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Home My WebLink About1986-05-06; City Council; 8611; Tax Reform Bill Redevelopment Tax Allocation Bondsz 0 ~ c( ..I 6 z ::, 0 u cn--oF CARLSBAD -AGENC)BILL I..... P'r_ 11 I\Dff Y -1 • TAX REFORM BILL RESTRICTING REDEVELOPMENT TAX ALLOCATION BONDS DEPT.HO. _____ _ MTG. 5/6/86 DEPT. RED CITY A TTY )/:Jii CITY MGR.~ RECOMMENDED ACTION: City Council adopt Resolution No.Y.S-~o opposing H.R. 3838 the "Tax Reform Act of 1985", restricting Redevelopment Tax Allocation Bonds. ITEM EXPLANATION The House of Representatives has passed a comprehensive tax reform package which would serverly limit the use of Redevelopment tax allocation bonds by placing certain restrictions on their use. The proposal, would drastically reduce the usefulness of redevelopment bonds as an urban revitalization financing tool. The aim of the federal proposal to limit or eliminate tax exempt financing is to "recapture" federal tax revenues which go uncollected when this form of financing is used. Redevelopment bonds would be severly conditioned or eliminated if the bill is adopted in its present form. The League of California Cities opposes the legislation. Senator Pete Wilson is asking that Carlsbad City Council take action opposing H.R. 3838. i":CSCAL IMPACT None EXHIBITS 1 -Resolution No. ?s"yo opposing H.R. 3838. 2 -League of California Cities Bulletin dated Nov~mber 27, 1985 3 -Letter from Senator Pete Wilson dated March 31, 1986 I l 2 3 4 II RESOLUTION NO. 8540 -~------ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF C~RLSBAD, CALIFORNIA OPPOSING H.R. 3838 "TAX REFORM ACT OF 19 8 5" . WHEREAS, the passage of H.R. 3838 would severely limit 5 the use of Redevelopment Tax Allocation Bonds, and; 6 WHEREAS, restriction and/or elimination of the use of 7 Redevelopment taK allocation bonds would be detrimental to the 8 City's Redeve~opment efforts~ 9 NOW, THEREFORE BE IT RESOLVED by the City Council of the 10 City of Carlsbad, California as follows: ll (1) 12 13 That the Carlsbad City Council is opposed to H.R. 3838 "Tax Reform Act of 1985". PASSED, APPROVED AND ADOPTED at a regular meeting·of the 14 City Council of the City of Carlsbad, California held this 6th 15 day of May, 1986, by the following vote, to wit: 16 17 18 19 20 21 22 23 24 25 26 27 28 AYES: Council Members Casler, Lewis, Kulchin, Chick and Pettine NOES: None ABSTAIN: None ABSENT: None ATTEST: CASLER, Mayor lerk (SEAL) Ill/ Ill/ Ill/ ~ :ilill ~~~ISlA~IV~_ L~_LLETIN· • .' ~ • 111"81B.. lff.. &?~ague of Cahfornaa Cities ~i!)\ 1 ?.31-s . CaHom,a C,t,es Wo:lmti_al?iand ,-;,rcu 1~00 K Street • Sacramento 95814 • !916) 444.5790 . ~-4 6 .,> • . . . • . . • ~ • <:P • · • • ~ -DtC: 1985 -tO 140-1985 ~~-, ·c· .t-J·. t -• cS ir,. • h O • • -, .· .. • . . N ..• •. - . Novetrber 27, 1985 ~ . ~LSBAQ. fJ :. ~ -. . . . . . ~ ~,P..~1?§,d, ~ ~ ***************************d*·k*LOOISLATIVE ACTIVITIES************ ~?Jl******tc~ *** •• -------l'c?6JSlL\~\ 1. House Ways and Means Committee Tax Reform Bill. Restrictions on Redevelopment Tax Alloc~.tion Bonds. ****************k******************************************************************** 1. UPDATB House Wavs and Means Carrnittee Tax Reform Bill. Restrictions on Re<favelopment Tax Allocation Bonds. As we reported in·· last week's Legislative Bulletin (lf39-1985, Nov. 22), the House i1ays and Means Committee has formulated a comprehensive tax reform package which will be reported out when the Congress returns from its Thanksgiving recess on Decerrber 2. .:\ttachad to this Bull~tin is the single-page description of the Cor.nittee 's action which was provided to the League staff by the Ways and Mean3 Ccccnittee. ;•:hile it raises naarly as ma..,y questions as it answers, we offer it as the cnly available explanation of the com.ittee's decisions. Com.nittee s:aff have not been willing this week to answer questions and the actual statutory language will not oo cor:i:'leted 1.:ntil a:::er Dec. 2. (The actual language of the tax reform bill to;ether: with our a:1alysis ,ill h??Jfully oo the subject of our Legislative Bulletin next week). '2he j?rO?