BILL ANALYSIS Ó
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|Hearing Date:April 29, 2013 |Bill No:SB |
| |431 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: SB 431Author:Price
As Amended:April 2, 2013 Fiscal: Yes
SUBJECT: Economic development: California Socioeconomic Development
Pods Program.
SUMMARY: Establishes the California Socioeconomic Development Pods
Program within the Governor's Office of Business and Economic
Development (GO-Biz) 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.
Existing law:
1)Federal law establishes the Social Innovation Funds (SIF) grant
program to make grants on a competitive basis to eligible entities.
(42 USCS § 12653k)
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. (Government
Code (GC) §§ 12096 - 12098.5)
3)Establishes processes and accountability measures for GO-Biz to
accept private monies to fund, establish and operate international
trade offices. (GC § 13997)
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4)Authorizes under the Bergeson-Peace Infrastructure and Economic
Development Bank Act (Act) the creation of the Infrastructure and
Economic Development Bank (I-Bank) within Business, Transportation
and Housing Agency (BTH), to promote economic revitalization, enable
future development, and encourage a healthy climate for jobs in
California. (Government Code (GC) §§ 63000 - 63087)
5)Provides legislative intent in the Enterprise Zone (EZ) Act that the
health, safety, and welfare of the people of California depend upon
the development, stability, and expansion of private business,
industry, and commerce, and there are certain areas within the state
that are economically depressed due to a lack of investment in the
private sector. Therefore, it is declared to be the purpose of this
chapter to stimulate business and industrial growth in the depressed
areas of the state by relaxing regulatory controls that impede
private investment. Further, that it is in the economic interest of
the state to have one strong, combined, and business-friendly
incentive program to help attract business and industry to the
state, to help retain and expand existing state business and
industry, and to create increased job opportunities for all
Californians. (GC § 7071)
6)Establishes geographically-targeted economic development area
programs (G-TEDAs) including: the EZ Program with a maximum of 42
EZs, each designated for an initial 15-year period by the Department
of Housing and Community Development (HCD); the Local Agency
Military Base Realignment Area (LAMBRA) Program with a maximum of
eight LAMBRAs, each designated for an eight-year period by HCD and
limits designation to one LAMBRA per geographical region of the
state; the Manufacturing Enhancement Area (MEA) Program with a
maximum of two MEAs, each designated for a 14-year period by HCD and
limits MEA designation to impoverished areas along the
California-Mexico border; and the Targeted Tax Area (TTA) Program,
administered by HCD, within the County of Tulare for a 15-year
period.
This bill:
1)Establishes the California Socioeconomic Development Pods Program
(Pods Program) within GOBiz.
2)Makes various findings and declarations about the Pods Program
including:
a) Job creation is a critical part of improving the economic
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well-being of the state's designated blighted neighborhoods.
b) Introducing new industries to these blighted areas and
coupling them with socially innovative financing to provide
resources to retrain the community will help create employment
opportunities at an accelerated rate and lead to the state's
improved financial health.
c) Social and economic development must occur simultaneously in
order to maintain a healthy state economy.
d) Socioeconomic development pods are operated in California
through a cooperative agreement between GO-Biz and two
geographically distinct regions and are the state'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 will
facilitate a change in demographics and economic outcomes by
removing the "blighted" stigma permanently.
e) Social innovative financing is characterized by a number of
steps, including: contracting by a governmental entity with an
intermediary to obtain a service; funding for the service to the
intermediary by private investors; distribution of the money to
the service provider by the intermediary; and, payment of
investors by the government in principal and agreed-upon
interested earned if benchmarks are met.
3)Defines "blighted community" as an area that was previously a
functioning city, or part of a city, that has fallen into disrepair
and decrepitude and 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.
4)Defines "Pod" as 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.
5)Defines "socioeconomic development" as the process of social and
economic development in a society, measured with indicators such as
gross domestic product, life expectancy, literacy, and levels of
employment. States that socioeconomic development also includes
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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.
6)Defines "socioeconomic development pod" as 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. States that social redevelopment and
economic redevelopment occurs simultaneously.
7)Defines "social innovative financing" as an approach to expanding
social programs whereby the government pays a service provider based
on the results delivered, as opposed to the activities performed.
States that social innovative financing means a partnership in which
philanthropic funders and impact investors take on the financial
risk of scaling up social programs.
