SB 516 amends the law governing enhanced infrastructure financing districts (EIFDs) to specify how property taxes are divided between affected taxing entities and a district’s special fund, clarifies the use and definition of “net available revenue,” and lists additional revenue sources a district may employ with voter approval. It also makes any district debt subordinate to enforceable obligations of overlapping former redevelopment project areas and excludes certain RPTTF deposits from amounts that can be captured by the district.
The bill matters to cities and counties seeking concentrated downtown revitalization funding, to school and special districts that stand to lose incremental property tax revenue, and to municipal finance professionals who structure EIFD bonds or assessments. It tightens the mechanics of tax allocation, defines what local revenue a city or county may dedicate, and sets legal priorities that may affect borrowing capacity and intergovernmental negotiations.
At a Glance
What It Does
SB 516 requires allocation of property taxes based on the assessed value shown on the last equalized roll before district formation: the base share stays with affected taxing entities and any tax above that base—if specified in the adopted plan and if participating entities consent—goes into the district’s special fund. The bill also permits a city or county to dedicate “net available revenue” from the Redevelopment Property Tax Trust Fund and authorizes use of other funding mechanisms subject to voter approval and plan approval.
Who It Affects
Cities and counties that form EIFDs and the affected taxing entities (school districts, community colleges, special districts and counties) within district boundaries are directly affected. Bond underwriters, municipal advisors, developers seeking public financing, and county auditor‑controllers who must compute and apportion the tax shares will also face new operational and diligence obligations.
Why It Matters
The statute clarifies the base year for tax‑increment calculation, preserves priority for prior redevelopment enforceable obligations where overlaps exist, and enumerates alternate revenue tools that can complement tax increments. For finance teams, those mechanics change revenue predictability, affect bond security, and reshape negotiation leverage between a city and other local governments.
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What This Bill Actually Does
The bill sets a specific rule for dividing property taxes inside an enhanced infrastructure financing district. It uses the assessed values on the last equalized assessment roll before the district’s creation to compute a ‘‘base’’ share.
Each affected taxing entity keeps the taxes that correspond to that base share as if the district did not exist; any amount the city or county and participating taxing entities specify in the adopted infrastructure financing plan above that base can be redirected into a district special fund for district purposes.
A practical consequence is a two‑step flow: calculate the base using the last equalized roll, pay that base through to the taxing entities in the usual way, and then allocate any agreed‑upon excess into the district fund. The statute also contains a hold‑harmless trigger: until the total assessed value in the district exceeds the prior total shown on that baseline roll, all taxes continue to go to the taxing entities rather than to the district.
When the district terminates under its plan, future taxes revert to the affected taxing entities.Where a new district overlaps a former redevelopment project area, the bill requires the district’s debt and obligations to be subordinate to enforceable obligations of the former redevelopment agency as approved by the relevant oversight bodies. The statute explicitly excludes from district capture any taxes that the county auditor‑controller must deposit into the Redevelopment Property Tax Trust Fund (RPTTF) under existing law.Finally, the bill defines ‘‘net available revenue’’ (periodic distributions from the RPTTF after preexisting commitments are satisfied) and allows a city or county to dedicate some of that net available revenue to the district.
It also lists multiple alternative revenue mechanisms—assessments, Mello‑Roos, landscape/lighting districts, parking/vehicle parking district laws, certain facilities benefit assessments, and even state funds—that a district may use to support projects, but only after the requisite voter approval and adoption of the infrastructure financing plan.
The Five Things You Need to Know
SB 516 fixes the ‘base’ for tax‑increment allocation using the total assessed value from the last equalized assessment roll prior to the district’s creation.
Until the district’s current total assessed valuation exceeds that baseline total, every property tax dollar from the district’s parcels continues to flow to the affected taxing entities rather than to the EIFD.
If a district overlaps a former redevelopment project area, 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 bill defines ‘net available revenue’ as post‑commitment distributions from the Redevelopment Property Tax Trust Fund and allows a city or county to dedicate any portion of those distributions to the district, but excludes funds payable to K–12 school districts, community college districts, county offices of education, and the ERAF.
SB 516 expressly permits a district to use a long list of other financing sources—Mello‑Roos, benefit assessments, improvement acts, certain parking or facilities assessments, and state funds—provided voter approval and plan approval are obtained.
Section-by-Section Breakdown
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Tax allocation mechanics and base‑year rule
This subsection prescribes the arithmetic: the assessed values on the last equalized roll prior to the district resolution establish the base used to calculate the taxes each affected taxing entity continues to receive. Taxes producing that base rate are paid to the taxing entities in the normal fashion; any amount the plan specifies above that base and that participating entities agree to allocate becomes district revenue and is paid into the district’s special fund. Practically, this gives municipalities a clear baseline for negotiating how much incremental revenue can be diverted and establishes a phase‑in rule tied to assessed valuation growth.
