SB 5 sets the rules for dividing property tax revenues when a city or county creates an Enhanced Infrastructure Financing District (EIFD). It spells out what portion of taxes stay with existing taxing entities versus what portion can be routed into a district special fund, defines what counts as a city or county’s “net available revenue,” and confirms limits tied to prior redevelopment obligations.
The bill matters because it clarifies baseline and increment mechanics that determine how much new development revenue an EIFD can capture, who legally gets first claim on property tax dollars, and which additional revenue sources a district may use — all of which affect local budgets, project feasibility, and creditor risk exposure for districts and overlapping taxing agencies.
At a Glance
What It Does
The statute divides property taxes into a baseline portion (based on the last equalized assessment roll) that continues to go to affected taxing entities and an incremental portion that the infrastructure financing plan can allocate to a district special fund. It also allows a city or county to dedicate a portion of its ‘net available revenue’ to the district through the financing plan and enumerates other revenue mechanisms the district may use with voter approval.
Who It Affects
Cities and counties that form EIFDs, the affected taxing entities that would otherwise receive local property tax (schools, special districts, counties), county auditor-controllers who administer the allocations, and project developers and bondholders relying on captured increment as a revenue stream.
Why It Matters
By locking the baseline to the last equalized roll and defining what counts as net available revenue, the bill limits how quickly and how much local governments can redirect tax dollars into an EIFD, shaping project financing capacity and the fiscal exposure of schools and other local services.
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What This Bill Actually Does
SB 5 lays out a two-part allocation rule. First it preserves a baseline tax share for each affected taxing entity equal to what they would receive from the assessed value shown on the last equalized assessment roll prior to the district’s creation; that baseline continues to be paid to those entities.
Second, the financing plan may specify an incremental share — the portion of taxes above that baseline — to be deposited into a special fund controlled by the EIFD for its lawful purposes. The effect is a classic tax-increment financing structure tied explicitly to a fixed baseline assessment roll.
The bill adds guardrails. It says that until the district’s total assessed valuation actually exceeds the total shown on that last equalized roll, all taxes continue to go to the taxing entities (i.e., no increment is captured until valuation surpasses the baseline).
When the district ends under its financing plan, future taxes revert entirely to the affected taxing entities as they would elsewhere in the county.SB 5 also resolves priority issues where EIFD boundaries overlap former redevelopment project areas: any EIFD debt or obligation must be subordinate to enforceable obligations of the former redevelopment agency as approved by the Oversight Board and Department of Finance. The statute clarifies that the division of taxes to the EIFD does not include amounts the county auditor-controller must deposit into the Redevelopment Property Tax Trust Fund under state law.The bill defines “net available revenue” as periodic distributions from the Redevelopment Property Tax Trust Fund that remain available to the city or county after existing legal and statutory commitments are met; it excludes funds that were deposited into the trust fund before distribution and excludes moneys payable to K–12 school districts, community college districts, county offices of education, and the Educational Revenue Augmentation Fund.
SB 5 permits the district to use other local financing tools — including benefit assessments, Mello-Roos, and various improvement acts — but only if the requisite voter approval is secured and the infrastructure financing plan itself is approved.
The Five Things You Need to Know
The baseline for tax allocations is fixed to the assessed values on the last equalized assessment roll immediately prior to the EIFD’s creation; that baseline share is paid to affected taxing entities.
No tax increment is available to the district until the district’s total assessed valuation exceeds the total shown on that last equalized roll; until then, all property taxes go to the taxing entities.
Any EIFD debt is explicitly subordinate to enforceable obligations of a former redevelopment agency where boundaries overlap; oversight by the Oversight Board and Department of Finance governs that subordination.
‘Net available revenue’ is limited to post-distribution Redevelopment Property Tax Trust Fund receipts available after preexisting commitments, and it expressly excludes funds that were deposited into the trust fund before distribution and monies payable to K–12 schools, community colleges, county offices of education, or ERAF.
The statute lists alternative revenue sources an EIFD may use (for example, Mello-Roos, benefit assessments, several improvement acts), but each requires the applicable voter approval and adoption of the infrastructure financing plan.
Section-by-Section Breakdown
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Baseline allocation tied to last equalized assessment roll
This provision fixes each affected taxing entity’s baseline share to the amount that tax rates applied to the district’s assessed value would have produced on the last equalized assessment roll before the EIFD was created. Practically, that locks the baseline in time so future captures are measured against a fixed historical snapshot rather than a moving target, which matters for forecasting and for protecting existing service revenues.
