BILL NUMBER: AB 981	AMENDED
	BILL TEXT

	AMENDED IN SENATE  SEPTEMBER 2, 2011

INTRODUCED BY   Assembly Member Hueso

                        FEBRUARY 18, 2011

   An act to amend Sections 44559.1, 44559.3, and 44559.4 of the
Health and Safety Code, relating to the Capital Access Loan Program.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 981, as amended, Hueso. California Pollution Control Financing
Authority: Capital Access Loan Program.
   (1) Existing law establishes the Capital Access Loan Program for
small businesses, administered by the California Pollution Control
Financing Authority (authority), which provides loans through
participating financial institutions to qualifying small businesses.
   This bill would expand the definition of financial institution for
purposes of the program to include depository institutions, insured
credit unions, and community development financial institutions, as
defined pursuant to federal law.
   (2) Existing law requires the authority to create a loss reserve
account for each financial institution in order to provide protection
against loss. The loss reserve account for a financial institution
consists of moneys paid as fees by borrowers and the financial
institution, moneys transferred to the account from a small business
assistance fund, matching federal moneys, and other moneys provided
by the authority or other source. The authority is authorized to
withdraw from the loss reserve account all interest or other income
that has been credited to the loss reserve account, to be used for
the sole purpose of offsetting costs associated with carrying out the
program, including administrative costs and loss reserve account
contributions.
   This bill would also authorize the authority to withdraw a portion
of the interest or other income that has been credited to the loss
reserve account.
   (3) Existing law requires the authority, if matching funds are not
available, to transfer to the loss reserve account an amount that is
not less than the amount of the fees paid by the participating
financial institution. If the qualified business is located within a
severely affected community, as defined, the authority is required to
transfer to the loss reserve account an amount equal to 150% of the
amount of the fees paid by the participating financial institution.
   This bill would instead require the authority to contribute an
amount not less than 150% of the amount of the fees paid by the
participating financial institution, if the qualified business is
located within a severely affected community. 
   (4) This bill would incorporate additional changes in Section
44559.1 of the Health and Safety Code proposed by AB 901, to be
operative only if AB 901 and this bill are both chaptered and become
effective on or before January 1, 2012, and this bill is chaptered
last. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  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, and 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. 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. 1.5.    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,  and  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. 
   (3) 
    (B)  A financial institution described in  this
 paragraph  (2)  shall be domiciled or have its
principal office in the State of California. 
   (C) "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. 2.  Section 44559.3 of the Health and Safety Code is amended
to read:
   44559.3.  (a)  The authority shall establish a loss reserve
account for each financial institution with which the authority makes
a contract.
   (b) The loss reserve account for a financial institution shall
consist of moneys paid as fees by borrowers and the financial
institution, moneys transferred to the account from a small business
assistance fund, any matching federal moneys, and any other moneys
provided by the authority or other source.
   (c) Notwithstanding any other law, the authority may establish and
maintain loss reserve accounts with any financial institution under
any policies the authority may adopt.
   (d) All moneys in a loss reserve account established pursuant to
this article are the exclusive property of, and solely controlled by,
the authority. Interest or income earned on moneys credited to the
loss reserve account shall be deemed to be part of the loss reserve
account. The authority may withdraw from the loss reserve account
all, or a portion of, the interest or other income that has been
credited to the loss reserve account. Any withdrawal made pursuant to
this subdivision may be made prior to paying any claim and shall be
used for the sole purpose of offsetting costs associated with
carrying out the program, including administrative costs and loss
reserve account contributions.
   (e) The combined amount to be deposited by the participating
financial institution into any individual loss reserve account over a
three-year period, in connection with any single borrower or any
group of borrowers among which a common enterprise exists, shall be
not more than one hundred thousand dollars ($100,000).
  SEC. 3.  Section 44559.4 of the Health and Safety Code is amended
to read:
   44559.4.  (a) If a financial institution that is participating in
the Capital Access Loan Program established pursuant to this article
decides to enroll a qualified loan under the program in order to
obtain the protection against loss provided by its loss reserve
account, it shall notify the authority in writing on a form
prescribed by the authority, within 10 days after the date on which
the loan is made, of all of the following:
   (1) The disbursement of the loan.
   (2) The dollar amount of the loan enrolled.
   (3) The interest rate applicable to, and the term of, the loan.
   (4) The amount of the agreed upon premium.
   (b) The financial institution may make a qualified loan to be
enrolled under the program to an individual, or to a partnership or
trust wholly owned or controlled by an individual, for the purpose of
financing property that will be leased to a qualified business that
is wholly owned by that individual. In that case, the property shall
be treated as meeting the requirements of paragraph (1) of
subdivision (g) of Section 44559.1.
   (c) When making a qualified loan that will be enrolled under the
program, the participating financial institution shall require the
qualified business to which the loan is made to pay a fee of not less
than 2 percent of the principal amount of the loan, but not more
than 31/2 percent of the principal amount. The financial institution
shall also pay a fee in an amount equal to the fee paid by the
borrower. The financial institution shall deliver the fees collected
under this subdivision to the authority for deposit in the loss
reserve account for the institution. The financial institution may
recover from the borrower the cost of its payments to the loss
reserve account through the financing of the loan, upon the agreement
of the financial institution and the borrower. The financial
institution may cover the cost of borrower payments to the loan loss
reserve account.
   (d) When depositing fees collected under subdivision (c) to the
credit of the loss reserve account for a participating financial
institution, the authority shall do the following:
   (1) If no matching funds are available under a federal capital
access program or other source, the authority shall transfer to the
loss reserve account an amount that is not less than the amount of
the fees paid by the participating financial institution. However, if
the qualified business is located within a severely affected
community, the authority shall transfer to the loss reserve account
an amount not less than 150 percent of the amount of the fees paid by
the participating financial institution.
   (2) If matching funds are available under a federal capital access
program or other source, the authority shall transfer, on an
immediate or deferred basis, to the loss reserve account the amount
required by that federal program or other source. However, the total
amount deposited into the loss reserve account shall not be less than
the amount which would have been deposited in the absence of
matching funds.
   SEC. 4.    Section 1.5 of this bill incorporates
amendments to Section 44559.1 of the Health and Safety Code proposed
by both this bill and Assembly Bill 901. It shall only become
operative if (1) both bills are enacted and become effective on or
before January 1, 2012, (2) each bill amends Section 44559.1 of the
Health and Safety Code, and (3) this bill is enacted after Assembly
Bill 901, in which case Section 1 of this bill shall not become
operative.