BILL ANALYSIS �
SB 214
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Date of Hearing: August 22, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 214 (Wolk) - As Amended: August 6, 2012
SENATE VOTE : 24-13
SUMMARY : Eliminates the voter approval requirement for a city
or county to create an infrastructure financing district (IFD)
and expands the types of projects that may be financed by an
IFD. Specifically, this bill :
1)Exempts the formation of an IFD by a city or county from voter
approval requirements, requirements to adopt an infrastructure
financing plan, and bond issuance requirements, and repeals
other relevant election-related requirements contained in
existing IFD law.
2)Allows an IFD to contribute to the cost of maintaining
facilities, as specified, and adds the following to the types
of facilities an IFD can finance:
a) 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
brownfield properties contaminated by hazardous waste under
the provisions of the Polanco Redevelopment Act.
4)Allows an IFD to finance any project that implements a transit
priority project, regional transportation plan, or other
projects that are consistent with the general use designation,
density, building intensity, and applicable policies specified
for the project area in either a sustainable communicates
strategy (SCS) or an alternative planning strategy (APS) for
which the Air Resources Board has accepted the metropolitan
planning organization's determination that the SCS or the APS,
would, if implemented, achieve the greenhouse gas emission
reduction targets.
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5)Expands the life of an IFD from 30 to 40 years.
6)Removes the prohibition against an IFD including any portion
of a redevelopment project area.
7)Prohibits an IFD from providing any form of financial
assistance to a vehicle dealer or a 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, as specified.
8)Specifies that an IFD is a local agency for purposes of the
Ralph M. Brown Act.
9)Requires the resolution of intention for the establishment of
an IFD to state the need for the IFD and the goals the IFD
proposes to achieve by financing public facilities.
10)Requires the legislative body to direct the clerk to mail a
copy of the resolution of intention to create the IFD to each
owner of land within the IFD and to each affected taxing
entity and to direct the clerk to post a copy of the
resolution of intention to create an IFD in an easily
identifiable and accessible location on the legislative body's
Internet web site.
11)Allows the legislative body to adopt a resolution
establishing the IFD, at the conclusion of the required public
hearing, based upon a finding that (a) the goals of the IFD
are consistent with the general plan; and, (b) the financing
programs undertaken by the IFD are an efficient means of
implementing the goals of the IFD.
12)Requires the legislative body to send a copy of the
resolution to the public financing authority, after adoption
of the resolution as specified in 11) above.
13)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.
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14)Requires, if an infrastructure financing plan contains a
provision that provides for the division of taxes of any
affected taxing entity, the creation of a public
accountability committee, and provides for the membership and
responsibilities of that public accountability committee, as
follows:
a) Requires the public accountability committee to be
comprised of a representative of each affected taxing
entity that has agreed to the division of its taxes, a
representative of the public financing authority, and one
or more public members;
b) Requires the legislative body of each affected taxing
entity and the legislative body of the public financing
authority to appoint one of its members, or their designee,
to the public accountability committee;
c) Requires all meetings of the public accountability
committee to be noticed in accordance with specified
provisions of the Ralph M. Brown Act; and,
d) Provides that the purpose of the public accountability
committee shall be to conduct or have conducted an annual
performance review and an annual independent financial
review of the public financing authority, and specifies
that the costs of the audits shall be paid from the
revenues of the public financing authority.
15)Requires, in the financing section of the infrastructure
financing plan, the inclusion of the following:
a) The goals the IFD proposes to achieve by financing
public facilities;
b) The goals the IFD proposes to achieve by assisting with
specified development related to transit priority projects;
and,
c) The creation of a public accountability committee, if
funding from affected taxing entities is included in the
plan.
16)Creates and defines, for purposes of IFD law, the term
"public financing authority" to mean the legislative body of
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the IFD established pursuant to the bill's provisions.
17)Requires the public financing authority to be comprised of
five people, three of whom shall be members of the city
council or board of supervisors that established the IFD, and
two of whom shall be public members.
18)Allows a public financing authority to enter into a joint
powers agreement with an affected taxing entity to carry out
the purposes of the bill's provisions with regard to nontaxing
authority or powers only.
19)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.
20)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.
21)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.
22)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.
