BILL ANALYSIS �
AB 1079
Page A
Date of Hearing: April 23, 2013
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 1079 (Bradford) - As Amended: April 2, 2013
SUBJECT : Enterprise zones: energy management plans
SUMMARY : Authorizes a city, county or a city and county to prepare
one or more energy management plans in order to reduce air emissions
and promote economic development. Further, the bill authorizes the
financing for enterprise zone energy-related improvements through the
issuance of conduit revenue bonds by the state. Specifically, this
bill :
1)Makes findings and declarations, including, but not limited to, the
need for the state to encourage the development of new businesses
and retention of existing businesses within enterprise zones, the
benefits to existing energy utility customers from the addition of
new businesses, the value of greater stability and certainty in the
cost of energy services to businesses, and the optimal position that
investor-owned and publically owned utilities have in facilitating
these objectives.
2)Specifies that if a city, county, or city and county chooses to
prepare an energy management plan it is required to include the
following elements:
a) An electric or natural gas load forecast, as specified;
b) An assessment of the role that distributed generation,
combined with accurately priced utility services, could play in
providing greater rate stability and energy cost certainty, as
specified;
c) A list of recommendations for the enhanced use of
cost-effective energy efficiency and demand-side management in
existing buildings and the inclusion of energy efficiency
measures as part of the development of new buildings;
d) A plan to reduce air emissions for vehicle use within the
district boundaries, as specified;
e) Proposed actions for the development of infrastructure to aid
in the refueling of alternative fuel vehicles, as specified;
AB 1079
Page B
f) Consideration of projects that provide greater certainty of
energy costs over a period of up to 15 years for businesses
developing in the district;
g) Other proposed actions and associated utility services that
may be implemented in connection with an energy management plan;
and
h) Proposed methods of funding the activities in the energy
management plan, including the California Infrastructure and
Economic Development Bank (I-Bank) and the California Alternative
Energy and Advanced Transportation Financing Authority, among
other sources.
3)Specifies that the energy management plan is to be jointly developed
by the city, county, or city and county and one or more of the
following: servicing electoral corporation, gas corporation, local
publicly owned electric utility or rural electric cooperative.
4)Requires expedited review of jointly developed elements of an energy
management plan by the California Public Utilities Commission (PUC),
as specified.
5)Requires the PUC and governing boards of local publically owned
utilities and rural electric cooperatives to encourage electric or
gas corporations to participate in developing, implementing, and
administering viable energy management plans for districts.
6)Requires projects that promote economic development in enterprise
zones pursuant to a specified energy management plan to consider
conduit revenue bond financing through the I-Bank. Specifies that
these projects would be eligible for funding and directs the bank to
remove unnecessary barriers to that funding.
EXISTING LAW
1)Makes findings and declarations, including, but not limited to, the
electric and natural gas utilities having a principal goal in
resource planning and investment to minimize the cost to society of
the reliable energy services, improve the environment, encourage
conservation and energy efficiency, and to encourage the diversity
of energy sources including wind, solar, and geothermal energy.
2)Creates the I-Bank, within the Business, Transportation and Housing
AB 1079
Page C
Agency (BTH), to promote economic revitalization, enable future
development, and encourage a healthy climate for jobs in California.
The I-Bank is authorized to offer a variety of financial
undertakings including, but not limited to, issuance of conduit
revenue bonds for financing economic development facilities.
3)Defines economic development facilities to mean real and personal
property, structures, buildings, equipment, and supporting
components that are used to provide industrial, recreational,
research, commercial, utility, or service enterprise facilities,
community, educational, cultural, or social welfare facilities and
any parts or combinations thereof, and all facilities or
infrastructure necessary or desirable in connection therewith,
including provision for working capital, but shall not include any
housing.
