BILL ANALYSIS Ó
AB 250
Page 1
Date of Hearing: April 9, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 250 (Holden) - As Amended: March 4, 2013
SUBJECT : California Innovation Hub Program
SUMMARY : Codifies and expands the California Innovation Hub (iHub)
Program at the Governor's Office of Business and Economic Development
(GO-Biz) for the purpose of stimulating economic development and job
creation through the coordination of federal, state and local
innovation-supporting resources. Specifically, this bill :
1)Expresses legislative intent stating, among other things, that:
a) Innovation- and tech-driven business start-ups, supported by
venture investments, create new employment opportunities and are
important to California's economic competitiveness and should be
supported.
b) IHubs are operated through a cooperative agreement between the
Governor's Office of Business and Economic Development (GO-Biz)
and 12 geographically distinct regions for the purpose of the
success of entrepreneurial and small technology start-ups that
can grow California's economy.
2)Establishes the California Innovation Hub Program within GO-Biz for
the purpose of stimulating economic development and job creation by
providing an innovation platform for startup businesses, economic
development organizations, business groups, and venture capitalists.
GO-Biz will oversee, coordinate, and provide assistance to each
iHub in the program.
3)Defines "Applicant" as meaning a fully accredited institution of
higher education, a private nonprofit corporation engaged in
economic activities, a county or municipality in this state that has
a preexisting economic development program, or an economic
development institution.
AB 250
Page 2
4)Defines "iHub" as meaning a network of interrelated firms and
industries that collectively drive economic growth within a defined
geographic area.
5)Establishes proposal criteria for applicants to the California
Innovation Hub Program. This criteria includes:
a) A statement of purpose, business plan, and list of goals and
expectations for job development and business creation.
b) A statement of cooperation listing each entity involved with
the partnership and a description of their role.
c) Designation of an iHub coordinator.
d) An explanation of the geographic boundaries of the proposed
iHub.
6)Requires designated iHubs to include:
a) At least one major university or research center or institute.
b) At least one economic development organization.
c) At least four of the following:
i) A business support organization, including workforce
development or training organizations, incubators or business
accelerators, a chamber of commerce, and networking
organizations that supports innovation;
ii) An educational consortium that includes technology
transfer representatives;
AB 250
Page 3
iii) A venture capital network including angel investors;
iv) A business foundation, science foundation, laboratory
research institution, federal laboratory, or research and
development facility;
v) A municipal economic division or department; and/or
vi) A federal government partner such as a national
laboratory.
7)Prior to designation as an official iHub, the iHub is required to
certify that it will comply with state nondiscrimination laws, and
requires the iHub and its principals to be current in payment of all
state and local taxes owed, barring an agreement, and full
compliance with the agreement, with the respective taxing agency.
8)Specifies that iHubs may, among other things:
a) Provide counseling and technical assistance in business
planning, management, financing, and marketing;
b) Provide advice on starting a business and accessing financing
opportunities;
c) Conduct business workshops, seminars, and conferences with
local partners; and
d) Facilitate partnerships between start-ups and research
institutions with venture capitalists and financial institutions.
9)Requires the iHubs, to the extent feasible, to:
AB 250
Page 4
a) Work in close collaboration with the activities of GO-Biz as
its primary statewide partner; and
b) Coordinate activities with the Employment Training Panel, the
California Workforce Investment Board, the Office of the
Chancellor of California Community Colleges, the University of
California, the California State University, and other state
economic and workforce development programs.
10)Authorizes GO-Biz, with the approval of the Department of General
Services, to use unused or underused state owned or leased property
for the purpose of, and not limited to, assisting iHubs, nonprofits,
and businesses establish proof of concept centers, incubators, and
demonstration sites. Further, the bill:
a) Requires a formal agreement be entered into between GO-Biz and
the nonprofit organization or business prior to the commencement
of the demonstration program; and
b) Specifies the content of the demonstration agreement,
including, but not limited to, indemnification of the state
against any liability or damages arising from the demonstration;
cancelation of the project for falsified or the withholding
material information; insurance to cover possible damage or cost
to the state; certification that the demonstration project meets
applicable regulations and that it can be safely demonstrated.
c) Authorizes state property to be used as matching funds to meet
federal funding requirements, as specified.
