Senate Standing Committee on Local Government

The Senate welcomes the public in person, and we are holding our Committee hearings here in the O Street building. I ask all Members of the Committee be present in room 2200 so we can establish our quorum and begin our hearing. We have two bills on today's agenda. We don't have a quorum, so we'll wait on that. We'll go ahead. We'll function as a Subcommitee. Okay. Today until we get the quorum. Now let's hear from our first author. Welcome. zero, I thought we couldn't do that until.

Yeah, we have several things to approve, but we need the quorum. We're going to get started with our first author. Senator Caballero, you'll present SB 1140. Welcome. Good morning.

Good morning, Madam Chair. Thank you to the Chair and the Committee Members for the opportunity to present SB 1140. First, I'd like to thank the Committee staff for their work on this and accept the Committee amendments, and we can restate them at the end if we need to. So, as you all know, from the early 1950s until the state dissolved them in 2011, California redevelopment agencies, or RDAs, used property tax increment financing to pay for economic development projects in blighted and deteriorating neighborhoods.

After RDAs were dissolved in 2011, local officials sought other methods to raise the capital needed to fund public works projects. And really, the dissolution of the RDAs was a way for the state to take their money out of the RDAs and not be contributing to erasing blight as a way to balance the budget. And quite frankly, in response to some RDAs using their funds in questionable ways to encourage development in areas that were not blighted and to do giveaways to big companies.

After the RDAs were dissolved in 2011, in response to the elimination of the RDAs, the Legislature enacted SB 628 in order to allow the officials to create an enhanced infrastructure financing district, or the EIFDs. The EIFDs can finance public capital facilities or other specified projects to provide benefits to the district or the surrounding community that result in a useful life of 15 years or more. So they have to be really capital facilities.

Similarly, SB 852, using this model, created climate resiliency districts in 2022, or CRDs in order to raise revenue, plan climate mitigation or adaptation projects with a funding mechanism to implement infrastructure projects. Enhanced infrastructure finance districts and climate resilience districts are vital tax increment financing tools to fund and finance public facilities or other projects of communitywide significance at the local government level. It's basically a way to be able to come up with a long-term financing mechanism.

Unfortunately, cities and counties have limited staff and resources, and forming these districts has proven to be to have duplicative processes and are cumbersome to initiate, causing them to miss important economic development and climate resilience opportunities. SB 1140 will reform EIFD and CRD law to streamline and create efficiencies in the formation process and expand the types of projects these tools can finance.

The benefits will significantly improve the ability of EIFDs and CRDs to advance their mission to support economic development, spur climate change resiliency in communities across the state, while at the same time allow robust community notice and opportunity to participate. And some of the amendments that the Committee requested make that absolutely necessary.

So I appreciate the input, and I think it made the Bill a better Bill, and there was a reference in the analysis to CRIAs and a different mechanism in order to be able to do similar things. And I don't have a problem in the future of looking at CRIAs to see whether it makes sense to add them as know. So I'm not opposed to that as well. If the Committee Members think that that might be an appropriate change in the future.

I thought it was a good point.

And with that, I respectfully ask for your Aye vote.

Okay.

Thank you. And I failed to mention how you had chaired this Committee in one version or another of it in the past. So thank you for your service.

Thank you so much. I appreciate it.

Okay, we're going to move on now to our lead witness. Do we have a.

We do not. They could not be here today.

Okay.

It is the Community Foundation of Fresno.

Okay. So... don't hear from that. Let's move on to witnesses in support of SB 1140. Please, if you'd line up.

Good morning, Madam Chair and Committee Members. My name is Gurbax Sahota. I'm the President and CEO of the California Association for Local Economic Development. We represent over 800 economic developers and nearly 300 jurisdictions, all working together to create economic opportunity at the local level for Californians.

We're pleased to have a letter of support and concept on this Bill, only because we haven't completed our formal process of taking support, but I will say these tools, EIFDs are becoming more and more popular for jurisdictions to Fund infrastructure and different types of infrastructure and capital projects as the Senator said. Also, the formation process is both complex and costly. And so we're excited to see that the Senator has taken this leadership position in addressing those issues. We support the Bill.

Look forward to seeing the amendments and working with the staff and the Senator on seeing future versions of this. So thank you.

Any other witnesses in support? Okay, seeing none. Are there any witnesses in opposition? No? Seeing none. Thank you to all the support witnesses. We'll now bring the discussion back to the Members. Do any of the Members have questions or comments? Yes, Senator Wahab.

