BILL ANALYSIS Ó
AB 1545
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Date of Hearing: April 17, 2012
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Pérez, Chair
AB 1545 (V. Manuel Pérez) - As Introduced: January 25, 2012
SUBJECT : Bi-National Development Bank
SUMMARY : Expands the role of the California Infrastructure and
Economic Development Bank (I-Bank) to include facilitating
infrastructure and economic development financing activities within
the California and Mexico border region. Specifically, this bill :
1)Expresses legislative intent stating, among other things, that:
a) The lack of economic development along the border region with
Mexico has caused economic challenges to the state and that the
existence of an economic development authority that can address
these challenges serves a public purpose.
b) That a fundamental purpose of the I-Bank should be to use its
authority to facilitate private sector investment.
c) There is a need for the federal government to re-capitalize
the North American Development Bank (NAD) Bank in order to be a
more effective financing partner within the border region.
2)Authorizes the I-Bank to facilitate and finance infrastructure and
economic development projects within the border region. The
"border region" is defined as the area within 120 miles on each
side of the California-Mexico border, including areas along the
north-south and east-west transportation networks on both sides of
the border.
3)Expands the definition of a "participating party" for the purpose
of financing a project to include international entities.
4)Expands and clarifies the types of goods movement related
infrastructure necessary to more competitively place California and
the border region within existing and future supply chains.
5)Prohibits the use of General Fund moneys from being used to
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implement this measure. This is consistent with all I-Bank
programs. Each program and activity is exclusively capitalized
through the I-Bank.
EXISTING LAW :
1)Creates the I-Bank within Business, Transportation and Housing
Agency (BTH), to promote economic revitalization, enable future
development, and encourage a healthy climate for jobs in
California.
2)Authorizes the I-Bank to contract for engineering, architectural,
accounting, or other services that are necessary for the successful
development of a project.
3)Authorizes the I-Bank to acquire, take title to, and sell lands,
structures, real or personal property rights, rights-of-way,
franchises, easements, and other interests in lands that are
located within the state as the bank may deem necessary or
convenient for the financing of the project.
4)Authorizes the I-Bank to receive subventions, grants, loans,
advances, and contributions from any source of money, property,
labor, or other things of value. The sources may include bond
proceeds, dedicated taxes, federal appropriations, federal grant
and loan funds and public and private sector retirement system
funds.
5)Authorizes the I-Bank to make loans to any sponsor or participating
party, either directly or by making a loan to a lending
institution, in connection with the financing of a project, as
specified.
6)Defines "project" to mean the designing, acquiring, planning,
permitting, entitling, constructing, improving, extending,
restoring, financing, and generally developing public development
facilities or economic development facilities within the state.
FISCAL EFFECT : Unknown
COMMENTS :
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1)Author's purpose : According to the author, "With Mexico being
California's largest trading partner, the two economies are highly
integrated with a substantial dependence on cross-border trade.
One barrier to the expansion of trade and bi-national commerce is
the deficit in border infrastructure, which has not kept pace with
increases in trade and transit since ratification of the North
American Free Trade Agreement. The long-term success of the
bi-national region is dependent on attracting more private sector
investment. Attracting private capital, however, will require
innovative financing structures and a commitment to the border's
economic success, which the I-Bank is qualified to undertake."
2)Oversight hearings : The Assembly Jobs, Economic Development and
the Economy (JEDE) Committee held two oversight hearings examining
the relationship between infrastructure and the state's economic
recovery. The first hearing, March 2011, examined how the I-Bank
could be better utilized as a tool for statewide economic
development. The second hearing, November 2011, took a more
focused look at the Imperial and Coachella Valleys and how
infrastructure, trade and business development affected the
economic prosperity of the border region. One of the key findings
from these hearings related to the importance of modern logistical
networks in linking rural border manufacturers and businesses to a
global supply chain and consumer base. Financing these
infrastructure linkages was reported to be challenging and that
there was need for a quality facilitator to help put infrastructure
financing packages together. AB 1545 was developed in response to
testimony and research from these hearings.
3)Goods movement infrastructure : Goods movement supports employment,
business profit, and state and local tax revenue. California
businesses rely heavily on the state's air/sea ports and their
related transportation systems to move manufactured goods. Firms
rely on fast, flexible, and reliable shipping to link national and
global supply chains and bring products to the retail market.
Transportation breakdowns and congestion can idle entire global
production networks. As a result, the capacity and efficiency of
seaports, airports, and multimodal linkages have become critical
factors in global trade.
Changes in U.S. and global trade patterns in the past 20 years have
placed increased challenges on California's goods movement system.