8)Creates the California Socioeconomic Development Pod Program (Pod
Program) within GO-Biz. Provides that GO-Biz 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. States that assets may include, but are not limited to,
research parks, technology incubators, universities, and federal
laboratories. Requires GO-Biz to oversee, coordinate, and provide
assistance to each socioeconomic development pod (Pod).
9)Requires GO-Biz to identify blighted areas suited for the Pod
Program, using any of the following to designate a Pod:
a) A statement of purpose.
b) A signed statement of cooperation and a description of the
roles and relationships of each entity involved in the
partnership.
c) A designated socioeconomic development pod coordinator.
d) A clear explanation and map conveying the pod's physical
boundary.
e) A clearly identified designee to coordinate pod activities.
f) A clearly identified central location.
g) Clearly identified benchmarks or milestones with approximate
dates as to when they will be achieved.
h) A list and brief description of local and regional incentives
and support programs.
i) A list of the pod's assets and resources.
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j) A clearly articulated focus area of the pod, including
industry sectors or other targeted areas for development and
growth.
aa) A list of specific resources available to support and guide
training.
bb) Expectations for job development and business creation.
cc) Defined performance standards agreed upon by the partners
involved in the development of the pod.
dd) Evaluation procedures that will be used to measure the level
of achievement for each stated goal.
ee) A plan for sustainability.
10)Provides that 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:
a) A business support organization including a workforce
development or training organization, incubator or business
accelerator, chamber of commerce, and networking organization
that supports innovation.
b) An educational consortium including technology training
representatives.
c) A social innovative financing network including traditional
investors.
d) A community-based organization specializing in retraining,
reducing recidivism, or homelessness.
e) A municipal economic development division or department.
f) A federal government partner.
1) Provides that a Pod may:
a) Provide counseling and technical assistance, either by direct
or indirect services, in the areas of retraining or reduction in
recidivism.
b) 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.
c) Facilitate partnerships between innovative startup businesses,
research institutions, and venture capitalists or financial
institutions.
12)Provides that a Pod shall, to the extent feasible, perform
activities in close collaboration with GO-Biz as its primary
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statewide partner and coordinate activities with the Employment
Training Panel (ETP), the California Workforce Investment Board
(CWIB), the Office of the Chancellor of the California Community
Colleges (CCC), the University of California (UC), the California
State University (CSU), and other state economic and workforce
development programs.
13)Authorizes GO-Biz, with the consent of the Director of the
Department of General Services (DGS), to use vacant or underused
state-owned or leased property to assist Pods in the establishment
of incubators and demonstration sites. States that state property
under this section, when authorized by law, may be used as matching
funds to meet federal funding requirements. States that GO-Biz may
authorize a business or nonprofit organization to use a state-owned
or leased property, or both.
14)Creates the Pod Accelerator Fund within the State Treasury.
Provides that, subject to the approval of the Department of Finance,
all moneys collected and received by GO-Biz for the Pod Program from
gifts, bequests, or donations shall be deposited in the Pod
Accelerator Fund.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author . According to the
Author, there is no existing law that allows GO-Biz or any other
agency to utilize social innovative financing as a tool for
economic development. The Author states that this bill will allow
the State of California to develop and implement the Pod program
for use in blighted communities, allowing government agencies to
access social innovative financing as a tool for social
redevelopment. According to the Author, "California is currently
facing numerous intractable public policy problems that affect the
quality of life of its residents and will have a devastating impact
on the future of the Golden State. We have been dormant in
generating solutions that would reduce homelessness, improve
delivery of critical health care and reform our criminal justice
system, and inaction has only exacerbated these problems. It's
essential that we create private-public partnerships to leverage
our limited resources."
2. Background. Studies show that in California, poverty is primarily
concentrated among communities of color which have a statistical
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correlation with lower levels of educational attainment and access
to basic health care. This creates a significant socioeconomic
disparity within our society, which has led to two separate and
unequal societies. Research by the California Endowment shows that
more than half of the Latinos in this country and nearly 65% of
African Americans live in neighborhoods of color, generally
low-income communities.
According to information provided by the Author, economically
distressed communities typically lack jobs, good schools, and safe
and well-maintained housing. These areas often have high crime
rates, gang violence, and unemployment. Moreover, they do not have
the sufficient social support to eliminate or overcome these
obstacles on their own. Narrow focused programs are generally
ineffective because there is an array of complex issues that drive
poverty. Comprehensive programs, however, are expensive and can be
difficult to measure impacts. Yet, leaving poverty unaddressed
results in its expansion, creating higher unemployment levels and
increasing disparity within the broader community.
