BILL ANALYSIS                                                                                                                                                                                                    







           ----------------------------------------------------------------- 
          |Hearing Date:April 13, 2009    |Bill No: SB                      |
          |                               |358                              |
           ----------------------------------------------------------------- 


               SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC  
                                     DEVELOPMENT
                        Senator Gloria Negrete McLeod, Chair

                        Bill No:        SB 358Author:Ducheny
                   As Amended:  April 13, 2009        Fiscal: Yes

          
          SUBJECT:   Indian tribes:  economic development.
          
          SUMMARY:  Creates within the Business, Transportation and  
          Housing Agency (BT&H), the Native American Business Revolving  
          Loan and Guarantee Program to fund non-gaming business projects  
          for members of Indian tribes and creates the Native American  
          Business Finance Council to review applications for program  
          funding.

          Existing law:  

          1)Promotes the economic self-sufficiency of California Indian  
            tribes.
          
          2)Establishes the Business, Transportation and Housing Agency to  
            oversee and coordinate the activities of various departments,  
            offices, and economic development programs.
          
          3)Creates in the State Treasury a special fund called the  
            "Indian Gaming Revenue Sharing Trust Fund" (RST Fund) for the  
            receipt and deposit of moneys derived from gaming device  
            license fees that are paid into the fund pursuant to the terms  
            of tribal-state gaming compacts for the purpose of making  
            distributions to non-compact tribes.  

          4)Provides that the administration and distribution of RST Fund  
            moneys to qualifying tribes that do not have gaming, or  
            operate less than 350 machines, is to be carried out by the  
            California Gambling Control Commission pursuant to the terms  
            of the tribal-state gaming compacts ratified and in effect as  
            provided in subdivision (f) of Section 19 of Article IV of the  





                                                                     SB 358
                                                                     Page 2



            California Constitution.
          
          This bill:

          1)Requires the Secretary of BT&H (Secretary) to create the  
            Native American Business Revolving Loan and Guarantee Program  
            for the purpose of providing non-gaming business loans and  
            loan guarantees to federally recognized, non-compacted, and  
            revenue sharing tribes who are based in California.

          2)Creates the Native American Business Revolving Loan and  
            Guarantee Program Account within the California Small Business  
            Expansion Fund for the purpose of receiving state, federal, or  
            local government moneys, other public or private moneys, and  
            tribal government contributions.
          3)Defines the following terms:

             a)   "Account" means the Native American Business Revolving  
               Loan and Guarantee Program Account.

             b)   "Applicant" means an applicant for a loan or loan  
               guarantee pursuant to the bill.

             c)   "Council" means the Native American Business Finance  
               Council.

             d)   "Program" means the Native American Business Grant and  
               Revolving Loan Program.

             e)   "Qualified Indian tribe" means a federally recognized  
               tribe located in the state that receives payments from the  
               Indian Gaming Revenue Sharing Trust Fund.

          4)Stipulates that the program and the implementation steps  
            necessary to make it operative shall not be undertaken until  
            the Secretary determines that funds of a sufficient amount to  
            create a loan pool and pay program administrative costs have  
            been received into the account.

          5)Requires the Secretary to select a Director to coordinate and  
            manage the program and requires the Director to do the  
            following:

             a)   Provide for the development and implementation of the  
               application review process for the program, including  
               defining the eligibility standards and rating and ranking  





                                                                     SB 358
                                                                     Page 3



               criteria, which shall then be approved by the Council.

             b)   Seek to maximize the ability of applicants to leverage  
               other public and private funding opportunities to the  
               extent the addition of these funds furthers the purposes of  
               the program.

             c)   Routinely seek the advice of the Council on matters  
               related to the management and operation of the program.

             d)   Report annually on the activities of the program to the  
               Secretary.

             e)   Submit to the Governor and the Legislature the results  
               of an audit of the program undertaken by an independent  
               entity no later than January 1, 2011.

