BILL ANALYSIS                                                                                                                                                                                                    Ó







         ----------------------------------------------------------------------- 
        |Hearing Date:June 16, 2014         |Bill No:AB                         |
        |                                   |2749                               |
         ----------------------------------------------------------------------- 


                      SENATE COMMITTEE ON BUSINESS, PROFESSIONS 
                               AND ECONOMIC DEVELOPMENT
                              Senator Ted W. Lieu, Chair
                                           

                Bill No:        AB 2749  Author:Assembly Committee on 
                                           Jobs, Economic Development 
                                                 and the Economy
                    As Amended:April 10, 2014          Fiscal:  Yes

        
        SUBJECT:  Economic development.
        
        SUMMARY:  Makes technical changes to the Government Code relating to  
        the transfer of economic development related programs from the  
        Business, Transportation and Housing Agency (BTH) to the Governor's  
        Office of Business and Economic Development (GO-Biz).         

        Existing law:
        
        1)Places the definitions for specified terms relating to economic  
          development within part 4.7 of division 3 of title 2 of the  
          California Government Code, concerning Business and Tourism  
          (Government Code (GC) § 13997.2).  This is reflective of the  
          Business, Transportation and Housing Agency (BTH)'s previous role as  
          administrator of economic development programs within the executive  
          branch of the California government. 

        2)Establishes GO-Biz within the Governor's Office 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.  (GC §§ 12096  
          - 12098.5)

        3)Designates the Director of GO-Biz as the official state  
          administrator of the Economic Adjustment Assistance Grant and the  
          Small Business Expansion Fund.  (GC §13997.7)





                                                                        AB 2749
                                                                         Page 2




        4)Establishes the California Small Business Finance Center within the  
          California Infrastructure and Investment Bank (I-Bank) for the  
          purpose of overseeing programs locally delivered through a network  
          of small business financial development corporations (FDCs). (GC §  
          63088 et. seq.)

        This bill:

        1)Makes technical corrections to the transfer of the administration of  
          the Economic Adjustment Assistance Grant and the Sudden and Severe  
          Economic Dislocation Grant Program from the BTH to GO-Biz. 

        2)Renumbers within statute the following definitions (no changes have  
          been made to the definitions):


         ------------------------------------------------------------------- 
        |   a)     Local Economic      |  b)  Financial Intermediary        |
        |     Development Organization |                                    |
        |------------------------------+------------------------------------|
        |   c)     Regional Economic   |  d)  Regional Economic Development |
        |     Development Organization |    Corporation                     |
        |------------------------------+------------------------------------|
        |   e)     Regional Economic   |  f)  Small Businesses              |
        |     Development Organization |                                    |
        |------------------------------+------------------------------------|
        |   g)     Economic Development |  h)  Community Development         |
        |     Corporation              |                                    |
        |------------------------------+------------------------------------|
        |   i)     Triple Bottom Line  |  j)  Financial Institution Capital |
        |------------------------------+------------------------------------|
        |   aa)     Economic Development|  bb) Community Development         |
        |                              |    Intermediary                    |
        |------------------------------+------------------------------------|
        |   cc)     Local Economic     |  dd) Microbusiness Lender          |
        |     Development              |                                    |
        |------------------------------+------------------------------------|
        |   ee)     Emerging Domestic  |  ff) California Council on Science |
        |     Market                   |and Technology                      |
        |                              |                                    |
         ------------------------------------------------------------------- 

        3)Modifies the annual reporting requirements of the I-Bank including:  
          consolidating requirements; making submittal of the report to the  
          Legislature rather than the Joint Legislative Audit Committee;  





                                                                        AB 2749
                                                                         Page 3



          requiring that aggregate-level reporting be provided on revolving  
          loan fund activities rather than the current requirement to report,  
          in detail, on every application received during the reporting  
          period; and requiring the annual report be posted on its website.

        4)Removes the requirement for the Small Business Advocate to consult  
          with the Department of Transportation on the Small and Emerging  
          Manager Contractor Technical Assistance Program, a program that  
          sunsetted on January 1, 2013.

