BILL ANALYSIS
SB 103
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Date of Hearing: July 18, 2007
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mark Leno, Chair
SB 103 (Cedillo) - As Amended: February 27, 2007
Policy Committee: Local
GovernmentVote:5-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill requires that each local agency prepare a report and
hold hearings on economic development subsidies approved after
January 1, 2008. Specifically the bill:
1)Requires the report to include information on the name and
address of the entity receiving the subsidies, the start and
end dates of the subsidies, and the total amount of
expenditures or foregone revenues resulting from the
subsidies.
2)Defines an economic development subsidy to include bonds,
grants, loans, loan guarantees, enterprise zones, tax
increment financing, fee waivers, land price subsidies,
matching funds, tax abatements, tax exemptions, or tax
credits.
3)Requires that the report be issued on or before October 1 of
each odd-numbered year, unless the subsidy will exist for 40
years or more, in which case the report is required every six
years.
4)Requires each local agency, on or before November 1 in each
odd-numbered year, to hold a public hearing to consider
comments on the reports.
5)Requires that the information in the reports be presented on a
public web-site.
FISCAL EFFECT
SB 103
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Significant costs, potentially exceeding $1 million annually, to
local government agencies for the compilation of information and
preparation of reports required by this bill. If the Commission
on State Mandates determines that the bill contains mandated
costs, the GF could incur costs to reimburse local governments
for these expenses. The extent to which these local costs would
be reimbursable is uncertain.
COMMENTS
1)Background . Cities and counties influence land use development
through regulatory powers (such as general plans, zoning
ordinances, and permitting requirements), direct spending
through their budgets for public works, grants, and loans, and
through economic incentives to induce individual businesses to
locate in their communities, Most regulatory and budgetary
activities are transparent because of legal requirements for
public hearings, environmental reviews, annual financial
reports, and regular audits. Some groups are concerned that
economic development subsidies do not receive the same level
of public scrutiny as budgetary and regulatory decisions.
2)Rationale . According to the author, the bill is intended to
increase public accountability and oversight of local economic
development subsidies. Supporters indicate that while economic
development is a worthy goal, more transparency and oversight
is needed.
3)Concerns . In policy committee, concerns were raised that the
bill, as currently drafted, contains an overly broad and vague
definition of an "economic development subsidy", and that the
bill requires duplicative reports and hearings on the same
subsidies, thereby leading to unnecessary time and expenses by
local governments.
4)Reimbursable Mandate ? Under the Constitution, when the
Legislature or a state agency mandates a new program or higher
level of service on a local government, it is required to
provide a subvention of funds. If the Commission on State
Mandates finds that the requirements of this bill constitute a
reimbursable mandate, the costs to the state could be
significant. For example, investment reporting requirements
imposed on local government treasurers following the Orange
County bankruptcy resulted in local mandate claims of
SB 103
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averaging $3.5 million per year.
However, the extent to which the local costs imposed by this
bill would be reimbursable is uncertain. For example, courts
have found that redevelopment agencies are not eligible for
mandate reimbursements, and redevelopment agencies are one of
the major entities that offer local economic subsidies.
Similarly, the state is only required to reimburse local
governments for mandatory activities. To the extent that
economic subsidies are considered discretionary activities of
local agencies, they would not be reimbursable.
5)Previous Legislation . This bill is similar to SB 1268
(Cedillo) from 2006, which was held in the Senate
Appropriations Committee.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081