BILL NUMBER: AB 29 CHAPTERED 08/09/01 CHAPTER 160 FILED WITH SECRETARY OF STATE AUGUST 9, 2001 APPROVED BY GOVERNOR AUGUST 8, 2001 PASSED THE SENATE JULY 21, 2001 PASSED THE ASSEMBLY MAY 10, 2001 AMENDED IN ASSEMBLY MARCH 20, 2001 INTRODUCED BY Assembly Member Papan DECEMBER 4, 2000 An act to amend Sections 44537.5, 44548, and 44559.1 of the Health and Safety Code, relating to pollution control, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 29, Papan. Capital access loan program: financial institutions: pollution control authority. (1) Existing law establishes the Capital Access Loan Program and authorizes the California Pollution Control Financing Authority to contract with a financial institution to participate in the program. Existing law defines the term "financial institution" for purposes of the program as one that is domiciled or has its principal office in the State of California. This bill would limit that requirement to a lending institution that has executed a participation agreement with the Small Business Administration under a guaranteed loan program or a specified small business investment company. (2) Existing law authorizes the California Pollution Control Financing Authority to finance various pollution control projects to control and eliminate pollution hazards to the environment. Existing law authorizes the authority to provide a loan to any city, county, school district, and redevelopment agency, financial institution, any for-profit or not-for-profit organization, or any participating party, to assist in financing the costs relating to the cleanup, remediation, or development of brownfield sites. This bill would correct erroneous references in those provisions. (3) The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 44537.5 of the Health and Safety Code is amended to read: 44537.5. The authority shall provide the maximum opportunity for the use of the authority's financing by individuals, businesses engaged in agricultural operations, and small businesses or corporations by providing information, assistance, and coordination to facilitate financing for small projects and other financing that benefits the environment and the economy of the state, including financing for projects for the disposal of agricultural wastes, with special attention to the needs of businesses that do not meet standard commercial lending requirements but provide public benefits, such as job creation or retention and the redevelopment for economically beneficial uses of contaminated properties. The authority shall assist with the financing of the costs of, among other things, assessment of, remedial planning and reporting for, technical assistance for, and the cleanup, remediation, or development of, brownfield sites, and any other similar or related costs, by providing the loans authorized pursuant to subdivision (h) of Section 44526. The authority shall provide the maximum opportunity to provide loan funding pursuant to subdivision (h) of Section 44526 to assist brownfield site financing assistance programs where the sites are located in economically struggling communities suffering from a low level of income or a high level of poverty or unemployment. SEC. 2. Section 44548 of the Health and Safety Code is amended to read: 44548. (a) (1) Subject to any prior contractual obligations to any of its bondholders, the authority may establish one or more small business assistance funds in order to do any of the following: (A) Assist small businesses to achieve financing of pollution control facilities. (B) Assist with the financing of the costs of, among other things, assessment, remedial planning and reporting, technical assistance, cleanup, remediation, and development of brownfield sites, and with other similar or related costs, by providing loans pursuant to subdivision (h) of Section 44526. (C) Fund a capital access program for small businesses pursuant to Article 8 (commencing with Section 44559). (2) For the purpose of establishing and maintaining small business assistance funds as it determines to be necessary or desirable to secure its bonds or any issuance thereof or for other authorized purposes, the authority, pursuant to its contracts with participating parties, may levy fees or other charges on, or require deposits from, participating parties receiving financing for a project under this division. The total amount of these fees, charges, and deposits with respect to a single issue of bonds shall not exceed 3 percent of the principal amount of that issue of bonds. (3) Prior to levying any fees or charges or requiring deposits, the authority shall adopt regulations for the operation of the small business assistance funds, the amounts and any payment schedule for the fees, charges, or deposits, eligibility standards for small businesses desiring to use or benefit from the small business assistance funds, and any other matters the authority determines to be necessary for the establishment and maintenance of small business assistance funds. The regulations may provide for differential fees from participating parties based upon the size of a project financed by the authority or other factors determined to be relevant by the authority, and the regulations may restrict any benefits to those eligible small businesses specified in the regulations. (4) The authority may transfer any funds available to it or set aside for its administrative expenses to any small business assistance fund established under this section. (b) (1) The forms of financial assistance that the authority may provide under this section include, but are not limited to all of the following: (A) Payments to reduce, but not eliminate, the interest rate on loans. (B) Payments of part or all of the cost of acquiring letters of credit. (C) Payments of part or all of the cost of acquiring insurance. (D) Payments of part or all of the cost of acquiring guarantees. (E) Payments of part or all of the cost of acquiring other forms of credit support. (F) Payments of part or all of the authority's expenses in issuing revenue bonds or providing other assistance. (2) The authority may also pledge any small business assistance fund, on an individual or pooled basis, to repay, directly or indirectly, the principal of, or interest or premium on, any issue of bonds of the authority or any loan made or acquired pursuant to this section. (3) The authority may also use moneys in a small business assistance fund to assist in the financing of the costs of assessment of, remedial planning and reporting for, technical assistance for, and the cleanup, remediation or development of, brownfield sites, and of other similar or related costs, by providing loans, pursuant to, and under the terms permitted by, subdivision (h) of Section 44526. (4) In addition to other purposes set forth in this section, the authority may use moneys in a small business assistance fund to make or acquire loans or guarantee commercial loans to participating parties eligible for assistance from those funds. (5) Any moneys repaid or returned to the authority in connection with or as a result of any loan or financial assistance made pursuant to this section shall be deposited in the small business assistance fund from which the loan or assistance was originally provided. (6) The