Thank you. I actually do appreciate this. I think that you know, being on local councils, economic development is a priority. It's also a big struggle for smaller towns. The City of Hayward, for example, had one individual that was working in economic development until several years later, we tried to hire somebody else. And we also know that it's largely areas that have small mom-and-pop shops and immigrant communities and people of color territories that are where their businesses are that need the most help.

So I really do appreciate you focusing on this. And obviously, the capital improvements are the biggest deal to make sure that an environment looks nice and feels safe, and so forth. So I'm happy to move this. And again, thank you for your leadership.

Thank you. Great. As soon as we get our quorum, we will accept your motion. Thank you. Senator?

Thank you. So a lot of these financing districts cities have been grappling with for years and years, and over the years, I speak a lot about this with the bonds and stuff like that, is we've kind of eroded the public trust. And so one of the most important things for me, when we're doing any changes like this, is to ensure that we're not even giving the appearance that we're reducing transparency or efforts to be transparent while we're developing these things.

It seems some of the amendments address those issues. And so I'm going to take another look at those amendments and see if that helps me rise to the level of making sure that we're not being less transparent and we're actually trying to increase transparency and at the same time accomplishing something for communities, make it easier for them to get in some of these important infrastructure things.

Because if we keep doing things that erode transparency, we're going to have a more and more difficult time doing financing when it is entirely appropriate. So anyway, I'll probably be laying off of this today, but I will, like I said, look at the changes that you made and see if that will alleviate any of my concerns. Thank you.

Thank you.

Okay. If you want to make any more comments or close?

Just respectfully ask for your Aye vote when you have a quorum.

Okay. So I'm going to go through the amendments real quick. So the motion, when we actually get to have it, will be do pass as amended to Environmental Quality. The amendments are from comments two through five of the analysis. One, they increase the number of EIFD formation meetings from two to three. And I think, Senator Sayarto, this is meant to be to address your concerns.

I understand.

So the second one is to require the public financing authority to maintain an email list of interested parties and update that list if meeting times or locations change. Require the PFAs to translate the notices into other languages. If 20% or more of the county population that speaks English less than very well also speak that language. And last, to restore newspaper notices, but clarify they are separate from the mailed notices. So we hoped and worked with the author on the issues of transparency.

So hopefully that puts you in a better place to support the Bill. And I want to just thank the author for bringing forward the Bill, agreeing to the amendments, and addressing, as Senator Seyarto said, the public transparency requirements. I'm particularly concerned with ensuring that the public is aware when there are environmental justice issues and that these are the kinds of projects that would be covered.

Deciding whether to use these tools to finance projects that tackle issues like improving air quality is something that the communities, of course, really deserve to weigh in on. While the amendments ensure that some communities receive this information in the languages they speak at home, more continues to be done. And I know you're a big advocate for that. Many communities rely on ethnic media sources, the smaller newspapers, for information, and more information, I know needs to go out in indigenous languages.

So it's something that this Committee is going to continue to work on the rest of this year. So with that, I thank you very much for your presentation.

Thank you, Madam Chair. Appreciate it.

Thank you. We'll be taking a recess since we don't have the other author here.

We have our other author here. Senator Cortese, would you like to come up and present your bill? This is Senate Bill 1209.

Thank you, Madam Chair and Senators. I appreciate the opportunity to present SB 129, which would explicitly authorize Local Agency Formation Commissions, otherwise known as LAFCOs, to indemnify the purpose of LAFCO. Commissions include discouraging urban sprawl, preserving open space and prime agricultural lands, encouraging the orderly formation and development of local agencies, and ensuring the efficient delivery of government services.

LAFCOs use these principles for various local agency applications to modify boundaries, establish new services, and evaluate agencies through the preparation of municipal service reviews and spheres of influence. For most applications to public agencies, such as those for land use, public agencies, such as cities, for example, private parties indemnify the involved city or county. LAFCOs also were indemnified by applicants until the Second District Court of Appeals determined that LAFCO could not require indemnification because it is not expressly authorized in the Cortese-Knox-Hertzberg Local Government Act.

Without the ability to indemnify, LAFCO will necessarily have to consider whether to make concessions to the applicant or to not defend its actions. Funding for each LAFCO is provided by their respective county, city, and special district members pursuant to a statutorily defined formula that shares the cost proportionately. So allowing LAFCOs to use indemnification essentially will prevent the expense of one entity from being shifted to all representative agencies that fund LAFCO.

