BILL ANALYSIS Ó
AB 1067
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Date of Hearing: April 9, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 1067 (Medina) - As Introduced: February 22, 2013
SUBJECT : Economic development: foreign trade
SUMMARY : Codifies the state's participation in the federal
investment visa program by establishing the California Foreign
Investment Program within the Governor's Office of Business and
Economic Development (GO-Biz). Specifically, this bill :
1)Specifies that GO-Biz shall serve as the lead state entity for
overseeing the state's participation with the U.S. Citizenship and
Immigration Services' EB-5 Investment Program (EB-5 Investment
Program).
2)Provides that, among other duties, GO-Biz shall set the terms and
conditions for issuing a state designation letter for Targeted
Employment Areas (TEAs).
3)Requires an applicant for a regional center operating within the
state to register with GO-Biz including the provision of contact
information. Each regional center is required to annually provide
information to GO-Biz on the number of clients served, location of
investments, and the number of direct and indirect jobs created.
4)Authorizes GO-Biz to provide a support letter for regional center
applications to the EB-5 Investment Program. GO-Biz is required to
post on its Internet website a list of contact information for each
regional center applicant that receives a support letter.
5)Authorizes all applicants for an EB-5 investment visa to register
with and, be assisted by, GO-Biz in applying for an EB-5 investment
visa. Authorizes GO-Biz to charge a fee for services.
6)Authorizes GO-Biz to take all necessary action to assist individuals
seeking to invest in California through the EB-5 Investment Program
including, but not limited to, collaborating with the U.S.
Department of Justice in assisting applicants in obtaining the
necessary security background checks.
7)Provides that the requirements and authorities in this bill only
affect EB-5 related activities that occur on or after January 1,
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2014.
EXISTING LAW authorizes GO-Biz to undertake international trade and
investment activities and, as a condition of that authority, directs
the development and implementation of a comprehensive international
trade and investment strategy (ITI Strategy). All international
trade and foreign investment activities and funding are required to be
consistent with the ITI strategy.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose: According to the author, "According to the
author, "California produces more than $1.8 trillion in goods and
services annually, making the state the eighth largest economy in
the world. When it comes to international business, California is
the ideal place to be. No other location has the high-tech
industries of Silicon Valley, the biotech industries of San Diego
and the San Francisco Bay Area, the agricultural technology industry
of the Central Valley, and the entertainment industry of Los
Angeles. The variety of industries makes the state an ideal place
for foreign businesses to operate.
Presently, California leads the nation in attracting and receiving
foreign direct investment. Foreign direct investment impacts the
California economy in many positive ways, one of which is creating
new jobs. In 2010, foreign firms employed almost 6 million
Americans, and owned over 33,000 individual business establishments.
Today, foreign affiliate employment accounts for over 700,000 jobs
in California. While our budget is recovering slowly, our state
cannot afford to miss out on the tremendous economic benefits that
foreign investment provides. Losing the great opportunity to boost
and stimulate our economy through foreign investment is something
our state cannot afford. Implementing a robust EB-5 program in the
state will continue to create jobs, introduce new technology and
research, and contribute to rising productivity within our state."
2)Framing the Policy Issue : This bill provides statutory clarity to
the state's role in facilitating the federal immigrant investor visa
program. Established in 1990, prospective foreign investors who
agree to invest $500,000 in economically distressed areas or $1
million in other areas are eligible to receive one of 10,000 EB-5
visas.
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In making the case for codifying the state's involvement in
attracting and facilitating EB-5-based foreign investments, the
author sites the existing state responsibilities to issue
certification letters, the large number of EB-5 regional centers
(over 60) within the state, and the important role private sector
investments and business development play in the health of the
state's economy. This analysis provides background on how the
state's diversity is a trade advantage, the EB-5 Investment Program,
and California's globally integrated economy.
3)EB-5 Investment Program : Created as a pilot program in 1990, the
EB-5 Investment Program is designed to stimulate the U.S. economy
through capital investment and resulting in job creation by
immigrant investors. As of June 30, 2011, it is estimated that the
program has resulted in more than $1.5 billion in capital
investments and created at least 34,000 jobs.
Under the U.S. Citizenship and Immigration Service (USCIS)
administered program, permanent-resident status is available to
foreign investors who have invested - or are actively in the process
of investing - at least $1million into a new commercial enterprise,
which can entail: the creation of an original business; the purchase
of an existing business and restructuring or reorganizing the
business to the extent that a new commercial enterprise results; or
a significant expansion of an existing business.
An applicant seeking status as an immigrant investor must
demonstrate that his or her investment will benefit the U.S. economy
and create full-time employment for at least ten qualified
individuals, or maintain the number of existing employees in a
troubled business. For investors who choose to invest in TEAs, the
required investment is decreased to $500,000. A TEA is either a
high-unemployment area that has experienced an unemployment rate of
at least 150% of the national average rate or a rural area.
