BILL ANALYSIS �
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|Hearing Date:June 17, 2013 |Bill No:AB |
| |1067 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Ted W. Lieu, Chair
Bill No: AB 1067Author:Medina
As Amended:April 18, 2013 Fiscal:Yes
SUBJECT: Economic development: foreign trade.
SUMMARY: Establishes the California Foreign Investment Program within
the Governor's Office of Business and Economic Development (GO-Biz) as
the lead entity for overseeing the state's participation in the
federal the EB-5 visa program.
Existing law:
1)Establishes the enterprise zone program, administered by California
Department of Housing and Community Development (HCD) to stimulate
business and industrial growth and create jobs in depressed areas of
the state. (Government Code (GC) � 7071 and � 7072)
2)Defines a "targeted employment area" (TEA) for the purposes of an
enterprise zone, to mean an area within a city, county, or city and
county that is composed solely of those census tracts designated by
the U.S. Department of Housing and Urban Development as having at
least 51% of its residents of low- or moderate-income levels, using
either the most recent U.S. Department of Census data available at
the time of the original enterprise zone application or the most
recent census data available at the time the targeted employment
area is designated to determine that eligibility. Specifies that
the purpose of a TEA is to encourage businesses in an enterprise
zone to hire eligible local residents. A TEA may include, but is
not required to include, all or part of the boundaries of the
enterprise zone. The TEA does not need to encompass all eligible
areas, but may include only those areas that the local government
determines have residents who are in the most need of this
employment targeting.
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(GC � 7072 (i))
3)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 the
administrative oversight for the California Business Investment
Service and the Office of the Small Business Advocate. (GC �� 12096
- 12098.5)
4)Specifies that GO-Biz is the primary state agency authorized to
attract foreign investments, cooperate in international public
infrastructure projects, and support California businesses in
accessing markets, and requires the Director of GO-Biz to develop an
international trade and investment program (Program) attracting
employment-producing direct foreign investment to the state and
provides support for California businesses in accessing
international markets and increasing exports. (GC � 13996.41)
5)Authorizes GO-Biz to establish international trade and investment
(ITI) offices outside of the U.S. according to certain requirements.
(GC � 13996.42)
6)Requires GO-Biz to prepare an international trade and investment
strategy and provide a report to the Legislature on or before
February 1, 2014, updated once every five years that includes: (GC
� 13996.55)
a) Policy goals, objectives and recommendations necessary to
implement a comprehensive international trade and investment
program.
b) Measurable outcomes and timelines for the goals, objectives
and actions for the program.
c) Impediments to achieving goals and objectives.
d) Key stakeholder partnerships that will be used to implement
the strategy.
e) Options for funding.
f) An organizational structure for state administration of
international trade and investment policies, programs and
services.
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1)Requires the Director of GO-Biz to prepare the following: (GC �
13996.65)
a) A budget for the Program and a separately stated budget for
each ITI office, with specified information.
b) A strategy and business plan for the Program, with specified
information, that is developed with input from California
businesses that shall include, but not be limited to, measurable
goals, objectives, and outcomes and timelines necessary to
attract employment-producing direct foreign investment to the
state and increase California exports.
c) A written review of the implementation of the prior year's
strategy and business plan for the Program that addresses the
performance of the program and each ITI Office.
1)Provides that the Controller shall not allocate any state funds to
GO-Biz for international trade and investment activities unless the
strategy for international trade and investment has been submitted
to the Legislature by May 1, 2014. (GC � 13996.75)
2)Establishes processes and accountability measures for GO-Biz to
accept private monies to fund, establish and operate international
trade offices. (GC � 13997)
3)Establishes the EB-5 visa category Section 203(b)(5) of the
Immigration and Nationality Act
(8 U.S.C. Sec. 1153(b)(5)).
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 Program).
2)Provides that, among other duties, GO-Biz shall set the terms and
conditions for issuing a state designation letter for TEAs.
