BILL NUMBER: AB 901 ENROLLED
BILL TEXT
PASSED THE SENATE SEPTEMBER 1, 2011
PASSED THE ASSEMBLY SEPTEMBER 6, 2011
AMENDED IN SENATE AUGUST 30, 2011
AMENDED IN SENATE AUGUST 15, 2011
AMENDED IN SENATE JULY 13, 2011
AMENDED IN SENATE JUNE 27, 2011
AMENDED IN SENATE JUNE 21, 2011
AMENDED IN ASSEMBLY MAY 27, 2011
AMENDED IN ASSEMBLY MAY 10, 2011
INTRODUCED BY Assembly Member V. Manuel Pérez
FEBRUARY 17, 2011
An act to amend Section 13997.2 of the Government Code, and to
amend Sections 44559.1, 44559.2, and 44559.6 of the Health and Safety
Code, relating to economic development.
LEGISLATIVE COUNSEL'S DIGEST
AB 901, V. Manuel Pérez. Economic development: small business.
(1) Existing law establishes the California Economic Development
Fund in the State Treasury to receive economic development funds and
loan repayment and grant proceeds and authorizes the Secretary of
Business, Transportation and Housing, upon appropriation by the
Legislature, to expend the fund's revenue to provide matching funds
for economic development purposes. Existing law establishes certain
definitions in this regard and defines a financial intermediary and a
community development intermediary to include, among other things,
microenterprise development organizations.
This bill would delete the reference to microenterprise
development organizations in the definitions of financial
intermediary and community development intermediary and would instead
provide that a financial intermediary and a community development
intermediary include microbusiness lenders, as defined.
(2) Existing law establishes the Capital Access Loan Program,
which is administered by the California Pollution Control Financing
Authority, and defines the term "financial institution," for purposes
of that program. The authority is required to include specified
terms in any contract that the authority enters into with a financial
institution participating in the program, as specified. Existing law
requires the authority to submit a report annually to the Governor
and the Legislature that describes the financial condition and the
programmatic results of the Capital Access Loan Program for small
businesses.
This bill would revise the definition of the term "financial
institution" to include a small business financial development
corporation or microbusiness lender that meets standards that shall
be established by the authority and to include depository
institutions, insured credit unions, and community development
financial institutions, as defined pursuant to federal law.
This bill would require that the form contract used by the
authority when contracting with a participating financial institution
include provisions requiring the financial institution to provide
information to the authority on the number of jobs created and the
number of jobs retained relative to loans made by the financial
institution under the program. The bill would also specify, for
purposes of the annual report to the Governor and the Legislature,
that programmatic results include, but are not limited to, the total
number of businesses served, jobs created, jobs retained, the
geographic distribution of the loans, and the breakdown of businesses
served by industry sector, as specified.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 13997.2 of the Government Code is amended to
read:
13997.2. (a) The Legislature finds and declares all of the
following:
(1) California's economic development organizations and
corporations are an integral component of the state job creation
effort because they are a critical link between state economic
development activities and the statewide business community,
providing an excellent opportunity to leverage state resources.
(2) Economic development corporations and organizations provide
broad public benefits to the residents of this state by alleviating
unemployment, encouraging private investment, and diversifying local
economies.
(3) Economic development corporations engage in a wide range of
programs and strategies to attract, retain, and expand businesses,
including marketing the community, small business lending, and other
financial services, a wide range of technical assistance to small
business, preparation of economic data, and business advocacy.
(4) By using public sector resources and powers to reduce the
risks and costs that could prohibit investment, the public sector
often sets the stage for employment-generating investment by the
private sector.
(b) For purposes of this chapter, all of the following definitions
apply:
(1) "Local economic development organization" means a public or
public-private job creation activity recognized by cities and
counties as the lead agency within that city or county for planning
and implementation of job creation involving business expansion,
business retention, and new business development.
(2) "Regional economic development organization" means an
organization comprised of any of the following:
(A) A single county.
(B) More than one county.