Research shows that effective solutions to poverty must be deep,
long-term and center on policies which provide economic
opportunities and individual and neighborhood empowerment.
3. Examples of Social Innovation Funds and Financing. According to
the White House Office of Social Innovation and Civic
Participation, the federal Social Innovation Fund (SIF) is a
program of the Corporation for National and Community Service
(CNCS) and combines public and private resources with the intention
of growing "promising community-based solutions that have evidence
of results in any of three priority areas: economic opportunity,
healthy futures, and youth development."
The SIF was established in 2009 as part of the bipartisan Edward M.
Kennedy Serve America Act and makes grants to experienced
intermediaries well-positioned within communities to identify the
most promising programs and guide them towards greater impact and
stronger evidence of success. These grants typically range from
$1-5 million annually for up to 5 years. The intermediaries then
match the federal funds dollar-for-dollar and hold open
competitions to identify the most promising nonprofit organizations
working in low-income communities that have evidence of compelling
results. Once selected, these nonprofits must also match the funds
they receive, and participate in rigorous evaluations of the impact
of their programs.
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In addition to funding, SIF grantees receive significant technical
assistance from CNCS to support implementation of their innovative
programs. Participation in the SIF gives grant-makers greater
visibility and plugs them into a national network of funders and
nonprofits that are committed to fostering social innovation to
improve lives in low-income communities throughout the U.S.
The SIF launched its first competition in April of 2010 and
selected 11 intermediary grantees. These 2010 grantees have made
awards to more than 150 subgrantees serving low-income communities
across the country. The SIF began its second competition in
February of 2011, and selected five additional grantees. The SIF
initiated its third competition in February of 2012, and will
engage between three and five new grantees. As of February 2012,
$95 million in federal funds have been awarded, and $250 million in
additional private funds have been leveraged through the program.
Over 150 private philanthropic funders have partnered with the SIF
including private foundations, community foundations, corporations,
and individual donors. More than 100 cities in 33 states and the
District of Columbia are being directly impacted by the SIF.
Organizations in cities throughout California have received
subgrants from the SIF.
Santa Monica, California was recently selected as a winner of the
Mayor's Challenge sponsored by Bloomberg Philanthropies and Mayor
Michael Bloomberg of New York. The city's proposal, "The Wellbeing
Project" (Project), was based on a premise that cities currently
have no holistic way to measure their success. Under the Project,
Santa Monica aims to become the first city in the nation to measure
and actively improve what really matters to every person in our
community; wellbeing. The city will create a sophisticated single
metric focused on economic vitality, social relationships, health,
education/care, and local environment; a way to measure wellbeing
which will enable the city to manage for better outcomes in these
key areas.
4. 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 and recommended the creation
of a new governmental entity to fill the void left by the
dismantled agency.
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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 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.
Among other programs, GO-Biz administers the Innovation Hub (iHub)
program in partnership with the statewide network of Small Business
Development Centers. There are currently 12 regional iHubs located
throughout the state. The iHub program is designed to improve the
state's national and global competitiveness by stimulating
partnerships, economic development, and job creation around
specific research clusters. Key assets and partners of the
initiative include technology incubators, research parks,
universities, federal laboratories, economic development
organizations, business groups, and venture capitalists.
Another key initiative of GO-Biz is the "strike teams" which can be
mobilized to help attract and/or retain specific businesses.
Strike teams are especially well suited to engage with major
employers and have been successfully activated to assist Bayer
Healthcare, Jazz Semiconductor, and Baxter Pharmaceutical to locate
and/or expand in California.
5. Related Legislation. SB 9 (Price) establishes the Office of Social
Innovation within GO-Biz to establish partnerships with government
agencies, private investors, nonprofit organizations, and
for-profit service providers to facilitate the use of social impact
bonds (SIBs), as defined, to address social services needs.to
explore the use of social innovative financing in the State of
California. This bill is pending in the Senate Committee on
Governance and Finance.
AB 250 (Holden and V. Manuel Pérez) codifies and expands the iHub
Program at GO-Biz for the purpose of stimulating economic
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development and job creation through the coordination of federal,
state and local innovation-supporting resources. This bill is
pending in the Assembly Committee on Appropriations.
