BILL ANALYSIS
SB 71
Page 1
( Without Reference to File )
SENATE THIRD READING
SB 71 (Padilla, Alquist and Strickland)
As Amended March 22, 2010
2/3 vote. Urgency
SENATE VOTE :Vote not relevant
BUDGET 16-0
-----------------------------------------------------------------
|Ayes:|Blumenfield, Nielsen, | | |
| |Adams, Arambula, Beall, | | |
| |Brownley, Caballero, | | |
| |Carter, Cook, Emmerson, | | |
| |Feuer, Fuller, Gilmore, | | |
| |Harkey, Jones, Swanson | | |
| | | | |
-----------------------------------------------------------------
SUMMARY : Expands the range of projects which may be approved
for a sales tax exclusion to include equipment used to
manufacture products that produce energy from alternative
sources such as solar, wind and biomass. Specifically, the
bill :
1)Allows the California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) to authorize a
state and local sales tax exclusion for tangible personal
property that is used for the design, manufacture, production,
or assembly of advanced transportation technologies or
alternative source products, components or systems.
Alternative source products, components or systems includes
cogeneration technology, energy conservation, solar, biomass,
wind, geothermal, specified hydro-electric, or any other
energy efficient technologies that reduce the use of fossil
and nuclear fuels. Alternative sources would also include
advanced electric distributive generation technology and
energy storage technology.
2)Requires CAEATFA to evaluate project applications for the
sales tax exclusion based on the extent to which: the project
develops manufacturing facilities or purchases equipment in
California; the benefits of the project to the state equal or
exceed the benefits to the project applicant and other
participants; the project creates new permanent jobs in
California; the project results in a reduction in greenhouse
gases, a reduction in air or water pollution, an increase in
SB 71
Page 2
energy efficiency, or a reduction in energy consumption,
beyond what is required by state or federal law; unemployment
exists in the area in which the proposed project is to be
located; any other factors deemed appropriate.
3)Requires CAEATFA to provide 20-day notice to the Legislature
once the value of exclusions approved by CAEATFA exceeds $100
million. The notification must be provided prior to additional
approvals being granted.
4)Sunsets the expanded authority of CAEATFA to approve specified
projects effective January 1, 2021.
5)Mandates the Legislative Analyst's Office to report to the
Joint Legislative Budget Committee on the effectiveness of the
program on or before January 1, 2019, evaluating factors
including but not limited to: the number of jobs created in
California; the number of businesses retained in or relocated
to California; the amount of state and local revenue and
economic activity generated.
EXISTING LAW : CAEATFA was established in 1980 as a means to
encourage the use of equipment using alternative or renewable
energy sources, such as wind, solar, cogeneration and
geothermal. Under its existing authority, CAEATFA may approve
projects and authorize financial assistance for the purchase of
equipment that uses such alternative energy sources. CAEATFA is
authorized to provide financial assistance to projects that meet
its approval though the issuance of bonds, loans, loan
guarantees and credit enhancements. In addition, existing law
permits CAEATFA to approve projects and exclude equipment
purchased pursuant to those projects from the state and local
sales tax. Currently, projects that may be approved by the
authority do not include equipment that is used to manufacture
alternative or renewable energy products (such as solar panels,
photovoltaic cells or wind turbines).
FISCAL EFFECT : The fiscal impact is dependent on the extent to
which alternative and renewable energy technologies expand in
California, as well as gross sales amount of the projects
approved for the sales tax exclusion by CAEATFA.
The Board of Equalization has estimated that in 2008, capital
expenditures related to renewable and alternative energy were
approximately $225 million. Assuming these constituted projects
meeting CAEATFA's criteria and were approved, the General Fund
revenue reduction based on the current 6% rate would be $13.5
million, with total state and local revenue losses of
SB 71
Page 3
approximately $20 million.
According to the Department of Finance, the program would have
no impact on the budget, since absent the program, the projects
approved by CAEATFA would not have occurred. Based on this
analysis, the program would be stimulative in design and effect
and not result in granting exclusions to investment activities
that would have occurred anyway.
COMMENTS : This bill expands the realm of eligible projects
which may be approved for exclusion from the sales tax. This
expanded authority is limited to the period ending January 1,
2021. The bill does not result in placing a sunset date on
CAEATFA's authority under the existing program.
Under current law, CAEATFA may already approve projects based on
advanced transportation technologies, and approved one such
project in 2009. Thus, the addition of the advanced
transportation technology language in this bill appears to be
motivated by an effort to increase the clarity of the existing
statutory language.
According to the Department of Finance, the program would have
no impact on the budget, since absent the program, the projects
approved by CAEATFA would not have occurred. Based on this
analysis, the program would be stimulative in design and effect
and not result in granting exclusions to investment activities
that would have occurred anyway.
The bill is intended to retain companies and economic activities
in California that might otherwise relocate to other states. The
bill is also intended to increase activity perceived as a
potential economic growth area. Based on the criteria to be used
by CAEATFA in approving projects and by the Legislative
Analyst's Office in evaluating the effectiveness of the program,
the bill is also motivated by a desire to create job
opportunities in this sector.
Analysis Prepared by : Mark Ibele / BUDGET / (916) 319-2099FN:
0003780