BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                       CONSENT


          Bill No:  AB 1247
          Author:   Medina (D)
          Amended:  8/12/13 in Senate
          Vote:     27 - Urgency

           
           SENATE GOVERNMENTAL ORGANIZATION COMMITTEE  :  11-0, 6/25/13
          AYES:  Wright, Nielsen, Berryhill, Calderon, Cannella, Correa,  
            De León, Galgiani, Hernandez, Lieu, Padilla

           SENATE GOVERNANCE & FINANCE COMMITTEE  :  7-0, 7/3/13
          AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  70-0, 5/16/13 (Consent) - See last page for  
            vote


           SUBJECT  :    Business investments:  Small Business Financial  
          Assistance Act
                      of 2013

           SOURCE  :     Author


           DIGEST  :    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).

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           ANALYSIS  :    

          Existing law:

          1. Creates the California Small Business Board as an advisory  
             board to the I-Bank Board; and specifies the duties and  
             membership of the Board.

          2. Creates the California Small Business Expansion Fund solely  
             for the purpose of receiving state, federal, or local  
             government monies, and other public or private money to make  
             loans, guarantees, and restricted investments. 

          3. Authorizes the formation of small business FDCs to grant  
             loans from, or guarantee loans made by a financial  
             institution or financial company, as defined, against, monies  
             awarded to the corporation from the expansion fund for the  
             purpose of stimulating small business development. 

          4. Authorizes a director designated by the Secretary of the BTH  
             to perform specified duties under the California Small  
             Business FDC Law.  

          This bill transfers the administration of the small business FDC  
          managed programs from the BTH to the I-Bank within GO-Biz.   
          Specifically, this bill: 

          1. Repeals and recasts the statutes 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 Governor's Reorganization Plan No. 2 (GRP 2)  
             directs 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 the  
             guarantee and direct loan programs from "director" to  
             "executive director."  

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          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.  Modifies and  
             expands the membership of the California Small Business Board  
             by two FDC representatives and two additional Governor  
             appointments.

          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.   
             Adds technical changes requiring 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 the  
             statute, the FDCs serve as a pre-selected pool of local  

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             nonprofits to administer the finance programs.

          12.Authorizes the I-Bank to make investment decisions about  
             Expansion Fund monies, which is consistent with existing  
             I-Bank policy.  Currently, the program manager has to get the  
             Department of Finance 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. 

          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.  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. 

          17.Expands the mandatory criteria the program manager uses to  
             allocate or transfer monies between the FDC trust fund  
             accounts by allowing the consideration of the number of jobs  
             created or retained by the FDC's financial activities and the  
             number and amount of other financial activities.  Existing  
             law only provides for the mandatory consideration of the  
             FDC's default rate and the number and amount of loans, loan  
             guarantees, and surety bond guarantee activity of the FDC.   
             The program manager may include other information in making  
             the performance based allocation.

          18.Allows an exception to the preclusion against mixing separate  
             FDC trust fund accounts when the program manager has  
             designated a shared trust fund account with multiple FDCs.

          19.Makes other conforming and technical changes in the  
             definitions and administrative functions of the finance  
             programs within the I-Bank. 


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           Background
           
           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. 

           GO-Biz  .  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.

           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.
           
           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  Yes



           ASSEMBLY FLOOR  :  70-0, 5/16/13
          AYES:  Achadjian, Alejo, Ammiano, Atkins, Bigelow, Bloom,  
            Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dahle, Daly, Dickinson, Donnelly, Fong, Fox, Frazier, Garcia,  
            Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall, Harkey,  
            Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Logue,  
            Lowenthal, Maienschein, Mansoor, Medina, Mitchell, Mullin,  
            Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea,  
            V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner,  
            Ting, Torres, Wagner, Waldron, Weber, Wieckowski, Wilk,  

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                                                                    AB 1247
                                                                     Page  
          6

            Williams, Yamada, John A. Pérez
          NO VOTE RECORDED:  Allen, Buchanan, Eggman, Beth Gaines, Grove,  
            Holden, Melendez, Morrell, Stone, Vacancy


          MW:d  8/13/13   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  NONE RECEIVED

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