Increment allocation to district special fund and threshold rule
The financing plan may allocate the tax increment (the portion above the baseline) to the EIFD’s special fund for its projects. However, the statute includes a threshold: until the total assessed value within the district exceeds the total shown on the last equalized roll, all taxes are paid to the affected taxing entities. This creates a clear ‘no-capture-until-growth’ trigger that reduces risk of diverting tax dollars from services when assessed values have not yet grown.
Subordination to former redevelopment obligations and RPTTF exclusion
Where EIFD boundaries overlap a former redevelopment project area, the bill makes all district debt subordinate to enforceable obligations of the former redevelopment agency — but only those obligations approved by the Oversight Board and Department of Finance. It also instructs that the division of taxes to the EIFD does not include taxes that the county auditor-controller must deposit into the Redevelopment Property Tax Trust Fund, safeguarding preexisting RDA-related claims.
City/county dedication option and precise definition of net available revenue
The legislative body forming the EIFD may dedicate some or all of its net available revenue to the district through the financing plan. SB 5 tightly defines ‘net available revenue’ as periodic distributions from the Redevelopment Property Tax Trust Fund that remain after all preexisting legal commitments and statutory obligations are satisfied, and it excludes funds deposited into the trust fund prior to distribution and amounts earmarked for school districts, community colleges, county offices of education, or ERAF. That definition narrows what local governments can pledge as supplemental support for EIFD projects.
Ad valorem allocations under Revenue and Taxation Code section 97.70
The statute allows a district to claim that portion of any ad valorem property tax revenue allocated to a city or county under section 97.70 that corresponds to increases in assessed valuation, provided the city or county agreed to participate via the plan. When the district ends, those revenues revert back to the city or county. This links a specific revenue stream to the district while giving a clear reversion path at dissolution.
Permitted additional revenue sources — voter approval required
SB 5 lists an array of other financing tools an EIFD may use — several historical improvement acts, Mello-Roos, benefit assessments, and certain charter city facilities benefit assessments — but conditions their use on obtaining the applicable voter approval and on having the infrastructure financing plan approved. That preserves local ballot control over certain recurring or property-related charges that could otherwise be used without direct voter consent.
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Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Cities and counties that create EIFDs — they gain a clearer path to capture incremental property tax revenue and an explicit mechanism to dedicate net available revenue to projects, improving predictability for local project finance.
- Developers and bondholders financing EIFD projects — the statute’s clear baseline, threshold rule, and special-fund structure provide a defined revenue stream (subject to subordination rules) that improves underwriting clarity.
- Communities targeted for revitalization — by enumerating allowable funding tools and defining available revenue, the bill can make it easier to assemble financing packages for infrastructure and redevelopment projects when value growth occurs.
Who Bears the Cost
- School districts and community college districts — the law explicitly carves out many educational revenue flows from ‘net available revenue’ but they still face potential long-term loss of incremental property tax receipts when EIFDs capture growth above the baseline.
- Other affected taxing entities (special districts, counties) — they face delayed or reduced access to incremental growth revenue once an EIFD begins capture and during its life, which can complicate budgeting for services.
- County auditor-controllers and local finance offices — administrative burdens increase because auditors must apply the last-equalized-roll baseline, manage deposits into the Redevelopment Property Tax Trust Fund exclusions, and apportion 97.70 ad valorem allocations when districts form or dissolve.
Key Issues
The Core Tension
The bill tries to reconcile enabling local tax-increment capture for infrastructure projects with protecting existing taxing entities and prior redevelopment claims; the tension lies between unlocking enough predictable revenue to make EIFD projects bankable and preserving stable funding for schools and other local services — a trade-off with no mechanical fix and outcomes that depend on local valuation dynamics and political choices about pledging net available revenue.
SB 5 balances two core objectives — enabling EIFDs to finance projects while protecting preexisting claims on local tax dollars — but that balance raises implementation questions. Fixing the baseline to the ‘last equalized assessment roll’ creates predictability but can also freeze in a baseline that is either too low or too high relative to current market conditions; parties will disagree about how that interacts with reassessments, parcel splits, and new construction timing.
The threshold that requires total assessed valuation to exceed the baseline before any increment is captured reduces the chance of premature diversion, but it can delay project financing, particularly in slow-recovery areas.
The subordination rule protects former redevelopment enforceable obligations but creates complexity for investors: EIFD debt is usable only after satisfying prior RDA claims, which can materially reduce borrowing capacity in overlapping footprints. The statutory carve-outs in the ‘net available revenue’ definition (excluding pre-distribution deposits and certain educational allocations) narrow the pool of funds a city or county can pledge; local governments will need careful cash-flow models to determine whether they can realistically dedicate net available revenue without violating other commitments.
Finally, the list of alternative financing sources is broad, but tying their use to voter approval and plan adoption means relying on ballot outcomes and exacting plan language — a practical constraint on rapid financing decisions.
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