BILL ANALYSIS Ó
AB 311
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Date of Hearing: April 9, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 311 (V. Manuel Pérez) - As Introduced: February 12, 2013
SUBJECT : Bi-National Development Bank
SUMMARY : Expands the role of the California Infrastructure and
Economic Development Bank (I-Bank) to include facilitating
infrastructure and economic development financing activities within
the California and Mexico border region. Specifically, this bill :
1)Expresses legislative intent stating, among other things, that:
a) The lack of economic development along the border region with
Mexico has caused economic challenges to the state and that the
existence of an economic development authority that can address
these challenges serves a public purpose.
b) That a fundamental purpose of the I-Bank should be to use its
authority to facilitate private sector investment.
c) There is a need for the federal government to re-capitalize
the North American Development Bank (NAD Bank) in order to be a
more effective financing partner within the border region.
2)Authorizes the I-Bank to facilitate and finance infrastructure and
economic development projects within the border region. The "border
region" is defined as the area within 125 miles on each side of the
California-Mexico border, including areas along the north-south and
east-west transportation networks on both sides of the border.
3)Expands the definition of a "participating party" for the purpose of
financing a project to include international entities.
4)Expands and clarifies the types of goods movement related
infrastructure necessary to more competitively place California and
the border region within existing and future supply chains.
5)Prohibits the use of General Fund moneys from being used to
implement this measure. This is consistent with all I-Bank
programs. Each program and activity is exclusively capitalized
through the I-Bank.
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EXISTING LAW :
1)Creates the I-Bank within Business, Transportation and Housing
Agency (BTH), to promote economic revitalization, enable future
development, and encourage a healthy climate for jobs in California.
2)Authorizes the I-Bank to contract for engineering, architectural,
accounting, or other services that are necessary for the successful
development of a project.
3)Authorizes the I-Bank to receive subventions, grants, loans,
advances, and contributions from any source of money, property,
labor, or other things of value. The sources may include bond
proceeds, dedicated taxes, federal appropriations, federal grant and
loan funds, and public and private sector retirement system funds.
4)Defines "project" to mean the designing, acquiring, planning,
permitting, entitling, constructing, improving, extending,
restoring, financing, and generally developing public development
facilities or economic development facilities within the state.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "With Mexico being
California's largest trading partner, the two economies are highly
integrated with a substantial dependence on cross-border trade. One
barrier to the expansion of trade and bi-national commerce is the
deficit in border infrastructure, which has not kept pace with
increases in trade and transit since ratification of the North
American Free Trade Agreement (NAFTA). The long-term success of the
bi-national region is dependent on attracting more private sector
investment. Attracting private capital, however, will require
innovative financing structures and a commitment to the border's
economic success, which the I-Bank is qualified to undertake."
2)Oversight Hearings : The Assembly Committee on Jobs, Economic
Development and the Economy (JEDE) held three oversight hearings
examining the relationship between infrastructure and the state's
economic recovery. The first hearing, March 2011, examined how the
I-Bank could be better utilized as a tool for statewide economic
development. The second and third hearing, November 2011 and 2012,
took a more focused look at how infrastructure, trade, and business
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development affected the economic prosperity of the border region.
One of the key findings from these hearings related to the
importance of modern logistical networks in linking rural border
manufacturers and businesses to a global supply chain and consumer
base. Examples of the high priority border infrastructure projects
included the strategic development, upgrade, and expansion of air
and land port of entry facilities, as well as the continued
development of the region's geothermal, solar, and biomass capacity.
Financing these infrastructure linkages was reported to be
challenging and that there was need for a quality facilitator to
help put infrastructure financing packages together. AB 311 was
developed in response to testimony and research from these hearings.
3)Goods Movement Infrastructure : Goods movement supports employment,
business profit, and state and local tax revenue. California
businesses rely heavily on the state's ports and their related
transportation systems to move manufactured goods. Firms rely on
fast, flexible, and reliable shipping to link national and global
supply chains and bring products to the retail market.