4)Provides for the establishment of 42 enterprise zones to stimulate
business and industrial growth, and create jobs in depressed areas
of the state. Each enterprise zone is authorized for a term of
15-years, unless there is cause for dedesignation.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "Businesses are finding
it more and more difficult to locate and expand in California. Of
the numerous obstacles, the supply and cost of energy has caused a
significant amount of uncertainty, staggering business growth and
the creation of new jobs. In economically distressed areas, these
costs paint an even bleaker picture for business development and
retention.
The California Enterprise Zone program was designed to incentivize
businesses retention and development in economically distressed
areas. Cities and counties can provide tax incentives to make it
easier to do business in these areas. However, they lack the ability
to develop energy management plans, making it difficult to achieve
enterprise zone objectives. AB 1079 recognizes the importance of
reducing energy costs in economically disadvantaged areas by
authorizing a city, county, or city and county, to develop energy
management plans jointly with the serving electric or gas utilities
(including publicly owned utilities). In doing so, this bill will
promote economic development, the addition of new business, and the
retention of existing businesses as well as reduce air emissions in
AB 1079
Page D
that enterprise zone."
2)Framing the Policy Issue : This bill proposes to encourage cities
and counties to adopt comprehensive energy management plans for
enterprise zones by offering an expedited PUC review of projects
that stem from the plan. Enterprise zones are one of California's
few remaining economic incentives. Business located within zone
generally face significant challenges in remaining competitive with
other business across the state, nation and world.
The analysis includes additional information on energy management
plans, how plans could advantage zone businesses, the enterprise
zone program, and related legislation. Suggested amendments are
included in comment 6.
3)Energy Management Plans : Energy management plans are comprehensive
strategies for monitoring, controlling, and conserving energy. This
is primarily accomplished through a systemic analysis of current
energy consumption in order to identify areas of suboptimal energy
usage. The resulting data is used to identify baseline energy usage
metrics and opportunities for cost-effective energy savings measures
through upgrades to high-efficiency equipment and systems, and
promoting efficient behaviors by workers.
Efficiency improvements can be found in many different areas.
Upgrades to existing infrastructure can be substantially
cost-effective because advances to HVAC systems, lighting,
refrigeration systems, motors, and transformers have been
significant enough in recent years that the cost of replacement of
decades-old equipment can be cost-neutral in little time. Modern
design techniques allow for new construction and renovations to be
designed to be highly energy efficient. Strategic purchasing of
energy, avoiding peak hours and choosing an appropriate rate plan
can also yield significant energy savings. Finally, education and
institutional culture are of the utmost importance, as a successful
energy management plan takes the full commitment of the entire
organization.
4)Energy Management Plans and Enterprise Zones : High energy costs are
one of California businesses' top concerns. To the extent that
energy management plans can help local communities identify key
actions to reduce energy consumption, share best conservation
practices, and access financing that would not otherwise be
available, the measure would be of benefit to underserved
communities.
AB 1079
Page E
Energy management plans within enterprise zones will, however,
require unique approaches to planning and stakeholder involvement.
Typically, plans are developed by entities that have some level of
control over the project, building, or even a port district, as is
the case in AB 628 (Gorell and Hall). Enterprise zones, however,
have multiple government and nongovernmental stakeholders, each
having different levels of control over various elements of the
community. This lack of direct control will be a challenge to
setting an agenda, financing, and ensuring commitments are kept over
times. While the bill identifies some funding sources, there are
still repayment requirements which could be difficult for residents
and businesses in low-income areas. Ensuring the benefits that
arise from longer term energy planning will be another challenge. In
developing the plans, it will be necessary to recognize and
appropriately mitigate for infrastructure success results in
gentrification and the displacement of long-time residents and
businesses.
5)The California Enterprise Zone Program : The EZ program and the
other G-TEDAs are among the largest state economic development
programs in California. HCD administers four G-TEDA programs
including programs for the EZs, MEAs, LAMBRAs, and one TTA.
