BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1128|
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UNFINISHED BUSINESS
Bill No: SB 1128
Author: Padilla (D), et al.
Amended: 8/24/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 4/11/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, Kehoe, La Malfa, Liu
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 12-0, 4/24/12
AYES: Padilla, Fuller, Berryhill, Corbett, De León,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Simitian,
Wright
NO VOTE RECORDED: Strickland
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SENATE FLOOR : 38-0, 5/30/12
AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon,
Cannella, Corbett, Correa, De León, DeSaulnier, Dutton,
Emmerson, Evans, Fuller, Gaines, Hancock, Harman,
Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio,
Simitian, Steinberg, Vargas, Walters, Wolk, Wright,
Wyland, Yee
NO VOTE RECORDED: Runner, Strickland
ASSEMBLY FLOOR : Not available
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SUBJECT : Energy: alternative energy financing
SOURCE : Author
DIGEST : This bill expands until July 1, 2016, the sales
and use tax exemption under the California Alternative
Energy and Advanced Transportation Financing Authority
(CAEATFA )program to include "advanced manufacturing," as
specified.
Assembly Amendments (1) require the Governor's Office of
Business and Economic Development to consult with the
Legislative Analyst's Office (LAO), among others, to review
and identify efficient and cost-effective methods for the
state to create jobs in advanced manufacturing, and submit
a report to the Legislature by January 1, 2017; (2) remove
the existing $1 billion cap imposed on the total amount of
outstanding debt that CAEATFA is authorized to incur; and
(3) authorize CAEATFA to refinance bonds, notes or other
evidence of indebtedness of any public agency, as provided;
and (4) make other clarifying and technical changes.
ANALYSIS : Existing law creates CAEATFA for the purpose
of promoting the development and utilization of alternative
energy sources and the development and commercialization of
advanced transportation technologies and authorizes up to
$1 billion in revenue or prepayment bonds to fund projects.
Existing law authorizes CAEATFA to utilize a
sale/lease-back mechanism with manufacturers which results
in a sales and use tax exemption on tangible personal
property utilized for the design, manufacture, production,
or assembly of advanced transportation technologies or
alternative energy source products, components or systems
projects, must meet the "net benefits test" by showing that
the new project will create jobs in the state. The sales
and use tax exemption sunsets on January 1, 2021.
This bill expands temporarily the sales and use tax (SUT)
exemption under the California Alternative Energy and
Advance Transportation Financing Authority (CAEATFA)
program by revising the definition of "project" to include
"advanced manufacturing processes," as specified, and makes
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technical clarifying changes to other provisions related to
the program.
This bill:
1. Requires the Governor's Office of Business and Economic
Development to consult with the LAO, among others, to
review and identify efficient and cost-effective methods
for the state to create jobs in advanced manufacturing,
and submit a report to the Legislature by January 1,
2017.
2. Authorizes CAEATFA, until July 1, 2016, to grant
financial assistance to eligible projects that promote
the utilization of "advanced manufacturing processes,"
as defined, therefore, expanding the sales and use tax
exemption under the CAEATFA program.
3. Defines "advanced manufacturing processes" as
manufacturing that improve existing, or create entirely
new, materials, products, and process through the use of
science, engineering, or information technologies,
high-precision tools and methods, a high-performance
workforce, and innovative business or organization
models in utilizing any of the following technology
areas: micro- and nano-electronics, including
semiconductors, advanced materials, integrated
computational materials engineering, nanotechnology,
additive manufacturing, or industrial biotechnology.
4. Specifies that the phrase "advanced manufacturing"
includes certain systems and technologies that:
A. Result from substantive advancement, beyond the current
industry standards, in the production of materials and
products (for example, 'smart' or 'intelligent'
manufacturing systems, which integrate computational
predictability and operational efficiency); or,
B. Are sustainable manufacturing systems and manufacturing
technologies that minimize the use of resources while
maintaining or improving cost and performance.
5. Provides that "sustainable manufacturing systems and
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manufacturing technologies" do not include those
required to be undertaken pursuant to state or federal
law or regulations, air district rules or regulations,
memoranda of understanding with a governmental entity,
or legally binding agreements or documents. Requires
the Air Resources Board (ARB) to advise CAEATFA to
ensure that these requirements are met.
6. Modifies the definition of "advanced transportation
technologies" to do all of the following:
A. Eliminate outdated references to specified
technologies;
B. Specify that eligible technologies do not
include those projects that are required to be
undertaken pursuant to state or federal law or
regulations, air district rules or regulations, or
memoranda of understanding with a governmental
entity, or legally binding agreements or documents;
and,
C. Require the ARB to advise CAEATFA regarding
projects that are excluded, as specified.
7. Narrows the definition of "financial assistance" by
clarifying that insurance and guarantees are limited to
credit enhancements - bond insurance and loan guarantees
- and do not include other forms of insurance or
guarantees.
8. Specifies that only those applicants that qualify for
financial assistance under Public Resources Code Section
26011.8 are eligible for the sales and use tax exemption
provided for in Revenue and Taxation Code Section
6010.8..
9. States that the total amount of the sales and use tax
exemptions granted for projects approved by CAEATFA in
each calendar year may not exceed $100 million.
10.Clarifies CAEATFA's rulemaking authority and its
authority to delegate its powers and duties to the State
Treasurer's designee.
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11.Requires CAEATFA to do all of the following:
A. Study the efficacy and cost benefit of the sales
and use tax exemption as it relates to advanced
manufacturing projects. The study must include the
number of jobs created, the costs of each job, and
the annual salary of each job and must consider a
dynamic analysis of the economic output to the
state that would occur without the exclusion.