3)Requires a regional center operating within the state to provide
GO-Biz with contact information for the center and the geographic
region and industry sector or subsectors recognized by U.S.
Citizenship and Immigration Service (USCIS) for that center.
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Requires each regional center 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 which may be
satisfied by providing GO-Biz with a copy of the USCIS Form I-9224A.
4)Authorizes GO-Biz to provide a support letter for regional center
applications to the EB-5 Program. Requires GO-Biz to post a list of
contact information for each regional center applicant that receives
a support letter on its website and specifies that the list shall be
updated when new information is made available on at least an annual
basis.
5)Provides that the requirements and authorities in this bill only
affect EB-5 related activities that occur on or after January 1,
2014.
FISCAL EFFECT: This bill has been keyed "fiscal" by Legislative
Counsel. According to the Assembly Committee on Appropriations
analysis dated May 1, 2013, this bill will result in administrative
costs of approximately $100,000 for GO-Biz to implement this program.
COMMENTS:
1. Purpose. The Author is the Sponsor of this bill. According to the
Author, California leads the nation in attracting and receiving
foreign direct investment. The Author asserts that the top
countries investing in California are Japan, the United Kingdom and
the Netherlands and that foreign direct investment has many
positive impacts on the state's economy, including job creation.
According to the Author, in 2010, foreign firms employed almost 6
million Americans and owned over 33,000 individual business
establishments. The Author states that foreign affiliate
employment accounts for over 700,000 jobs in California and that
the state cannot afford to miss out on the tremendous economic
benefits that foreign investment provides. The Author believes
that 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 the state.
2. EB-5 Program. The EB-5 visa category, which was created by
Congress in 1990, is available to immigrants seeking to enter the
United States in order to invest in a business or company that will
benefit the economy. This federal program is administered by the
USCIS. The name "EB-5" is derived from the fact that it is the
5th category of the Employment-Based visa. Permanent-resident
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status through an EB-5 visa 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.
10,000 EB-5 visas are made available per year by USCIS. Close to
4,300 investors attained EB-5 status in 2009, up from only hundreds
in 2007.
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. If the investment in a new commercial
enterprise is made in a TEA, 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.
In addition to individual investors, the federal government can
also recognize regional centers which allow for a pooling of
investor money. There are at least 31 federally-recognized
regional centers currently operating in California, significantly
more than any other state. These regional centers are based across
the state. Their focuses vary widely, and include commercial real
estate development, agricultural products, film project, and
high-tech ventures.
Applicants to the EB-5 visa program must demonstrate that they meet
all requirements of the program prior to the 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.
3. California's Role in EB-5. Currently, GO-Biz serves as a resource
to connect those interested in receiving foreign investment through
EB-5 with the necessary state entities responsible for the
identification and designation of TEAs. In accordance with Title
8, Code of Federal Regulations Section 204.6(i), the California
Employment Development Department (EDD) has been delegated the
authority by the state to designate the cities, counties,
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metropolitan statistical areas, and geopolitical subdivisions
(census tracts) that meet the high unemployment definition to
qualify for the $500,000 minimum investment threshold as TEAs for
EB-5 program purposes.
Unemployment rates for cities, counties and census tracts are
published annually and the state uses the most recent calendar year
labor force and unemployment estimates to establish high
unemployment rates and high unemployment areas.
Upon the request of the applicant or an alternative representative
body, staff at GO-Biz may determine that a specific metropolitan
statistical area, a county within a metropolitan statistical area,
or a county in which a city or town with a population of 20,000 or
more is located, is a TEA. In order to make such a determination,
the county, city or census tract in question must experience an
average unemployment rate of 150 percent of the national average.
According to GO-Biz, for TEA projects that do not meet the existing
standard, pre-calculated certification categories, GO-Biz can
certify "Special TEA applications" under the following criteria:
Projects can receive an EB-5 "Special TEA certification"
if they are located within an area of twelve or fewer
contiguous Census Tracts with a total average unemployment
rate of 150% the national average.
