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California Forward, in partnership with Resilient Cities Catalyst, are turning Climate Resilience Districts (CRD) from statute into practice through the Resilience District Incubator (Incubator) project. Through close collaboration with pilot communities, we will work directly with local and regional governments exploring CRDs as an option for advancing long-term climate resilience, while also assessing alternative governance, funding, and financing pathways. Insights from the research below will directly inform the design of the Incubator and shape a statewide call for pilot communities in Q1 2026.
By Ned Resnikoff
Under even the most optimistic scenarios, cities and counties across California will have to manage the impacts of a changing climate, including climate-related stress on their physical infrastructure over the coming years and decades. Today, these local governments don’t have the budget to weather these threats. Increasingly, they will need to identify long-term and stable revenue sources to support implementation of risk reduction and resilience investments.
Ultimately, local governments are going to have to incorporate resilience planning into every element of their infrastructure development and maintenance, programmatic work, and long-term strategizing. Doing all of this costs money—more money than many local governments are able to raise through the tax code, which is significantly hampered by the limits imposed on property tax revenues by Proposition 13.
That is where Climate Resilience Districts (CRDs) come in. The state legislature created this category of special district in 2022 through SB 852 (Dodd) to help local jurisdictions access the funding and financing needed to make their communities more resilient. CRDs can use a wide variety of revenue-raising tools, making them potent vehicles for local and regional resilience work.
So far, the CRD model remains largely unutilized. There is, to date, one CRD in existence in California—the Sonoma County Regional Climate Protection Authority (RCPA). Even this example is limited: while RCPA uses its CRD as a regional governance structure, it has not utilized any of the financing tools available to CRDs.
Why haven’t local governments in California taken advantage of SB 852? How can they best use CRDs to improve their resilience? And what can the state do to encourage CRD adoption in regions that would benefit from the model? In 2025, as part of its broader efforts to promote fiscal resilience, CA FWD sought answers to these questions.
What are Climate Resilience Districts?
SB 852 allows one or more local governments to form a special district that will “address climate change mitigation, adaptation, or resilience” within its defined project area. This project area can cover a single neighborhood or an entire region; furthermore, there is no requirement that all parts of the district be geographically contiguous.
As the reference to “mitigation, adaptation, or resilience” suggests, CRDs can fund a wide variety of climate-smart infrastructure projects, making them considerably more flexible than other special district types authorized by state law. They can also access more funding and financing tools than is typical for other district types.
CRDs can raise money through:
- Tax Increment Financing (TIF). CRDs “lock in” today’s property values, then borrow money based on the future increase in property tax revenue that is expected once the project is completed. SB 852 stipulates that no more than 5 percent of TIF revenue can be spent on administration, with the rest going directly to project development.
- Non-TIF bonds, including general obligation, revenue, and other traditional municipal bonds, backed by local revenues.
- Special assessments. These assessments apply to every property owner in a particular project area, and are scaled based on the expected benefit each property owner will receive from the project once it is completed.
- Grants, gifts, and fees. CRDs may directly solicit gifts from both public and private institutions by applying for grants, seeking donations, and charging fees in exchange for services.
- Investments. State law permits CRDs to “deposit or invest moneys of the district in banks or financial institutions in the state in accordance with state law.” Investments traditionally serve as a cash management strategy with modest returns, versus a mechanism for project development.
To establish a CRD, local jurisdictions typically need to go through a fair amount of public process, potentially including a local election. However, SB 782 (Pérez, 2025) creates one exception to these requirements: CRDs may bypass the public hearing and noticing requirements associated with implementing TIF, provided they are working in a disaster-affected area and plan on using TIF revenue to aid in disaster recovery and/or mitigate the risk of future disasters.
Advantages of the CRD model
Flexibility: While many other special districts can play a role in addressing climate risks at the local and regional level to one degree or another, few have such an extensive list of allowable project types, much less the ability to service those projects by financing ongoing upkeep costs. This flexibility allows RDs to play a much more expansive role in building local and regional resilience than, for example, Air Districts or Flood Control Districts that are focused on a more specific set of issues.