          6)Establishes the following eligibility criteria for applicants  
            for a loan or loan guarantee under the program:

             a)   Applicant must be a federally recognized Indian tribe  
               that has or wants to start, acquire, expand, or supply  
               working capital to a non-gaming business on Native American  
               or state lands.

             b)   The maximum loan limit is set at one million dollars  
               ($1,000,000).

             c)   Applicant must provide matching funding in an amount  
               equal to one-half of the loan requested.

             d)   Applicant must be the majority owner of the business  
               during the term of the loan or loan guarantee.

             e)   Applicant must demonstrate that they will have  
               reasonable access to business and management technical  
               assistance during the term of the loan or loan guarantee.

             f)   A qualified Indian tribe shall not be eligible to apply  
               for funds unless any funds previously loaned to the tribe  
               pursuant to this article have been repaid in full.

          7)Requires projects funded by this program to provide for the  
            general welfare of a non-gaming tribe and its members by  
            promoting long-term tribal economic development that creates  
            or retains jobs, provides work skills and business  





                                                                     SB 358
                                                                     Page 4



            development, and training and education for tribe members.

          8)Allows BT&H to contract with one or more corporations to make  
            loans and loan guarantees pursuant to this bill.

          9)Creates the Native American Business Finance Council  
            (Council), consisting of nine members who are appointed by and  
            serve at the pleasure of the Governor, and who are responsible  
            for the final approval of funding subject to the following  
            requirements:

             a)   The Council must include six members of federally  
               recognized Indian tribes in California, three representing  
               tribes from northern California and three representing  
               tribes from southern California.

             b)   The Council must include one member with expertise in  
               each of the following areas: tribal government, business  
               finance, and economic development related to the purposes  
               of the program.

             c)   Prohibits a Council member from voting on the  
               application of his or her own tribe.

             d)   Specifies five members constitute a quorum and a member  
               prohibited from voting on his or her application shall not  
               be included in the quorum count for a particular  
               application.

          FISCAL EFFECT:  Unknown.  This bill is keyed "fiscal" by  
          Legislative Counsel.

          COMMENTS:
          
          1.Purpose.  According to the Sponsor, the  California Tribal  
            Business Alliance  , this measure would boost the opportunities  
            for California Indian tribes to establish a firm economic base  
            for their members' future.  They assert that many tribes have  
            benefited from tribal gaming, but just as many are not  
            geographically located in a market that can sustain a casino  
            operation and those tribes are struggling to develop  
            non-gaming enterprises with funds they receive from the Indian  
            Gaming Revenue Sharing Trust Fund (RST Fund).  The Alliance  
            states that a revolving loan fund would help them maximize  
            their RST Funds and a program to provide expert business  
            advice will help those tribes get sustaining enterprises off  





                                                                     SB 358
                                                                     Page 5



            the ground.

            The Author argues that without access to capital, both Indian  
            tribes and individuals have difficultly breaking cycles of  
            poverty, fostering business activity, and achieving personal  
            and community economic prosperity.  For that reason, it is in  
            the best interests of California to help non-gaming Indian  
            tribes achieve economic independence through the Native  
            American Business Revolving Loan and Guarantee Program.  The  
            Author also suggests that while this measure as a whole  
            creates a mechanism for the Native American Business Revolving  
            Loan and Guarantee Program, the program's implementation  
            remains conditional on the presence of sufficient funds in the  
            account.

          2.Background.  According to an article published by the Harvard  
            Project for American Indian Economic Development, a U.S.  
            Department of Treasury study found that Native Americans lack  
            access to capital and financial services, which is a key  
            barrier to economic advancement.  In that study, 66 percent of  
            Native Americans reported that private equity is difficult or  
            impossible to obtain for Native American business owners.   
            Although the article found that the problem can be attributed  
            to trust-land issues, jurisdictional disputes and cultural  
            misunderstandings, it identified access to capital as an  
            important factor to the lack of economic advancement for  
            Native Americans.   

            According to U.S. Census data, California Indian reservation  
            income growth rates vary dramatically and in 2000, the income  
            inequality between gaming and non-gaming reservations was the  
            largest income gap in the nation.  There was even substantial  
            variation in growth rates among gaming tribes.  Additionally,  
            the data demonstrates the average income for American Indians  
            in California remains well below the national average.  In  
            1990, it was 42 percent of the national average and by 2000,  
            it increased to 53 percent. 

