BILL ANALYSIS Ó
AB 2144
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GOVERNOR'S VETO
AB 2144 (John A. Pérez, et al.)
As Amended August 20, 2012
2/3 vote
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|ASSEMBLY: |50-25|(May 21, 2012) |SENATE: |23-12|(August 23, |
| | | | | |2012) |
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|ASSEMBLY: |53-27|(August 27, | | | |
| | |2012) | | | |
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Original Committee Reference: L. GOV.
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 (Polanco
Act), and renames IFD law to the Infrastructure and
Revitalization Financing District (IRFD) Act.
The Senate amendments :
1)Allow bonds issuances of an IRFD to be sold at a negotiated
sale.
2)Require that a negotiated sale for bond issuances of an IRFD
that exceeds $5 million is contracted for and let to the
lowest responsible bidder.
3)Prohibit any negotiated sale of bonds of an IRFD from
exceeding $5 million.
4)Define the following terms:
a) "Project area" means a defined area within an IRFD in
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which the activities of the district share a common purpose
or goal and an overall financing plan.
b) "Net available revenue" means periodic distributions to
the city from the Redevelopment Property Tax Trust Fund
that are available to the city after all preexisting legal
commitments and statutory obligations funded from that
revenue are made, as specified. Net available revenue
shall only include revenue remaining after all current
distributions, including, but not limited to, payment of
enforceable obligations, all distributions to other taxing
entities, and applicable administrative fees, have been
made.
c) "Public works" means public facilities or any other
facilities, as specified, that are to be financed in whole
or in part by the IRFD.
5)Waive the voter-approval requirements for an IRFD established
to accomplish military base reuse on land that is
publicly-owned or controlled at the time of district
formation.
6)Allow a military base reuse IRFD to construct replacement
housing anywhere on the former base consistent with the base
reuse plan, infrastructure financing plan, and local general
plan, as applicable.
7)Allow an IRFD to be divided into project areas, each of which
may be subject to distinct limitations, and allow a
legislative body to, at any time, add territory to a district
or amend the infrastructure financing plan for the IRFD by
conducting the same procedures for the formation of an IRFD or
approval of bonds, as specified.
8)Allow the legislative body of the city forming the IRFD to
choose to dedicate any portion of its net available revenue to
the IRFD through the financing plan, as specified.
9)Require, if applicable, the infrastructure financing plan to
also include a specification of the maximum portion of the net
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available revenue of the city proposed to be committed to the
IRFD for each year during which the district will receive
revenue.
10)Add that an equal number of replacement dwelling units may
also be at affordable rent, as defined in state law.
11)Provide, in the case of an affected taxing entity that is a
special district that provides fire protection services and
where the county board of supervisors is the governing
authority or has appointed itself as the governing board of
the district, that the infrastructure financing plan shall be
adopted by a separate resolution approved by the district's
governing authority or governing board.
12)Add chaptering-out amendments to avoid conflicts with other
IFD legislation.
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.
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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,
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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Added 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;
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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)Authorized an IRFD to utilize the powers under the Polanco Act
in order to finance environmental remediation and brownfield
restoration.
3)Authorized an IRFD to finance any project that implements the
provisions of a sustainable communities strategy.
4)Removed the restriction that an IRFD may not purchase
facilities still under construction.
5)Specified 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)Removed 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)Removed the restriction that an IRFD may not overlap with any
redevelopment project area.
8)Required that any debts of an IRFD be subordinate to an
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enforceable obligation of a former redevelopment agency if the
IRFD and the redevelopment area overlap.
9)Expanded the timeline for which an IRFD can collect tax
increment from 30 to 40 years.
10)Prohibited an IRFD from issuing debt with a final maturity
more than 30 years from the creation of an IRFD.
11)Reduced the vote threshold for creating an IRFD and issuing
bonds from two-thirds voter approval to 55% voter approval.
12)Required an annual report to be sent to each land owner and
affected taxing entity in the IRFD that contains all of the
following:
a) A summary of the IRFD's expenditures;
b) A description of the progress made towards the IRFD's
adopted goals; and,
c) An assessment of the status regarding completion of the
IRFD's public works projects.
13) Identified an IRFD as a "local agency" for the purposes of
the Polanco Act.
13)Renamed IFDs as IRFDs.
14)Stated 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.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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COMMENTS : 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 cleanup. 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.
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 cleanup and mitigation. The bill reduces the
voter-approval requirements for the formation of a 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.
This bill 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.
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."
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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.
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 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.
Since the creation of IFD law there have been multiple bills
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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 (SB 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.
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 liability. This bill
authorizes an IRFD to utilize the provisions of the Act and to
fund activities related to the Act.
Existing law allows IFD bonds to be sold at discount not to
exceed 5% of par at public sale. Bonds may be sold at no less
than par to the federal government at private sale without any
public advertisement. At least five days prior to the sale, a
notice must be published in a general circulation newspaper and
financial newspaper published in the Cities of San Francisco and
Los Angeles. This bill authorizes bonds to be sold at discount
not to exceed five percent of par at negotiated sale. This bill
specifies that the notice of the bond sale in newspapers only
apply to a public sale. A negotiated sale for bond issuances of
an infrastructure and revitalization financing district that
exceeds $5 million shall be contracted for and let to the lowest
responsible bidder.
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Before an IFD can divert property tax increment from another
taxing entity, current law requires 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, this bill requires the
special district to act on an IRFD's plan by adopting a separate
resolution.
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.
GOVERNOR'S VETO MESSAGE :
"This bill authorizes the creation of Infrastructure and
Revitalization Financing Districts to finance economic
development projects. These projects would be funded if
approved by a 55 percent voter approval.
"Expanding the scope of infrastructure financing districts is
premature. This measure would likely cause cities to focus
their efforts on using the new tools provided by the measure
instead of winding down redevelopment. This would prevent the
state from achieving the General Fund savings assumed in this
year's budget."
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
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FN: 0005954