BILL ANALYSIS Ó
AB 495
Page 1
ASSEMBLY THIRD READING
AB 495 (Campos)
As Amended January 23, 2014
Majority vote
BANKING & FINANCE 9-0 HOUSING 6-1
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|Ayes:|Dickinson, Achadjian, |Ayes:|Chau, Atkins, Brown, |
| |Bonta, Chau, Gatto, | |Maienschein, Quirk-Silva, |
| |Perea, Rodriguez, Weber, | |Yamada |
| |Williams | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Beth Gaines |
| | | | |
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APPROPRIATIONS 12-3
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|Ayes:|Gatto, Bocanegra, |
| |Bradford, |
| |Ian Calderon, Campos, |
| |Eggman, Gomez, Holden, |
| |Pan, Quirk, |
| |Ridley-Thomas, Weber |
| | |
|-----+--------------------------|
|Nays:|Bigelow, Allen, Wagner |
| | |
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SUMMARY : Establishes the California Community Investment
Program (CCIP) with the Governor's Office of Business and
Economic Development (GOBiz). Specifically, this bill :
1)Defines "poverty" as the supplemental poverty measure,
established by the United States Census Bureau in 2013 to
incorporate cost of living in the established rate of poverty.
2)Defines "triple bottom-line investment funds" as including,
but not limited to, equity and debt investment vehicles that
pursue market and above market rates of financial return while
at the same time producing living wage jobs, affordable
housing, and other economic, social and environmental benefits
for the residents of the communities where the investments are
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made.
3)Defines "low-income" as households whose income does not
exceed 80% of the area median income.
4)Provides for the following purposes of CCIP:
a) Encourage private sector investment in low-income
neighborhoods to improve the economic, environmental and
social conditions for existing residents;
b) Serve investors, employers, corporate executives,
business owners and site location consultants who are
considering low-income neighborhoods for business
investment and expansion; and
c) Coordinate state programs and funding resources to be
used to address poverty reduction.
5)Requires the director of CCIP to establish and implement a
process for establishing public education programs and
providing technical assistance to private sector investors.
6)Specifies that CCIP shall be governed by a 14 member
California Community Investment Council (Council) comprised of
the following:
a) Six appointees from the Governor, three members from the
private sector with business or investment expertise, two
members with community development expertise and one
representative of organized labor;
b) Four members of the Legislature, two from the Senate,
one from each political party, appointed by Senate Rules
Committee and two from the Assembly, one from each
political party, appointed by the Speaker. Further
specifies that appointed members of the Legislature will be
non-voting and only participate to the extent that their
participation is compatible with their respective positions
as members of the Legislature;
c) The Treasurer;
d) The Controller;
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e) Secretary of the Business, Consumer Servicers and
Housing Agency; and
f) Director of GOBiz, who shall also serve as chair of the
Council.
7)Requires the CCIP to conduct the following activities:
a) Develop and annually update a database of low-income
neighborhoods in California by county and city with
relevant data about each neighborhood;
b) Compile and maintain a current inventory of California
public sector funding resources and financing mechanisms
that may be allocated to or utilized in low income
communities. Further requires that in compiling this list
the Council shall use the inventory of business incentives,
public sector funding resources, and financing mechanism
maintained by GOBiz.
8)Communities identified by CCIP will be known as "California
Community Investment Neighborhoods."
9)Specifies that CCIP shall coordinate public sector financial
investment and public programs to assist low-income
communities that are eligible California Community Investment
Neighborhoods to become business, development, and investment
ready and attract private sector triple bottom-line fund
investments.
10)Requires CCIP to develop and adopt criteria for identifying
eligible triple bottom-line investments funds that will serve
as partners and invest in enterprises and employers that
generate permanent living wage jobs, including investments to
assist in starting-up, locating, and expanding employers in
low-income neighborhoods.