             In certain respects this program is similar to the State of  
             Minnesota Indian Business Loan Program.  The Minnesota Indian  
             Business Loan Program supports the development of  
             Indian-owned and operated businesses and promotes economic  
             opportunities for Native American people in that state.   
             Eligible applicants must be enrolled members of the federally  
             recognized Minnesota-based band or tribe.  Businesses may be  
             located anywhere in the state, although most of the loans are  





                                                                     SB 358
                                                                     Page 6



             made to businesses on a reservation. 

          3.The Business, Transportation and Housing Agency.  The mission  
            of the Secretary for Business, Transportation and Housing is  
            to oversee and coordinate the activities of 13 departments and  
            several important economic development programs and  
            commissions.  These entities seek to improve California's  
            place in the global marketplace by leveraging the state's  
            advantages to promote job and business growth, improving  
            transportation mobility, and increasing affordable housing  
            opportunities while promoting environmental quality and safe  
            communities.  The Secretary manages the following economic  
            development programs:

             California Film Commission (CFC)  is the state's primary  
            liaison between the film production community and all levels  
            of government. The CFC's number one goal is to support  
            California's vital film production industry and to increase  
            the number of film and TV productions by offering support  
            services and providing filmmakers with low cost alternatives  
            when filming in the state.


             California Travel and Tourism Commission  (CTTC) was created in  
            1996 to help increase leisure-travel volume, market share and  
            revenue to California.


             Infrastructure and Economic Development Bank (I-Bank)  is a  
            state financing authority that provides low-cost financing to  
            public agencies, manufacturing companies, nonprofit  
            organizations and other entities eligible for tax-exempt  
            financing. 


             International Trade Promotion  The International Trade Program  
            (ITP) was created in 2006 to establish a mechanism for  
            monitoring international trade activities. The State of  
            California has not had an official international trade  
            capacity since the state Legislature eliminated the  
            Technology, Trade and Commerce Agency and foreign trade  
            offices effective January 1, 2004.


             Office of Military and Aerospace Support (OMAS)  acts as the  
            official liaison to the U.S. Department of Defense and is the  





                                                                     SB 358
                                                                     Page 7



            state's leader on issues involving military base retention,  
            conversion and reuse. OMAS is focused on maintaining  
            California's prominence both as a national military resource  
            and contributor to the state's economy.


             Small Business Loan Guarantee Program  provides guarantees on  
            bank loans to small businesses that would otherwise not be  
            made. A network of 11 Small Business Financial Development  
            Corporations, who are working closely with small business  
            borrowers and local community banks, issues the guarantees on  
            behalf of the state. The guarantees are backed by a trust fund  
            that can be leveraged four times. 


          4.Indian Gaming Revenue Sharing Trust Fund (RST Fund).  In 1999,  
            the state created the RST Fund to provide monetary assistance  
            to non-gaming tribes.  The money generated from the gaming  
            license fees is deposited in the fund and dispersed to  
            non-compact tribes.  By law, payments to non-compact tribes  
            are required to be $1.1 million a year.  Since it was created,  
            the RST Fund has lacked sufficient funds to cover the cost of  
            the payments and other funds have been used to address the  
            shortfall.

          
          5.Previous Legislation.   SB 1200  (Ducheny, 2008) would have  
            established the Native American Business Revolving Loan  
            Program (NABRLP) for the purpose of promoting the long-term  
            economic viability of tribal communities by providing capital  
            to create or retain jobs, offer business development and  
            employment training, and provide general education to tribal  
            members.  The measure was held in the Assembly Appropriations  
            Committee.




          SUPPORT AND OPPOSITION:
          
           Support:  

          California Tribal Business Alliance (Sponsor)
          California Communities United Institute
          Numerous Individuals






                                                                     SB 358
                                                                     Page 8



            Opposition:  

            None on file as of April 6, 2009



          Consultant:Yuliya Zeynalova