23)Allows the public financing authority to authorize the
issuance of bonds by adoption of a resolution, and expands the
requirements of the resolution to additionally include the
following information:
a) The issuance of the bonds in one or more series;
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b) The date the bonds will bear;
c) The denomination of the bonds;
d) The form of the bonds;
e) The manner and execution of the bonds;
f) The medium of payment in which the bonds are payable;
g) The place or manner of payment and any requirements for
registration of the bonds; and,
h) The terms of call of redemption, with or without
premium.
24)Changes the time period that any action or proceeding to
attack, review, set aside, void, or annul the creation of an
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.
25)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.
26)Makes specified findings and declarations, including the
following:
a) It is in the public interest to develop a mechanism that
allows public agencies to jointly dedicate their revenues
to projects that support sustainable communities;
b) Disadvantaged communities, as defined, may not be
beneficiaries of quality public works, and therefore these
communities are neglected, isolated from, and deprived of
the basic facilities needed for public health and safety;
and,
c) IFDs are consistent with the conclusion of California
courts that tax increment revenues are not "proceeds of
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taxes," as specified.
27)Revises the definition of an IFD to mean "a legally
constituted public and corporate governmental entity separate
and distinct from the city that established it."
28)Defines "public facilities of community wide significance" to
mean "facilities that benefit all areas within the IFD or
serve or are made available to those areas."
29)Prohibits an IFD from compensating the members of the
legislative body of the city or the IFD for any activities
undertaken pursuant to the bill's provisions.
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
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
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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 : This bill is keyed fiscal.
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
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.
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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.
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.
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 local officials use IFDs to capture property tax
increment revenues, state law requires a two-thirds approval.
4)Recognizing these barriers, this bill 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 thus lowering monthly payments. Also, to increase
transparency, this bill includes measures of programmatic and
fiscal accountability, requiring IFDs to annually report its
progress and expenditures to its affected taxing entities and
landowners.
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Recent amendments to the bill state that an IFD is a separate
and distinct entity from a city or county that creates the
IFD. In addition, the amendments require the creation of a
public accountability committee, in the event that the IFD's
infrastructure financing plan contains provisions that provide
for the division of taxes of any affected taxing entity. The
bill's provisions also provide for the membership and
responsibility of that public accountability committee.
5)This bill allows the creation of an IFD to fund public works
projects in disadvantaged communities and communities seeking
to implement sustainable communities strategies, like transit
priority projects. The bill also allows non-traditional flood
and watershed management projects - using nature to conserve
and restore at-risk watershed lands - to be available for IFD
financing. Additionally, the bill authorizes tax increment
financing for the rehabilitation of upgrades to existing
facilities, which the author notes will "further local
flexibility and opportunity."
6)This bill was heard by this Committee in June of 2011, and
passed on a 5-3 vote. Author's amendments taken on the
Assembly Floor in June of 2012 triggered the referral of the
bill back to Committee for further hearing.
7)Support arguments : Supporters argue that this bill gives
local officials a rigorous, flexible financing tool that does
not impact K-14 education or the state's General Fund, and
local officials need, and should be given, the flexibility to
do their job: to determine local priorities and the most
appropriate local financing mechanism to achieve those
priorities.
Opposition arguments : CalTax argues that eliminating voter
approval for infrastructure financing removes the people from
the decisions process of what their communities will look
like, how bonds are issued, and how property tax revenues are
spent. CalTax also points out that "this bill is inconsistent
with Governor Brown's efforts to eliminate tax-increment
financing through redevelopment agencies and his philosophical
belief in the social contract - that is, policymakers should
seek the consent of the governed on issues involving public
finance."
REGISTERED SUPPORT / OPPOSITION :
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Support
Bay Area Rapid Transit District
California Building Industry Association
California Infill Builders Association
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
California State Association of Counties
Cities of Cerritos and West Sacramento
Counties of Imperial and Yolo
Davis Joint Unified School District
League of California Cities
Los Angeles Business Council
The Nature Conservancy
San Diego Housing Federation
Southern California Association of Governments
Ventura Council of Governments
3 individuals
Opposition
Associated Builders and Contractors of California
CalTax
California Association of Realtors
Eagle Forum
Howard Jarvis Taxpayers Association
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958