BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1650| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1650 Author: Feuer (D), et al Amended: 8/31/10 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE : 7-0, 6/29/10 AYES: Wright, Calderon, Florez, Negrete McLeod, Padilla, Price, Yee NO VOTE RECORDED: Harman, Denham, Oropeza, Wyland SENATE APPROPRIATIONS COMMITTEE : 11-0, 8/12/10 AYES: Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno, Price, Walters, Wolk, Wyland, Yee ASSEMBLY FLOOR : 74-0, 6/1/10 - See last page for vote SUBJECT : Public contracts: state and local contract eligibility: energy Sector investment activities in Iran SOURCE : Author DIGEST : This bill enacts the Iran Contracts Act of 2010 which prohibits a person from bidding or renewing contract with a public agency entity for goods and services of $1 million who is identified on a list maintained by the Department of General Services (DGS) and engaging in investment activities in Iran, as specified (applies to a person that provides goods and services for $20 million). This bill also prohibits a person or entity that is a CONTINUED AB 1650 Page 2 financial institution that extends $20 million or more in credit to another person, for 45 days or more, if the person will use the credit to invest in the energy sector in Iran from bidding or renewing a contract with a public entity for goods and services of $1 million or more, and is also identified on the DGS list as a person engaging in investment activities in Iran. Requires DGS to develop this list by June 1, 2011 and update it every 180 days as specified. This bill states the intent of the Legislature to implement the authority granted in H.R.2194, 111th Congress (2009-2010), the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. ANALYSIS : Existing federal law requires the President of the United States, under the federal Iran Sanctions Act of 1996, as subsequently amended, to impose specified sanctions on foreign companies that make substantial investments in Iran's energy sector. Existing law prohibits the California Public Employees' Retirement System and the State Teachers' Retirement System from investing public employee retirement funds in a company with active business relations in Sudan or that has invested or engaged in business operations with entities involved in the development of petroleum or natural gas resources of Iran. Existing law authorizes contracting between state agencies and private contractors and sets forth the requirements for the procurement of goods and services and for the solicitation and evaluation of bids and the awarding of contracts by public entities. Existing law prohibits companies involved in specified business activities in Sudan from entering into a contract with a state agency for goods and services and requires a prospective bidder for a state contract to certify that the company is not engaged in such activities. Existing law specifies penalties for submitting a false certification. The United States and much of the international community has condemned the Government of Iran for its human rights violations, its support of international terrorism, and its efforts to develop nuclear weapons under the guise of AB 1650 Page 3 developing nuclear power for domestic energy uses. The Iran Sanctions Act expresses U.S. policy to work with international organizations to pressure the government of Iran to cease its illicit nuclear activity, and it authorizes the President, by Executive Order, to impose sanctions and limit the ability of U.S. persons and business from engaging in business activities with the Government of Iran and other designated groups. In light of recent confrontations between the Government of Iran and the international community over its nuclear activity, its support of international terrorism, and its suppression of civil rights and liberties, legislation is currently pending in Congress that would strengthen existing sanctions and enable state and local governments to adopt restrictions consistent with federal policy. This bill: 1. Prohibits the State of California and its subdivisions from contracting for over $1 million dollars with companies that have specified business activities in Iran's petroleum sector. The prohibition applies to new contracts or contract renewals. 2. Requires a company seeking to bid on state and local government contracts to certify that they are not engaged in developing Iran's petroleum resources. 3. Requires the Department of General Services (DGS) to maintain a list of companies engaged in the offending investments, which will be available to companies interested in bidding for contracts with the State. Provides that any costs to DGS for maintaining the list shall be recovered, as specified. 4. Requires companies to be given 90 days written notice to challenge their disqualification for prohibited activities. 5. Provides that companies that cease these activities shall become eligible to do business with the State of California and its subdivisions. 6. Establishes fines for companies that submit a false AB 1650 Page 4 certification in an amount that is equal to the greater of $250,000 or twice the amount of the contract for which a bid was submitted. 7. Specifies that companies who submit a false certification shall be ineligible to bid on government contracts for three years. Background The U.S. also has imposed sanctions on the Government of Iran, determining that Iran's illicit nuclear activities, combined with its support of international terrorism, represent a serious threat to the security of the United States, Israel and other United States allies in Europe, the Middle East and around the world. On June 24, 2010, President Obama signed into law H. R. 2194, the "Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010" (Public Law 111-195), which enacted new sanctions legislation against Iran, authorizing states and local governments to divest and otherwise disassociate themselves from companies operating in Iran's energy sector that support Iran's efforts to achieve a nuclear weapons capability Comments According to the author's office, this bill is intended to support federal and international efforts by precluding private companies from entering into or renewing state contracts if they have substantial business dealings in Iran's energy sector, thereby "ensuring that California's tax dollars do not support companies whose investments either directly or indirectly support Iran's nuclear or terrorist activities." The author's office contends that "it is the responsibility of the State to decide how, where and by whom its financial resources should be invested. It also is the prerogative of the State not to invest in, or do business with, companies whose investments with Iran place those companies at risk from the impact of economic sanctions imposed upon the Government of Iran for sponsoring terrorism, committing AB 1650 Page 5 egregious violations of human rights, and engaging in illicit nuclear weapons development." The author's office notes that for decades California has engaged in socially responsible investing, ranging from divesting state pension funds from companies that supported apartheid in South Africa in the 1980s to sanctions for human rights violations in Sudan. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/31/10) 30 Years After Anti-Defamation League American Jewish committee - Los Angeles Center for the Promotion of Democracy and Human Rights City of Beverly Hills City of Los Angeles City of West Hollywood County of Los Angeles Jewish Community Relations Council of Sacramento Jewish Community Relations Council of San Francisco, the Peninsula, Marin, Sonoma, Alameda, and Contra Costa Counties Jewish Federation of San Diego Jewish Labor Committee, Western Region Jewish Public Affairs Committee of California Los Angeles County Board of Supervisors Simon Wiesenthal Center United Against a Nuclear Iran ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, AB 1650 Page 6 Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas, Saldana, Silva, Skinner, Smyth, Solorio, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, John A. Perez NO VOTE RECORDED: Tom Berryhill, Fuentes, Fuller, Norby, Audra Strickland, Vacancy DLW:nl 8/31/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****