BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 214|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 214
Author: Wolk (D)
Amended: 4/25/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 4/27/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
SUBJECT : Infrastructure financing districts
SOURCE : Author
DIGEST : This bill repeals the voter approval
requirements to form an Infrastructure Financing Districts
(IFD), issue IFD bonds, and set the IFD's appropriations
limit.
ANALYSIS : Cities and counties can create IFDs 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, IFDs divert property tax
increment revenues from other local governments for 30
years. However, IFDs can't divert property tax increment
revenues from schools (SB 308 �Seymour], Chapter 1575,
Statutes of 1990).
The following outlines changes to existing law:
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1. Voter approval . Under existing law, after preparing an
infrastructure financing plan, 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.
This bill repeals the voter approval requirements to
form an IFD, issue IFD bonds, and set the IFD's
appropriations limit.
2. Fire district approval . Under existing law, before an
IFD can divert property tax increment 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,
this bill requires the special district to act on an
IFD's plan by adopting a separate resolution.
3. Bond terms . Under existing law, the terms of IFDs'
bonds can't be more than 30 years.
This bill extends the maximum term of IFDs' bonds from
30 years to 40 years.
4. 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
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,
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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 website.
The report must include:
A summary of the IFD's expenditures.
A progress report of the IFD's adopted goals.
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, it 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.
5. Redevelopment project areas . Under current law, an IFD
can't overlap a redevelopment project area.
This bill repeals that statutory prohibition.
6. Big box retailers and vehicle dealers . State law
prohibits a community from giving financial
assistance-direct below-market property deals or cuts in
fees-to a big box retailer or vehicle dealer that
relocates in the same market area (SB 114 �Torlakson],
Chapter 781, Statutes of 2003). That law applies to
counties, cities, and redevelopment agencies.
This bill prohibits IFDs from providing financial
assistance to big box retailers or vehicle dealers to
relocate from one local agency to another in the same
market area.
7. Disadvantaged communities . State law defines
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disadvantaged communities as those with median household
incomes less than 80 percent of the statewide average.
Severely disadvantaged communities have median household
incomes less than 60 percent of the statewide average.
Many disadvantaged communities lack adequate public
services and facilities like clean water, sewers, paved
streets, storm drains, and street lights. Advocates
want legislators to require local officials to include
disadvantaged communities in their long-range planning
for land use and public facilities.
This bill declares that it is in the public interest for
IFDs to finance public works for disadvantaged
communities.
8. Polanco Act . The Polanco Redevelopment Act encourages
cleanup and development of brownfields-properties
contaminated by hazardous waste. The Polanco Act
authorizes redevelopment agencies to conduct a cleanup
and to recover the costs of that cleanup from
responsible parties. Redevelopment agencies that
conduct these cleanups, and individuals that enter into
redevelopment agreements with the agency, immune from
future cleanup liability.
This bill allows IFDs to finance necessary actions to
clean-up brownfield sites under the Polanco Act.
9. Sustainable Communities Strategy . The Sustainable
Communities and Climate Protect Act requires the Air
Resources Board to set regional targets for automobiles'
and light trucks' greenhouse gas emission reduction,
requires a regional transportation plan to include a
Sustainable Communities Strategy (SCS) to meet targets
for greenhouse gas emission reduction, requires the
California Transportation Commission to maintain
guidelines for travel demand models, requires cities and
counties to revise their housing elements every eight
years in conjunction with the regional transportation
plan, and relaxes California Environmental Quality Act
requirements for housing developments that are
consistent with a SCS (SB 375 �Steinberg], Chapter 728,
Statutes of 2008).
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This bill allows IFDs to finance any projects to
implement a SCS.
