California’s long-promised high speed rail is facing municipal opposition against a proposed financing scheme that could see some local taxes funneled into the rail line’s construction.
The proposed plan is to divert property tax growth – and possibly some sales taxes – stemming from developments near high speed rail stations to help pay for the track that’s supposed to stretch from San Francisco to Anaheim.
In Anaheim, that means tax revenue near ARTIC could take a hit since the train station is across the street from the Honda Center – the same area the OC Vibe entertainment development is being built.
City council members say years of local planning spurred the tax revenue around the train station.
“We’ve put these developments in there to generate sales tax for our residents and if the state comes in here and starts to either take property and/or sales tax from us, then we have to make up that revenue somewhere else,” Councilman Ryan Balius said during Tuesday’s council meeting.
City staff said the high speed rail funding proposal – known as Tax Increment Financing districts – would severely impact city coffers.
“Anaheim is identified as a future high-speed rail station site at the ARTIC, near the OCVIBE development. If the HSRA’s proposed TIF districts advance, it could divert future property and sales tax growth from the area surrounding the ARTIC. The City relies on such revenues to fund essential public services, including infrastructure maintenance, public safety, parks, housing, and local transportation improvements,” reads a staff report.
Councilwoman Natalie Rubalcava said she supports the high speed rail, but opposes the tax district funding scheme.
“I do think we should definitely talk about how we support public transportation and the importance of it as a tourism-heavy economy, but we oppose the tax,” Rubalcava said.
Balius, who spearheaded the council’s unanimous opposition to the state proposal, also called the move “incredibly vague.”
The High Speed Rail Authority’s draft 2026 business plan doesn’t exactly spell out how the tax increment financing district would work.
But the plan notes the rail authority could get “incremental value of investments in stations, facilities, air rights leasing, and joint development would be enhanced by enabling the Authority to initiate and lead Enhanced Infrastructure Financing Districts, with local partners, and related tax increment tools across city and county boundaries.”
An August report from High Speed Rail Authority CEO Ian Choudri asked the state legislature to help “empower the Authority with certain regulatory powers, including zoning and land use permitting controls, over land it owns and land within a one-half mile radius of high-speed rail stations.”
Choudri also wants legislators to support allowing “the Authority to capture sales and property tax increment resulting from such development to support station area infrastructure investments.”
In an opposition letter, a host of local government advocacy groups say the proposal jeopardizes tax revenue near high speed rail stations.
“We write to express our opposition to the California High-Speed Rail Authority’s proposal to establish Tax Increment Financing (TIF) districts within a one-half-mile radius of proposed station areas for the purpose of capturing property and potentially sales tax growth to fund high-speed rail construction and related commercialization activities,” reads a March 2 letter.
The letter was signed by the League of California Cities, California State Association of Counties, California Special Districts Association, Rural County Representatives of California and Urban Counties of California.
Anaheim Councilwoman Norma Kurtz said something’s off about the process behind creating the tax districts.
“Even the way the state is moving this is a little odd. Instead of going through the legislative process as it normally would, it’s just being attached to the budget,” Kurtz said during Tuesday’s meeting.
In their opposition letter, statewide local government advocacy organizations said the proposal might be against the California Constitution.
“As outlined in recent policy analyses, the proposal to divert local tax increment to a state entity appears inconsistent with multiple provisions of the California Constitution. Local sales tax revenues are expressly protected for local governmental purposes, and the Legislature is prohibited from reallocating or transferring those revenues,” reads the letter, adding similar concerns on property taxes.
The letter also raised concerns over the rail authority dictating local affairs.
“Equally concerning is the proposal’s suggestion that the Authority could exercise regulatory influence over land within station areas. Land use authority is constitutionally reserved to cities and counties. While the state may set standards, it cannot assume direct local planning powers,” reads the letter.
Anaheim city staff also say the proposal is going through a budget process instead of a legislative one, which could bury critical information about the financing scheme.
“The plan is now moving through the state budget process rather than the standard legislative process. More detailed information on the TIF proposal is expected to be released once it appears in a budget trailer bill,” reads a staff report.
During Tuesday’s meeting, Councilwoman Natalie Meeks said the High Speed Rail Authority shouldn’t be eying local tax revenues.
“We have prepared and implemented and we are ready to accept high speed rail if it ever gets here, but you can’t take the benefits away from us.”
Spencer Custodio is the civic editor. You can reach him at scustodio@voiceofoc.org. Follow him on Twitter @SpencerCustodio.