HCD is authorized to designate up to 42 enterprise zones based on a
statutory list of criteria related to poverty and economic
dislocation. The G-TEDA programs are based are based on the
economic principle that targeting significant incentives to lower
income communities allows these communities to more effectively
compete for new businesses and retain existing businesses, resulting
in increased tax revenues, decreased reliance on social services,
and lower public safety costs. Residents and businesses also
directly benefit from these more sustainable economic conditions
through improved neighborhoods, business expansion, and job
creation.
Enterprise zones are located in portions of 54 Assembly Districts
and 32 Senate Districts. Enterprise zones range in size from one
square mile to 70 square miles and in geographic locations ranging
from Eureka and Shasta Valley near the Oregon border to San Diego
and Calexico along the Mexican border.
Under the program, businesses and other entities located within the
area are eligible for a variety of local and state incentives. In
its application, a prospective enterprise zone is required to
AB 1079
Page F
identify specific local government incentives that will be made
available to businesses located in the proposed zone. The local
incentives can, among other things, include writing down the costs
of development, funding related infrastructure improvements,
providing job training to prospective employees, and/or establishing
streamlined processes for obtaining permits.
The state additionally offers a number of incentives, including tax
credits, special tax provisions, priority notification in the sale
of state surplus lands, access to certain Brownfield clean-up
programs, and preferential treatment for state contracts. In
addition to enterprise zones, the state is also authorized to
administer several other G-TEDAs including a TTA, MEA and LAMBRA.
Below is a chart comparing the state tax incentives offered to
businesses located in a G-TEDA.
-------------------------------------------------------------
| Comparison of State Tax Benefits by Targeted Area |
-------------------------------------------------------------
|---------+------+---------+---------+----------+-------------|
| |Hiring|Longer |Sales |Accelerate|Lender |
| | |NOL<1> |and Use |d |Interest |
| |Credit|Carry- |Tax |Depreciati|Deduction |
| | |Forward |Credit |on | |
| | |Period | | | |
|---------+------+---------+---------+----------+-------------|
|Enterpris| X | X | X | X | X |
|e Zone | | | | | |
|---------+------+---------+---------+----------+-------------|
|Manufactu| X | | | | |
|ring | | | | | |
|Enhanceme| | | | | |
|nt Zone | | | | | |
|---------+------+---------+---------+----------+-------------|
|Targeted | X | X | X | X | |
|Tax Area | | | | | |
|---------+------+---------+---------+----------+-------------|
|Local | X | X | X | X | |
|Agency | | | | | |
|Military | | | | | |
|Base | | | | | |
|Recovery | | | | | |
|Area | | | | | |
--------------------------------
<1> NOL= Net Operating Loss
AB 1079
Page G
-------------------------------------------------------------
-------------------------------------------------------------
|Source: Legislative Analyst's Office |
-------------------------------------------------------------
The Franchise Tax Board (FTB) reported that in 2010 - the most
current comprehensive data available - $721.5 million in enterprise
zone business incentives were claimed through corporate and personal
income tax (PIT) returns. Additionally, FTB reported hundreds of
millions in carryover credits have been earned by businesses, but
have not been claimed. Below is a chart that displays the dollar
amount of enterprise zone incentives claimed through each of the tax
incentives.
