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SB 214 (Wolk) Is Most Useful Tool on Governor’s Desk for Infrastructure Development

September 13, 2012

Gov. Jerry Brown will soon be making decisions on three bills on his desk that offer local agencies options to develop infrastructure and promote economic development in the wake of the loss of redevelopment.

 

The measures are SB 214 (Wolk), AB 2144 (Pérez) and SB 1156 (Steinberg). Given their complexity, city officials have found it challenging to sort through these measures to understand what opportunities they may present, so here is an explanation from the League's perspective.

Of these three measures, the League is supporting SB 214 because it is viewed as the most developed, flexible and useful tool that can be used by the widest variety of cities.

In 2012, the League made it a top priority to develop new tools that cities could use for infrastructure and economic development. The League Task Force on the Next Generation of Economic Development Tools, chaired by League President Bill Bogaard, mayor of Pasadena, met several times in the spring to develop options and ideas. 

A key focus of that task force was to examine the possibility of making Infrastructure Financing District Law (IFD), which had been on the books but rarely used for 22 years, a useful tool. There were many problems identified with IFD law. While the law allowed the use of tax increment to fund infrastructure, it required two public votes at a two-thirds vote threshold (both to establish a district and issue debt). These dual vote requirements are massive hurdles sufficient to deter most agencies from looking further. There were also unresolved legal questions over whether the Constitutional debt limit applied to these districts; funding rehabilitation and maintenance of infrastructure was not permitted. There was much work to be done to make the tool useful.

Some background on the vote threshold issue should also be provided. The vote thresholds that currently apply to the actions of local agencies typically are required by the California Constitution. If cities and counties seek to increase local taxes, they must go to the voters. The history on IFD law, however, is different. Tax increment financing does not involve a tax increase. It is simply a financing mechanism that captures the growth in assessed property value and directs it to help fund improvements to the property. The existing vote thresholds in IFD law were placed into statute when the bill was going through the Legislature 22 years ago. Since they are not a reflection of a Constitutional requirement, the Legislature can remove them as Sen. Lois Wolk (D-Davis) has proposed. From a legal standpoint, this tax increment structure in the current version of SB 214 is not much different from the legal authority to establish tax increment financing for former redevelopment agencies.

Sen. Wolk introduced SB 214 in 2011, but in 2012 the bill was still in the Assembly. She asked the League to work with her on the bill to make the tool as useful as possible for local agencies. Her measure already proposed to remove the vote threshold requirement from the law, but other work needed to be done. Under the guidance of the task force, the League worked with its attorneys, and also partnered with the California Building Industry Association (BIA), to craft a set of amendments which resolved a variety of issues with the law. The debt limit questions were resolved with the assistance of bond counsel, and other amendments authorized rehabilitation and maintenance and additional public transparency and accountability provisions. The League, BIA and other organizations are supporting the bill in its final form and urging the Governor’s signature. A summary of SB 214 has been posted on the League’s website.    

AB 2144, by Assembly Speaker John Pérez (D-Los Angeles), is similar in some respects to Sen. Wolk’s bill because it builds on provisions of existing IFD law, but labels the new tool “infrastructure and revitalization financing districts.” There are also some policy differences between the two bills, the most significant being that AB 2144 retains the dual vote threshold requirement, but reduces them from two-thirds to 55 percent. While the goal of this measure is clearly to be helpful, the League continues to view Sen. Wolk’s SB 214 as much more useful IFD-related bill for local agencies because of the vote threshold issue. Since AB 2144 is also crafted in a way which the Governor could sign both SB 214 and AB 2144 and not create conflicts between the two, the League has elected to take no position on the bill.

SB 1156, by Senate Pro Tem Darrell Steinberg (D-Sacramento), is different than the prior two bills in that it seeks to build its legal framework upon former redevelopment authority. The League spent significant time working on this measure. Early in the session, the League provided the Senator’s office with a legal analysis of how a redevelopment agency could be reestablished following the California Redevelopment Association v. Matosantos decision. The legal skeleton of this measure reflects concepts suggested by the League. The League differed with the author on policy and implementation issues surrounding the use of the tool.  

At an earlier point in the year, the League adopted an Oppose Unless Amended position on the measure. While there were numerous issues identified, a threshold issue for the League was that earlier versions of SB 1156 required a city to get county approval for use of the tool even if no county tax increment was affected. County approval of a city-only project was ultimately removed from the bill by the author, which the League appreciates.  

When the session ended, a number of significant implementations question raised by a subgroup of economic development and legal experts of the League’s task force remained unresolved. The League had been seeking amendments which would have included:

  • Ensuring that areas that were truly economically disadvantaged (consistent with the historic purpose of redevelopment) were able to take advantage of the tool;
  • Clarifying numerous issues involving how a new authority would interact with previous redevelopment law; and
  • Resolving questions associated with agreements that are required to be entered into on prevailing wages and living wages connected to a jobs plan.

If the Governor signs this measure more refinement to this law will be necessary. Given, however, that the author did take the amendment allowing cities to use the tool without county approval and the measure could provide another option in statute and further clarified in the future, the League is not requesting a veto of the bill.  

For all the above reasons, the League continues to view SB 214 as the most useful proposal with the widest potential benefit for its members. Cities are encouraged to send letters requesting the Governor’s signature.  A sample request for signature letter is available on the League’s website by typing “SB 214” into the search box.



 
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