BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 1067
          Author:   Medina (D), et al.
          Amended:  6/19/13 in Senate
          Vote:     21

           
           SENATE BUSINESS, PROF. & ECON. DEVELOP. COMM.  :  10-0, 6/17/13
          AYES:  Lieu, Emmerson, Block, Corbett, Galgiani, Hernandez,  
            Hill, Padilla, Wyland, Yee

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  73-0, 5/9/13 - See last page for vote


           SUBJECT  :    Economic development:  foreign trade

           SOURCE  :     Author


           DIGEST  :    This bill establishes the California Foreign  
          Investment Program within the Governors Office of Business and  
          Economic Development (GO-Biz) as the lead entity for overseeing  
          the states participation in the United States (U.S.) Citizenship  
          Immigration Services' EB-5 Investment Program (EB-5 Program).

           ANALYSIS  :    

          Existing law:

          1. Establishes the enterprise zone (EZ) program, administered by  
             the Department of Housing and Community Development to  
             stimulate business and industrial growth and create jobs in  
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             depressed areas of the state. 

          2. Defines a "targeted employment area" (TEA) for the purposes  
             of an EZ, 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 EZ application or the most recent census data  
             available at the time the TEA is designated to determine that  
             eligibility.  Specifies that the purpose of a TEA is to  
             encourage businesses in an EZ to hire eligible local  
             residents.  A TEA may include, but is not required to  
             include, all or part of the boundaries of the EZ.  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.  

          3. Establishes GO-Biz 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.  

          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 (ITI)  
             program attracting employment-producing direct foreign  
             investment to the state and provides support for California  
             businesses in accessing international markets and increasing  
             exports.  

          5. Authorizes GO-Biz to establish ITI offices outside of the  
             U.S. according to certain requirements.  

          6. Requires GO-Biz to prepare an ITI strategy and provide a  
             report to the Legislature on or before February 1, 2014,  
             updated once every five years that includes (a) policy goals,  

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             objectives and recommendations necessary to implement a  
             comprehensive ITI 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; and (f) an  
             organizational structure for state administration of ITI  
             policies, programs and services.  

          7. Requires the Director of GO-Biz to prepare the following:  

             A.    A budget for the ITI program and a separately stated  
                budget for each ITI office, with specified information.

             B.    A strategy and business plan for the ITI 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 ITI program  
                that addresses the performance of the program and each  
                ITI office.  

          8. Provides that the State Controller shall not allocate any  
             state funds to GO-Biz for ITI activities unless the strategy  
             for ITI has been submitted to the Legislature by May 1, 2014.  
              

          9. Establishes processes and accountability measures for GO-Biz  
             to accept private monies to fund, establish and operate  
             international trade offices.  

          10.Establishes the EB-5 visa category Section 203(b)(5) of the  
             Immigration and Nationality Act.

          This bill establishes the California Foreign Investment Program  
          within GO-Biz.  Specifically, this bill:

          1. Provides that GO-Biz shall serve as the lead state entity for  
             overseeing the state's participation with the U.S.  

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             Citizenship and Immigration Services' (USCIS) 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  
             TEAs, and requires GO-Biz if a state designation letter is  
             issued to transmit a copy of the letter to members of the  
             Legislature whose district is located in the TEA. 

          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 the USCIS for that center; and 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-924A.

          4. Authorizes GO-Biz to provide a support letter for regional  
             center applications to the EB-5 Program; and requires GO-Biz  
             to post a list of contact information for each regional  
             center applicant that receives a support letter on its Web  
             site 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.

           Background
           
           EB-5 Program  .  The EB-5 visa category, which was created by  
          Congress in 1990, is available to immigrants seeking to enter  
          the U. S. 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 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  

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          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/her investment will benefit the U.S.  
          economy and create full-time employment for at least 10  
          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.  

           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 Employment Development Department has been  
          delegated the authority by the state to designate the cities,  
          counties, 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.  


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          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% 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 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.  

           Comments
           
          According to the author's office, California leads the nation in  
          attracting and receiving foreign direct investment.  The  
          author's office 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's office, in 2010, foreign firms employed almost six  

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          million Americans and owned over 33,000 individual business  
          establishments.  The author's office 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's office 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.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           ASSEMBLY FLOOR  :  73-0, 5/9/13
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown,  
            Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Cooley,  
            Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,  
            Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray,  
            Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer,  
            Levine, Linder, Lowenthal, Maienschein, Medina, Melendez,  
            Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande,  
            Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk,  
            Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres,  
            Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, John A.  
            Pérez
          NO VOTE RECORDED:  Conway, Grove, Holden, Logue, Mansoor,  
            Waldron, Vacancy

          MW:d  7/1/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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