11)Establishes the iHub Accelerator Fund for all moneys collected from
gifts, bequests, and donations to the California iHub Program.
These moneys are to be continuously appropriated.
EXISTING LAW establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic strategy and
marketing of California on issues relating to business development,
private sector investment and economic growth. GO-Biz also serves as
AB 250
Page 5
the administrative oversight for the California Business Investment
Service and the Office of the Small Business Advocate.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "Job creation through
rapid technology commercialization is a vital part of the state's
economic well-being, as identified in a January 2012 symposium held
by the Brookings Institute. AB 250 will serve as a catalyst to
creating a network of intellectual and business development assets
that can facilitate technology commercialization by establishing the
Innovation Hub program into law and authorizing access to private
sector capital for its operations. iHubs are built around the triple
helix model of economic development: each iHub is operated by local
consortiums comprised of government entities, community colleges and
universities, and industry. With the addition of venture capital
networks, the inputs necessary for the development of an innovation
ecosystem are present.
Orange County's iHub, known as OCtane, has stimulated regional
business through programs such as LaunchPad which accelerates
entrepreneurs and start-ups through a comprehensive program that
quickly identifies and connects innovators and capital. LaunchPad
provides critical, individualized, and value-added support to early
stage biomedical, technology and cleantech companies. Its business
support prepares young companies for capital introductions, and has
relationships with local, regional, and national venture capitalists
and investors. As a result 23 companies have received more than $70
million in capital. Over 500 companies have inquired into LaunchPad.
These start-up companies have created more than 400 jobs in Orange
County."
2)Office of Business and Economic Development : In April 2010, the
Governor's Office of Economic Development was established to provide
a One-Stop-Shop for serving the needs of businesses and economic
developers. While initially established through Executive Order
S-01-10, the office was later codified and renamed as the Governor's
Office of Business and Economic Development (GO-Biz), in AB 29,
Chapter 475, Statues of 2010. In 2012, GO-Biz directly assisted
5,308 companies, resulting in the creation and/or retention of 9,050
jobs and $1.45 billion in investments.
Among other programs, GO-Biz provides permit assistance for new and
AB 250
Page 6
expanding businesses, as well as administering the iHUB program in
partnership with the statewide network of economic development
partners including the Small Business Development Centers. There
are currently 12 regional iHUBs located throughout the state. The
iHub Program is designed to improve the state's national and global
competitiveness by stimulating partnerships, economic development,
and job creation around specific research clusters. Key assets and
partners of the initiative include technology incubators, research
parks, universities, federal laboratories, economic development
organizations, business groups, and venture capitalists.
GO-Biz is also sponsoring a permit streamlining pilot project, which
will offer a One-Stop-Shop for state and local permits. The pilot,
launched in partnership with the City and County of San Francisco,
will allow a business owner to login to a single Web site (24x7) and
apply for and pay all necessary city, county and state permits.
In 2012, the Governor initiated, and the Legislature allowed to move
forward, a comprehensive reorganization of the state's
administrative structure. Key changes included the dismantling of
the Business, Transportation and Housing Agency (BTH) and further
consolidating GO-Biz' position as the state's lead in economic
development. Effective July 1, 2013, GO-Biz will have
administrative authority for more economic development related
programs and services including the Small Business Loan Guarantee
Program and the Infrastructure and Economic Development Bank.
AB 250 codifies an existing program at GO-Biz and expands the
authority for GO-Biz to implement a process for the private sector
to apply for and gain access to state owned property and facilities
as part of a proof of concept center or project demonstration site.
The committee may want to consider whether the importance of
innovation within the California economy warrants the establishment
of an Office of Innovation at GO-Biz, which would house these two
new programs. Similar offices have been statutorily created for the
small businesses and international trade.
