BILL ANALYSIS Ó
Bill No: AB
1247
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
AB 1247 Author: Medina
As Amended: June 18, 2013
Hearing Date: June 25, 2013
Consultant: Paul Donahue
SUBJECT
Business investments: Small Business Financial Assistance
Act of 2013
DESCRIPTION
This bill transfers the administration of the small
business financial development corporation (FDC) managed
programs from the Business, Transportation and Housing
Agency (BTH) to the California Infrastructure and Economic
Development Bank (I-Bank) within the Governor's Office of
Business and Economic Development (GO-Biz). Specifically,
this bill :
1)Repeals and recasts the statues related to the
establishment, operations and oversight of the FDC
managed programs from BTH to the I-Bank, which is
relocated to GO-Biz. The GRP 2 directed the transfer of
the I-Bank and the FDC administered programs to GO-Biz.
2)Repeals and recasts the statutes related to the small
business finance programs administered by the FDCs from
the Corporations Code, as overseen by BTH, to the
Government Code, as overseen by the I-Bank. This includes
the small business loan guarantee, disaster loan
guarantee, surety bond guarantee, and the authority to
make direct loans.
3)Revises the title of the person responsible for managing
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the guarantee and direct loan programs from "director" to
"executive director;"
4)Transfers the California Small Business Board from a
free-standing board at BTH to an advisory board to the
I-Bank board of directors, the I-Bank executive director,
and the guarantee and direct loan program manager. The
bill and expands the membership of the California Small
Business Board by two FDC representatives.
5)Modifies the designation and appeals process by placing
the I-Bank Board as the final authority rather than the
California Small Business Board.
6)Deletes the requirement for the program manager to
approve amendments to a corporation's articles of
incorporation. The program manager still receives a copy
and has the authority to take action should the amendment
cause harm to the program.
7)Expands the list of eligible financial institutions and
entities, that an FDC may offer a loan guarantee to
include credit unions, community development financial
institutions and microlenders.
8)Shifts finance programs from regulations to directives
and requirements adopted by the I-Bank Board at a public
meeting. This is consistent with other I-Bank activities.
9)Specifies that any prior regulations adopted by BTH will
remain in effect until the I-Bank Board adopts directives
and requirements. In no case, however, can this extension
go beyond June 1, 2015.
10)Clarifies that a corporation that has been suspended
from the state's access to capital programs remains a
nonprofit benefit corporation. This is consistent with
existing law. The bill also adds technical amendments
from the Secretary of State that require an FDC that has
been terminated from administering the programs to amend
its articles of incorporation to reflect its new
diminished status.
11)Exempts the annual contract between the state and the
FDCs from the state's general procurement process. Under
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the statute, the FDCs serve as a pre-selected pool of
local nonprofits to administer the finance programs;
12)Authorizes the I-Bank to make investment decisions about
Expansion Fund moneys, which is consistent with existing
I-Bank policy. Currently, the program manager has to get
DOF approval.
13)Authorizes the I-Bank to adopt other financial products
related to debt instruments and credit enhancements. This
is consistent with existing I-Bank operational practice.
14)Places similar program conditions for direct loans and
disaster guarantees as with loan guarantees. Existing law
is silent.
15)Clarifies that FDCs may make direct loans, regardless of
the geographic area and reduces the minimum loan
guarantee coverage from 90% to 80%, which is consistent
with federal guarantee products. The bill also removes
specific statutorily set loan limit to a limit set by the
I-Bank board through adopted directives and requirements.
16)Adds the FDC disaster finance programs to the general
list of small business assistance programs the Governor
can activate in case of disaster; and
17)Makes other conforming and technical changes in the
definitions and administrative functions of the finance
programs within the I-Bank.
BACKGROUND
1)Purpose : This bill transfers the administration of the
small business financial development corporation (FDC)
managed programs from the Business, Transportation and
Housing Agency (BTH) to the California Infrastructure and
Economic Development Bank (I-Bank) within the Governor's
Office of Business and Economic Development (GO-Biz). The
bill also separates the FDC-managed programs from the
FDC- incorporation provisions to more effectively
leverage the programs within the state's existing network
of programs.
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2)Small Business Loan Guarantee Program : The SBLGP enables
a small business to obtain a term loan or line of credit
when it cannot otherwise qualify for a loan on its own.
The state, working through 11 FDCs, offers direct loans
or loan guarantees that a qualifying small business
borrower could not otherwise obtain.
3)Governor's Office of Business and Economic Development :
GO-Biz was established through the enactment of AB 29 (J.
Pérez), Chapter 475, Statutes of 2011, to serve as the
primary executive agency responsible for economic
development and job creation efforts. GO-Biz offers a
range of services to business owners including:
attraction, retention and expansion services, site
selection, permit streamlining, small business
assistance, international trade development and
assistance with the government requirements. Prior to the
creation of GO-Biz, economic development programs were
administered through a number of state entities including
BTH.
4)Governor's Reorganization Plan 2 (GRP 2) : In 2012,
Governor Brown proposed, with the approval of the
Legislature, a comprehensive reorganization plan (GRP 2)
of state agencies and programs. Among other changes, the
GRP 2 reduces the number of state agencies by eliminating
five agencies and merging their responsibilities into
three new agencies: Government Operations; Business,
Consumer Services and Housing; and Transportation.
PRIOR/RELATED LEGISLATION
AB 780 (Bocanegra), 2013-2014 Session. Would provide
additional administrative funds for the eleven financial
development corporations (FDCs) through the state who serve
as the regional vehicles for California's Small Business
Loan Guarantee Program. (Pending in Senate B.P. & E.D.
Committee)
AB 2671 (V. Manuel Perez), Chapter 648, Statutes of 2012.
Extended the sunset date for the authority of Financial
Development Corporations (FDCs) to secure loans with a
minimum loss reserve of 20% to January 1, 2018. In 2007,
the leverage ratio was increased from 4 to 1, to 5 to 1.
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SB 727 (Berryhill), 2011-2012 Session. Would have removed
the requirement that public works financed under the
Bergeson-Peace Infrastructure and Economic Development Bank
Act comply with the prevailing wage requirements. (Held in
Senate Labor and Industrial Relations Committee)
AB 29 (J. Perez), Chapter 475, Statutes of 2011. Created
"GO Biz" within the Governor's Office for the purpose of
serving as the lead entity for economic strategy and
marketing California on issues relating to business
development, private sector investment and economic growth.
AB 1047 (V. Manuel Perez), 2009-2010 Session. Would have
established a new program within the State Infrastructure
Bank (I-Bank) that would use bond proceeds to assist small
and rural communities to obtain bond financing for
infrastructure projects. The technical support could
include drafting of strategic plans, writing grants,
applying for public and private loans and obtaining funding
for infrastructure projects. (Held in Assembly
Appropriations)
SUPPORT:
None on file
OPPOSE:
None on file
TRIPLE REFERRAL: Senate Governance and Finance Committee &
Senate Banking and Financial Institutions Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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