()sal, if ado~ted by the S:::1ate, would dr:asticall y reduce the usefulness of red-::-..·~lcr,m::nt as an :.;rban revitalization financing tool. The pro;.osed statewide bond c;,ip is so 1110:i~st th'7,t if it had ooen in place in F":l s:.-35, it wo'.lld have prevented the issuance of 75% of all redt;,velopment oonds as tax-cx-~r.:pt bonds. A new federal cbfinition of blight is prop.:,sed as well as a federal limit on project size (project ass.~scd value as a ~rcent of city assessed value). We encourage redcve) opment agency officials to review this language carefully, as well as the blll language itself which we will distribute when it oocomcs available next week. To the extent it will prohibit the completion of current or; contemplated redevelopment ~ia,1s with tax-exempt financing, city officials should make this known forcefully.to their own Congress Merrbers and to Senato~s Wilson and Cranston, as well as the bond sp:1cialist on the staff of the Senate Finance Comnittee, where it is rrost likely that chnnges to the bill can be made: Senator Pete Nilson .Attn: Todd Thakar 720 Hart Scnnte Office Bldg. Washin~ton, o.c. 20515 Senat~r Robert Packwood, Chairman Senate Finance Con1llittee Attn: ~ary Francis Pearse~ 259 Russell Senate Office Bldg. Washington, o.c. 20515 Senator Alan Cranston Attn: John Fleming 112 Hart Senate Office Bldg. Washington, o.c. 20510 3 I •· ·, I ., .., ., ., .: ••' ' ...... -.....,,. r • ,, ' .•.,,,.~ I ,, ~ .. , ,,,,.,, -House Ways and Me, Comnittee Staff Descriotion o fax Reforin Bill's Treatment of Redevelo::.mZ:nt Tax Allocation.· •. .. . . ... --.. . . ., -~ .. : ' (a) Bonds issued befor~· Januar;t .!!_ 1986 •• -;-Grandfather tax increment bonds issued _before January 1, 1986. •. • -.. : • (b) Bonds·· iss~ed aft~r Dece~r 31, 1985.-Tax increment bonds would be treated as governmental bonds to theextentthat the bond proceeds were used to finance facilities such as streets, sidewalks, lighting, curbing, and ether similar essential governmental improve:nents. Tax increment bonds that are qualified redevelopment bonds could be issued subject to the new unified volume limitation (and generally to other limitations for bonds used to finance activities comparable to those to be conducted on the financed property) to the extent that the bond proceeds were used for- (1) Costs of acquiring land pursuant to the p:,wer of eminent domain (or the threat thereof) to be transferred to a nongovernmental person, and (2) Costs of relocating cccu~ants of structures on the land acquired in (1), Qualified r-edev:alo;:,:n,mt ::onds would be defined as bonds- (1) Issued pursuant to a State redevelop:n,;nt statute authorizing issuailce of ~onds s~c~red exclusively by incremental property tax revenues; (2) Issued to finance activities descri!xld in (1) and (2) above in a de:ined blighted area (oeterr.:ined based on the substantial presence of structurally s~bstandard buildings), the designation of which occurs before issu~nce of the bon::is; ( 3) Issued put"suc:nt to a plan of redcvelopm?nt for the area, which ~lan is ado~ted by the rJoverning body of the jurisdiction in which the blighted area is located in advance of issu=nce of the bonds; and (4) Issued for financing in an area in which the assessed value of the property (when combined with the value of property in other designated areas in the jurisdiction) does not exceed 10 percent of the total assessed value of property in the jurisdiction. Volume limitation set-aside.-A portion of each State;s unified volume limitation equal to the greater of $6 per capita .. or $8 million would be set ' aside for qualified redevelopment bonds in any State that issued more than $25 million of such bonds between July 18, 1984, and November 21, 1985. This .set aside could be overridden by State statute. ,: t.