11)Requires CCIP to develop and adopt criteria for eligible
triple bottom-line investment funds that invest in real estate
developments to assist in constructing, expanding, renovating,
and rehabilitating buildings in low-income neighborhoods that
accommodate all allowed land use approved and permitted by the
local government land use regulations.
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12)Mandates that CCIP establish overall triple bottom-line goals
and standardized metrics for economic, social, and
environmental outcomes that shall be accepted by all eligible
investment funds.
13)Specifies that CCIP shall gather evidence and conduct public
forums to identify a broad array of incentives that will
encourage triple bottom-line fund investments in low-income
neighborhoods.
14)Specifies that CCIP establish and convene regular meetings of
the California Community Investment Network comprised of
organizations and institutions with expertise and resources to
advise the Council and eligible investment fund managers.
15)States that CCIP must report biannually to the Legislature
and the Governor on the status and progress of the CCIP and
performance on goals and triple bottom-line outcomes.
16)Provides that the CCIP shall encourage significant private
sector commitment, cooperation, and collaboration to invest
private capital in low-income neighborhoods through eligible
triple bottom-line investment funds with the goal of
obtaining, by January 1, 2019, at least $1 billion of new
investment by triple bottom-line investment funds in
triple-bottom real estate developments and businesses located
in low-income California neighborhoods.
EXISTING LAW establishes the Governor's Office of Business and
Economic Development. (Government Code Section 12096, et seq.)
FISCAL EFFECT : According to Assembly Appropriations Committee,
estimated administrative costs of approximately $500,000 for
GO-Biz.
COMMENTS : According to information provided by the author's
office this bill is necessary for the following reasons:
Poverty is increasing in California, and the state
lacks a coordinated economic development strategy to
bring social equity private investment to low-income
neighborhoods. According to the supplemental poverty
measure, established by the U.S. Census Bureau in 2013
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to incorporate cost of living in the establishment of
the rate of poverty, the rate of poverty in California
is 23.5%, which means that nearly nine million people
are poor. Low-income neighborhoods face challenges in
accessing capital. One way to address poverty is to
increase public and private investment in resource
poor neighborhoods through triple bottom line
investing. Triple bottom line investing promotes a
market or above market rate of economic return,
environmental protection, and social equity. However,
private investment won't flow into low-income
neighborhoods unless the state can help underwrite the
risk of crime, poverty, low job skills, and poor
infrastructure. While the state has numerous programs
aimed at reducing poverty and promoting economic
development, none of this is organized or coordinated.
AB 495 seeks to provide a structure within state
government to coordinate public investment so that it
complements and encourages triple bottom line
investing into low-income neighborhoods. The triple
bottom line investment sector consists of funds like
the Bay Area Family of Funds organized by the Bay Area
Council. The Bay Area Family of Funds is a regional
effort to attract private capital into low and
moderate income neighborhoods. The Family of Funds
leverages its investments in these communities through
projects that promote smart growth, address poverty,
support local businesses and clean up contaminated
sites with market-based solutions.
It has raised over $215 million for double and triple
bottom line investments through four separate funds:
the Bay Area Smart Growth Funds I & II, the Bay Area
Equity Fund, and the California Environmental
Redevelopment Fund. The Funds' investors consist of
banks, foundations, pension funds, insurance
companies, individuals, and other corporations. The
triple bottom line sector of the private capital
market has matured over the past decade and is
positioned to accelerate its investment in low-income
neighborhoods if the state is able to step-up and help
mitigate the risk that social equity investors face.
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Triple Bottom Line (TBL) Investing .
The goal of AB 495 is to encourage greater investment in
communities in need TBL investments. What is TBL investing? In
traditional business accounting, the "bottom line" is the sum of
revenue minus expenses, which is either a loss or a profit. The
term originated from the profit is always shown at the very
bottom of the statement of revenue and expenses. In the last 50
years, social and environmental justice groups have struggled to
bring a broader definition of "bottom line" into public
consciousness. The concept of TBL is designed to bring about
other bottom lines, often paraphrased as "profit, people,
planet." These other bottom lines are social and environmental
concerns that provide a societal benefit. TBL accounting gained
attention in the mid-1990s when John Elkington, an authority on
corporate responsibility and sustainability, came up with TBL as
a way to measure the sustainability outcomes of corporate
America. Andrew W. Savitz, author of The Triple Bottom Line and
formerly a lead partner running PricewaterhouseCoopers'
sustainability consulting practice has said the TBL "captures
the essence of sustainability by measuring the impact of an
organization's activities on the world? including both its
profitability and shareholder values and its social, human and
environmental capital."