3)Drivers in California's Future Economy : For decades, California has
been known as a place where innovation and creativity flourishes. A
2007 study on California's global competitiveness identified eight
key dominant and emerging industry clusters including high-tech
manufacturing, biotech and clean technologies. While the report
found that the state was uniquely positioned to be a preferred
global partner in the areas of innovation, science, and technology,
the study also stated that California was facing significant
AB 250
Page 7
challenges from a growing talent pool in other countries and the
global redistribution of manufacturing abroad.
While the global recession may have slowed down growth, the newly
emerging economies of China, India, and Singapore have already made
significant investments in research and development. Emerging
economies around the world have strived to become leaders in
innovation and not merely "copycat" economies of the United States.
As one Massachusetts Institute of Technology report states, "It is
not out of the question that they may soon be able to 'leapfrog'
developed centers of innovation with new innovations of their own."
While these dynamics pose challenges to current leading technology
centers, they also offer California new opportunities for
collaboration and cooperation. The state is already engaged in
academic and research partnerships with 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.
AB 250 proposes to take the state's commitment to another level by
formally codifying the state's iHub Program and directly engaging
with the business and nonprofit community in the testing and
demonstration of new products, services and processes.
4)Case Study of Government as a Partner in Demonstrating New
Technologies : In June 2008, the City of San Jose (City) adopted a
framework for engaging in and evaluating public/private technology
partnerships for the purpose of testing and demonstrating innovative
products, services and processes. According to the City's website,
these demonstration partnerships advance the community's goals
related to obtaining a more robust and green economy, as well as
making its ongoing operations more cost effective: "Through these
partnerships, we hope to create new markets and new jobs or/and
support existing local innovators; advance the City's Green Vision
and Economic Development Strategy; and educate the public about
innovative solutions."
Under the demonstration partnership agreements, the City allows
businesses to temporarily utilize City owned land, facilities,
equipment, rights-of-way and data in order to test innovative
solutions at-scale. In some instances, the City provides financial
assistance and/or absorbs some costs for project implementation.
Another key program element is the ability for the business to
request exemption from City policies.
AB 250
Page 8
Examples of the types of projects which the City has approved
include street lighting, electrical charging stations and a range of
energy efficiency pilots and demonstration projects. According to
the City's demonstration program manager, the program has resulted
in mutual benefits to both the companies who are able to demonstrate
the efficacy of their technologies and the City. During the past
few years, the manager reported that the City gained a better
understanding of how technologies can be used to manage its
operational costs, lower carbon emissions through its everyday
activities, and more accurately gauge return on public investment.
One of the City's first demonstration projects provided for the
installation of a Colomb electrical charging station across from
City Hall. From this first station, installed in 2009, the company
currently has stations in over 14 countries. This demonstration
project also helped facilitate other key demonstration funding from
the federal Department of Energy (approximately $34 million) and the
California Energy Commission ($4 million) to help with the final
installation of the equipment.
Other local governments in the Bay Area have adopted demonstration
ordinances including the Town of Los Gatos, the County of Santa
Clara and the City of Livermore. AB 250 would authorize a similar
state program for helping businesses and nonprofit organizations
test and otherwise demonstrate innovative products, solutions and
processes at scale.
5)Technology Commercialization Programs : California faces competition
from other countries and states. While previously the state was the
clear leader in global innovation and technology, the past decade
has seen other regions make significant strides that can now support
technology based industries. As an example, China and Germany have
both surpassed California as the leaders in equity capital for
solar. Below are two examples of programs from other states
designed to support a vibrant and continually innovating business
sector:
a) The Utah Technology Commercialization & Innovation Program :
The purpose of the Technology Commercialization & Innovation
Program (TCIP) is to accelerate the commercialization of
promising technologies that have strategic value for Utah. The
end goal of the TCIP Program is to help drive economic
development and job creation. The program is a state funded
grant program initially adopted by the Utah Legislature in 1986
and focuses on accelerating the process of taking
AB 250
Page 9
university-developed cutting-edge technologies to market.
b) The Massachusetts START Program : In March 2012, the
Massachusetts Technology- Development Corporation announced the
launch of a $6 million initiative to help startups commercialize
technologies developed under federal Small Business Innovation
Research grants. As designed, the START program will provide
financial support, as well as coaching, business planning, and
introductions to potential investors.