Comments
The author's office indicates this bill creates a more
flexible development tool to finance needed public works
projects, while incorporating rigorous accountability
measures to ensure local government diligence, positive
project results, and healthier community development. This
bill recognizes the potential for infrastructure financing
districts to implement SB 375's (Steinberg, 2008) SCS and
the benefits of protecting and rehabilitating brownfields
from hazardous waste. Local officials use tax increment
financing to divert part of the property tax revenue stream
to a separate IFD. If a local government decides not to
participate in the IFD formation, its tax increment revenue
shares are not touched. Before taxes are raised,
assessments are levied, or bonds are issued, the California
Constitution requires local officials to get voters'
approval: special taxes require 2/3-voter approval;
general taxes require majority-voter approval; benefit
assessments require a weighted ballot approval by property
owners; local general obligation bonds that require new
property tax revenues need 2/3-voter approval; local
revenue bonds that rely on new fee revenues require
majority-voter approval. However, in contrast to taxes,
assessments, or bonds, IFDs neither raise taxes nor
generate new revenue. This bill removes the requirement
for voter approval of IFDs' plans, bonds, and
appropriations limits. Legislators and voters who have
elected their local representatives should let local
officials do their job-setting local priorities for
spending local revenues.
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
percent-voter approval. That is why local 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 is why local limited obligation bonds need 2/3-voter
approval. However, because that constitutional limit does
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not mention redevelopment agencies, local officials do not
need voter approval before they issue tax allocation bonds.
Redevelopment agencies are not diverting local general
funds, they pay for their bonds with property tax increment
revenues. When Governor Deukmejian signed SB 308 (Seymour,
1990) that created IFDs, there was a political agreement
that local officials should get 2/3-voter approval before
they could issue IFD bonds. That requirement is statutory
and not based on a constitutional limitation. There is no
constitutional requirement for IFDs to seek 2/3-voter
approval (or any voter-approval) before they issue bonds
backed by property tax increment revenues. This bill
repeals the statutory requirement for 2/3-voter approval on
IFDs' bonds.
The Senate Local Government Committee indicates for many
years, local
officials were reluctant to form IFDs because they worried
about the constitutionality of using tax increment revenue
from property not within a redevelopment project area. In
1998, an Attorney General's opinion allayed those concerns,
and the City of Carlsbad formed an IFD to fund the public
works for a new hotel and any future public works needed to
develop Legoland theme park up to $1.5 million. To date,
it is the only example of a finished IFD project.
Intrigued by the concept, other local officials have
persuaded legislators to pass special bills that adapt the
IFD statute to their local circumstances:
SB 207 (Peace), Chapter 773, Statutes of 1999 - border
development zone IFD.
SB 223 (Kelley), Chapter 59, Statutes of 1999 - Salton
Sea Authority IFD.
SB 1085 (Migden), Chapter 213, Statutes of 2005 - San
Francisco waterfront IFD.
AB 2882 (De La Torre), Chapter 197, Statutes of 2006 -
Orangeline mag-lev train IFD.
Similar Legislation
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AB 485 (Ma), 2011-12 Session, utilizes IFDs to create more
transit-oriented development and related low-income
housing.
AB 664 (Ammiano), 2011-12 Session, authorizes, under
existing authorization for the City of County of San
Francisco to create IFDs, the adoption of a financing plan
and use of IFD revenues for the portion of the San
Francisco waterfront district designated as the America's
Cup venue.
AB 664 (Ammiano), 2011-12 Session, also requires the County
Board of Supervisors to submit a fiscal analysis to the
California Infrastructure and Economic Development Bank for
review and approval before adopting the resolution
authorizing issuance of debt.
AB 910 (Torres), 2011-12 Session, expands the list of
project IFDs can finance to include affordable housing
facilities and economic development.
SB 310 (Hancock), 2011-12 Session, which seeks to use IFDs
for transit priority projects.
AB 1836 (Fueur), 2007-08 Session, which would have repealed
the 2/3-voter approval for local officials to form an IFD,
repealed the 2/3-voter approval to issue tax bonds, and
extended the time an IFD could receive property tax
increment revenues from 30 years to 40 years. AB 1836's
intent was to adapt IFDs to public transit projects. The
bill failed passage in the Senate Local Government
Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/28/11)
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
California State Association of Counties
County of Yolo
Davis Board of Education Trustee Susan Lovenburg
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Non-Profit Housing Association of Northern California
Imperial County Board of Supervisors
OPPOSITION : (Verified 4/28/11)
California Taxpayers Association
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : The California Special Districts
Association note in their letter of support that "Senate
Bill 214 removes a number of key impediments to forming and
utilizing Infrastructure financing districts, providing an
important alternative to traditional redevelopment agency
project area financing, specifically the use of mandatory
tax increment financing."
ARGUMENTS IN OPPOSITION : According to the Cal Tax
"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."
AGB:kc 4/28/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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