BILL ANALYSIS Ó
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|Hearing Date:April 25, 2011 |Bill No:SCR |
| |33 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SCR 33Author:Price
As Introduced: April 4, 2011 Fiscal:No
SUBJECT: Foreign investment
SUMMARY: Expresses the sentiment of the Legislature that the EB-5
visa program is beneficial to the state's economic development and
provides important opportunities for foreign direct investment to
California.
Existing law, The Government Code (GC):
1)Specifies that BT&H is the primary state agency authorized to
attract foreign investments, cooperate in international public
infrastructure projects, and support California businesses in
accessing markets, and requires the Secretary to develop an
international trade and investment policy.
2)Sets forth findings and declarations detailing: (1) The importance
of strengthening collaborative linkages among remaining
California-based international trade and investment promotion
programs operated at federal, state, regional and local levels in
light of the repeal of the statutory authority for the Technology,
Trade and Commerce Agency (TTCA) in 2003;
(2) Data from 2000 shows that international trade and investment
activity in the state supports one in every seven jobs; (3) Public
Policy Institute of California (PPIC) data as to the productivity of
export business; (4) California has elements to form the foundation
for a global market-related economy; (5) California's multicultural
and ethnic populations offer unique opportunities for international
trade and investment; (6) High numbers of California workers are
employed by subsidiaries of foreign companies; and, (7) California's
trade and investment policy is a living document that should be
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regularly updated to reflect emerging business trends and the
changing needs of California businesses and workers. (GC § 13996.4)
3)Requires the Secretary to complete a study on the potential roles of
the state in global markets and a strategy for international trade
and investment. (GC §§ 13996.5 and 13996.55)
4)Requires the Secretary to convene a statewide business partnership
for international trade and investment. (GC § 13996.6)
5)Sets forth criteria by which the Secretary can establish
international trade and investment offices and the Controller can
allocate funds for those offices. (GC §§ 13996.65-3996.75)
6)Specifies that the Governor is the primary state officer
representing California's interest in international affairs; the
Lieutenant Governor is the Chair of the California Commission for
Economic Development to improve trade opportunities for California;
the Attorney General assists the federal government in defending
against international challenges to California law; the Secretary
of State oversees the International Business Relations Program which
assists foreign business entities with the various filing processes;
the Department of Food and Agriculture (Food and Ag) is the primary
agency for the promotion of California agriculture, fish and forest
exports and; BT&H is the agency responsible for international trade
and investment activities other than those covered by Food and Ag .
(GC § 99500)
7)Establishes the enterprise zone program, administered by California
Department of Housing and Community Development (HCD) to stimulate
business and industrial growth and create jobs in depressed areas of
the state. (GC § 7071 and § 70702)
8)Defines a "targeted employment area" (TEA) for the purposes of an
enterprise zone, to mean an area within a city, county, or city and
county that is composed solely of those census tracts designated by
the US Department of Housing and Urban Development as having at
least 51% of its residents of low- or moderate-income levels, using
either the most recent U.S. Department of Census data available at
the time of the original enterprise zone application or the most
recent census data available at the time the targeted employment
area is designated to determine that eligibility. Specifies that
the purpose of a TEA is to encourage businesses in an enterprise
zone to hire eligible local residents. A TEA may include, but is
not required to include, all or part of the boundaries of the
enterprise zone. The TEA does not need to encompass all eligible
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areas, but may include only those areas that the local government
determines have residents who are in the most need of this
employment targeting. (GC § 7072 (i))
This resolution:
1) States that the economic downturn has led to higher unemployment in
California, and has limited access to credit and investment for
California businesses.
2) States that greater foreign investment in California would create
jobs and improve the state's economy.
3) States that many foreign investors see California as a desirable
place to invest and reside.
4) Declares that it is in California's economic interest to promote
opportunities for EB-5 visa investment in the state.
COMMENTS:
1. Purpose. The Author is the Sponsor of this measure. SCR 33 touts
the merits of the EB-5 visa program and the critical role that
foreign investment can play in California's economic recovery and
economic viability. Promoting EB-5 investment opportunities in the
state will bring an influx of money to California projects, which
will in turn create job opportunities for thousands of displaced
workers seeking employment.
2. EB-5 Program. The EB-5 visa category, which was created by
Congress in 1990, is available to immigrants seeking to enter the
United States in order to invest in a business or company that will
benefit the economy. This federal program is administered by the
US Citizenship and Immigration Service (USCIS). EB-5 is a federal
program. The name "EB-5" is derived from the fact that it is the
5th category of Employment-Based visa. Permanent-resident status
through an EB-5 visa is available to foreign investors who have
invested - or are actively in the process of investing - at least
$1million into a new commercial enterprise, which can entail: the
creation of an original business; the purchase of an existing
business and restructuring or reorganizing the business to the
extent that a new commercial enterprise results; or a significant
expansion of an existing business.
