Legal Alerts Oct 6, 2014

Legislation Broadening Infrastructure Financing Districts Signed by Gov. Brown

Four bills broaden the appeal of IFDs as a funding mechanism for local infrastructure, environmental mitigation, private industrial facilities, affordable housing and broadband

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Four bills affecting infrastructure financing districts, a funding mechanism for infrastructure and development projects that benefit the broader community, were recently signed by Gov. Jerry Brown. IFDs, created in 1990, have garnered renewed interest after the dissolution of redevelopment in California as a way for cities to capture the resulting increase in property tax revenues generated by the affected area (tax increment financing). The legislative intent to provide an alternative means for local communities to finance public infrastructure and improvements, in the wake of the dissolution of redevelopment agencies, is explicitly noted in these bills:

SB 628 by Sen. Jim Beall (D-San Jose) allows local agencies to create enhanced infrastructure financing districts  to finance specified infrastructure projects and facilities, and reduces the statutory threshold for voter approval of an EIFD’s issuance of tax increment bonds from two-thirds to 55 percent. An EIFD’s lifespan is also significantly extended from 30 years to a period of no more than 45 years from the date on which the issuance of bonds is approved. An EIFD authorizes the issuance of bonds to finance capital public infrastructure projects with tax increment financing.

EIFDs can be used to finance every type of public infrastructure, as well as other types of capital projects. Eligible projects include transportation, transit, water treatment, flood control and storm water quality management, industrial facilities for private use, affordable housing, childcare facilities, libraries, parks, public facilities, energy, solid waste disposal and environmental impact mitigation. EIFDs also have the power to finance the re-use of former military bases, fund transit projects, and construct and rehabilitate affordable housing units.

EIFDs may also utilize any powers under the Polanco Redevelopment Act, which would allow the EIFD to take actions necessary to remedy or remove a release of hazardous substances within the EIFD’s boundaries.

Among the prerequisites for forming an EIFD, cities with former redevelopment agencies must have received a finding of completion from the Department of Finance, and resolved all outstanding litigation matters.

SB 614 by Sen. Lois Wolk (D-Vacaville) allows a local agency, until Jan. 1, 2025, to use tax increment financing in a newly formed or reorganized IFD to fund improvements or upgrades to structures, roads, sewer or water facilities, or other infrastructure that serves a disadvantaged unincorporated community. A community qualifies as a “disadvantaged unincorporated community” if the annual median household income is less than 80 percent of the statewide annual median household income.

AB 229 by Assemblymember John Perez (D-Los Angeles ) authorizes a city to form an IFD to finance projects on a former military base and dedicate any portion of its funds from the Redevelopment Agency Property Tax Trust Fund to the district. The bill also allows districts to finance projects in former RDA areas.

AB 2292 by Assemblymember Rob Bonta (D-Oakland) authorizes cities to create IFDs that can issue bonds to pay for public capital facilities or projects for broadband. Before AB 2292, city-wide fiber optic networks could qualify for IFD financing in some cases, even though it was not specifically included in the definition of eligible projects for communitywide infrastructure. The bill expands the definition of public capital facilities to specifically include broadband and any communications network facilities that enable high-speed Internet access.

If you have any questions about IFDs, tax increment financing or economic development, please contact one of the attorney authors of this legal alert listed at right in the firm’s Municipal Law practice group, or your BB&K attorney. For more discussion and updates on IFDs, please visit BBKnowledge.com and subscribe to BB&K Legal Alerts.

Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

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