Transportation breakdowns and congestion can idle entire global
production networks. As a result, the capacity and efficiency of
land ports, seaports, and airports have become critical factors in
global trade.
Changes in U.S. and global trade patterns since the enactment of
NAFTA have placed increased challenges on California's goods
movement system. For California's border region, the increased
tourism, as well as the expanded supply chains for manufacturing and
product distribution have resulted in significant delays at border
crossings, decreased regional air quality, and border crossings that
are difficult to secure.
U.S. firms with significant business passing through the Imperial
and San Diego County port of entry report that their
logistics-supply chains are highly time sensitive. Long wait times
at border crossings result in delays in receiving intermediary goods
and ultimately lead to problems in the manufacturing chain. Long
wait times (as high as three to four hours) between Mexico and the
U.S. along the Imperial County - Baja California border accounted
for an estimated output loss of $1.4 billion and 11,600 lost jobs
nationally in 2007. In California losses were estimated at $436
million and 5,639 jobs for 2007. By 2011, the negative economic
impact on California grew to $620 million, according to the Southern
California Association of Governments.
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4)Bi-National Economic Development and Migration : Outward migration
from Mexico to the U.S. has historically been a complex and
controversial issue. For a select group of workers in Mexico,
coming to California appears as a good economic choice for them and
their families given the sometimes limited alternatives where they
live. While migration from Mexico has benefitted many economic
sectors in California, the issue of immigration has consistently
been on the state's public policy agenda.
One often overlooked and under-funded element to this discussion are
proactive bi-national economic development policies, which could
help to re-balance the drivers of immigration. The "maquiladoras,"
a by-product of NAFTA, are manufacturing and assembly facilities
located in Northern Mexico, including Mexicali. With cross border
supply chains, these facilities have become important players within
extended and sometimes global supply chains.
The NAD Bank, another entity created through the enactment of NAFTA,
provides project financing and construction oversight for projects
initiated through the U.S. Environmental Protection Agency's
U.S.-Mexico Border Water Infrastructure Program. The program serves
communities within 62 miles, north and south, of the border. By
providing cleaner water and improved infrastructure, the quality of
life is improved and jobs are created on both sides of the border.
AB 311 proposes the recapitalization of the NAD Bank and to expand
the activities of the I-Bank to serve as a catalyst for improving
infrastructure within the border region.
5)Infrastructure: A Major Challenge to California's Competitiveness :
World class infrastructure plays a key role in business attraction,
as multinational companies consistently rank the quality of
infrastructure among their top four criteria in making investment
decisions. Research shows that as U.S. infrastructure has been in
decline, infrastructure in other countries is rapidly increasing.
The 2010-11 Global Competitiveness Report by the World Economic
Forum places U.S. infrastructure 23rd in the world, a drop from its
rank of 7th in 2000.
California's infrastructure is in a similar state, according to the
American Society of Civil Engineers, California Infrastructure
Report Card 2012, with an estimated $65 billion a year investment
gap. The impact of this lack of investment is compounded by the
substantial new investments made in other states and nations,
including the expansion of the Panama Canal. With the logistics
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sector alone employing over 73,000 workers, failing to remain
competitive will impact California jobs.
Institutional investors have responded to the U.S.'s infrastructure
shortfall and the lack of sufficient public finance opportunities by
adopting new investment mandates to privately finance public
infrastructure. As an example, the California Public Employee's
Retirement System (CalPERS) currently has over $525 million invested
in a combination of physical infrastructure investments,
infrastructure-targeted private equity funds, and credit enhancement
for infrastructure bonds. This is addition to an outstanding $800
million mandate for project finance including transportation,
energy, natural resources, utilities, water, communications and
other social support services.
