Simpler, More User Friendly Infrastructure Finance

17 Jun

We all know how important infrastructure investment is to job creation. The concept is straightforward: the more money we invest in infrastructure, the more jobs we create. Though  simple in concept, getting the resources necessary to invest in infrastructure is no easy feat. And with the dissolution of redevelopment agencies across the state, finding gap funding to finance infrastructure has become increasingly difficult.

Unfortunately, limitations on funding for infrastructure have come at a time when infrastructure investments are ideal because interest rates are low, and laborers are many. Given this reality, Californians are looking for new ways to direct resources toward infrastructure development and improvements.

Attention is being focused on Infrastructure Finance Districts (IFDs) as a plausible alternative funding source for financing public projects. Recently proposed legislation including AB 2144 put forward by Assemblywoman Toni Atkins and Speaker John Perez, and AB 2551 put forward by Assemblyman Ben Hueso, along with efforts on the part of business leaders, are all geared toward reforming and reinvigorating this seemingly dormant policy. If you were wondering, Legoland is the only development that has benefitted from an IFD in over 20 years. Policymakers see this as a potential answer to our infrastructure finance woes, but will they work?

Establishing an IFD is complex and onerous. IFDs can be created by cities and counties to pay for community scale public works, such as highways, transit, water systems, sewer projects, flood control, child care facilities, libraries, parks, and solid waste facilities. This is accomplished by the diversion of property tax increment revenues from local governments, excluding school districts, for up to 30 years to pay back bonds issued by the IFD. It sounds a lot like redevelopment, but IFDs lack the power of eminent domain, and they can’t pay for maintenance, repairs, operating costs, and services.

According to current law, to create an IFD “the city or county must develop an infrastructure plan, send copies to every landowner, consult with other local governments, and hold a public hearing. Every local agency that will contribute its property tax increment revenue to the IFD must approve the plan. Once the other local officials approve, the city or county must get the voters’ approval to: (1) form the IFD (2/3 voter approval), (2) issue bonds (2/3 voter approval), (3) set IFD appropriations limit (majority vote).” Complicated much?

Clearly, IFDs are no TIFs. A lot of work must be done to make IFDs a feasible and reasonable option for infrastructure investment. Despite the fact that there is some opposition to making IFDs more accessible for infrastructure investment, there is still hope that with the right reforms, IFDs will get California back on track with infrastructure development and job creation.

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