BILL ANALYSIS Ó
AB 562
Page 1
Date of Hearing: May 8, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 562 (Williams) - As Introduced: February 20, 2013
SUBJECT : Economic development: subsidies: review by local
agencies.
SUMMARY : Requires local agencies, beginning January 1, 2014, to
provide specified information to the public before approving any
economic development subsidy of $100,000 or more. Specifically,
this bill :
1)Requires, beginning January 1, 2014, each local agency, before
approving any economic development subsidy (subsidy) within
its jurisdiction, to provide all of the following information
in written form available to the public, and through its
Internet Web site (website), if applicable, for the entire
term of the subsidy:
a) The name and address of the entity or individual that is
the beneficiary of the subsidy,
if applicable;
b) The start and end dates and the schedule for the
subsidy;
c) A description of the subsidy, including the estimated
total amount of the expenditure
of public funds by, or revenue lost to, the local agency as a
result of the subsidy;
d) A statement of the public purposes for the subsidy;
e) Projected tax revenue to the local agency as a result of
the subsidy; and,
f) Estimated number of jobs created by the subsidy,
categorized by full-time, part-time, and temporary
positions.
2)Requires each local agency, before granting a subsidy, to
provide public notice and a hearing regarding the subsidy,
unless a hearing and notice is otherwise required by law.
AB 562
Page 2
3)Requires, on or before October 1, 2015, and on or before
October 1 in each odd-numbered year thereafter, each local
agency to prepare a report for each subsidy approved after
January 1, 2014, and to make the report available to the
public, and through the agency's website. The report must
include the items listed in 1a) through 1f), above, and the
actual data on those elements as the subsidy is extended. For
any subsidy that will exist for 40 years or more, the report
must be prepared only once every six years after the initial
report.
4)Requires the local agency, on or before November 1, 2015, and
on or before November 1 in each odd-numbered year thereafter,
to hold a public hearing to consider any written or oral
comments on the information contained in the report.
5)Requires the local agency to provide a final report at the
conclusion of each economic development subsidy, as specified.
6)Provides that subsidies with a term of less than two years are
not subject to the ongoing reporting requirements of this
bill, but the local agency must comply with the final report
requirement within two years of the date the subsidy is
granted and must hold a public hearing to consider any written
or oral comments on the final report.
7)Defines an "economic development subsidy" to mean any
expenditure of public funds or loss of revenue to a local
agency in the amount of $100,000 or more, for the purpose of
stimulating economic development within the jurisdiction of a
local agency, including, but not limited to, bonds, grants,
loans, loan guarantees, enterprise zone or empowerment zone
incentives, tax-increment financing, fee waivers, land price
subsidies, matching funds, tax abatements, tax exemptions and
tax credits.
8)Specifies that an "economic development subsidy" does not
include expenditures of public funds by, or loss of revenue
to, the local agency for the purpose of providing affordable
housing to those of low and moderate income, as defined in
current law.
9)Defines a "local agency" to mean as a city, including a
charter city, county, city and county, and community
AB 562
Page 3
redevelopment agency.
EXISTING LAW prohibits cities, counties, and redevelopment
agencies from subsidizing the relocation of big box retailers
and auto malls within the same market area, but otherwise
generally allows local governments to make their own decisions
regarding local economic development matters.
FISCAL EFFECT : None
COMMENTS :
1)This bill requires cities and counties to provide specified
information to the public before approving a subsidy of
$100,000 or more. This bill is sponsored by the American
Federation of State, County and Municipal Employees.
2)According to the author's office, "Local governments engage in
a wide variety of economic development activities to build
their tax bases. In that respect, local officials use their
regulatory powers to direct spending and tax policies which,
in turn, influence where, when and how the private sector
invests capital and improves real property. Each year, local
governments give out billions of dollars in tax incentives to
corporations in hopes of increasing economic growth and
drawing jobs for their residents?State requirements for local
budgets, annual financial reports, and regular audits allow
constituents to review most of the direct fiscal decisions
made by local governments. However, local economic subsidies
do not receive the same public scrutiny as budgets and
regulatory decisions. Additionally, local governments rarely
track how many jobs are created and it's impossible to know
whether the jobs would have been created without the aid. AB
562 seeks to remedy this shortcoming."
