SAN FRANCISCO — A rarely used California tax increment financing law is likely to get a makeover this year, giving local governments a financing tool that could be a partial replacement for redevelopment agencies.
Senate Bill 628, introduced by Senator Jim Beall, D-Campbell, would change the state's current Infrastructure Financing District law, which has been around for 25 years and only used twice.
An amended version of Beall's bill passed in the legislature during the waning hours of its session early Saturday morning, and was sent to Gov. Jerry Brown for his signature, which is seen as likely.
"SB 628 is consistent with the administration's previous proposal regarding infrastructure financing districts," said a spokesperson from the governor's office.
"The bill would establish [Enhanced Infrastructure Financing Districts] to provide a flexible tool for local governments to address needed economic development, affordable housing, sustainable development, environmental mitigation, and other needs in a fiscally responsible manner," said Assemblymember Roger Dickinson, D-Sacramento, a principal co-author of the bill.
The bill is in part a replacement for the authority local governments could once exercise through redevelopment, which was abolished in California in early 2012.
Earlier this year Dickinson introduced similar legislation, Assembly Bill 243, which was held at the Senate Desk only to have its contents inserted into SB 628 as the end of the session neared. The new version of the bill appeared in the legislature on Aug. 26.
"We anticipate that the governor will sign it because the administration had quite a bit to do with the details," said Dan Carrigg, legislative director for the League of California Cities, which supports the bill.
SB 628 closely mirrors Brown's own Enhanced Infrastructure Financing District proposal, which was introduced in his 2015 state budget proposal in January.
That proposal was the first time Brown indicated a willingness to work on reviving local development financing following the dissolution of redevelopment agencies.
Many bills aimed at redevelopment financing have been proposed since then to help local governments replace the infrastructure financing tools that were eliminated with redevelopment.
Brown vetoed these bills, saying it would be premature to return to economic development financing until the fallout from the end of redevelopment had settled down.
In January, Brown indicated that time had come with his proposal to revise the current IFD law by expanding the types of projects that IFDs can fund, and lowering the voter approval requirement to 55%.
Current law requires a two-thirds public vote to form an IFD and to issue debt — a threshold that has been criticized for being too strict, making it too difficult for local governments to create IFDs.
Since the law passed in 1990, it has only been used twice — in Carlsbad in 1999 and in San Francisco in 2011.
The main difference between the governor's previous proposal and the new one is that SB 628 removed the 55% voter approval requirement to form a new infrastructure financing district. However, it still includes the 55% requirement to authorize bonds.
Carrigg said that the requirement could make it hard to issue bonds for a project that doesn't have enough support, like an affordable housing project. He said it could also make such districts more likely to be created in areas that are less populated.
"This latest version is clearly an improvement over the prior version," Carrigg said. "We'll have to see how it evolves."
SB 628, which passed 44-31 in the Assembly and 21-13 in the Senate, has also received support from the California Economic Summit, which sent a letter to lawmakers last week urging action on the bill.
Along with the letter, the Summit, a partnership between the California Stewardship Network and California Forward, sent a white paper describing how the new enhanced IFDs can improve local infrastructure development.
"SB 628's proposed EIFDs would give communities more authority to build the infrastructure California needs to achieve its growth and sustainability goals," the Summit said in paper. "These financing districts would not only be able to build all public infrastructure, they could also serve as a platform for multiple funding streams — including private financing."
Under the law, cities and counties can create the districts to divert incremental property tax growth in a district for projects such as highways, transit, and water and sewer systems.
Incremental property tax growth can be used to back debt, similar to the tax allocation bond financing used by the now-dissolved redevelopment agencies.
In addition to SB 628, a few other redevelopment bills, many of which address issues resulting from the 2012 dissolution, have made it to the governor's desk this year.
"We hope that AB 628 isn't the only tool in the box," Carrigg said. "We're also advocating that the governor sign AB 2280, which has a similar tax structure as SB 628."
AB 2280, introduced by Assemblymember Luis Alejo, D-Salinas, would reestablish a form of redevelopment authority targeted toward the state's poorer and deteriorated areas.
The bill includes a 25% affordable housing requirement, and more rigorous community approval and accountability provisions than the prior redevelopment law.
Redevelopment clean-up bills that passed the legislature include AB 2493, introduced by Assemblymember Richard Bloom, D-Santa Monica, and SB 1129, introduced by Senate Leader Darrell Steinberg, D-Sacramento.
AB 2493 would authorize access to redevelopment bond proceeds issued in 2011 for infrastructure and housing projects that were in the planning stages before redevelopment dissolution.
"Mr. Bloom has done a really good job in drafting criteria that would ensure that worthwhile projects would be able to go forward with those already issued bond proceeds," Carrigg said. "We think that's a helpful bill."
SB 1129 would clean-up and clarify the redevelopment dissolution law. It would authorize the use of available funding to produce projects with high-paying construction jobs, expedite the approval and implementation of long range property management plans, and provide additional certainty for agencies receiving a "finding of completion."
A number of tax credit bills designed to promote economic development in cities have also made it to the governor's desk.
These include AB 1839, a tax credit to encourage film and television production; AB 1999, a state income tax credit on costs of rehabilitating historic structures; and AB 1399, a new markets tax credit to attract private capital and federal matching funds for investments in low-income communities.
"California is one of the few states to not provide an incentive for the preservation of our historic buildings," said Assembly Speaker Toni Atkins, D-San Diego, who authored AB 1999. "A state tax credit for this purpose would help stimulate local economies, revitalize downtown areas and communities, promote and increase the supply of affordable housing, encourage property maintenance and rehabilitation, and leverage use of the federal rehabilitation tax credit."
Another bill that would help address infrastructure needs, SB 1077, also passed the Legislature. The bill targets highway infrastructure and would create a committee to guide the development and implementation of a pilot program to study the potential for a road usage charge as an alternative to the gas tax.
"It's time to embrace new ideas for solving transportation funding needs in California," said the American Council of Engineering Companies of California's President Mary Erchul. "The state gas tax is reaching its inherent limit, and we need to explore other options. SB 1077 is the beginning of a potential new direction that will help move California forward."
The governor has until Sept. 30 to sign or veto bills passed by the legislature.