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Between 1970 and 2002, for example, imports from Asia (as a share
of U.S. trade) increased from 8% to 40%, thereby increasing the
flow of imports through California's gateways. Over the same
period, U.S. trade shifted toward lighter goods, which are more
likely to be shipped by air. While the state may have limited
ability to affect these larger patterns, there are actions that the
state can take to help California's global gateways keep pace with
the growing demand for shipping services.
4)Coping with congested ports : For California, expanded supply
chains for manufacturing and product distribution have resulted in
congested seaports, where cargo ships are often delayed for
extended periods of time waiting to unload. Truck access is often
cited for the delays. At international airports, truck access is
also a problem, and expansion of major airports is severely limited
by urbanization, ground access, air quality impacts, and local
opposition.
California's land-based border crossing with Mexico is particularly
congested and inhibits trade and commerce within the region and its
access to global markets. There are six land crossings referred to
as Points of Entry (POEs). The San Diego County-Tijuana/Tecate
region is home to the San Ysidro-Puerta México, the Otay Mesa-Mesa
de Otay, and the Tecate-Tecate POEs while the Imperial
County-Mexicali region hosts the Calexico-Mexicali, Calexico
East-Mexicali II, and Andrade-Los Algodones POEs.
U.S. firms with significant business passing through the three
Imperial Valley POEs report that their logistics-supply chain is
highly time sensitive. Long wait times at border crossings result
in delays in receiving intermediary goods and ultimately lead to
problems in the manufacturing chain. Long wait times between
Mexico and the U.S. along the Imperial County - Baja California
border accounted for an estimated output loss of $1.4 billion and
11,600 lost jobs nationally in 2007. In California losses were
estimated at $436 million and 5,639 jobs.
5)Bi-National economic development and migration : Outward migration
from Mexico to the U.S. has historically been a complex and
controversial issue. For a select group of workers in Mexico,
coming to California appears as a good economic choice for them and
their families given the sometimes limited alternatives where they
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live. While migration from Mexico has benefitted many economic
sectors in California, the issue of immigration has consistently
been on the state's public policy agenda.
One often overlooked and under-funded element to this discussion is
bi-national economic development policies which can help to
re-balance the drivers of immigration. The "maquiladoras," a
by-product of NAFTA, are manufacturing and assembly facilities
located in Northern Mexico, including Mexicali. With cross border
supply chains, these facilities have become important players
within extended and sometimes global supply chains.
The North American Development Bank, another entity created through
the enactment of North American Free Trade Agreement (NAFTA),
provides project financing and construction oversight for projects
initiated through the U.S. Environmental Protection Agency's
U.S.-Mexico Border Water Infrastructure Program. The program
serves communities within 62 miles, north and south, of the border.
By providing cleaner water and improved infrastructure, the
quality of life is improved and jobs are created on both sides of
the border. AB 1545 proposes the recapitalization of the NAD Bank
and to expand the activities of the I-Bank to serve as a catalyst
for improving infrastructure within the border region.
6)Infrastructure: A major challenge to California's competitiveness :
World class infrastructure plays a key role in business
attraction, as multinational companies consistently rank the
quality of infrastructure among their top four criteria in making
investment decisions. Research shows that as U.S. infrastructure
has been in decline, infrastructure in other countries is rapidly
increasing. The 2010-11 Global Competitiveness Report by the World
Economic Forum places U.S. infrastructure 23rd in the world, a drop
from its rank of 7th in 2000.
California's infrastructure is in a similar state, according to the
American Society of Civil Engineers, California Infrastructure
Report Card 2012, with an estimated $65 billion a year investment
gap. The impact of this lack of investment is compounded by the
substantial new investments made in other states and nations,
including the expansion of the Panama Canal. With the logistics
sector alone employing over 73,000 workers, failing to remain
competitive will impact California jobs.
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Institutional investors have responded to the U.S.'s infrastructure
shortfall and the lack of sufficient public finance opportunities
by adopting new investment mandates to privately finance public
infrastructure. As an example, in the fall of 2011, the California
Public Employees' Retirement System (CalPERS) Board of
Administration approved a motion that would allow up to $800
million to be invested in California infrastructure over the next
three years. Both public and private infrastructure facilities are
eligible, including, but not limited to, transportation, energy,
natural resources, utilities, water, communications and other
social support services.
Currently, CalPERS has $203 million invested in a combination of
physical infrastructure investments and infrastructure-targeted
private equity funds around the state. CalPERS has also provided
credit enhancement to more than $326 million in infrastructure
bonds.