While profits can be measured in dollars, how does one measure
social capital? This remains a significant challenge. There is
no universal standard method for calculating the TBL nor is
there a universal standard for the measures that compromise the
three TBL categories. Government and business may view
sustainability in different terms. Stakeholder groups, such as
socially responsible investors, non-governmental organizations,
green consumers, and governmental regulators and agencies are
increasingly calling for information related to the social and
environmental dimensions.
TBL is not without its critics. Notwithstanding the
difficulties of quantification, a report, Triple Bottom Line: A
Business Metaphor for a Social Construct, had a negative view of
TBL as a metaphor for the "bottom line." The author found:
We conclude that the bottom line as a metaphor for
measuring and reporting business' contribution to
social sustainability is fatally flawed. The
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metaphor's application through current triple bottom
line reporting protocols allows businesses to ignore
critical sustainability concerns for several reasons.
First, businesses attempting to legitimate themselves
without actually addressing sustainability can use the
reporting exercise to co-opt the external pressure for
true sustainability. Due to the lack of mandatory
standards, businesses freely pick and choose which
characteristics they measure, derive their own metrics
and standards for these characteristics, and produce a
report that reveals precisely what they wish to
disclose. The bottom line metaphor implies rigor and
objectivity that fail to exist in these situations.
Second, businesses that start with a genuine
commitment to enhancing their sustainability efforts
can be distracted as the inter-relationships among the
dimensions are masked by the apparent independence of
the three "bottom lines". There is neither demand to
analyze inter-relationships nor pressure to consider
how the impacts from one dimension affect the others.
The focus is an atomistic one, a (relatively) easy and
uninformed perspective for addressing sustainability
objectives. Third, the fundamental differences between
the three the triple bottom line elements make using a
single framework problematic. The major differences
are in: the ability to identify, quantify, and measure
these central constructs; the applicability of being
metaphorically designated as capital; and the
metaphorical representations and conceptual approaches
to understand, quantify, and report the dimensions.
In spite of these academic concerns, TBL investing has gained
legitimacy over the last decade as private investors attempt
align to their investment portfolios with socially responsible
goals. The California Emerging Technology Fund writes in
support of AB 495:
The Community Capital Investment Initiative does not
require any new State
funds nor does it incur any financial liability for
the State government. However,
CCII will help support living-wage jobs, affordable
housing, a healthier
environment and improved community services in
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low-income communities.
CCII will be led and managed by the Governor's Office
of Business and
Economic Development (GOBiz) with the assistance of a
coordinating and
oversight body comprised of Administration Agencies
and public representatives
with expertise to align and support with all other
economic development tools.
Thus, CCII complements augments and leverages the
State's existing economic
development strategies and programs to enhance their
impact.
Over the last decade, socially-responsible TBL
investing has matured as industry, demonstrating that
private investors can achieve market-rate financial
returns while also generating social and environmental
benefits. However, most TBL funds invest in more
moderate-income than low-income communities because of
higher risks in the poorest neighborhoods. AB 495
will help reduce those private-sector investment risk
by mobilizing public leadership and existing
government resources into low-income neighborhoods
where the TBL funds invest. AB 495 fosters the kind
of public-private collaboration that is needed to
attract investment into California's poorest
neighborhoods to benefit the most disadvantaged
residents.
This bill attempts to utilize the state's economic investment
strategies, via GOBiz, to encourage greater investment and
revitalization in California's disadvantaged communities.
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0002987