Hold‑harmless until assessed value grows and reversion on termination
The statute prevents any diversion of property tax receipts to the district until total assessed value in the district exceeds the baseline total on the last equalized roll; until that trigger, all taxes are paid to affected taxing entities. It also mandates that when the infrastructure financing plan ends and the district ceases to exist, future tax receipts from those parcels revert to the taxing entities. For bond structuring and fiscal modeling, that creates a clear reversion event and a growth threshold that determines the start of tax‑increment capture.
Priority of legacy redevelopment enforceable obligations
Where EIFD boundaries overlap a former redevelopment area, the bill places any EIFD debt subordinate to enforceable obligations of the former redevelopment agency as approved by the Oversight Board and Department of Finance. It also specifies that taxes required to be deposited into the RPTTF are not part of the tax division available for EIFD capture. That subordinated status and the RPTTF carve‑out affect how much revenue an EIFD can pledge and therefore influence market pricing and lender willingness.
Dedicating ‘net available revenue’ and its limits
The local legislative body may dedicate any portion of ‘net available revenue’ to the district via the financing plan. The bill defines ‘net available revenue’ narrowly as distributions from the RPTTF that remain after satisfying preexisting legal and statutory commitments; it explicitly excludes money that was deposited into the RPTTF prior to distribution and excludes funds payable to K–12 schools, community colleges, county offices of education, and the ERAF. This creates a limited, discretionary revenue stream a city or county may use in addition to tax increment—subject to prior obligations.
Ad valorem allocation under Revenue & Taxation Code section 97.70
This subsection ties certain ad valorem property tax revenue allocated under Revenue and Taxation Code section 97.70 to the district to the extent the infrastructure financing plan specifies and the city or county participates. The revenues that correspond to increases in assessed valuation are apportioned to the district’s special fund while the district exists, and revert to the city or county when the district terminates. That provides an additional, valuation‑linked revenue stream distinct from the base/overflow rule in subsection (a).
Permitted supplementary financing mechanisms (subject to voter approval)
The statute lists a wide array of additional financing tools a district may use—various improvement and assessment acts, Mello‑Roos, district parking and facilities assessments, and state funds—provided the district secures the applicable voter approval and an approved infrastructure financing plan. Functionally, this gives local governments flexibility to layer funding sources but does not remove the voter‑approval requirement for those other tools.
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Who Benefits
- Cities and counties forming EIFDs — gain a statutorily clearer path to capture incremental tax revenue and dedicate net available RPTTF distributions to downtown projects, increasing financing options for public improvements.
- Developers and private investors in downtown projects — benefit from clearer potential public funding streams (tax increment plus allowable assessments or Mello‑Roos) that can make large redevelopment projects financially viable.
- Municipal finance teams and bond underwriters — gain defined statutory mechanics (baseline roll, hold‑harmless trigger, RPTTF carve‑outs) that improve modeling assumptions for revenue streams backing EIFD bonds or pay‑as‑you‑go financing.
Who Bears the Cost
- School districts, community college districts, and county offices of education — face reduced flexibility and potential loss of incremental local revenue because the bill allows cities/counties to dedicate net available RPTTF distributions (with statutory exclusions) and to capture ad valorem increases under certain conditions.
- Other affected taxing entities (special districts, counties) — may see delayed or diminished incremental revenues depending on the amount cities/counties elect to allocate to the EIFD and the timing of assessed value growth.
- County auditor‑controllers and local finance staff — bear administrative burdens and compliance costs to calculate allocations based on last equalized rolls, manage special funds, and track reversion events and RPTTF exclusions.
Key Issues
The Core Tension
The central dilemma SB 516 frames is straightforward: it enlarges a city’s toolbox to fund concentrated downtown revitalization by allowing diversion of incremental and certain post‑redevelopment revenues, while simultaneously protecting prior redevelopment obligations and certain public recipients (schools) by subordinating new district debt and carving out RPTTF deposits—creating a trade‑off between financing potency and preservation of existing public revenue streams.
SB 516 tightens the mechanics of tax‑increment capture but creates practical and political tradeoffs. The reliance on the last equalized assessment roll provides certainty about the base year, yet it can freeze a relatively low baseline in a rapidly appreciating downtown or, conversely, lock in a high baseline in a depressed market—both outcomes complicate forecasts and negotiations with affected taxing entities.
The hold‑harmless rule that prevents capture until assessed valuation exceeds the baseline reduces near‑term risk to other taxing entities, but it also delays EIFD revenue and may lengthen payback periods for project financing.
The subordination requirement where districts overlap former redevelopment project areas narrows an EIFD’s ability to pledge future tax increments, which could raise borrowing costs or limit available debt capacity. The statutory carve‑out excluding RPTTF deposits adds another layer of complexity: local officials and auditors must sort which revenues are capturable, which are statutorily off limits, and how net available revenue is computed after preexisting commitments.
Finally, many of the bill’s alternative funding tools require separate voter approvals; those approvals are campaign‑heavy and can substantially delay or block planned financing layers despite legislative authorization.
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