        5)Makes other technical and conforming changes to the Government Code.  
           

        
        FISCAL EFFECT:  This bill is keyed "fiscal" by Legislative Counsel.   
        According to the Assembly Committee on Appropriations analysis dated  
        May 7, 2014, this bill will result in minor and absorbable costs to  
        GO-Biz.

        
        COMMENTS:
        
        1. Purpose.  The  Author  is the Sponsor of this measure.  According to  
           the Author, this measure makes a number of technical changes to  
           conform existing law with the previously enacted legislation.        
            

        2. Background. 
           
                a)        Governor's Office of Business and Economic  
                  Development (GO-Biz).  In February 
              2010, the Little Hoover Commission undertook a review of the  
              state's economic and workforce development programs.  In its  
              final report, Making up for Lost Ground:  Creating a Governor's  
              Office of Economic Development, it analyzed the status and  
              effectiveness of current programs since the 2003 demise of the  
              Technology, Trade and Commerce 

              Agency (TTCA) and recommended the creation of a new governmental  
              entity to fill the void left by the dismantled agency.

              The report called for a single entity that would promote greater  
              economic development, foster job creation, serve as a policy  
              advisor and deliver specific services (i.e., permitting, tax,  
              regulatory, and other information) directly to the California  
              business community.  In April 2010, Governor Schwarzenegger  





                                                                        AB 2749
                                                                         Page 4



              issued Executive Order S-05-10 as a means to operationalize the  
              report recommendations including the creation of the Governor's  
              Office of Economic Development (GOED).

              In October 2011, the Governor signed AB 29 (cited and described  
              below), which effectively codified GOED and changed its name to  
              GO-Biz, effective January 1, 2012.  Since its inception, the  
              office has served over 3,000 businesses, 95% of which are small.  
               The most frequent types of assistance include help with permit  
              streamlining, starting a businesses, relocation and expansion of  
              businesses, and regulatory challenges. 

              According to GO-Biz, the Office of Small Business Advocate  
              (OSBA) advocates the causes of small business and provides small  
              business owners with the information needed to succeed in the  
              California marketplace.  OSBA staff provides assistance to the  
              state's small business community on issues ranging from  
              regulations to procurement.  Depending on the issue, staff can  
              refer small businesses to appropriate contacts in State  
              government, business, and service organizations.  OSBA staff  
              also serves on various State interagency working groups and task  
              forces to represent small business interests in state  
              legislation, policy, and procedures.

              In March 2012, the Governor initiated a reorganization process  
              to realign the state's administrative structure.  Key changes  
              include dismantling of the Business, Transportation and Housing  
              Agency (BTH) and the shifting of a number of key programs and  
              services to GO-Biz including the California Travel and Tourism  
              Commission, Small Business Loan Guarantee Program, the  
              California Film Commission, the Film California First Program  
              and the Infrastructure and Economic Development Bank (I-Bank).  

             
            b)     Economic Adjustment Assistance Grant.  The federal Economic  
              Adjustment Assistance Grant program was initially designated to  
              be administered through the Technology, Trade, and Commerce  
              Agency, which was eliminated in 2003.  Although the State  
              Controller retained the federal money, no state entity had the  
              legal authority to actually use the money.  

              In 2008, BTH was designated as the state administrator of the  
              funds and the moneys were transferred to the California  
              Expansion Fund where they could be used under contract through  
              the state's network of FDCs.  Code clean-up to the Governor's  
              GRP 2 transferred the authority to use the federal funds and the  





                                                                        AB 2749
                                                                         Page 5



              responsibility to oversee the FDC contracts from BTH to GO-Biz.   
              However, legislation enacted in 2013 (  AB 1247  (Medina), Chapter  
              537, Statutes of 2013), transferred the FDC programs to the  
              I-Bank, a unit within GO-Biz.  This bill would give the  
              executive director of the I-Bank the authority to administer the  
              federal funds through the FDCs.