(C) A subregion within a county established by the cities and
county within that subregion.
(D) An economic development corporation.
(3) "Economic development corporation" means a local or regional
nonprofit public-private economic development organization recognized
in a defined region by the public and private sector as the lead
agency for the planning and implementation of job creation involving
business retention and new business development.
(4) "Regional economic development corporation" means a
corporation comprised of any of the following:
(A) A single county.
(B) More than one county.
(C) A subregion within a single county established by a group of
cities and counties.
(5) "Economic development" means any activity that enhances the
factors of productive capacity, such as land, labor, capital, and
technology, of a national, state, or local economy. "Economic
development" includes policies and programs expressly directed at
improving the business climate in business finance, marketing,
neighborhood development, small business development, business
retention and expansion, technology transfer, and real estate
redevelopment. "Economic development" is an investment program
designed to leverage private sector capital in such a way as to
induce actions that have a positive effect on the level of business
activity, employment, income distribution, and fiscal solvency of the
community.
(6) "Local economic development" is a process of deliberate
intervention in the normal economic process of a particular locality
to stimulate economic growth of the locality by making it more
attractive, resulting in more jobs, wealth, better quality of life,
and fiscal solvency. Prime examples of economic development include
business attraction, business expansion and retention, and business
creation.
(7) "Emerging domestic market" means people, places, or business
enterprises with growth potential that face capital constraints due
to systemic undervaluations as a result of imperfect market
information. These markets include, but are not limited to,
ethnic-owned and women-owned firms, urban and rural communities,
companies that serve low-income or moderate-income populations, and
other small- and medium-sized businesses.
(8) "Financial intermediary" means an institution, firm,
organization, or individual who performs intermediation between two
or more parties in a financial context, such as connecting sources of
funds with users of funds. A financial intermediary is typically an
entity that facilitates the channeling of funds between lenders,
investors, foundations, or other entities that have money and are
interested in connecting with businesses or communities where their
money can be deployed. Financial intermediaries include, but are not
limited to, banks, financial development corporations, economic
developers, microbusiness lenders, and community development
organizations.
(9) "Community development intermediary" means an institution,
firm, organization, or individual that performs intermediation
between two or more parties in a community development context, such
as connecting people and organizations that have a stake in the
future well-being of communities and individuals who may not easily
have access to these stakeholders. A community development
intermediary is typically an entity that channels financial and
nonfinancial resources between government and foundations and other
nonprofit organizations that have resources and are interested in
connecting with small- and medium-size businesses and low- and
moderate-income households and communities. Community development
intermediaries include, but are not limited to, community development
corporations, microbusiness lenders, and community development
financial institutions.
(10) "Triple bottom line" means the economic, environmental, and
social benefits arising from a project, investment, or community and
economic development activity.
(11) "Small businesses" means a business with less than 100
employees and with a gross revenue of less than five million dollars
($5,000,000), or a business that is otherwise targeted by or
participating in a federal or state program engaged in programs or
services for small businesses. Application of this definition may
only be used pursuant to a direct reference.
(12) "Community development" means a process designed to create
conditions of economic and social prosperity for the whole community,
or a targeted subset of the whole community, with the fullest
possible reliance on the community's initiative and active
participation.
(13) "Financial institution capital" means resources of a
financial institution, including, but not limited to, a bank or
credit union, that are legally available to be used to generate
wealth for the financial institution.
(14) "California Council on Science and Technology" means the
council established by California academic research institutions,
including the University of California, the University of Southern
California, the California Institute of Technology, Stanford
University, and the California State University, in support of
Assembly Concurrent Resolution No. 162 (Res. Ch. 148, Stats. 1988).
(15) "Microbusiness lender" means a nonprofit or nonbank lender
that serves very small businesses in low- and moderate-income
communities that experience barriers in accessing capital. These
businesses are often owned by minorities, immigrants, women, and
persons with disabilities. Microbusiness lenders generally provide
loans under fifty thousand dollars ($50,000) and offer business
technical assistance, both preloan and postloan, to improve an
applicant's ability to qualify and successfully repay a loan.