The challenges facing the deployment of institutional capital was
particularly highlighted at November 2012 hearing in Calexico when
CalPERS discussed a study it had completed as part of its deployment
of $800 million in California infrastructure investments. Among
other findings, their study found that increased information flow
and greater consistency of deal structure is essential to greater
public pension fund infrastructure investments. AB 311 was
developed in response to testimony and research from all three of
the JEDE hearings. The bill proposes to have the I-Bank use its
expertise in infrastructure finance to facilitate public and private
finance-ready infrastructure along the border region.
6)The I-Bank and Reorganization : The I-Bank was established in 1994
to promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. Housed within
BTH, it is governed by a five-member board of directors comprised of
the BTH Secretary (Chair), State Treasurer, Director of the
Department of Finance, Secretary of State and Consumer Services
Agency, and a Governor's appointee.
The day-to-day operations of the I-Bank are directed by the
Executive Director who is an appointee of the Governor and is
subject to confirmation by the California State Senate. Currently,
the I-Bank has authority for 24 staff members. The I-Bank does not
receive any ongoing General Fund support, rather it is financed
through fees, interest income and other revenues derived from its
public and private sector financing activities.
The I-Bank administers two categories of programs: 1) The
Infrastructure State Revolving Fund which provides direct low-cost
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financing to public agencies for a variety of public infrastructure
projects; and 2) Bond Financed Programs which provide financing for
manufacturing companies, nonprofit organizations, public agencies
and other eligible entities. There is no commitment of I-Bank or
state funds for any of the category #2 conduit revenue bonds. Even
in the case of default, the state is not liable.
Since its inception, the I-Bank has loaned over $400 million to
local agencies, developing a high-level of expertise in the
financing of public infrastructure. The I-Bank also serves as the
state's only general purpose financing authority with broad
statutory powers to issue revenue bonds. Over $30 billion in
conduit revenue bonds have been issued by the I-Bank since 2000.
7)Reorganization : In March 2012, the Governor initiated a
reorganization process to realign the state's administrative
stricture. Key changes were proposed and agreed to by the
Legislature including the dismantling of BTH and the shifting of a
number of key programs and services to GO-Biz including the I-Bank.
In addition, the Secretary of BTH is replaced by the Director of
GO-Biz as Chair of I-Bank and the newly established Secretary of
Transportation replaces the Secretary of State and Consumer Services
on the I-Bank board.
Programmatic approval of the reorganization was granted in July 2012
and will become effective July 2013. The necessary statutory
changes are being made in AB 1317 (Frazier), which recently passed
the Assembly Committee on Accountability and Administrative Review
and is pending in Assembly Appropriations Committee.
8)Related legislation : Below is a list of related bills.
a) AB 696 (Hueso) Economic Development Mandate for Infrastructure
Projects : This bill would have required projects selected for
funding under the Infrastructure State Revolving Fund Program,
administered through the California Infrastructure and Economic
Development Bank, to only be funded if the project meets
specified land use and economic development criteria. Status:
Vetoed by Governor in 2011.
b) AB 893 (V. Manuel Pérez) Technical Assistance for
Infrastructure Development : This bill would have authorized the
I-Bank to provide technical assistance outreach to small and
rural communities, and adding new reporting requirements to the
appropriate fiscal and policy committees of the legislature.
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Status: Held on Suspense File of the Senate Committee on
Appropriations in 2011.
c) AB 1094 (John A. Pérez) Board Membership of the California
Infrastructure Bank : This bill, as it was heard by JEDE, would
have added a member of the Assembly and a member of the Senate as
advisory members to the board of administration of the I-Bank.
Amendments were taken to remove the I-Bank provisions and the
bill was related to a different topic and a different author at
the time the bill was pulled into the Senate Committee on Rules.
Status: Held in the Senate Committee on Rules in 2012.
d) AB 1545 (V. Manuel Perez) Bi-National Infrastructure and
Economic Development Bank : This bill would have expanded the
role of the California Infrastructure and Economic Development
Bank (I-Bank) to include facilitating infrastructure and economic
development financing activities within the California and Mexico
border region. Status: Held in the Assembly Committee on
Appropriations in 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
County of Imperial
California Asian Pacific Chamber of Commerce
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090