While redevelopment agencies may be facing annihilation, Senator Lois Wolk (D-Davis) is taking steps to ensure that municipalities still retain some tools to continue their economic development mission. Senator Wolk has introduced legislation to give locals another financing option similar to redevelopment agencies.
Wolk’s legislation, Senate Bill 214, is a compromise between the entrenched camps of the Redevelopment debate. For proponents of eliminating redevelopment, claiming that they are wasteful and operate to the detriment of schools and other core services, it will protect source of revenues to these services from being usurped by redevelopment. For the proponents of redevelopment, SB 214 would allow Infrastructure Financing Districts (IFDs) to absorb many of the functions of the current redevelopment agencies.
It would be a means to continue to provide targeted economic development while placating the fears of school and special districts.
“It’s time to look ahead at practical alternatives that retain the ability of local governments to finance economic development,” said Wolk, a supporter of the Governor’s plan and Chair of the Senate Governance and Finance Committee.
Current law already enables a city or county to create an IFD, or a specified area in which property taxes that would ordinarily go to the general fund are diverted to pay for public projects. Qualifying projects would include such as highways, transit, water and sewer projects, flood control, libraries, parks, childcare and solid waste facilities. Unlike an RDA, an IFD cannot divert school property taxes and must have the approval from other local entities within the district. One government cannot raid another.
Comparing an IFD to a RDA, immediately the compromises can be identified:
Redevelopment Agencies have greater access to funding, since they draw from all property tax revenues. IFDs can draw upon about one half of the revenues.
Unlike RDAs, IFDs will not affect school funding.
Redevelopment agencies have the power of eminent domain; while IFDs would not.
Local governments now favor utilizing a RDA structure primarily because school property taxes are the largest contributor to RDA funding, over half statewide, and current law makes forming an IFD a comparatively cumbersome option. Furthermore, unlike an RDA, an IFD cannot use the power of eminent domain. Senate Bill 214 does not change this difference.
The cumbersome nature of the IFD is a result of barriers of entry and the requirement for an involved electorate. Voters must give their approval to create an IFD, approve bond amounts, and issue the bonds themselves. All but the IFD’s bond limits would require a 2/3rds vote.
Wolk’s legislation removes the statutory requirement for voters to approve the formation of an IFD or to issue debt, just as there is no voter approval requirement for RDAs to do the same. The bill also extends the term of IFD bonds from 30 years to 40 years, giving local governments longer to repay their debt and lowering their monthly debt payments.
“Having served in local government, I know how important these kinds of projects are to our communities. My legislation can help local governments continue to fund important economic development, as well as public works projects, without adversely affecting our schools, core local services, or the state general fund,” concluded Wolk.
Should the stakeholders and interested parties buy into her legislation, Senator Wolk’s SB 214 could remove major barriers to passing the Governor’s Budget.
Originally posted at 9:05 PM on February 16, 2010