6)Programmatic Issues : AB 250 proposes the establishment of the iHub
Program in order to facilitate an "innovation platform for startup
businesses, economic development organizations, business groups, and
venture capitalists. The author may wish consider the following
amendments in order to further this purpose.
a) Joint applications : The program is designed to encourage
collaborative efforts among regions and the application requires
a listing of all partners. The current definition of applicant,
however, allows only a single entity to apply. Perhaps the
eligible applicant definition should be expanded to allow for
joint applications.
b) Definition of iHubs : The current definition of an iHub only
includes private sector firms and industries. Other areas of the
bill include academic institutions, economic development
organizations, and local governments. Perhaps the definition
should be expanded to include these other partners.
c) Term of the designation : The bill has not set a term for the
designation of an iHub. With the nature of innovation being
change, it may be appropriate to set a set term and also provide
for a mechanism for the de-designation of an iHub.
d) Overlapping iHubs : With the ability of iHubs to focus on one
or more particular industries or technologies, it may be
appropriate to have a mechanism for recognizing more than one
iHub in a region to the extent that their industry focus is
different.
e) Measuring success : The bill clearly requires the setting of
measureable goals, however, there is no mention on the reporting
of those goals and outcomes to GO-Biz. Since GO-Biz will, in
part, be evaluated on the iHubs individual progress, having clear
statutory direction may help them access that information.
AB 250
Page 10
f) Small Business Technical Assistance : As designed, GO-Biz's
role is to facilitate regional collaboration around specific
tech-based activities. The measure includes several key
stakeholder, but not two of the most significant technical
assistance providers for small businesses, the Small Business
Development Centers and the microenterprise development
organizations.
7)Related legislation : This bill is substantially similar to the
provisions in AB 653 (V. Manuel Pérez) California Innovation and
Jobs Act. According to the authors' staff, the two offices are
working collaboratively to codify the program. AB 653, which is
sponsored by the California Hispanic Chambers of Commerce, provides
additional provisions (described below) that are designed to promote
California's innovation-based economy. The following is a list of
bills related to this measure from the prior sessions.
a) AB 29 (John A. Pérez) Codification of GO-Biz: This bill
established GO-Biz within the Governor's Office for the purpose
of serving as the lead entity for economic strategy and marketing
of California on issues relating to business development, private
sector investment and economic growth. Status: Signed by the
Governor, Chapter 475, Statutes of 2011.
b) AB 653 (V. Manuel Pérez) California Innovation and Jobs Act :
This bill requires significant regulation to be reviewed the
Joint Rules Committee of the Legislature, codifies the iHub
program, increases the state research and development tax credit,
and establishes a new tax credit for businesses that contribute
to a postsecondary educational institution for curriculum or
research leading to job opportunities. Status: Pending in
Assembly Rules Committee.
c) AB 1646 (Campos) California Demonstration Program : This bill
would have established the California Demonstration of Emerging
Market Opportunities Program for the purpose of supporting the
testing of innovative products, services and processes that have
been developed by private for-profit and non-profit entities.
Status: Held in the Senate Committee on Appropriations in 2012.
d) AB 2506 (V. Manuel Pérez) Innovation and Job Creation Act :
This bill would have authorized a comprehensive set of
enhancements to tax incentive programs and administrative
procedures including a manufacturing sales tax exemption,
AB 250
Page 11
increased R&D credits and secondary education donation credits
for the purpose of creating jobs and supporting innovation-based
businesses. Status: Held in Assembly Committee on Business,
Professions and Consumer Protection in 2012.
e) AB 2711 (Portantino, Arambula, Price and Salas) State
Technology and Innovation Strategy : This bill would have required
the Secretary of the Business, Transportation and Housing Agency
to develop a comprehensive state technology and innovation
strategy to guide future state expenditures and activities.
Status: Held in Assembly Committee on Appropriations in 2008.
REGISTERED SUPPORT / OPPOSITION :
Support
California Healthcare Institute
San Gabriel Valley Economic Partnership
San Diego iHub
BIOCOM
CleanTECH San Diego
CONNECT
San Diego Regional Economic Corporation
Opposition
None Received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090