BILL ANALYSIS �
SB 214
Page 1
Date of Hearing: June 29, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 214 (Wolk) - As Amended: June 21, 2011
SENATE VOTE : 24-13
SUBJECT : Infrastructure financing districts: voter approval:
repeal.
SUMMARY : Eliminates the requirement of voter approval to create
an infrastructure financing district (IFD) and revises the
provisions governing the public facilities that may be financed
by an IFD. Specifically, this bill :
1)Requires an IFD to only finance structural or nonstructural
public capital facilities.
2)Adds the following to the types of facilities an IFD can
finance:
a) Facilities and watershed lands used for the collection
and treatment of water for urban uses;
b) Flood management, including levees, bypasses; and,
c) Habitat restoration.
3)Authorizes an IFD to finance the cleanup and development of
brownfields-properties contaminated by hazardous waste under
the provisions of the Polanco Redevelopment Act.
4)Removes the prohibition against an IFD including any portion
of a redevelopment project area.
5)Authorizes an IFD to finance any projects that implement a
sustainable communities strategy (SCS) as required under SB
375 (Steinberg), Chapter 728, Statutes of 2008.
6)Removes intent language that an IFD has to cover areas that
are substantially undeveloped.
7)Changes the time period that any action or proceeding to
attack, review, set aside, void, or annul the creation of an
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IFD or the adoption of an infrastructure financing plan from
30 days after the enactment of the ordinance creating the IFD
to 30 days after the date the legislative body adopted the
resolution adopting the infrastructure financing plan.
8)Changes the time period that any action or proceeding to
attack, review, set aside, void, or annul the issuance of
bonds by the IFD from 30 days after the resolution that the
voters approved the issuance of bonds to 30 days from the date
the legislative body adopted the resolution providing for the
issuance of bonds.
9)Prohibits an IFD 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 territorial
jurisdiction of another local agency but within the same
market area.
10)Requires the resolution of intention for the creation of an
IFD to state the need for the IFD and the goals the IFD
proposes to achieve by financing public facilities.
11)Requires the legislative body to direct the clerk to mail a
copy of the resolution of intention to create an IFD to each
affected taxing entity.
12)Removes the requirement that the public facilities of the IFD
are of communitywide significance.
13)Expands the life of an IFD from 30 to 40 years.
14)Provides that in the case of an affected taxing entity that
is a special district that provides fire protection service
and where the county board of supervisors is the governing
authority or has appointed itself as the governing board of
the district, the plan shall be adopted by a separate
resolution approved by the district's governing authority or
governing board
15)Removes the election requirement to form an IFD, adopt an
infrastructure financing plan, or issue bonds.
16)Requires an annual report to be sent to each land owner and
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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.
17)Prohibits the IFD, if it fails to provide the annual report,
from spending any funds to construct public works projects
until the annual report is submitted.
18)States that if the IFD fails to produce evidence of progress
made towards achieving its adopted goals for five consecutive
years, the IFD shall not spend any funds to construct any new
public works projects, except to complete any public works
projects that it had started.
19)Requires, if the IFD fails, that any excess property tax
increment revenues that had been allocated for new public
works projects be reallocated to the affected taxing entities.
20)Makes other technical and clarifying changes.
EXISTING LAW :
1)Authorizes cities and counties to 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.
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 that when forming an IFD, local officials must find
that its public facilities are of communitywide significance
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and provide significant benefits to an area larger than the
IFD.
5)Requires that every local agency who will contribute its
property tax increment revenue to the IFD 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 IFD's
appropriations limits.
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 territorial
jurisdiction of another local agency but within the same
market area.
12)Requires the regional transportation plan for specified
regions to include an SCS, as specified, designed to achieve
certain goals for the reduction of greenhouse gas emissions
from automobiles and light trucks in a region.
FISCAL EFFECT : None
COMMENTS :
1)According to the author "SB 214 makes it easier for local
agencies to use IFDs to pay for public projects, without
impacting school district's share of property tax or the
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state's general fund. In a fiscally distressed economic
climate, local officials need a flexible financing tool that
is rigorous and responsible. Currently, existing law
perversely incentivizes locals to pursue less accountable
financing mechanisms."
2)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 are prohibited
from diverting property tax increment revenues from schools.
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.
The broader use of 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)Public officials continue to search for ways to raise the
capital they need to invest in public works 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 use property tax increment
financing to eradicate blight, state law does not require
voter approval. When local officials use IFDs to capture
property tax increment revenues, state law requires a
two-thirds approval.
5)Recognizing these barriers, SB 214 removes key impediments to
IFDs, such as the voting requirements to form and bond the
IFD. In addition, the bill extends the term of the IFD bonds
from 30 to 40 years, allowing for a longer debt repayment
period lowering monthly payments. Also, to increase
transparency, SB 214 includes measures of programmatic and
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fiscal accountability, requiring IFDs to annually report its
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 IFD law to 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 last year in AB 1199 (Ammiano),
Chapter 664, Statutes of 2010.
7)SB 214 contains provisions that allow an IFD to be formed in
an area that is or was previously in a redevelopment project
area. Current law expressly prohibits this. The Committee
may wish to consider if the Legislature chooses not to end
redevelopment agencies out right then should we really be
allowing the overlap of an IFD and a redevelopment agency
since they both are funded through tax increment?
8)This bill allows an IFD to finance the costs of projects that
implement and SCS; however,
SB 375 also authorized regional planning agencies to create an
alternative planning strategy (APS) in-lieu of an SCS. The
Committee may wish to ask the author to amend the bill to
allow for projects in an APS to also be financed by an IFD.
9)Support arguments: Supporters argue that SB 214 creates a
more flexible development tool to finance needed public works
projects. Given the "opt-in" nature of IFDs tax increment
financing, more local governments will have a voice in if
their growth in property tax is allocated, a luxury currently
not provided to them under redevelopment law.
Opposition arguments: Opposition could say that by removing
the voter approval requirements for the creation of an IFD and
the issuance of tax allocation bonds will remove any input or
direct voter oversight. Moreover, with the removal of the
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voting requirement the measure is creating more of a
redevelopment type agency without the requirement of making a
finding of blight.
10)This measure, AB 485 (Ma), AB 910 (Torres), and SB 310
(Hancock) all contain similar provisions in IFD law and will
need to contain double-jointing language in order to not have
chaptering out issues if the measures move forward.
REGISTERED SUPPORT / OPPOSITION :
Support
California Infill Builders Association
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
California State Association of Counties
Counties of Imperial and Yolo
Davis Joint Unified School District
Los Angeles Business Council
San Francisco Bay Area Rapid Transit District
Supervisor Gary Wyatt, District 4, Imperial County Board of
Supervisors
The Nature Conservancy
The Non -Profit Housing Association of Northern California
TransForm (if amended)
Individual letter (1)
Opposition
California Building Industry Association (unless amended)
California Business Properties Association (unless amended)
California Taxpayers Association
Howard Jarvis Taxpayers Association
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958