SEC. 2. 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, all of the following terms have the following meanings:
(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) (A) "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, 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, and a small business
financial development corporation, as defined in Chapter 1
(commencing with Section 14000) of Part 5 of Division 3 of Title 1 of
the Corporations Code, or microbusiness lender, as defined in
Section 13997.2 of the Government Code, that meets standards that
shall be established by the authority. For loans where all or part of
the fees and matching contributions are paid by an entity
participating in the program pursuant to subdivision (e) of Section
44559.2, "financial institution" also includes financial lenders, as
defined in Section 22009 of the Financial Code, making commercial
loans, as defined in Section 22502 of the Financial Code.
(B) A financial institution described in this paragraph shall be
domiciled or have its principal office in the State of California.
(3) "Financial institution" also includes an insured depository
institution, insured credit union, or community development financial
institution, as these terms are defined in Section 4702 of Title 12
of the United States Code.
(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. 3. Section 44559.2 of the Health and Safety Code is amended
to read:
44559.2. (a) The authority may contract with any financial
institution for the purpose of allowing the financial institution to
participate in the Capital Access Loan Program established by this
article.
(b) For purposes of this section, the authority may contract with
participating financial institutions and shall utilize a standard
form of contract that is reviewed and approved by the Department of
General Services. The standard form of contract shall provide for all
of the following:
(1) The creation of a loss reserve account by the authority for
the benefit of the financial institution.
(2) The financial institution, qualified business, and the
authority will deposit moneys to the credit of the institution's loss
reserve account when the financial institution makes a qualified
loan to a qualified business.
(3) The liability of the state and the authority to the financial
institution under the contract is limited to the amount of money
credited to the loss reserve account of the institution.
(4) The financial institution shall provide the information that
the authority may require, including financial information that is
identifiable with, or identifiable from the financial records of a
particular customer who is the recipient of a qualified loan. In
addition to any other information that the authority may require, the
financial institution shall provide the complete North American
Industry Classification System (NAICS) for the qualified business,
the number of jobs created, the number of jobs retained, and
information that provides the precise geographic location of both the
qualified business and the borrower, if different.
(5) The financial institution will file a report with the
executive director setting out a full description of the board of
directors, including size, race, ethnicity, and gender.
(6) The participating financial institution will require each
borrower, prior to receiving a loan under the program, to sign a
written representation to the participating financial institution
that the borrower has no legal, beneficial, or equitable interest in
the nonrefundable premium charges or any other funds credited to the
loss reserve account established by the authority for the
participating financial institution.
(7) Other terms that the authority may require for purposes of
this article.
(c) A financial institution is not subject to laws restricting the
disclosure of financial information when the financial institution
provides information to the authority as required by paragraph (4) of
subdivision (b).
(d) A credit union operating pursuant to a certificate issued
under the California Credit Union Law (Division 5 (commencing with
Section 14000) of the Financial Code) may participate in the Capital
Access Loan Program established pursuant to this article only to the
extent participation is in compliance with the California Credit
Union Law. Nothing in this article shall be construed to limit the
authority of the Commissioner of Financial Institutions to regulate
credit unions subject to the commissioner's jurisdiction under the
California Credit Union Law.
(e) Any individual, company, corporation, institution, utility,
government agency, or other entity, including any consortium of these
persons or entities, whether public or private, may participate in
the Capital Access Loan Program established pursuant to this article
by depositing funds in the California Capital Access Fund under those
terms and conditions as may be deemed appropriate by the authority.
SEC. 4. Section 44559.6 of the Health and Safety Code is amended
to read:
44559.6. The authority shall annually prepare a report to the
Governor and the Legislature that describes the financial condition
and programmatic results of the capital access loan program for small
businesses authorized under this article. Programmatic results shall
include, but not be limited to, the total number of businesses
served, jobs created, jobs retained, the geographic distribution of
the loans, and the breakdown of businesses served by industry sector
for all new loans issued since the report for the prior year.