BILL ANALYSIS Ó
SCR 33
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Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Pérez, Chair
SCR 33 (Price) - As Introduced: April 4, 2011
SENATE VOTE : 33-1
SUBJECT : Foreign investment
SUMMARY : Expresses the sentiment of the Legislature that it is
in California's economic interest to promote opportunities for
EB-5 visa investments in the state. Among other key findings,
the Legislative intent states the following:
1)That the economic downturn has led to higher unemployment in
California and has limited access to credit and investment for
California businesses.
2)That greater foreign investment would create jobs and improve
the state's economy.
3)That many foreign investors see California as a desirable
place to invest and reside.
EXISTING LAW specifies that the Business, Transportation and
Housing Agency (BTH) is the primary state agency authorized to
attract foreign investments, cooperate in international public
infrastructure projects, support California businesses in
accessing markets, and requires the Secretary to develop an
international trade and investment strategy (ITI Strategy).
FISCAL EFFECT : None
COMMENTS :
1)Purpose : According to the author, "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.
"California's formal trade and trade promotion activities
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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
BTH. 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."
2)EB-5 Investment Program : The EB-5 investment program is
administered by the U.S. Citizenship and Immigration Service
(USCIS) pursuant to the federal Immigration Act of 1990. The
name "EB-5" is derived from the fact that it is the fifth
category of employment-based visa.
Under the program, permanent-resident status 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.
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. For investors who choose
to invest in economically targeted employment areas (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.
Based on 2010 state figures and a high unemployment rate
defined as 14.4% or greater, 56 cities, 13 counties, 21 rural
areas, and 11 metropolitan statistical areas in California
have been identified as eligible TEA. Some states, such as
South Dakota, have specific programs that target foreign
investment by those who are looking to apply for visas under
the investment provisions.
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In addition to individual investors, the federal government
can also recognize regional centers which allows 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 projects, and high-tech ventures.
Among other requirements, applicants of the EB-5 visa program
must demonstrate that they meet all requirements of the
program prior to 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.
Ten thousand EB-5 investment visas are authorized for issuance
each year to potential immigrants that make new investments in
the U.S. Historically, the annual allocation of 10,000 EB-5
visas is not fully utilized, although usage is growing. In
2009, close to 4,300 investors obtained EB-5 visas as compared
to only hundreds in 2007.
3)Export promotion also drives high foreign investment : In
January 2010, the President announced a national goal of
doubling U.S. exports within five years, setting a 2015 target
for U.S. exports of $3.14 trillion. In accomplishing this
goal, the federal government will be proposing new programs,
targeting existing trade-related activities, and increasing
funding and technical assistance within current programs.
The National Export Initiative (NEI), the mechanism by which
the federal government manages activities and funds related to
increasing U.S. exports, has identified eight priority areas,
including the following:
o Increasing exports among small- and medium-sized
enterprises including support for trade promotion and
export financing;
o Creating more opportunities for U.S. sellers to meet
with foreign buyers, especially in the area of green
technologies; and
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o Increasing the number of U.S. trade missions abroad and
those coming to the U.S., as well as improving
coordination with state government trade offices and
national trade associations.
Since the announcement of the new national goal at the start
of 2010, exports from California were up $20 billion over
2009. As the second largest exporter of products in the U.S.
and the largest receiver of foreign direct investment in the
nation, this federal goal could result in significant new
economic opportunities for California. Further, in opening
new markets to our domestic products, foreign investors will
also be reminded of the economic investment opportunities in
the U.S. Policy makers may want to advance the policy
objective of SCR 33 to increase foreign investment through an
active EB-5 investment program in conjunction with the state's
activities to promote export development.
1)EB-5 Success Stories : According to information provided by
the author, 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 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
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availability of EB-5 status to gain foreign investment and is
a model for state involvement in securing this type of 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.
2)The state's trade and foreign investment strategy :
California's international trade and foreign investment
activities are required to be directed through the development
and implementation of the ITI Strategy. Prepared every five
years, the ITI Strategy is based on current state and regional
economic research and a public vetting with the Legislature to
ensure the inclusion of jointly agreed upon goals and
measurable objectives. The current ITI Strategy was
finalized in August 2008, and the next strategy is due in
August 2013.
Taking as industry sector approach, the ITI Strategy is based
on the state's core and emerging industries. By emphasizing
the development of deeper relationships within core and
emerging industry sectors and their trade associations, the
strategy better aligns with other economic development
activities at the local and federal levels, increasing the
impact of state activities and investments.