AB 495 (Campos) establishes the California Community Investment
Initiative within GO-Biz tasked with creating an inventory of
low-income neighborhoods, public interments, state and local
programs, and sources of public-sector finance, coordinate
public-sector financial investment and public programs to assist
low-income communities to become business, development, and
investment ready, develop criteria for determining the type of
economically, socially, and environmentally responsible businesses
and real estate developments to assist in starting-up, locating,
and growing in low-income neighborhoods, establish a broad array of
incentives to encourage responsible businesses and real estate
developments to grow in low income neighborhoods and to encourage
investment in low income neighborhoods. The bill is pending in the
Assembly Committee on Banking and Finance.
AB 1178 (Bocanegra) establishes the California Promise Neighborhood
Initiative to develop a system of 40 California promise
neighborhoods throughout the state to support children's
development. The bill is pending in the Assembly Committee on
Education.
AB 653 (V. Manuel Perez) establishes the California Innovation and
Jobs Act, which increases the maximum value of the research and
development credit, eliminates state sales tax on manufacturing
equipment, authorizes a new tax credit for private investments in
postsecondary institutions, and codifies iHub Program. The bill is
pending in the Assembly Committee on Jobs, Economic Development and
the Economy.
AB 2506 (V. Manuel Pérez) of 2012 would have increased the state
R&D credit from 15% to 40%, eliminated sales tax on manufacturing
equipment, authorized a new tax credit for private investments in
postsecondary institutions, required state agencies to submit
regulatory actions to the Legislature 60 days prior to submitting
those actions to the Office of the Administrative Law, and
authorized the creation of regional innovation boards. The bill
was held in the Assembly Committee on Business, Professions, and
Consumer Protection.
AB 1072 (Fuentes) of 2011 would have established the California
Promise Neighborhoods Initiative in the then-Governor's Office of
Economic Development (GOED) with the purpose of maximizing
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collective efforts within a community to improve the health,
safety, education and economic development of each neighborhood.
The bill directed GOED to work with various agencies and
departments and gives cities, counties and school districts, in a
promise neighborhood, priority for certain programs, grants and
funding. The bill was held in the Senate Committee on
Appropriations.
AB 1233 (V. Manuel Perez) of 2011 aimed to modernize California's
economic development activities and promotes the state's
competitiveness by requiring an integrated economic and workforce
development strategy consistent with the needs of all Californians.
The bill was held in the Assembly Committee on Appropriations.
SB 1259 (DeSaulnier) of 2010, would have created the Economic
Development and Job Creation Agency and require the appointed
Secretary of the Agency to develop a reorganization plan, propose a
structure for the agency, and perform specified duties relating to
economic development and job creation. The bill was held in the
Senate Committee on Appropriations.
AB 2287 (Bass) of 2010, would have established the Office of
Economic Development, which includes the California Business
Investment Services Program, within the then-Governor's Economic
Development Office. The bill was held in the Assembly Committee on
Jobs, Economic Development and the Economy.
AB 699 (Portantino and V. Manuel Pérez) of 2009 would have updated
the requirements for the development of a State Economic
Development Strategy, especially in the areas of technology and
innovation, and required it be submitted to the Legislature by May
1, 2010. The bill was held in the Assembly Committee on
Appropriations.
AB 1558 (V. Manuel Perez) of 2009, would have reorganized the
state's economic development efforts by eliminating the duties of
the Secretary of Business, Transportation and Housing and transfer
modified duties to a Director and Executive Director of a renamed
Economic and Employment Development Department, which would succeed
to some of the duties of the existing Employment Development
Department. The bill was held by the Senate Committee on
Appropriations.
SB 732 (Steinberg, Chapter 729, Statutes of 2008), creates the
Strategic Growth Council and requires the Council to take certain
actions with regard to coordinating specified programs of member
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state agencies, and requires the Council to manage and award grants
and loans to support the planning and development of sustainable
communities.
AB 1721 (Arambula, Chapter 631, Statutes of 2007) designates BT&H
as the state's primary agency responsible for the facilitation of
economic development activities. The bill also established a fund
for receiving federal, state, local, and private economic
development moneys that can be used to further state economic
development activities.
NOTE : Double-referral to Governance and Finance Committee second.
SUPPORT AND OPPOSITION:
Support:
None on file as of April 23, 2013
Opposition:
None on file as of April 23, 2013
Consultant:Sarah Mason