Amended in Senate April 2, 2013

Senate Bill No. 431

Introduced by Senator Price

February 21, 2013

An act begin insert to add Article 6 (commencing with Section 12099) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the Government Code, end insert relating to economic development begin insert , and making an appropriation therefor end insert .

LEGISLATIVE COUNSEL’S DIGEST

SB 431, as amended, Price. begin delete Local government: economic development. end delete begin insert Economic development: California Socioeconomic Development Pods Program. end insert

begin insert Existing law establishes the Governor’s Office of Business and Economic Development, which is administered by a director appointed by the Governor. The office serves the Governor as the lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, and economic growth. end insert Existing law provides for various economic development programs that foster community sustainability and community and economic development initiatives throughout the state.

begin insert

This bill would establish the California Socioeconomic Development Pods Program within the Governor’s Office of Business and Economic Development to encourage the use of social innovative financing, as defined, within blighted areas in the state. The bill would also create the Pod Accelerator Fund, a continuously appropriated fund, within the State Treasury, to receive moneys collected and received by the Governor’s Office of Business and Economic Development for the California Socioeconomic Development Pod Program from gifts, bequests, or donations.

end insert begin delete

This bill would express the intent of the Legislature to enact legislation that would implement a regional pilot program or programs in low income regions of the state that would encourage the growth of a unique industry not common to that region, and retrain the community through social innovative financing to meet the industry’s workforce needs.

end delete

Vote: majority. Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

begin insert Article 6 (commencing with Section 12099) is
added to Chapter 1.6 of Part 2 of Division 3 of Title 2 of the end insert begin insert Government Code end insert begin insert , to read: end insert

begin insert

 

Article begin insert 6. end insert   California Socioeconomic Development Pods
Program

 

begin insert 12099. end insert   

The Legislature finds and declares all of the following:

(a) Job creation is a critical part of improving the economic
well-being of the state’s designated blighted neighborhoods.

(b) Introducing new industries into these blighted areas, such
as high-tech, biomed and genomics, space technology, and
manufacturing industries, and coupling them with social innovative
financing to provide the resources needed to retrain the community
will help to create employment opportunities at an accelerated
rate, which will lead to the state’s improved financial health and
economic competitiveness.

(c) In order to maintain a healthy state economy and to aid
communities, social and economic development must occur
simultaneously.

(d) The socioeconomic development pods are operated in
California through a cooperative agreement between the
Governor’s Office of Business and Economic Development and
initially two geographically distinct regions, all of which are
partnered with public universities, community college districts,
local governments, research institutions, industry, social innovative
financing networks, and traditional financial institutions. The
socioeconomic development pods are California’s premier tool
for facilitating growth and socioeconomic development within
underrepresented and low-income communities in California.
Providing residents of these communities with viable employment
opportunities through the creation and retention of jobs in the
newly developed industry will facilitate a change in demographics
and economic outcomes of the designated neighborhood by
removing the “blighted” stigma permanently.

(e) Social innovative financing is characterized by the following
steps:

(1) A governmental entity contracts with an intermediary to
obtain a service.

(2) Private investors provide the funding for the service to the
intermediary.

(3) The intermediary then distributes the money to the service
provider.

(4) The intermediary issues a “pay for success contract” to the
investor.

(5) The government is responsible for paying investors the
principal and agreed-upon interest earned if and only if the
benchmarks are met.

begin insert 12099.1. end insert   

For purposes of this article, the following terms shall
be defined as follows:

(a) “Blighted community” means an area that was previously
a functioning city, or part of a city, that has fallen into disrepair
and decrepitude. A blighted community may feature
deindustrialization, depopulation or changing population,
economic restructuring, abandoned buildings, high local
unemployment, fragmented families, political disenfranchisement,
crime, and a desolate, inhospitable city landscape.

(b) “Pod” means a specific geographical area designated as
“blighted” or underrepresented, identified and developed into a
pod by ZIP Codes, including or close to a university, research
facility, or community college within the designated ZIP Codes.

(c) “Socioeconomic development” means the process of social
and economic development in a society. Socioeconomic
development is measured with indicators such as gross domestic
product, life expectancy, literacy, and levels of employment.
Socioeconomic development also includes changes in less tangible
factors, such as personal dignity, freedom of association, personal
safety and freedom from fear of physical harm, and the extent of
participation in civil society.

(d) “Socioeconomic development pod” means a hybrid urban
enterprise zone that utilizes some of the incentives of the urban
enterprise zone to encourage certain industries to develop in a
designated blighted area where retraining of the community is
financed by social innovative financing. Social redevelopment and
economic redevelopment occurs simultaneously.