Successfully deploying private capital for public infrastructure
can, however, be challenging. Large investors such as CalPERS can
deploy capital anywhere in the world. AB 1545 proposes to have the
I-Bank use its expertise in infrastructure finance to facilitate
private sector-ready infrastructure along the border region.
7)Background on I-Bank : The I-Bank was established in 1994 to
promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. Housed within
BTH, it is governed by a five-member board of directors comprised
of the BTH Secretary (chair), State Treasurer, Director of the
Department of Finance, Secretary of the State and Consumer Services
Agency, and a Governor's appointee. The I-Bank does not receive
any ongoing General Fund support, rather it is financed through
fees, interest income and other revenues derived from its financing
activities.
The I-Bank administers two categories of programs: 1) The
Infrastructure State Revolving Fund (ISRF) which provides direct
low-cost financing to public agencies for a variety of public
infrastructure projects; and 2) Bond Financed Programs which
provide financing for manufacturing companies, nonprofit
organizations, public agencies and other eligible entities. There
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is no commitment of I-Bank or state funds for any of the category
#2 conduit revenue bonds. Even in the case of default, the state
is not liable.
Since its inception, the I-Bank has loaned over $400 million to
local agencies, developing a high-level of expertise in the
financing of public infrastructure. The I-Bank also serves as the
state's only general purpose financing authority with broad
statutory powers to issue revenue bonds. Over $30 billion in
conduit revenue bonds have been issued by the I-Bank since 2000.
8)Reorganization of the I-Bank : On March 30, 2012, the Governor
submitted a reorganization plan to the Little Hoover Commission,
which proposes to dismantle BTH and move programs to other existing
and new government entities. The I-Bank is proposed to be
relocated to the Governor's Office of Business and Economic
Development (GO-Biz), along with the Small Business Loan Guarantee
Program; The California Travel and Tourism Commission; The
California Film Commission; and the Film California First Program.
The Secretary of BTH is replaced by the Director of GO-Biz as Chair
of I-Bank. The newly established Secretary of Transportation
replaces the Secretary of State and Consumer Services on the I-Bank
board.
The Little Hoover Commission has 30 days to analyze the
reorganization plan and submit its recommendations to the Governor
and Legislature. The Legislature then has 60 days to consider the
plan. The plan goes into effect unless the Legislature takes an
action to disapprove the plan with a majority of the Members in
each house voting.
A repositioned I-Bank within GO-Biz offers a range of cost
effective and innovative options for advancing the state's economic
position. AB 1545 is one of several bills being heard by JEDE in
April 2012 that leverage existing programs and resources.
9)Related legislation : Below is a list of related bills.
a) AB 696 (Hueso) - Economic Development Mandate for
Infrastructure Projects : This bill would have required projects
selected for funding under the Infrastructure State Revolving
Fund Program, administered through the California Infrastructure
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and Economic Development Bank, to only be funded if the project
meets specified land use and economic development criteria.
Status: The bill was vetoed by the Governor in 2011.
b) AB 893 (V. Manuel Pérez) - Technical Assistance for
Infrastructure Development : This bill would have authorized the
California Infrastructure and Economic Development Bank to
provide technical assistance outreach to small and rural
communities, and adding new reporting requirements to the
appropriate fiscal and policy committees of the Legislature.
Status: The bill was held on Suspense File of the Senate
Committee on Appropriations in 2011.
c) SB 822 (Evans) - Five-Year Infrastructure Plan : Existing law
requires the Governor, in conjunction with the Governor's
Budget, to submit annually to the Legislature a proposed 5-year
infrastructure plan containing specified information concerning
infrastructure needed by state agencies, public schools, and
public postsecondary educational institutions and a proposal for
funding the needed infrastructure. This bill makes technical,
nonsubstantive changes to this provision. Status: The bill is
pending in the Assembly Committee on Budget.
d) SB 907 (Evans) - 20-Year Infrastructure Master Plan : This
bill establishes an 11-member Master Plan for Infrastructure
Financing and Development Commission. The Commission is
required to submit to the Governor and Legislature, by December
1, 2013, a long-term plan and strategy for the state's
infrastructure needs and a prioritized plan to meet those needs.
The Commission is also required to submit periodic progress
reports. Status: Pending in JEDE.
REGISTERED SUPPORT / OPPOSITION :
Support
Assembly Committee on Jobs, Economic Development and the Economy
(sponsor)
California Association for Micro Enterprise Opportunity
Calexico County Enterprise Zone
City of Imperial
Coachella Valley Economic Partnership
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County of Imperial
Opposition
None Received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090