to the
Act.
8)This bill allows an IRFD to finance the costs of projects that
implement a sustainable communities strategy (SCS). However,
SB 375 (Steinberg), Chapter 728, Statutes of 2008, also
authorized regional planning agencies to create an alternative
planning strategy (APS) in lieu of an SCS. The Legislature
may wish to ask the author to amend the bill to allow for
projects in an APS to also be financed by an IRFD.
9)Support arguments : Supporters argue that this bill creates a
more flexible development tool to finance needed public works
projects. Given the opt-in nature of IFDs, this measure gives
local governments a voice in how the growth in property tax
will be allocated.
Opposition arguments : Opposition believes that by reducing
the voter-approval requirements for the creation of an IFD and
for the issuance of bonds, this will reduce input or direct
voter oversight for matters affecting their communities.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
California Association of Realtors
Fieldstead & Co. (unless amended)
Howard Jarvis Taxpayers Association
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958