Requests for a special TEA should include a table
listing of each census tract with its corresponding
unemployment rate and a map showing the project address.
A supporting letter from the local Economic Development
Corporation (EDC) or County or City in which the project is to
be located must be provided. The letter must indicate the
economic development corporation's concurrence that the
proposed census tract will reasonably be a source of workforce
for the project.
1. EB-5 Success Stories. There are many examples of areas and
developments that have benefitted from foreign investment through
EB-5, most especially as businesses routinely cite access to
capital as a roadblock to successful development of new or growth
of existing ventures. According to a 2011 article in the
Sacramento Bee, there are now close to 15,000 people who work at
McClellan Business Park, a residential and industrial development
at the former McClellan Air Force Base which closed in 2001,
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resulting in the loss of some 12,000 jobs in the region. The
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 EB5 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 (NPR) both reported extensively on a ski
resort that was able to expand from seasonal winter recreation to
being 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 elected officials, including the Governor and Congressional
delegation.
2. Governor's Office of Business and Economic Development (GO-Biz).
In February 2010, the Little Hoover Commission undertook a review
of the state's economic and workforce development programs. In its
final report, Making up for Lost Ground: Creating a Governor's
Office of Economic Development, it analyzed the status and
effectiveness of current programs since the 2003 demise of the
Technology, Trade and Commerce Agency and recommended the creation
of a new governmental entity to fill the void left by the
dismantled agency.
The report called for a single entity that would promote greater
economic development, foster job creation, serve as a policy
advisor and deliver specific services (i.e., permitting, tax,
regulatory, and other information) directly to the California
business community. In April 2010, Governor Schwarzenegger issued
Executive Order S-05-10 as a means to operationalize the report
recommendations including the creation of the Governor's Office of
Economic Development (GOED).
In October 2011, the Governor signed AB 29 (cited and described
below), which effectively codified GOED and changed its name to
GO-Biz, effective January 1, 2012. Since its inception, the office
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has served over 3,000 businesses, 95% of which are small. The most
frequent types of assistance include help with permit streamlining,
starting a businesses, relocation and expansion of businesses, and
regulatory challenges.
Among other programs, GO-Biz administers the Innovation Hub (iHub)
program in partnership with the statewide network of 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.
Another key initiative of GO-Biz is the "strike teams" which can be
mobilized to help attract and/or retain specific businesses.
Strike teams are especially well suited to engage with major
employers and have been successfully activated to assist Bayer
Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to locate
and/or expand in California.
3. International Trade Efforts in California. Between 1986 and 2004,
the Technology, Trade and Commerce Agency (TTCA) was the
responsible government entity for promoting economic development,
international trade, and foreign investment in California. When
the agency was eliminated due to its poor administrative
performance, the authority for all state trade activity was also
eliminated and the few remaining programs came under the umbrella
of the Business, Transportation and Housing Agency (BT&H). The
former International Investment Division under TTCA had 91
employees and a budget of $43 million, allowing it to engage in
activities like formal marketing. Beginning in the 2005-06
Session, several legislative measures were introduced to reinstate
the state's trade authority. SB 1530 (Romero, 2006) addressed
these concerns by requiring BT&H to undertake a trade study to
determine what role the state should play in international trade
and foreign investment activities and required them to establish a
business advisory committee, and development of a trade strategy
consistent with the study and acts as the vehicle for implementing
the state's trade policy. The first strategy was published in
February 2008 and the next update is required in February 2014.
Until the creation of GO-Biz there were only a very small number of
former International Investment Division staff working on trade
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related issues and activities for the state. GO-Biz now has
authority for undertaking international trade and foreign
investment activities, including establishing any international
trade and investment office (AB 2012, Perez, Statutes of 2012).