---------------------------------------------------------------
| Enterprise Zone Tax Incentive Usage* |
| Source: |
|http://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2011_Tabl|
| es_Memo.pdf |
|http://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Reports/2011_Tabl|
| e_2_EZPA.pdf |
| |
|http://www.ftb.ca.gov/aboutFTB/Tax_Statistics/Rev_Est_Exhibits_1212.pdf |
---------------------------------------------------------------
|-------+------+------+------+------+-------+------+------+-----|
| | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 |2011 |
| | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Hiring |$349,1|$362,6|$385,6|$430,9|$462,68|$458,9|$697,9|$476,|
|and |27 |20 |77 |34 | 2 | 12 | 12 |205* |
|Sales | | | | | | | | |
|Tax | | | | | | | | |
|Credit | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|NOL |$72,32|$74,02|$126,1|$207,9|$50,418|$5,588|$6,521| -- |
|Deducti|6 |4 |06 |93 | | | | |
|ons | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Tax |$5,171|$5,966|$11,35|$15,80|$3,433 | $359 | $523 | -- |
|Impact | | |1 |7 | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Net |$432,8|$490,1|$517,3|$520,3|$264,54|$265,6|$335,9| -- |
|Interes|67 |29 |10 |72 | 7 | 83 | 82 | |
|t | | | | | | | | |
AB 1079
Page H
|Deducti| | | | | | | | |
|ons | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Tax |$29,10|$32,39|$34,15|$34,43|$17,282|$12,26|$22,98| -- |
|Impact |3 |5 |6 |8 | | 8 | 6 | |
|-------+------+------+------+------+-------+------+------+-----|
|Busines|$4,387|$4,770|$4,463|$5,136|$5,637 |$4,365|$4,481| -- |
|s | | | | | | | | |
|Expense| | | | | | | | |
| | | | | | | | | |
|Deducti| | | | | | | | |
|ons | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Tax |$222 |$200 |$188 |$197 | $199 | $163 | $159 | -- |
|Impact | | | | | | | | |
|-------+------+------+------+------+-------+------+------+-----|
|Total |$383,6|$401,1|$431,3|$481,3|$483,59|$474,5|$721,5| -- |
|Tax |24 |81 |71 |76 | 6 | 15 | 80 | |
|Impact | | | | | | | | |
---------------------------------------------------------------
---------------------------------------------------------------
| *Data shown in Thousands|
|---------------------------------------------------------------|
| Data Provided by the Franchise Tax Board 4/2013|
| *Estimated based on preliminary data (returns processed |
|through November 11, 2012) |
| |
---------------------------------------------------------------
Across the U.S., 37 other states have G-TEDA type programs.
Economic developers have testified that the G-TEDA programs are
among the state's last remaining marketing tools for attracting new
businesses and investment to California. Others, however, remain
unconvinced and have suggested that this level of tax expenditure
could be better spent elsewhere.
6)Implementing Amendments : This measure calls to the development of
energy management plans for the purpose of supporting the
development and expansion of businesses within the enterprise zones,
creating more certainty in energy costs, and improving the
environment. The following are a list technical and implementing
amendments including:
a) An assessment of current energy consumption by energy source
and user;
AB 1079
Page I
b) Short, mid and long term goals for and project and actions;
c) Require that short- and long-term cost and energy savings
somehow accrue to zone businesses;
d) Identify government and nongovernmental impediments to
implementing projects and actions;
e) Require an environmental justice assessment of the zone and
recommended funding options;
f) Clarify the meaning of prohibiting the PUC from limiting the
role of utilities who jointly developed recommendations; and
g) Engage small business technical assistance providers and
business and industry-related partners in identifying energy
efficiency opportunities, public education activities, and
funding discussions.
7)Related Legislation : The following is a list of related
legislation.
a) AB 628 (Gorell and Hall) Energy Management Plans at Ports :
This bill authorizes a harbor and port district to prepare one or
more energy management plans in order to reduce air emissions and
promote economic development. Further the bill authorizes the
financing for harbor and port district improvements through a
specified state revolving loan fund. Status: Pending in JEDE.
b) AB 1530 (Huffman and V. Manuel P�rez) Clean Manufacturing
Zones : This bill would have enacted the Clean Manufacturing and
Job Creation Incentive Act of 2012, which establishes a process
for local governments to designate clean manufacturing zone,
access tax credits for local manufacturers and have those
manufacturers receive priority on their permit and license
applications. Status: Held by the Assembly Committee on
Appropriations in 2012.
REGISTERED SUPPORT / OPPOSITION :
Support
None received
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090
AB 1079
Page J