Investments made in a TEA require certification that the area
qualifies as a TEA. GO-Biz currently issues these certification
letters. In 2012, over 6,500 TEA-based visas were issued for
investors and immediate family, while only 3 visas were issues for
non-TEA investments.
Based on 2011 state figures (most current) and a high unemployment
rate defined as 13.4% or greater, 58 urban cities, 16 counties, 21
rural areas, and 13 metropolitan statistical areas in California
have been identified as eligible TEAs. Some states, such as South
Dakota, have specific programs that target foreign investment by
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those who are looking to apply for visas under the investment
provisions.
In addition to individual investors, the federal government can also
recognize regional centers which allows for a pooling of investor
money. There are over 60 federally-recognized regional centers
currently operating in California, significantly more than any other
state. These regional centers are based across the state. Their
focuses are widely varied and include commercial real estate
development, agricultural products, film projects, and high-tech
ventures. Information on these centers is limited to the name of
the center. AB 1067 will provide transparency as to who are the
operators of regional centers, which should result in greater
program and investment integration within the state's economic
development network.
Among other requirements, applicants of the EB-5 Investment Program
must demonstrate that they meet all requirements of the program
prior to filing with the USCIS. If it is determined that the
investment criteria is met and properly documented, any investor may
be granted conditional permanent residence status for a period of
two years by USCIS. A permanent green card may be issued at the end
of the conditional period.
The U.S. Congress has authorized the approval of up to 10,000 EB-5
visas per year. Historically, the annual allocation is not fully
utilized, although usage is growing. In 2009, over 4,200 investors
obtained EB-5 visas as compared to only hundreds in 2007.
4)EB-5 Success Stories : There are many examples of areas and
developments that have benefited from foreign investment through the
EB-5 program, most especially as businesses routinely cite access to
capital as a roadblock to successful development of new or growth of
existing ventures. One example includes the McClellan Business
Park, a residential and industrial development at the former
McClellan Air Force Base. When the base closed in 2001
approximately 12,000 individuals lost their jobs across the region.
Today, nearly 15,000 people work at the McClellan Business Park.
This transformation was completed with the help of $18 million
invested by 36 immigrants from China, Mexico and an array of other
countries who have applied for EB-5 visas.
Nationally, the state of Vermont is home to one of the largest
success stories from EB-5 investment. The New York Times and
National Public Radio both reported extensively on a ski resort that
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was able to expand from seasonal winter recreation to a year-round
resort after raising nearly $200 million dollars from foreign
investors (South Africa, Sweden, Canada, Mexico and England). The
entire state of Vermont is now recognized as a regional center
called the Vermont Agency of Community Development, which focuses on
bringing foreign investment to the tourism, manufacturing,
professional services, education and information publishing
industries in the state. The state formally markets and promotes
the availability of EB-5 status to gain foreign investment and is a
model for state involvement in securing this type of money. On its
website, Vermont publicizes a swift approval process for projects,
state oversight of projects and activities to assure compliance with
U.S. Immigration Law, and hands-on involvement by Vermont's elected
officials, including the Governor and Congressional delegation.
5)State's Diverse Population as a Trade Advantage : New globally-based
models for innovation and technology have brought great changes in
how world economies work. The emerging economies of China, India,
and Singapore, just to name a few, have been and are committed to
continuing massive investments in research and development. While
these dynamics may pose challenges to some existing technology
centers, California's diverse population provides the state with a
key trade and investment advantage over other states and nations.
Due to strong past in-migration from other nations, more than
one-in-four of California's current residents (9.5 million people)
were born outside the U.S., compared to just over one-in-ten
nationally. About half of foreign-born Californians are from Latin
America, and another third are from Asia. Regionally, 36% of the
population in Los Angeles is foreign born, as is 27% of the Bay
Area. It is estimated that 40% of the entrepreneurs in the Silicon
Valley are foreign born. For many immigrant groups, California
represents the single largest gathering of their brethren outside
their native lands.
6)California's Global Economy : International trade and foreign
investment are very important components of California's $1.9
trillion economy. California receives more foreign direct
investment (FDI) than any other state in the U.S., which is
significant since the U.S. is the largest receiver of FDI in the
world. The California economy benefits from FDI in many ways, some
of which include assisting in the creation of jobs, boosting worker
wages, increasing exports, bringing in new technology and skills,
and generally strengthening the state's manufacturing base.
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The federal International Trade Administration estimates that over
562,700 California workers benefit from jobs with foreign-owned
firms, which accounts for 5.1% of all private sector jobs in the
state. Approximately 11% of all U.S. workers at foreign-owned firms
are located in California, which has had the highest level of
employment in foreign-owned firms since at least 1997. Along with
employment, foreign-owned firms own more property, plants, and
equipment in California than in any other state.
