Rebirth of Redevelopment?
Before their elimination, redevelopment agencies in California allowed cities and counties to borrow against future property tax proceeds to sell bonds for improving blighted areas. Essentially, redevelopment agencies kept most of the new property taxes generated from a “project area” and used them for their own projects rather than giving the money to other services that property taxes typically finance. 2011 legislation and a subsequent court ruling ultimately ended redevelopment in California, stalling and derailing a slew of development projects.
Cities have since struggled to find an effective alternative to finance blight-fighting projects. In September 2014, Governor Brown signed into law SB 628, allowing public agencies to create a new redevelopment-like creature called an “Enhanced Infrastructure Financing District” (“EIFD”). The law, which should help kick-start dormant projects and transform land into more productive uses, enables local agencies to fund infrastructure and community revitalization projects using tax increment revenue.
The law allows cities and counties to more easily form infrastructure and revitalization financing districts, which previously required a two-thirds local vote to form. Now, EIFDs can be formed by act of a county or city legislative body, and with 55% voter approval, may issue bonds to finance a variety of infrastructure and revitalization projects. There is no requirement that an area be considered "blighted" for an EIFD to be created.
EIFDs should help local leaders invest in a wide range of projects, from highways and sewage treatment plants to child care facilities, libraries, parks and open space. The list of potential projects in the law is illustrative only, and does not limit what an EIFD can finance so long as the project meets the law's requirements.
EIFDs do not levy new taxes or divert revenue from any non-consenting municipality or special district. Instead, they provide a streamlined tool for multiple layers of government to allocate existing and anticipated new tax revenue toward realizing shared goals.
The legislation envisions the main funding source will be property tax increment generated within the area encompassed by the EIFD. The preparation of an infrastructure financing plan will include discussions with other taxing entities (county, special districts) to determine whether they consent to transferring their share of the property tax increment or other eligible revenue to the EIFD for the purpose of financing facilities and development (which could be a major hurdle).
In January, Los Angeles officials took initial steps toward creating what is believed to be the first EIFD. The district would be focused on projects to restore and improve a 31-mile portion of the Los Angeles River. Council members sought to explore the steps needed to form a district and ordered a report, due back in early March.
The L.A. River is an example of what could be a wave of new and stalled economic development projects that could gain momentum as a result of the new EIFD law. City leaders will have to convince the county to part with a portion of its future property tax collections in order for the EIFD to work.
While SB 628 does not revive the era of redevelopment agencies, EIFDs are a promising tool for spurring revitalization, implementing sustainable community strategies.