B. Submit to the Legislature, prior to January 1,
2017, a report outlining the results of the study.
C. Work, before January 1, 2014, and within six
months of any significant change to the net
benefits test, with the University of California or
the California State University, to perform a peer
review of the net benefit test currently used to
evaluate applicants applying for the program.
D. Submit to the Legislature, prior to January 1,
2015, an interim report on the efficacy of the
program. The study must include recommendations on
program changes that would increase the program's
efficacy in creating permanent and temporary jobs,
and whether eligibility for the program should be
extended or narrowed to other manufacturing types.
Authorizes CAEATFA to work with the LAO in
preparing the report and its recommendations.
12.Revises provisions relating to conduit bond financing to
conform to current law and business practices.
13.Removes the existing $1 billion cap imposed on the total
amount of outstanding debt that CAEATFA is authorized to
incur.
14.Authorizes CAEATFA to refinance bonds, notes or other
evidence of indebtedness of any public agency, as
provided.
15.Specifies that, if CAEATFA refunds bonds or evidences of
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indebtedness not originally issued by the CAEATFA, it
shall make findings stating that the project being
refinanced qualifies as a "project" under the program.
16.Recast and restructure the existing provisions relating
to the Property Assessed Clean Energy and Clean Energy
Financing Program and makes corresponding clarifying
changes.
17.Repeals obsolete provisions relating to several programs
that have never been implemented nor funded.
18.Makes several technical non-substantive changes.
Background
CAEATFA was created in 1980 with an authorization of $200
million in revenue bonds to finance projects utilizing
alternative sources of energy, such as cogeneration, wind
and geothermal power. It was renamed in 1994 as the CAEATFA
and its charge expanded to include the financing of
"advanced transportation" technologies.
During the energy crisis of 2001, its authority was again
expanded, this time to provide financial assistance to
public power entities, independent generators, and others
for new and renewable energy sources, and to develop clean
distributed generation. CAEATFA's board, composed of the
State Treasurer, State Controller, Director of the
Department of Finance, Chairperson of the Energy Commission
and President of the Public Utilities Commission, decides
which projects to assist.
SB 71 (Padilla), Chapter 10, Statutes of 2010, expands its
authority which allows CAEATFA to grant a sales and use tax
exemption to an eligible firm that purchases property
necessary to design, produce, manufacture, or assemble
advanced transportation technologies or alternative energy
source products, components, or systems. Selected firms
purchase equipment without paying the sales and use tax
that is normally apply, lowering their cost of capital.
Neither CAEATFA nor the state is a creditor to the selected
firm in any way under the SB 71 program. Instead, CAEATFA
calculates whether the exemption will yield a net
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environmental and economic benefit for the state. Thus
far, CAEATFA has approved $104 million to 33 firms that
applied for the SB 71 benefit, of which 33 firms have
monetized $31.6 million in exemptions. Some of the firms
have purchased the property and deployed it in the
manufacturing process, while others have won the award, but
not yet purchased the equipment.
To date, CAEATFA has approved financial assistance for
private entities in the following fields: electric vehicle
manufacturing, solar photovoltaic manufacturing, landfill
gas capture and production, biogas capture and production
(dairies and waste water treatment plants), demonstration
hydrogen fuel production, electric vehicle battery
manufacturing, biomass processing and fuel production, and
others.
Comments
California prospered for decades on its ability to
research, develop and manufacture products for national and
international markets. Manufacturing led California's
economic strength in the 20th century, pushing the Golden
State to rank among the top eight global economies.
Manufacturing provides employment for millions of
Californians.
However, California's manufacturing sector has declined.
Other states and nations invested in their manufacturing
sectors and created policies to attract and retain
business. At the turn of the 21st century it was cost
effective and easier for manufacturers to invest outside
California and overseas.
Last summer, President Obama launched the Advanced
Manufacturing Program, to "invest in the emerging
technologies that will create high quality manufacturing
jobs". The program directed the U.S. Departments of
Commerce and Energy to invest more than $500 million to
expand manufacturing capabilities, expedite the production
of advanced materials, promote energy and resource
efficiency and provide high wage jobs. The Advanced
Manufacturing Program offers new opportunities for
California to draw down federal dollars, attract new
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investment, and employ our workforce. States such as
Massachusetts, Michigan and Georgia are creating
collaborative centers between industry and government to
attract advanced manufactures and draw down the federal
dollars. California must act to remain competitive.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Assembly Appropriations Committee, this
bill will result in uncertain, potential losses to the
General Fund beginning in 2013-14 through 2015-16, due to
increase loss of sales tax. However, there could be
offsetting savings because of the bill's imposition of a
hard cap of $100 million for the exemption program. In
addition, it is estimated that, as the result of this
bill's enactment, the state will incur several hundred
thousand dollars of costs, to be paid by a loan from the
General Fund for the development of emergency regulations
and reporting costs. These costs may eventually be
recovered through fees on applicants to the program,
depending on the level of program participation.
SUPPORT : (Verified 8/28/12)
Applied Materials
BayBio
Bloom Energy
Boehringer-Ingelheim, Inc.
California Business Roundtable
California Healthcare Institute
California State Association of Electrical Workers
California State Pipe Trades Council
CALSTART
Medtronic
Mohr Davidow
Pharmaceutical Research and Manufacturers of America
Simbol Materials
State Building and Construction Trades Council
TechNet
The Boeing Company
Valley Industry and Commerce Association
Western States Council of Sheet Metal Workers
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AGB:d 8/28/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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