authority may contract with qualified financial institutions, including, but not limited to, banks, investment and mortgage bankers, insurance companies, sureties, and guarantors, to provide any necessary assistance in the granting of credit for these purposes. (c) Each small business assistance fund established pursuant to this section shall be deposited in a special account that the Controller shall create. Notwithstanding any other provision of law, and subject to any requirements of federal tax law or regulations relative to maintaining the tax-exempt status of the obligations of the authority, all interest or other gains earned by investment or deposit of money in the special account pursuant to any provision of Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code or pursuant to any other provision of law shall be credited to, and deposited in, the account. (d) In carrying out this section, the authority shall participate with the air pollution control districts and air quality management districts in providing financial assistance in its lending programs. SEC. 3. Section 44559.1 of the Health and Safety Code is amended to read: 44559.1. As used in this article, unless the context requires otherwise: (a) "Authority" means the California Pollution Control Financing Authority. (b) "California Capital Access Fund" means a fund created within the authority to be used for purposes of the program. (c) "Executive Director" means the Executive Director of the California Pollution Control Financing Authority. (d) (1) "Financial institution" means a federal- or state-chartered bank, savings association, credit union, not-for-profit community development financial institution certified under Part 1805 (commencing with Section 1805.100) of Chapter XVIII of Title 12 of the Code of Federal Regulations, or a consortium of these entities. A consortium of those entities may include a nonfinancial corporation, if the percentage of capitalization by all nonfinancial corporations in the consortium does not exceed 49 percent. (2) "Financial institution" also includes a lending institution that has executed a participation agreement with the Small Business Administration under the guaranteed loan program pursuant to Part 120 (commencing with Section 120.1) of Chapter I of Title 13 of the Code of Federal Regulations and meets the requirements of Section 120.410 of Chapter I of Title 13 of the Code of Federal Regulations, and a small business investment company licensed pursuant to Part 107 (commencing with Section 107.20) of Chapter I of Title 13 of the Code of Federal Regulations. (3) A financial institution described in paragraph (2) shall be domiciled or have its principal office in the State of California. (e) "Loss reserve account" means an account in the State Treasury or any financial institution that is established and maintained by the authority for the benefit of a financial institution participating in the Capital Access Loan Program established pursuant to this article for the purposes of the following: (1) Depositing all required fees paid by the participating financial institution and the qualified business. (2) Depositing contributions made by the state and, if applicable, the federal government or other sources. (3) Covering losses on enrolled qualified loans sustained by the participating financial institution by disbursing funds accumulated in the loss reserve account. (f) "Participating financial institution" means a financial institution that has been approved by the authority to enroll qualified loans in the program and has agreed to all terms and conditions set forth in this article and as may be required by any applicable federal law providing matching funding. (g) "Passive real estate ownership" means ownership of real estate for the purpose of deriving income from speculation, trade, or rental, but does not include any of the following: (1) The ownership of that portion of real estate being used or intended to be used for the operation of the business of the owner of the real estate. (2) The ownership of real estate for the purpose of construction or renovation, until the completion of the construction or renovation phase. (h) "Program" means the Capital Access Loan Program created pursuant to this article. (i) "Qualified business" means a small business concern that meets both of the following criteria, regardless of whether the small business concern has operations that affect the environment: (1) It is a corporation, partnership, cooperative, or other entity, whether that entity is a nonprofit entity or an entity established for profit, that is authorized to conduct business in the state. (2) It has its primary business location within the boundaries of the state. (j) (1) "Qualified loan" means a loan or a portion of a loan made by a participating financial institution to a qualified business for any business activity that has its primary economic effect in California. A qualified loan may be made in the form of a line of credit, in which case the participating financial institution shall specify the amount of the line of credit to be covered under the program, which may be equal to the maximum commitment under the line of credit or an amount that is less than that maximum commitment. A qualified loan made under the program may be made with the interest rates, fees, and other terms and conditions agreed upon by the participating financial institution and the borrower. (2) "Qualified loan" does not include any of the following: (A) A loan for the construction or purchase of residential housing. (B) A loan to finance passive real estate ownership. (C) A loan for the refinancing of an existing loan when and to the extent that the outstanding balance is not increased. (D) A loan, the proceeds of which will be used in any manner that could cause the interest on any bonds previously issued by the authority to become subject to federal income tax. (k) "Severely affected community" means any area classified as an enterprise zone pursuant to the Enterprise Zone Act (Chapter 12.8 (commencing with Section 7070) of Division 7 of Title 1 of the Government Code), any area, as designated by the executive director, contiguous to the boundaries of a military base designated for closure pursuant to Section 2687 of Title 10 of the United States Code, as amended, and any other comparable economically distressed geographic area so designated by the executive director from time to time. (l) "Small Business Assistance Fund" means a fund created within the authority pursuant to Section 44548. (m) "Small business concern" has the same meaning as in Section 632 of Title 15 of the United States Code, or as otherwise provided in regulations of the authority. SEC. 4. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to clarify the ability of certain financial institutions to participate in the Capital Access Loan Program to provide small businesses with access to capital, and to clarify provisions relating to financing the assessment of, remedial planning and reporting for, technical assistance for, and the cleanup, remediation, or development of, brownfield sites, thereby better protecting the public health and safety and the environment, it is necessary that this act take effect immediately.