3)Cities and counties engage in a variety of economic
development activities to build their tax bases. Local
officials use regulatory powers, direct spending, and tax
policies to influence where, when, and how the private sector
invests capital and improves real property. Local officials
sometimes use economic development powers to induce business
to relocate to their communities. How local officials use
their regulatory powers is relatively transparent because
state law requires public notice, public hearings, and
environmental reviews. State requirements for local budgets,
AB 562
Page 4
annual financial reports, and regular audits allow
constituents to review most of the direct fiscal decisions.
However, some groups worry that local economic development
subsidies do not receive the same public scrutiny as budgets
and regulatory decisions.
4)SB 1103 (Cedillo, 2008), which was similar to this bill,
contained a sunset date and (in an early version) a
requirement that the Legislative Analyst's Office report to
the Legislature on the statewide number of subsidies completed
or in progress, the level of compliance by local agencies, and
the actual costs incurred by local agencies as a result of the
bill's requirements. This bill contains neither a sunset date
nor any reporting requirement. The Committee may wish to
consider whether this legislation should include a mechanism
for state review and/or oversight of the bill's effectiveness
and its impact on local agencies.
5)The American Federation of State, County and Municipal
Employees, in support, argues that this bill "is a
common-sense reform of local government economic development
subsidies?This bill will improve public knowledge of tax
incentives given to corporations, since these incentives have
an uneven track record and are often approved without
disclosure. Promised job growth does not always materialize
and mandating full disclosure of subsidies promotes
accountability and transparency in government."
6)The League of California Cities, in opposition, states, "The
local government decision-making process is already
highly-transparent, with many opportunities for public input.
Local elected officials are very accountable to their
communities for their decisions. This measure would impose
many costly and burdensome mandates on local
governments...Since the loss of redevelopment, and with
pending efforts to eliminate or restrict enterprise zones,
cities are on their own when it comes to efforts to improve
their communities. The effect of this measure would be to bog
down any remaining local economic development activities in
complex data keeping, reports and hearings (that) would
further discourage additional local economic development
efforts."
7)SB 1103 (Cedillo, 2008) was nearly identical to this bill. SB
1103 was approved by this Committee on a 4-2 vote on June 4,
AB 562
Page 5
2008. SB 1103 was subsequently amended to address an
unrelated subject.
SB 103 (Cedillo, 2007) was also nearly identical to this bill.
SB 103 was approved by this Committee on a 5-0 vote on July
3, 2007. SB 103 was vetoed by the Governor with the following
message:
During my administration, I have been committed to openness
in government operations and the public's right to know how
government spends their money. However, this bill does not
offer any additional information of significance that is
not already provided to the public by existing law. Local
governments already provide sufficient information about
the amount and timing of payments (or forgone revenue) at
the time the decision is made to grant an economic
development subsidy. Such decisions must be made in open
meetings and all documents are subject to public review.
Existing procedures already ensure that the public is
informed about all decisions made by their local government
representatives.
The multiple reports mandated by this bill add little value
and will create costs to the General Fund in the millions
of dollars. The approval processes envisioned by this bill
will likely result in major time delays in getting the
economic assistance to deserving communities and citizens.
SB 1268 (Cedillo, 2006) was another similar bill, which was
never heard by this Committee because it was held in the
Senate Appropriations Committee.
8)Support arguments : Supporters argue that this bill increases
transparency of local government decisions related to economic
development subsidies.
Opposition arguments : Opponents contend that this bill places
additional and unnecessary burdens on local agencies regarding
decisions that are already open to the public.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AB 562
Page 6
AFL-CIO [SPONSOR]
California Labor Federation
California Teamsters Public Affairs Council
Howard Jarvis Taxpayers Association
Service Employees International Union
United Food and Commercial Workers Western States Council
Opposition
California Chamber of Commerce
California Grocers Association
California Manufacturers and Technology Association
California Taxpayers Association
League of California Cities
TechAmerica
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958