(e) “Social innovative financing” means an approach to
expanding social programs whereby the government pays a service
provider based on the results delivered, as opposed to the activities
performed. Social innovative financing means a partnership in
which philanthropic funders and impact investors take on the
financial risk of scaling up social programs.

begin insert 12099.2. end insert   

(a) The California Socioeconomic Development Pod
Program is hereby created within the office.

(b) The office shall designate socioeconomic development pods
within the state to stimulate partnerships, economic development,
and job creation by leveraging assets to provide stimulation and
incentives for industry, economic development organizations,
business groups, and social innovation funders. The assets may
include, but are not limited to, research parks, technology
incubators, universities, and federal laboratories.

(c) The office shall oversee, coordinate, and provide assistance
to each socioeconomic development pod.

begin insert 12099.3. end insert   

(a) The office shall identify blighted areas suited for
the California Socioeconomic Development Pod Program.

(b) The office shall include, but not be limited to, any of the
following in the designation of a pod:

(1) A statement of purpose.

(2) A signed statement of cooperation and a description of the
roles and relationships of each entity involved in the partnership.

(3) A designated socioeconomic development pod coordinator.

(4) A clear explanation and map conveying the pod’s physical
boundary.

(5) A clearly identified designee to coordinate pod activities.

(6) A clearly identified central location.

(7) Clearly identified benchmarks or milestones with
approximate dates as to when they will be achieved.

(8) A list and brief description of local and regional incentives
and support programs.

(9) A list of the pod’s assets and resources.

(10) A clearly articulated focus area of the pod, including
industry sectors or other targeted areas for development and
growth.

(11) A list of specific resources available to support and guide
training.

(12) Expectations for job development and business creation.

(13) Defined performance standards agreed upon by the
partners involved in the development of the pod.

(14) Evaluation procedures that will be used to measure the
level of achievement for each stated goal.

(15) A plan for sustainability.

begin insert 12099.4. end insert   

(a) A designated pod shall include at least one major
university or research center or institute, one economic
development organization, and at least two of the following:

(1) A business support organization including a workforce
development or training organization, incubator or business
accelerator, chamber of commerce, and networking organization
that supports innovation.

(2) An educational consortium including technology training
representatives.

(3) A social innovative financing network including traditional
investors.

(4) A community-based organization specializing in retraining,
reducing recidivism, or homelessness.

(5) A municipal economic development division or department.

(6) A federal government partner.

begin insert 12099.5. end insert   

(a) A pod may, but is not be limited to doing, any of
the following:

(1) Provide counseling and technical assistance, either by direct
or indirect services, in the areas of retraining or reduction in
recidivism.

(2) Conduct workshops, seminars, or conferences with local
partners including, but not limited to, state universities, state
community colleges, local governments, state and federal service
providers, private industry, workforce investment boards and
agencies, small business service agencies, economic development
organizations, or chambers of commerce.

(3) Facilitate partnerships between innovative startup
businesses, research institutions, and venture capitalists or
financial institutions.

(b) The pod shall, to the extent feasible, do all of the following:

(1) Perform activities in close collaboration with the office as
its primary statewide partner.

(2) Coordinate activities with the Employment Training Panel,
the California Workforce Investment Board, the Office of the
Chancellor of the California Community Colleges, the University
of California, the California State University, and other state
economic and workforce development programs.

begin insert 12099.6. end insert   

(a) Notwithstanding any other law, the office may,
with the consent of the Director of the Department of General
Services, use vacant or underused state-owned or leased property,
or both, that is controlled by the Department of General Services
for purposes including, but not limited to, assisting Pods in the
establishment of incubators and demonstration sites.

(b) State property under this section, when authorized by law,
may be used as matching funds to meet federal funding
requirements.

begin insert 12099.7. end insert   

(a) The office may authorize a business or nonprofit
organization to use a state-owned or leased property, or both,
pursuant to Section 12099.6.

(b) State-owned or leased property under this section shall be
used only in furtherance of this chapter.

begin insert 12099.8. end insert   

The Pod Accelerator Fund is hereby created within
the State Treasury. Subject to the approval of the Department of
Finance, all moneys collected and received by the Governor’s
Office of Business and Economic Development for the California
Socioeconomic Development Pod Program from gifts, bequests,
or donations shall be deposited in the Pod Accelerator Fund.
Notwithstanding Section 13340, the moneys in the fund are
continuously appropriated to the office to be used for the California
Socioeconomic Development Pod Program pursuant to the terms
of the gift, bequest, or donation.

end insert

begin delete

SECTION 1.  

It is the intent of the Legislature to enact
legislation that would implement a regional pilot program or
programs in low income regions of the state that would encourage
the growth of a unique industry not common to that region, and
retrain the community through social innovative financing to meet
the industry’s workforce needs.

end delete