BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 214|
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UNFINISHED BUSINESS
Bill No: SB 214
Author: Wolk (D), et al.
Amended: 8/24/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 4/27/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
SENATE FLOOR : 24-13, 5/16/11
AYES: Alquist, Calderon, Corbett, De Le�n, DeSaulnier,
Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Vargas, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Blakeslee, Cannella, Correa,
Dutton, Emmerson, Fuller, Gaines, Harman, Huff, La Malfa,
Runner
NO VOTE RECORDED: Strickland, Walters, Wyland
ASSEMBLY FLOOR : Not available
SUBJECT : Infrastructure financing districts: voter
approval: repeal
SOURCE : Author
DIGEST : This bill 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.
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Assembly Amendments (1) recast provisions governing IFD (2)
designate membership of board adopting finance plans; (3)
expand legislative findings; (4) make clarifying and
technical changes; and (5) add coauthors.
ANALYSIS :
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 2/3 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.
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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 sustainable communicates strategy
(SCS), as specified, designed to achieve certain goals
for the reduction of greenhouse gas emissions from
automobiles and light trucks in a region.
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,
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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 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.
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
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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.Specifies that projects financed by an IFD that involve
construction, alteration, demolition, installation or
repair work and dwelling units constructed by an IFD
shall be subject to provisions in the Labor Code related
to public works, thereby subjecting these types of
projects to prevailing wage provisions.
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.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
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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.
16.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.
17.Creates and defines, for purposes of IFD law, the term
"public financing authority" to mean the legislative
body of the IFD established pursuant to this bill's
provisions.
18.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.
19.Allows a public financing authority to enter into a
joint powers agreement with an affected taxing entity to
carry out the purposes of this bill's provisions with
regard to nontaxing authority or powers only.
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20.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.
21.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.
22.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.
23.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.
24.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;
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
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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.
25.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.
26.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.
27.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 taxes," as specified.
28.Revises the definition of an IFD to mean "a legally
constituted public and corporate governmental entity
separate and distinct from the city that established
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it."
29.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."
30.Prohibits an IFD from compensating the members of the
legislative body of the city or the IFD for any
activities undertaken pursuant to this bill's
provisions.
Comments
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."
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.
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.
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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.
Recognizing these barriers, this bill removes key
impediments to IFDs, such as the voting requirements to
form and bond the IFD. In addition, this 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, 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.
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.
Similar Legislation
AB 485 (Ma), 2011-12 Session, utilizes IFDs to create more
transit-oriented development and related low-income
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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.: Yes
Local: No
SUPPORT : (Verified 8/29/12)
American Institute of Architects, California Council
Bay Area Council
Business Council, Inc.
California Building Industry Association
California Center for Rural Policy
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
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California State Association of Counties
Cities of Cerritos, Davis, Fremont, and West Sacramento
Coachella Valley Economic Partnership
Counties of Imperial and Yolo
Davis Unified School District
Economic Vitality Corporation of San Luis Obispo County
Greater Fresno Area Chamber of Commerce
League of California Cities
Long Beach Area Chamber of Commerce
Los Angeles Area Chamber of Commerce
Los Angeles Business Council
Los Angeles Economic Development Corporation
Nature Conservancy
North Bay Leadership Council
Orange County Business Council
Orangeline Development Authority
San Diego Housing Federation
San Diego Regional Economic Development Corporation
San Francisco Bay Area Rapid Transit
San Francisco Chamber of Commerce
San Gabriel Valley Economic Partnership
Southern California Association of Governments
State Building and Construction Trades Council (pending
amendments)
Ventura Council
OPPOSITION : (Verified 8/29/12)
Associated Builders and Contractors of California
California Association of Realtors
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 California
Taxpayers Association, "Eliminating voter approval for
infrastructure financing removes the people from the
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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:k 8/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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