Making local and regional housing and infrastructure funding more effective
May 9, 2019
Infrastructure improvements near a planned Metrolink station are part of the first EIFD in California to involve a partnership between a city and county (Photos: McLean & Schultz & JMDiaz, Inc.)
Governor Newsom issued a challenge in his January budget message: It is time to bolster the Enhanced Infrastructure Financing District law. Although a logical replacement for the redevelopment powers that were repealed in 2012, the progress for the adoption of these new tools has been slow to develop. To speed this process along it is essential that a new partnership be developed between the state, local and regional agencies to spur investment in housing and infrastructure and help grow local and regional economies.
The primary impact of the dissolution of redevelopment agencies was the loss of tax increment financing as the primary funding tool that provided an incentive to private sector business expansion and real estate. This process pledged a portion of the growth in property tax toward economic development activities. Over the last four years the legislature and governor have created a series of statutes designed to replace this authority. These statutes were enacted on the premise that local agencies (cities and counties) would cooperatively share the growth in their property tax for investment in housing and community infrastructure. That intergovernmental cooperative objective has not been met. Instead, most cities were expected to use the growth in the property tax allocated to them and, as it turns out, the share of the property tax of most cities acting alone is not enough to make a significant investment in housing and housing related infrastructure.
The best provisions of the existing statutes, including a broad range of financing powers are combined into a renamed statute “Community Funding and Investment Authority” (CIFA) that more clearly describes what these entities are designed to accomplish: community economic and housing development including the needed infrastructure and the environmental mitigation often needed to have more environmentally balanced growth.
Importantly, the Legislature should bolster these tools by doing the following:
1) Where the state has an interest in a particular regional issue, such as the sustainability of a watershed the responsible state department in this example the Department of Water Resources, should be authorized to participate in the new (CIFA). The state is already authorized to participate in Joint Powers Authorities, so this new authorization, made at the local request would advance the needed partnership between state, regional and local governments. This new institutional involvement will signal a fiscal as well as a policy partnership.
2) Although not currently authorized to do so, school districts and community college districts should also be able to actively participate since these tools are, at root, about community services and facilities that are needed to advance local economies and create jobs and an active employment base for future growth.
3)The underlying premise of these financing tools is that the growth in the local and regional economy is tapped for investment. The EIFD tools are restricted to the local share of that growth. This proposal would include the state’s share of growth so that the state is an equal partner in the investment in housing and housing related infrastructure as well as resource management issues that may confront the region.
These changes would make entities easier to form, and by clarifying their powers and funding capacity, making investments easier to implement. The changes not only bring new funding to enable critical investments needed to meet State and community/regional needs but will add the capacity to implement these investments. Modifying the board composition, including adding state organizations and school and community college districts that wish to participate, will facilitate improved partnerships needed to accomplish the ultimate community goal: build necessary housing, retain and create jobs with higher incomes and expand local economies that will enable more people to afford housing.
Read the full proposal as submitted to the Newsom Administration.
Fred Silva is Senior Fiscal Policy Advisor for California Forward and the California Economic Summit.