Access to funding and financing tools: Similarly, CRDs can draw on a broader range of funding and financing tools than most other special district types. They can also sequence different funding and financing tools over the course of a project’s life cycle to allow for sustained implementation. The fact that CRDs can earn returns on financial investments is particularly unusual (although most CRDs would likely collect the bulk of their revenue through more common public finance tools).
CRDs fill a gap in state law: Promoting climate resilience on a regional level is among the most urgent tasks facing California’s local jurisdictions, as many of the state’s climate risks do not align with city or county boundaries. Historically, local governments lacked a durable governance, legal, and financing framework to support coordinated action. CRDs satisfy a critical need that was not being met by other special district types.
Challenges associated with the CRD model
Legal ambiguity: Many local governments struggle with how they should interpret SB 852. The statute’s broad language about what constitutes an “eligible project” is one source of the confusion. Some local officials also have trouble parsing the requirements for establishing a CRD. For example, some have indicated that they believe all RDs need to make use of TIF, when in fact TIF is simply one option from a menu of CRD funding and financing tools.
Startup costs and technical capacity: Effectively implementing the CRD model requires resources for planning and staffing. Similarly, developing a resilience strategy might require subject matter expertise in areas ranging from TIF management to wetland ecology. It also requires the staff hours and resources to do intensive long-range planning for the affected area.
However, many local governments lack the in-house capacity to conduct this work. While CRD financing tools could create additional capacity, CRDs can only make use of their funding and financing tools after they have already been established. As a result, local governments with limited resources may struggle to staff an CRD in the early stages of its existence. Further, the requirement that CRDs spend no more than 5 percent of TIF revenue on administration limits their ability to develop in-house capacity and expertise over time.
The success of some funding tools relies on continued economic growth: TIF, general obligation bonds, and special assessments rely on assumptions of future economic growth. A TIF-funded redevelopment project can only pay for itself if it significantly enhances the project area’s property values beyond the existing baseline.
Similarly, because general obligation bonds accrue interest, the governments that issue them must demonstrate to prospective lenders that they will have the funds to pay a larger sum in the future, even though they currently lack the means to pay the principal out of their general funds. And, finally, in order to make the case for a special assessment, a local government must be able to show property owners that the benefit they receive will outweigh the assessment they are expected to pay.
Recommendations for local governments
Evaluate what resilience funding and financing tools are right for your community. Whether a CRD is the right revenue generation and implementation vehicle for strengthening climate resilience in a given community depends on a variety of factors, including the community’s infrastructural needs, the local political context, and the state of local financing and implementation capacity. In some cases, another approach might be more appropriate. From a local government perspective, the most important thing is to understand the strengths and weaknesses of various funding models relative to local implementation priorities.
Integrate resilience planning and economic development. Local governments can use TIF, bonds, and special assessments to finance the creation of resilience infrastructure provided they have the right underlying conditions to support economic growth. In effect, these funding and financing tools should do double duty, protecting an area against climate risk while also creating the conditions for that area to grow economically.
Recommendations for state action
Issue guidance to local governments on SB 852. As discussed above, one hurdle to CRD adoption is confusion among local governments regarding what is and is not allowable under SB 852. The state—possibly through the governor’s Office of Land Use and Climate Innovation—should provide guidance to local jurisdictions regarding both the legal requirements associated with utilizing various financing tools and criteria regarding what constitutes an allowable project.
Extend technical and financial assistance to local governments. Similarly, the state should direct a public entity to provide technical assistance for local governments that are exploring CRDs. Funding is needed to support local governments with CRD creation, including for upfront costs like hiring staff, conducting technical analysis, and developing implementation plans. State funding could also leverage strategic philanthropic investments and partnership to fund these upfront costs.
Revisit the requirement that no more than 5 percent of TIF funds go to CRD administration. The intent behind this requirement—ensuring that administrative overhead does not crowd out investment in resilience implementation—is reasonable. However, this limitation may constrain the ability of some CRDs to conduct the ongoing operations and maintenance tasks required to ensure the long-term viability of their resilience projects.
Conclusion
CRDs could be a powerful instrument for making California more resilient against climate change. But without many real-world examples of CRDs to study, it is difficult to fully evaluate how best to make use of this district type. California needs local experimentation and knowledge sharing across jurisdictional boundaries to determine how CRDs may be used to their full potential. CA FWD will keep working to support both local governments and the state as a whole in these efforts.
