A Boost In Funding CA’s Infrastructure Projects
PALO ALTO, CA—California’s local governments and developers received a potentially significant boost on September 29th with passage of Senate Bill 628 (44-31 Assembly; 21-13 Senate). SB 628 gives local governments the authority to establish Enhanced Infrastructure Financing Districts (EFIDs). Adding this new funding mechanism to the state’s infrastructure financing toolbox could not have come at a better time, with recent earthquakes, worsening drought conditions, and increasing demands for renewable energy, among other issues stressing California’s infrastructure.
While it remains to be seen how this law will function in practice, there are several aspects which may prove to be substantial improvements over existing and past financing schemes. First, unlike existing state law governing infrastructure financing districts, SB 628 does not require specific voter approval to establish EFIDs. In fact, public involvement will be limited to satisfying certain notice and hearing requirements as the local authorities establish the boundaries, the financing plan and the purpose of the EFID.
Additionally, EFIDs will be able to fund a wide range of community-scale public works projects, including most types of infrastructure, from highway and transit to water, sewer and flood control projects, libraries, childcare and recreation facilities, waste transfer and disposal facilities, brownfield restoration and other environmental mitigation projects, redevelopment on former military bases, and projects to implement strategies approved by the State Air Resources Board to reduce greenhouse gas emissions. Notably, school infrastructure is not included, which will eliminate the ability to pull revenues from school funding streams, a controversial aspect of the now-dissolved Redevelopment Authorities (RDAs). In contrast to RDAs, SB 628 specifically requires approval of the various taxing authorities whose tax streams will be subject to division with the EFIDs.
The wide variety of financing mechanisms available to EFIDs are another important enhancement. In addition to leveraging the tax revenue increment, EFIDs can finance projects through governmental loans, private loans, grants, assessments, fees and bonds (with only bonds requiring the approval of 55% of voters residing within the EFID). Moreover, this array of financing tools, in addition to public financing, creates opportunities for partnerships with the private sector. Availability payments, loans, and fee arrangements are typical mechanisms involving private enterprise.
Finally, local governments can create joint powers authorities (JPAs) to establish EFIDs, allowing for an intergovernmental collaboration of multiple streams of funding, avoiding the segmentation of funding that currently exists. These local governments can also finance projects outside their specific boundaries if they can demonstrate a tangible connection between the project and the work outlined in their infrastructure financing plans. Both of these options would potentially afford EFIDs a broader reach and greater efficiency in implementation.
One potential complication is the requirement that all outstanding obligations of any RDA must be satisfied before establishing an EFID that overlaps the boundaries of the RDA. Another factor to watch will be whether EFIDs will be limited to projects within the jurisdiction of their founding legislatures, or if local governments will successfully demonstrate a nexus between broader projects and their financing stream or establish JPAs to expand their reach. It remains to be seen whether the creativity of local governments in pursuing partnerships with other taxing authorities and the private sector will dictate if and when EFIDs will be robust enough to fund major projects (without seeking voter approved bond financing) or be relegated to smaller infill projects.
Although EFIDs will likely be only one of multiple financing mechanisms needed to fund California’s infrastructure revitalization and growth, it seems to be a positive step towards addressing the estimated $765 billion of development required in the state over the next decade.
 Cal. Sen. Bill 628, 2013-2014 Reg. Sess., ch. 2.99, 2014 Cal. Gov. Code http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml.
 California Economic Summit, Funding Sustainable Communities: A How-To Guide for Using Enhanced Infrastructure Financing Districts in SB 628 (Beall), 2014, available at https://cafwd.app.box.com/s/794spm1skimguavw7j7z.
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