10,000 EB-5 visas are made available per year by USCIS. Close to
4,300 investors attained EB-5 status in 2009, up from only hundreds
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in 2007.
An applicant seeking status as an immigrant investor must
demonstrate that his or her investment will benefit the U.S.
economy and create full-time employment for at least ten qualified
individuals, or maintain the number of existing employees in a
troubled business. If the investment in a new commercial
enterprise is made in a targeted employment area (TEA), the
required investment is decreased to $500,000. A TEA is either a
high-unemployment area that has experienced an unemployment rate of
at least 150% of the national average rate or a rural area.
In addition to individual investors, the federal government can
also recognize regional centers which allow for a pooling of
investor money. There are at least 31 federally-recognized
regional centers currently operating in California, significantly
more than any other state. These regional centers are based across
the state. Their focuses vary widely, and include commercial real
estate development, agricultural products, film project, and
high-tech ventures.
Applicants to the EB-5 visa program must demonstrate that they meet
all requirements of the program prior to the filing with the USCIS.
If it is determined that the investment criteria is met and
properly documented, any investor may be granted conditional
permanent residence status for a period of two years by USCIS. A
permanent green card may be issued at the end of the conditional
period.
3. California's Role in EB-5. California's formal trade and trade
promotion activities within state government are currently quite
limited. With the demise of the Technology Trade and Commerce
Agency (TTCA) in 2003, numerous trade related programs and services
were eliminated, and the few remaining came under the umbrella of
the BT&H. The former International Investment Division under TTCA
had 91 employees and a budget of $43 million, allowing it to engage
in activities like formal marketing. There is now only a very
small number of former International Investment Division staff
working on trade related issues and activities for the state.
Currently, the Governor's Office of Economic Development (GOED)
serves as a resource to connect those interested in receiving
foreign investment through EB-5 with the necessary state entities
responsible for the identification and designation of TEAs.
According to GOED, in accordance with Title 8, Code of Federal
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Regulations Section 204.6(i), the California Employment Development
Department (EDD) has been delegated the authority by the state to
designate the cities, counties, metropolitan statistical areas, and
geopolitical subdivisions (census tracts) that meet the high
unemployment definition to qualify for the $500,000 minimum
investment threshold as TEAs for EB-5 program purposes.
Unemployment rates for cities, counties and census tracts are
published annually and the state uses the most recent calendar year
labor force and unemployment estimates to establish high
unemployment rates and high unemployment areas.
Upon the request of the applicant or an alternative representative
body, staff at BT&H may determine that a specific metropolitan
statistical area, a county within a metropolitan statistical area,
or a county in which a city or town with a population of 20,000 or
more is located, is a TEA. In order to make such a determination,
the county, city or census tract in question must experience an
average unemployment rate of 150 percent of the national average.
4. EB-5 Success Stories. There are many examples of areas and
developments that have benefitted from foreign investment through
EB-5, most especially as businesses routinely cite access to
capital as a roadblock to successful development of new or growth
of existing ventures. According to a recent article in the
Sacramento Bee, there are now close to15,000 people who work at
McClellan Business Park, a residential and industrial development
at the former McClellan Air Force Base which closed in 2001,
resulting in the loss of some 12,000 jobs in the region. The
transformation was completed with the help of $18 million invested
by 36 immigrants from China, Mexico and an array of other countries
who have applied for EB5 visas.
Nationally, the state of Vermont is home to one of the largest
success stories from EB-5 investment. The New York Times and
National Public Radio (NPR) both reported extensively on a ski
resort that was able to expand from seasonal winter recreation to
being a year-round resort after raising nearly $200 million dollars
from foreign investors (South Africa, Sweden, Canada, Mexico and
England). The entire state of Vermont is now recognized as a
regional center called the Vermont Agency of Community Development
which focuses on bringing foreign investment to the tourism,
manufacturing, professional services, education and information
publishing industries in the state. The state formally markets and
promotes the availability of EB-5 status to gain foreign investment
and is a model for state involvement in securing this type of
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money. On its Website, Vermont publicizes a swift approval process
for projects, state oversight of projects and activities to assure
compliance with U.S. Immigration Law, and hands-on involvement by
Vermont elected officials, including the Governor and Congressional
delegation.
5. Related Legislation. AB 1558 (Assembly Committee on Jobs, 2009)
aimed to recodify and reorganize sections of the Government Code to
create one comprehensive code for the state's international trade
activities and programs. The measure was amended to deal with
reorganization of the state's economic development programs. This
measure was held in the Senate Committee on Appropriations in 2010.
SB 1513 (Romero, Chapter 663, Statutes of 2006) Provides new
authority for BT&H to undertake international trade and investment
activities, and as a condition of that new authority, directs the
development of a comprehensive international trade and investment
policy for California.
SUPPORT AND OPPOSITION:
Support: None on file as of April 20, 2011
Opposition: None on file as of April 20, 2011
Consultant:Sarah Mason/Chris Belsky