Dominant industry clusters include :
a) Professional business and information services
b) Diversified manufacturing
c) Wholesale trade and transportation
d) High-tech manufacturing
Emerging industry clusters include :
a) Life science and services
b) Value-added supply chain, manufacturing and logistics
c) Cleantech and renewable energy
d) Nanotechnology
Many of the industry sectors noted above are expanding
rapidly around the globe. While California may have been
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historically dominant in many of these innovation-based
industries, California businesses today are finding
competition from other states, as well as from other
nations. Keeping California competitive means maintaining
capital flows to all sizes of businesses. The EB-5
investment program could strengthen the state's ongoing
need for new capital to fuel job creation.
3)California's trade economy : International trade is a very
important component of California's $1.9 trillion economy. If
California were a country, it would be the 11th largest
exporter in the world. Exports from California accounted for
over 11% of total U.S. exports in goods, shipping to over 226
foreign destinations in 2010.
California's land, sea, and air ports of entry serve as key
international commercial gateways for products entering the
country. California exported $143 billion in goods in 2010
(up from $120 billion in 2009), ranking second only to Texas
with $163 billion in export goods. Computers and electronic
products were California's top exports in 2010, accounting for
30.1% of all state exports, or $43 billion.
--------------------------------------------------------
| 2010 Exports From California to the World |
--------------------------------------------------------
|-----------------------+-----------------+---------------|
| Product | Value ($) |Percent |
|-----------------------+-----------------+---------------|
|334 Computers & | 43,075,351,414| 30.1 % |
|Electronic Prod. | | |
|-----------------------+-----------------+---------------|
|333 Machinery (except | 14,486,638,626| 10.1 % |
|electrical) | | |
|-----------------------+-----------------+---------------|
|336 Transportation | 12,957,683,521| 9 % |
|Equipment | | |
|-----------------------+-----------------+---------------|
|325 Chemical | 11,590,683,001 | 8.1 % |
|Manufactures | | |
|-----------------------+-----------------+---------------|
|339 Misc. Manufactures | 11,502,854,621 | 8 % |
|-----------------------+-----------------+---------------|
|111 Agricultural | 9,353,709,931 | 6.5 % |
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|Products | | |
|-----------------------+-----------------+---------------|
|All Others | 40,301,943,159 | 28.1 % |
|-----------------------+-----------------+---------------|
|Total | 143,268,864,273 | 100 |
| | |% |
| | | |
---------------------------------------------------------
Manufacturing is California's most export-intensive activity.
Overall, manufacturing exports represent 9.4% of California's
gross domestic product. More than one-fifth (21.9%) of all
manufacturing workers in California directly depend on exports
for their jobs.
Small- and medium-sized firms generated more than two-fifths
(43%) of California's total exports of merchandise. This
represents the seventh highest percentage among states and is
well above the 29% national average export share for these
firms.
Mexico is California's top trading partner, receiving $21
billion (15%) in goods in 2010. The state's second and third
largest trading partners are Canada and China with $16.1
billion (11%) and $12.4 billion (8.6%), respectively. Other
top-ranking export destinations include Japan, South Korea,
Taiwan, the United Kingdom, Hong Kong, Germany, and Singapore.
Relative to last year, the value of California products
exported to other counties increased significantly in 2010
($143 billion v. $120 billion). In California's highest
export category, computer and electronic products, exports in
2010 almost reached their 2006 high ($43 billion v. $44.3
billion).
4)State's diverse population as a trade advantage : California's
diverse population provides the state with a key trade and
foreign investment advantage over other states and nations.
Due to strong past in-migration from other nations, more than
one-in-four of California's current residents (9.5 million
people) were born outside the U.S., compared to just over
one-in-ten nationally. About half of foreign-born
Californians are from Latin America, and another third from
Asia. Net foreign in-migration currently totals approximately
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200,000 persons annually, representing nearly 40% of
California's annual population growth. For many immigrant
groups, California represents the single largest gathering of
their brethren outside their native lands.
The first ITI Study found that California's economic and
social diversity uniquely positioned the state as a preferred
partner for certain regions around the world. Regionally, 36%
of the population in Los Angeles is foreign born, as is 27% of
the Bay Area. It is estimated that 40% of the entrepreneurs in
the Silicon Valley are foreign born. New globally-based
models for innovation and technology have brought great
changes in the function of world economies, and California's
dominance as a center of innovation is being challenged. The
newly emerging economies of China, India, and Singapore, among
others, have been and are committed to continuing massive
investments in research and development to become leaders in
innovation and not merely "copycat" economies.