GO-Biz has partnered with the Bay Area Council to open a
California-China Trade and Investment office in Shanghai's downtown
Yangpu district. In a March 2013 report to the Legislature on the
status of this effort, GO-Biz described the office's goals "to
drive increased employment, revenues at California enterprises, tax
revenues, and international competitiveness in California" which
will be accomplished through promoting investment in California;
facilitating two-way international business growth, with an
emphasis on expanding foreign sales by California employers,
including not only manufacturers, agricultural enterprises, and
commodity producers, but also service providers such as
universities, banks, consulting companies, and the like; supporting
continued growth of California's role as a gateway state for goods
movement and passenger travel, and; identifying and addressing
barriers to international expansion by California employers.
4. Related Legislation This Session. SB 9 (Price) establishes the
Office of Social Innovation within GO-Biz to establish partnerships
with government agencies, private investors, nonprofit
organizations, and for-profit service providers to facilitate the
use of social impact bonds (SIBs), as defined, to address social
services needs.to explore the use of social innovative financing in
the State of California. ( Status : The bill is pending in the
Senate Committee on Governance and Finance.)
SB 431 (Price) establishes the California Socioeconomic Development
Pods Program within GO-Biz to encourage the use of social
innovative financing, as defined, within blighted areas in the
state. ( Status : The bill was held in the Senate Committee on
Appropriations.)
SB 592 (Price) is an urgency measure that requires GO-Biz to
provide a port trade promotion strategy to the Legislature on or
before April 1, 2014 and requires GO-Biz to convene a statewide
business partnership for port trade promotion and makes various
findings and declarations about the economic impact of California's
ports and possible threats to ports from the expansion of the
Panama Canal. ( Status : The bill is pending in the Assembly.)
AB 250 (Holden and V. Manuel P�rez) codifies and expands the iHub
Program at GO-Biz for the purpose of stimulating economic
development and job creation through the coordination of federal,
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state and local innovation-supporting resources. ( Status : The
bill is pending in the Senate.)
AB 495 (Campos) establishes the California Community Investment
Initiative within GO-Biz tasked with (1) creating an inventory of
low-income neighborhoods, state and local programs, and sources of
public-sector finance, (2) coordinating public-sector financial
investment and public programs to assist low-income communities to
become business, development, and investment ready, (3) developing
criteria for determining the type of economically, socially, and
environmentally responsible businesses and real estate developments
that the Initiative will assist in starting-up, locating, and
growing in low-income neighborhoods, and (4) establishing a broad
array of incentives to encourage responsible businesses and real
estate developments to grow and invest in low income neighborhoods.
( Status: The bill is currently pending in the Assembly Committee
on Banking and Finance.)
AB 737 (Fox), as introduced, would have required GO-Biz to prepare
and submit a proposal for an unmanned aircraft test site to the
Federal Aviation Administration (FAA) on or before May 6, 2013.
( Status : The bill was amended to deal with a different subject
matter.)
8.Prior Related Legislation. AB 2012 (Perez, Chapter 294, Statutes of
2012) transferred the authority for undertaking international trade
and foreign investment activities from BT&H to GO-Biz, including
establishing any international trade and investment office.
SB 460 (Price) of 2011 required the Secretary of BT&H to convene a
statewide business partnership for international trade marketing
and promotion that includes, but is not limited to, representatives
of public airports, land ports of entry, seaports, ocean carriers,
marine terminal operators, air carriers, warehouse operators,
railroads, trucking companies, foreign trade zones, and shippers,
specifically including agricultural exporters, manufacturers,
post-consumer secondary material handlers, and retailers. Required
the partnership to advise the Secretary of the BT&H on what role
the state should play in international trade marketing and
promotion, as specified. ( Status : The bill was held in the
Assembly Committee on Appropriations.)
SCR 33 (Price, Resolution Chapter 60, Statutes of 2011) expressed
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
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California.
AB 1137 (V. Manuel P�rez) of 2011 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 :
The bill was held in Senate Committee on Appropriations in 2012.)
