BILL ANALYSIS Ó
SENATE BANKING & FINANCIAL INSTITUTIONS COMMITTEE
Senator Juan Vargas, Chair
SB 1508 (Lowenthal) Hearing Date: April 11, 2012
As Introduced: February 24, 2012
Fiscal: Yes
Urgency: No
SUMMARY Would add the California Infrastructure and Economic
Development Bank (the I-Bank) to the list of banks eligible to
receive deposits of state money from the State Treasurer.
EXISTING LAW
1. Authorizes the State Treasurer to select one or more
financial institutions for the safekeeping of money
belonging to or in the custody of the state, and defines an
eligible bank for purposes of receiving this money as a
state or national bank located in California, which has
received an overall rating of not less than satisfactory in
its most Community Reinvestment Act examination (Government
Code Section 16500).
2. Provides for the Bergeson-Peace Infrastructure and Economic
Development Bank Act (Government Code Section 63000 et
seq.), as described below.
COMMENTS
1. Purpose: According to the author's office, SB 1508 is
intended "to provide more resources to the I-Bank, in order
to promote economic growth and revitalization of California
communities." The bill arose out of a concern by the author
that recent court decisions regarding redevelopment will
hinder the creation of new funding for economic development,
and out of a recognition that the state's current fiscal
challenges hinder the diversion of existing state resources
to economic development. SB 1508 is intended to provide an
alternative source of funding for economic development,
which does not re-direct existing funding from other
programs.
SB 1508 (Lowenthal), Page 2
2. Background and Discussion: The I-Bank was created in 1994
to promote economic revitalization, enable future state and
local development, and encourage a healthy jobs climate in
California. The I-Bank has broad authority to issue
tax-exempt and taxable revenue bonds, provide financing to
public agencies, and provide credit enhancements. The
entity is self-supporting, and pays its cost of operations
from service fees and interest earnings on loans and
investments. To date, the I-Bank has financed approximately
$32 billion in projects conducted by its various
stakeholders. The I-Bank is housed within the Business,
Transportation, and Housing Agency and administered by a
five-member board of directors, consisting of the Director
of Finance or his/her designee, the Treasurer or his/her
designee, the Secretary of the Business, Transportation, and
Housing Agency or his/her designee (who serves as Chair of
the Board), the Secretary of the State and Consumer Services
Agency or his/her designee, and an appointee of the
Governor.
At present, the I-Bank offers five programs, as follows:
a. Infrastructure State Revolving Fund Program, which
provides direct, long-term, low-cost loans for local
government public infrastructure to cities, counties,
special districts, and joint powers authorities;
b. Industrial Development Bond Program, which provides
conduit tax-exempt and taxable bond financing for private
business expansion to qualified small manufacturing and
processing businesses;
c. Exempt Facility Bond Program, which provides conduit
tax-exempt and taxable bond financing for private
businesses that serve the general public;
d. 501(c)(3) Revenue Bond Program, which provides
conduit tax-exempt and taxable bond financing for
federally-approved, tax-exempt entities;
e. Public Agency Revenue Bond Program, which provides
conduit tax-exempt and taxable bond financing to expand
unique programs of specific state and local governmental
agencies.
3. Summary of Arguments in Support: None received.
SB 1508 (Lowenthal), Page 3
4. Summary of Arguments in Opposition: The California Bankers
Association (CBA) is opposed to the bill, on the basis that
SB 1508 "diminishes the imprimatur" of eligible bank status
by unconditionally granting that status to the I-Bank. CBA
observes that every other bank must achieve a satisfactory
Community Reinvestment Act grade, before it is deemed an
"eligible bank" under the statute. In contrast, the I-Bank
will not have to demonstrate that it is meeting the credit
needs of the community, nor will it have to make its
community reinvestment spending public, as do banks subject
to the Community Reinvestment Act. CBA is also concerned
that SB 1508 does not establish a business plan for how
state deposits into the I-Bank will be used.
5. Prior and Related Legislation:
a. AB 2523 (Hueso), 2011-12 Legislative Session: Would
authorize the I-Bank to enter into participation loan
agreements, as defined, with financial institutions that
have loans outstanding to small businesses, and would
require the I-Bank to summarize its participation loan
agreement activities in its annual report.
Double-referred to the Assembly Jobs, Economic
Development, and the Economy Committee and the Assembly
Banking and Finance Committee. Pending in the Assembly
Jobs, Economic Development and the Economy Committee.
b. AB 2500 (Hueso), 2011-12 Legislative Session: Would
establish the California Investment Trust within state
government, for the purpose of increasing access to
capital for businesses and farms within the state and
providing stability to the local financial sector. Would
require all state money, as defined, to be deposited into
the California Investment Trust. Pending in the Assembly
Banking and Finance Committee.
LIST OF REGISTERED SUPPORT/OPPOSITION
Support
None received
Opposition
California Bankers Association
SB 1508 (Lowenthal), Page 4
Consultant: Eileen Newhall (916) 651-4102