That, in turn, will protect counties, cities and special district taxpayers and ratepayers from incurring the expenses of LAFCO applicants who stand to benefit from the approval of an application. With us to testify today on behalf of her client, who is the California Association of Local Agency Formation Commissions, is Jean Hurst.

You can do it there.

I'm Jean Hurst, again representing the California Association of Local Agency Formation Commissions. We are the sponsors of SB 1209. As Senator Cortese mentioned, this is a relatively straightforward bill that authorizes LAFCOs to require an indemnification provision in applications and conditions of approval. The statutory change is necessary, as the courts have ruled that LAFCO's may not require nor rely upon indemnification because it's not expressly authorized in the Cortese-Knox-Hertzberg Act, even though cities, counties and special districts routinely require indemnification when considering land use applications.

Again, it's important to note that the Legislature has delegated the power to regulate the boundaries and services of local government agencies to LAFCOs. As Senator mentioned, LAFCOs are tasked with discouraging urban sprawl, preserving open space and prime agricultural lands, encouraging the orderly formation and development of local agencies, and ensuring the efficient delivery of government services on the state's behalf.

Without the ability to indemnify, any costs associated with litigation would be borne by the local agencies that fund the LAFCO. Alternatively, the LAFCO will necessarily have to consider whether to make concessions to the applicant or to not defend its actions, which undermines their fundamental statutory charge. We want to note for the Committee that we have had an initial conversation with the California Building Industry Association about some concerns that they have raised. And we're committed to working through those matters successfully.

We're grateful for the Committee's work on the bill and the helpful analysis. And to Senator Cortese for his willingness to take this issue on. We respectfully ask for your aye vote today.

Thank you very much. And I apologize for the mix up here. Okay. Any others in support of the bill? Yes? Okay.

My name is Meg Snyder. I'm here on behalf of the California Building Industry Association here with an in between position, as mentioned by the sponsor. We have raised some concerns with the bill and look forward to addressing them in future conversation. Thank you.

Okay. Thank you very much. Any others in support? Anyone in opposition? Okay. Seeing none, I come back here. Any questions for my colleagues? Okay, move the bill when we have the quorum. Thank you. Okay. Any other questions or comments? Okay, Senator Cortese, would you like to close?

Thank you, Madam Chair. I respectfully ask for your vote.

Okay, wonderful. Okay. We don't have a quorum yet, Senator Cortese, so we're going to hold and wait for other members of the Committee to show up.

I understand. I appreciate your attention. Thank you all very much.

Thank you. Thank you for being here.

Why? Okay, we'll be in recess until we get the quorum here.

Okay, we will come back into order. And first we're going to establish quorum. If our assistant would, please.

[Roll Call]

Thank you. We need a motion to adopt the rules. Motion is to adopt the committee rules. Okay. Please call the rule.

Motion is to adopt Committee rule. [Roll Call]. Four to zero.

Thank you. We move on now to motions. We have a motion by Senator Wahab on SB 1140. The motion is a do pass as amended to environmental quality.

[Roll Call]. Four to zero.

Thank you. Next, we have a motion by Senator Wahab on SB 129. Call the roll.

Motion is to pass to the Senate Floor. [Roll Call]. Five to zero.

Thank you. Thank you, everyone. That's it. Thank you. Network rules and. Okay, so we're going back to SB 1140 and call the roll.

Motion is to pass us amended to the Committee on Environmental Quality. [Roll Call]. Five to zero.

He did the second one. Yeah. So we're not going to do Senator Wiener on his way. So he wants to vote. Okay. I don't need you. We're going to recess for a few minutes, please. We're going to start with open the roll on Committee rules.

Motion is adopt Committee rules. [Roll Call]. Five to zero.

The rules are adopted. The rules are adopted. Next, we can open the roll on SB 1140.

Motion is to pass as amended to the Committee on Environmental Quality. [Roll Call]. Six to zero.

Okay, that Bill is out. Okay, open roll on SB 129.

Motion is to pass to the Senate Floor. [Roll Call]. Six to zero.

Great. That Bill is out. We have no further.

Happy birthday, Madam Chair.

Thank you. We'll make that an official part of the meeting. Thank you. And I want to thank everyone who participated in public testimony today. If you were not able to testify today, please submit your comments or suggestions in writing to the senate local government committee or visit our website. Your comments and suggestions are important to us. We want to include your testimony in the official hearing records. Thank you. We appreciate your patience, cooperation and participation.

We have concluded the agenda of the Senate Committee on Local Government. And we are now adjourned.