BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1067| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED AB 1067 Page 2 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, CONTINUED AB 1067 Page 3 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. CONTINUED AB 1067 Page 4 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 CONTINUED AB 1067 Page 5 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. CONTINUED AB 1067 Page 6 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 CONTINUED AB 1067 Page 7 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 **** END **** CONTINUED