           c)  I-Bank.  The I-Bank was established in 1994 to promote economic  
           revitalization, enable 
              future development, and encourage a healthy climate for jobs in  
              California.  Housed within GO-Biz, it is governed by a  
              five-member board of directors comprised of the Director of  
              GO-biz (Chair), State Treasurer, Director Department of Finance,  
              Transportation Agency, and a Governor's appointee.  The  
              day-to-day operations of the I-Bank are directed by the  
              Executive Director who is an appointee of the Governor and is  
              subject to confirmation by the California State Senate.   
              Currently, the I-Bank has authority for 25 staff members.
          
              The I-Bank does not receive any ongoing General Fund support,  
              rather it is financed through fees, interest income, and other  
              revenues derived from its public and private sector financing  
              activities.  According to its Comprehensive Annual Financial  
              Report for the fiscal year ended June 2013, its programs  
              continued to provide revenues sufficient to cover operating  
              expenses.  

              The I-Bank administers three programs:  (1) the Infrastructure  
              State Revolving Fund which provides direct low-cost financing to  
              public agencies for a variety of public infrastructure projects;  
              (2) the Conduit Bond Program which provides financing for  
              manufacturing companies, public benefit nonprofit organizations,  
              public agencies and other eligible entities; and (3) the Small  
              Business Finance Center which helps small businesses access  
              private financing through loan guarantees, direct loans, and  
              performance bond guarantees.  There is no commitment of I-Bank  
              or state funds for any of the conduit revenue bonds.  Even in  
              the case of default, the state is not liable.

              Since its creation in 1994, the I-Bank has loaned, financed, or  
              participated in over $344 billion in infrastructure and economic  
              expansion projects.  This includes over $400 million to local  
              and state agencies; developing a high-level of expertise in the  
              financing of public infrastructure.  The I-Bank also serves as  
              the state's only general purpose financing authority with broad  





                                                                        AB 2749
                                                                         Page 6



              statutory powers to issue revenue bonds, make loans, and provide  
              guarantees.  Over $33 billion in conduit revenue bonds have been  
              issued by the I-Bank since 2000.  
             
        3. Prior Related Legislation.   SB 820  (Committee on Governmental  
           Organization, Chapter 353, Statutes of 2013) enacted the statutory  
           changes to reflect the assignment and reorganization of the  
           functions of state government as outlined in the Governor's  
           Reorganization Plan No. 2 of 2012 (GRP 2), effective on July 3,  
           2012, and operative on July 1, 2013.
           
            AB 1247  (Medina, Chapter 537, Statutes of 2013) established the  
           California Small Business Finance Center at the I-Bank, within  
           GO-Biz, and transferred the authority to administer the small  
           business loan guarantee program and other related programs to the  
           I-Bank. 

            AB 1317  (Frazer, Chapter 352, Statutes of 2013) also enacted  
           statutory changes to reflect the assignment and reorganization of  
           the functions of state government as outlined in the Governor's  
           Reorganization Plan No. 2 of 2012 (GRP 2), effective on July 3,  
           2012, and operative on July 1, 2013.

            AB 29  (John A. Pérez, Chapter 475, Statutes of 2011) established  
           GO-Biz within the Governor's Office for the purpose of serving as  
           the lead entity for economic strategy and marketing of California  
           on issues relating to business development, private sector  
           investment and economic growth.

            AB 192  (Assembly Budget Committee, Chapter 312, Statutes of 2007)  
           made the necessary statutory changes to allow the transfer of $4.3  
           million in federal funds held by the State Controller's Office to  
           the Business Transportation and Housing Agency in order to  
           reactivate the Sudden and Severe Economic Dislocation Grant Program  
           as was approved in the budget. 

        
        SUPPORT AND OPPOSITION:
        
         Support:   None on file as of June 11, 2014.


         Opposition:   None on file as of June 11, 2014.


        Consultant:Sarah Mason





                                                                        AB 2749
                                                                         Page 7