Legislature Approves Enhanced Infrastructure Financing Districts; Awaiting Governor Signature

Gov. Jerry  Brown’s vision for “Enhanced Infrastructure Financing Districts” was approved by the Legislature and is awaiting Brown’s signature. SB 628 (Beall, D-Campbell), a gut-and-amend bill passed in the last week of the legislative session, enhances the rarely used infrastructure financing district law by lowering the threshold for voter approval for issuing bonds, expands the list of infrastructure projects eligible for financing and allows multiple cities and local governments to “opt-in” or reserve their share of the tax increment.

SB 628 allows cities to create an  EIFD that can issue bonds or obtain loans to finance capital public infrastructure projects with the resulting increase in property tax revenues generated by the affected area (tax increment). EIFDs could 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.

SB 628 reduces the statutory threshold (Cal. Gov. Code section 53397.6) for voter approval of an IFD’s issuance of tax increment bonds from two-thirds to 55 percent. The proponents of SB 628 contend that the issuance of bonds by EIFDs does not trigger the constitutional requirement for two-thirds voter approval for long-term indebtedness because IFDs are not specifically mentioned in Article XVI, section 18 and the bonds are financed by specific tax increments, not general fund revenues.

Cities with former redevelopment agencies must have received a finding of completion from the Department of Finance. EIFD-issued debts are subordinated to any enforceable obligations of a former redevelopment agency.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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