( PETE WILSON COMMITTEES: CALIFORNIA tinittd ~tatts ~matt WASHINGTON, DC 20510 March 31, 1986 The Honorable Mary H. Casler Mayor City of Carlsbad 1200 Elm Avenue Carlsbad, California 92008 Dear Mayor Casler: ARMED SERv1rEs AGRICULTURE. NUTRITION,ANO FORESTRY SPECIAL COMMITTEE ON AGING JOINT ECONOMIC COMMITTEE I want to take this opportunity to discuss a matter of critical importance to Carlsbad and other California cities. As you are no doubt aware, HR 3838, the "Tax Reform Act of 1985," as passed by the House of Representatives, includes detrimental restrictions on your ability to use tax-exempt bonds to finance infrastructure and redevelopment. HR 3838 severly limits local ability to use important redevelopment bonds like tax-increment financing bonds. It further restricts tax-exempt financing with an unrealistic volume cap. As localities assume almost exclusive responsibility for the nation's overwhelming infrastructure and redevelopment needs, it is unconscionable that Congress would effectively "gut~ the most important financing tools available to State and local governments. Effective tax reform must address the flaws in the tax-exempt laws by going to the root of the problem not by eliminating these important financing mechanisms. To this end, I have introduced legislation, s. 2166, with Senators Durenberger and Domenici, that takes the necessary steps to correct existing flaws in the tax-exempt bond statutes and also maintains tax-exempt financing for legitimate governmental and quasi-governmental activities. It is our hope thats. 2166 will be included in the Senate Finance Committee tax reform package and ultimately maintained during the Senate/House Tax Reform Conference. We must act quickly to assure that members of Congress fully understand the devastating impact these changes will have on America's cities. If we fail to avert these so-called reforms, I believe the tax reform act would more appropriately be titled "The Urban Decay Act of 1986." 0 -, ............. 1 The Honorable Mal H. Casler March 31, 1986 Page Two Therefore, I am writiPq to ask your help to retain tax-exempt financing mechanisms for governmental and quasi-governmental needs. You can help in three ways: 1. Contact your colleagues throughout the country and urge them to contact their federal representatives regarding the threat to tax-exempt financing mechanisms. 2. Involve your redevelopment agency and Chamber of Commerce. Make them aware of the harmful effects HR 3838 will have on infrastructure and redevelopment activities and ultimately on the Carlsbad economy. 3. Encourage your local newspaper editor to write editorials regarding the devastating impact HR 3838 will have on your community. I know that you are also concerned about the proposed budget reductions for City programs. As a former mayor, I share your concerns, and believe Congress should honor the commitments it has made t.o you. Local government should not bear more than its share of the deficit reduction effort. However, I think we agree that the harmful effects of inaction on the deficit will exceed the impact of budget reductions. On another front, in early April Senator Durenberger and I will introduce legislation to help relieve the growing burden of regulatory costs for State and local governments by requiring the Federal Government to reimburse them for additional costs imposed by future Federal mandates. It is our intent to reduce the financial drain federal mandates place on your limited resources. As Congress continues to address these important issues, by working together, I believe we can effect positive change. If you have questiGns or need additional information, please feel free to contact me or Todd Thakar, my legislative assistant for Intergovernmental Affairs. In the meantime, I look forward to continuing to work with you to meet our shared objectives for local government. Sincerely, ?~ PETE WILSON