While these dynamics pose challenges to current leading
technology centers, they also offer California new
opportunities for collaboration and cooperation. The state's
diversity could be a crucial advantage to successful global
collaboration and foreign investment attraction. The state is
already engaged in academic and research partnerships with
China, Canada, and Iceland on renewable energy and other
technologies. The University of California at San Diego has a
multi-year manufacturing initiative with Mexico supporting
economic growth on both sides of the border. These types of
partnership efforts, however, have not yet been brought
forward into a broader economic development framework and are
too often treated as one-off initiatives. Enormous potential
exists in research, development, and product manufacturing by
capitalizing on cross border initiatives if California can
successfully transition to the new and more highly connected
economic world of the 21st Century.
5)Current session related legislation: Below is a list of
related legislation from the current session:
a) AB 1137 (V. Manuel Pérez) - Trade Promotion and Export
Finance : This bill makes a number of changes to programs
designed to assist local communities and businesses,
enhance the local business climate, and create jobs by
increasing foreign trade and investment including providing
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authorizing the establishment of the California Trade
Promotion and Export Finance Program, codifying the state's
role in the EB-5 Program, and making technical corrections
to the international free trade zone program. Status:
Pending in the Senate Appropriations Committee.
b) AB 1409 (JEDE) - Goods Movement Update to the State
Economic Strategy : This bill requires that the next update
of the international trade and investment strategy include
policy goals, objectives and recommendations from the state
Goods Movement Action Plan (GMAP), as well as related
measurable outcomes and timelines. Status: Pending in the
Senate Appropriations Committee.
c) AB 1410 (JEDE Committee) - Trade Omnibus Bill : This
bill makes technical, non-substantive amendments to the
codes relating to international trade and foreign
investment. Specifically, this bill reorganizes the
statutory placement of the Office of California-Mexico
Affairs and the California-Mexico Border Relations Council
from a general title within state government to a more
specific title on foreign relations within the Government
Code. Status: Pending on the Senate Floor.
d) SB 460 (Price) - International trade and Marketing
Promotion : This bill requires the Secretary of the
Business, Transportation and Housing Agency (BTH) to
convene a statewide business partnership for international
trade marketing and promotion. Status: This bill is
pending in the Assembly Committee on Jobs, Economic
Development and the Economy.
6)Related legislation from prior sessions : Below is a list of
related legislation, some of which are discussed earlier in
the analysis.
a) AB 3021 (Nuñez) - California-Mexico Border Relations
Council : This bill established the six-member
California-Mexico Border Relations Council (Border Council)
comprised of all Agency Secretaries and the Director of the
Office of Emergency Services for the purpose of
coordinating activities of state agencies. The Border
Council is required to report to the Legislature on its
activities annually. Status: Signed by the Governor -
Chapter 621, Statutes of 2006.
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b) AJR 14 (Jeffries) - Customs Duties : This resolution
memorialized the President of the U.S. and Congress to
enact legislation to ensure that a substantial increment of
new revenues derived from customs duties and importation
fees be dedicated to mitigating the economic, mobility,
security, and environmental impacts of trade in California
and other trade-affected states across the U.S. Status:
Approved by both Houses, Resolution Chapter 73, Statutes of
2007.
c) AJR 27 (Torrico) - Support U.S.-Colombia Trade Promotion
Agreement : This resolution memorialized Congress that the
California Legislature opposes the United States-Colombia
Trade Promotion Agreement. Status: Approved by both
Houses, Resolution Chapter 145, Statutes of 2010.
d) AJR 55 (Villines) - Support U.S.-Colombia Trade
Promotion Agreement : This resolution would have
memorialized Congress that the California Legislature
supports the United States-Colombia Trade Promotion
Agreement. Status: Refused adoption in the Assembly
Committee on Jobs, Economic Development, and the Economy in
2008.
e) SB 1513 (Romero) - New International Trade Program :
Final Compromise - California International Trade and
Investment Act. This bill provided new authority for the
BTH 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. This bill
reflects extended bi-partisan discussions between the
Senate and the Assembly. Status: Signed by the Governor -
Chapter 663, Statutes of 2006.
REGISTERED SUPPORT / OPPOSITION :
Support
None known
Opposition
None known
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Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090