If California were a country, it would be the 11th largest exporter
in the world. Exports from California accounted for over 10.5% of
total U.S. exports in goods, shipping to over 220 foreign
destinations in 2012. California's land, sea, and air ports of
entry serve as key international commercial gateways for products
entering the country. California exported $161 billion in goods in
2012 (up from $159 billion in 2011), ranking only second to Texas
with $265.3 billion in export goods. Computers and electronic
products were California's top exports in 2012, accounting for 27.6%
of all state exports, or $44.5 billion.
-----------------------------------------------------------------
| 2012 Exports From California to the World |
-----------------------------------------------------------------
|-----------------------+-----------------+------------------------|
| Product | Value ($ | Percent |
| | billions) | |
|-----------------------+-----------------+------------------------|
|334 Computers & | 44.5 | 27.6 % |
|Electronic Prod. | | |
|-----------------------+-----------------+------------------------|
|333 Machinery (except | 14.8| 9.2 % |
|electrical) | | |
|-----------------------+-----------------+------------------------|
|336 Transportation | 16.1| 10 % |
|Equipment | | |
|-----------------------+-----------------+------------------------|
|325 Chemical | 12.7 | 7.9 % |
|Manufactures | | |
|-----------------------+-----------------+------------------------|
|339 Misc. Manufacture | 13.8 | 8.6 % |
|Commodities | | |
|-----------------------+-----------------+------------------------|
|111 Agricultural | 11.9 | 7.4 % |
|Products | | |
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|-----------------------+-----------------+------------------------|
|All Others | 47.2 | 29.3 % |
|-----------------------+-----------------+------------------------|
|Total | $161 | |
| | | 100 % |
------------------------------------------------------------------
-----------------------------------------------------------------
|Source: |
|Tradestates.com |
-----------------------------------------------------------------
Manufacturing is California's most export-intensive activity.
Overall, manufacturing exports represent 9.4% of California's gross
domestic product. More than one-fifth (21.9%) of all manufacturing
workers in California directly depend on exports for their jobs.
Small- and medium-sized firms generated more than two-fifths (43%)
of California's total exports of merchandise. This represents the
seventh highest percentage among states and is well above the 29%
national average export share for these firms.
Mexico is California's top trading partner, receiving $26.3 billion
(16%) in goods in 2012. The state's second and third largest
trading partners are Canada and China with $17.3 billion (10.7%) and
$13.9 billion (8.6%), respectively. Other top-ranking export
destinations include Japan, South Korea, Taiwan, the United Kingdom,
Hong Kong, Germany, and Singapore.
7)Amendments : Staff understands that the author will offer the
following amendments:
a) Reduce the requirement for regional centers to register with
GO-Biz to providing GO-Biz with relevant contact information and
the geographic region and industry sector the U.S. Citizenship
and Immigration Serves has approved for the center.
b) Authorize the regional center to provide GO-Biz with a copy of
their federally mandated annual report in lieu of any state
reporting requirement.
c) Remove an overly broad statement that GO-Biz take all steps
necessary to assist individuals interested in investing in
California through the EB-5 Investment Program.
d) Make related technical and conforming changes.
8)Related Legislation: : Below is a list of related legislation from
the prior session:
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a) AB 1137 (V. Manuel Pérez) Small Business Assistance and
Attracting Private Investment : This bill would have facilitated
local economic development and job creation by assisting small
businesses to access new export markets for their goods and
services, codifying the EB-5 investment visa program, updating
the law relating to free trade zones, and authorizing the use of
new federal funds under the Small Business Jobs Act of 2010.
Status: Held in Senate Committee on Appropriations in 2012.
b) AB 1409 (Jobs, Economic Development and the Economy Committee)
International Trade and Investment Strategy : This bill, as it
passed JEDE, would have required that the next update by
Business, Transportation and Housing Agency, of the international
trade and investment strategy to include policy goals, objectives
and recommendations from the state Goods Movement Action Plan.
The measure was amended in the Senate related another subject
matter. Status: Held in Senate Rules Committee in 2012.
c) AB 2012 (John A. Pérez) Economic Development Reorganization :
This bill transfers the authority for undertaking international
trade and foreign investment activities from the Business,
Transportation and Housing Agency to the Governor's Office of
Business and Economic Development. In addition, the bill
transfers the responsibility for establishing an Internet-based
permit assistance center from the Secretary of the California
Environmental Protection Agency to GO-Biz. Status: Signed by
the Governor, Chapter 294, Statutes of 2012.
d) SCR 33 (Price) Foreign Investment : This bill expresses the
sentiment of the Legislature that the EB-5 visa program is
beneficial to the state's economic development and provides
important opportunities for foreign direct investment to
California. Status: Chaptered by the Secretary of State- Res.
Chapter 60, Statutes of 2011.
REGISTERED SUPPORT / OPPOSITION :
Support
None received
Opposition
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None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090