AB 1409 (Jobs, Economic Development and the Economy Committee) of
2011 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.
( Status : The bill was amended to deal with another subject matter
and held in the Senate Committee on Rules in 2012.)
AB 1558 (Assembly Committee on Jobs, 2009) aimed to recodify and
reorganize sections of the Government Code to create one
comprehensive code for the state's international trade activities
and programs. The measure was amended to deal with reorganization
of the state's economic development programs. ( Status : The bill
was held in the Senate Committee on Appropriations in 2010.)
SB 1513 (Romero, Chapter 663, Statutes of 2006) Provides new
authority for BT&H to undertake international trade and investment
activities, and as a condition of that new authority, directs the
development of a comprehensive international trade and investment
policy for California.
9. Suggested Author's Amendment. EB-5 investment can provide
significant resources to local developments, which in turn may
positively impact local communities. Legislative members within
those areas may wish to be notified of the potential EB-5
investments to be made within their own districts.
The Author may wish to amend the bill to require GO-Biz to transmit
a copy of any TEA designation letters to the member of the
California State Assembly and California State Senate who
represents the area designated as a TEA where EB-5 investment will
be made.
On page 3, line 7, insert (c) "In the event that the office issues
a state designation letter, the office shall transmit a copy of the
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state designation letter to the member of the California State
Assembly and California State Senate in whose district the TEA is
located."
On page 3, line 7, strike "(c) (1)" and replace it with "(d)(1)"
On page 3, line 24, strike "(d)" and replace it with "(e)"
On page 3, line 26, strike "(e)" and replace it with "(f)"
(a) The office shall serve as the lead state entity for
overseeing the state's participation with the United States
Citizenship and Immigration Service's EB-5 Investment Program.
(b) The director shall set the terms and conditions for issuing a
state designation letter for target employment areas within the
structure and scope of the EB-5 Investment Program.
(c) In the event that the office issues a state designation letter,
the office shall transmit a copy of the state designation letter to
the member of the California State Assembly and California State
Senate in whose district the TEA is located.
(c) (d) (1) A regional center operating in the state shall provide
the
office with contact information for the center and the geographic
region and industry sector or subsectors recognized by the United
States Citizenship and Immigration Services (USCIS) for that
center.
(2) A regional center operating within this state shall annually
provide information to the office on the number of clients served,
location of investments, and number of direct and indirect jobs
created. The regional center may satisfy this requirement by
submitting a copy of Form I-9224A of the (USCIS) to the office.
(d) (e) The office may provide a support letter for regional center
applications to the (USCIS).
(e) (f) The director shall post on the office's Internet Web site a
list with contact information for each regional center where
information is readily available to the office. The list shall be
updated when new information is made available on at least an
annual basis.
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10.Suggested Technical Amendments.
a) In its current form, the bill refers to the "United States
Citizenship and Immigration Service's EB-5 Investment Program".
Staff recommends the following amendment to correct a drafting
error.
On page 3, line 3, strike "Service's" and replace it with
"Services' "
b) In its current form, the bill refers to "target employment
areas" rather than "targeted employment areas". Staff recommends
the following amendment to correct a drafting error:
On page 3, line 5, strike "target" and replace it with "targeted"
c) In its current form, the bill authorizes a regional center to
provide GO-Biz with certain information and states that the
requirement may be provided by providing GO-Biz with a copy of
"US Citizenship and Immigration Service Form I-9224A". Form
I-924A is the form used to demonstrate a regional center's
continued eligibility for designation as a regional center. Each
designated regional center is required to file a Form I-924A with
USCIS for each fiscal year (October 1 through September 30)
within 90 days after the end of the fiscal year (on or before
December 29) of the calendar year in which the fiscal year ended.
On page 3, line 16, strike "I-9224A" and replace it with "I-924A"
SUPPORT AND OPPOSITION:
Support:
None on file as of June 12, 2013
Opposition:
None on file as of June 12, 2013
Consultant: Sarah Mason
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