BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1230


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          Date of Hearing:   April 27, 2015


                      ASSEMBLY COMMITTEE ON BANKING AND FINANCE


                               Matthew Dababneh, Chair


          AB 1230  
          (Gomez) - As Amended March 24, 2015


          SUBJECT:  California Americans with Disabilities Act Small  
          Business Compliance Financing Act


          SUMMARY:   Establishes the California Americans with  
          Disabilities Act Small Business Compliance Financing Authority  
          (Authority) to provide loans to small businesses so they can  
          comply with the requirements of the Americans with Disabilities  
          Act (ADA).  Specifically, this bill:  





          1)States that it is the intent of Legislature to establish a  
            self-sustaining program to provide loans to assist small  
            businesses in complying with the ADA. 

             a)   Defines "Small business" as a business located in  
               California that meets all of the following criteria:

               i)     Less than six full-time equivalent employees.

               ii)     Less than one million dollars ($1,000,000) in total  
                 gross annual income from all sources; and,









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               iii)   Does not provide overnight accommodations.

          2)Specifies that that the Authority is composed of the following  
            members:

             a)   The Treasurer, who shall serve as chair;

             b)   The Controller;

             c)   The Director of Finance;

             d)   The Director of General Services;

             e)   One member appointed by Senate Rules Committee who shall  
               have special knowledge or experience with accessibility  
               issues for people with disabilities;

             f)   One member appointed by the Speaker of the Assembly who  
               shall be the owner of a small business or a member of  
               organization that represents the interests of small  
               businesses; and,

             g)   One member appointed by the Governor, subject to Senate  
               confirmation who shall be a member of the State Bar of  
               California with professional experience in consumer  
               protection laws.

          3)Provides that each member of the Authority shall serve a term  
            of four years and at the expiration of their term shall  
            continue to hold office until the successor has been appointed  
            and qualifies to begin serving.  Allows a member of the  
            Authority to be reappointed to a new term.  Limits the  
            application of these specific provisions to appointees of the  
            Senate Committee on Rules, The Assembly Speaker and the  
            Governor.

          4)States that the State Treasurer, in his or her capacity as the  
            chair, shall appoint an executive director who shall not be a  
            member of the Authority and shall receive a compensation fixed  








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            by the Authority.

          5)Requires the executive director or the person designated by  
            the Authority in a resolution to keep a record of proceedings  
            of the Authority and a copy of other records and documents of  
            the Authority.

          6)Provides for a majority vote of the Authority to take any  
            action and that four members shall constitute a quorum.

          7)Allows the Authority to issue revenue bonds.

          8)Specifies that except as expressly provided otherwise by the  
            Authority, revenue bonds shall be payable from any revenues or  
            moneys of the Authority available therefor and not otherwise  
            pledged, subject only to any agreements with the holders of  
            particular bonds or notes pledging any particular revenues or  
            moneys. Negotiable bonds shall be and be deemed to be for all  
            purposes negotiable instruments, notwithstanding that these  
            bonds may be payable from a special fund, subject only to the  
            provisions of these bonds for registration.

          9)Allows the Authority's revenue bonds to be issued as serial  
            bonds or as term bonds, or the Authority, in its discretion,  
            may issue bonds of both types. The issuance of all revenue  
            bonds shall be authorized by resolution of the Authority and  
            shall bear such date or dates, mature at such time or times,  
            not exceeding 40 years from their respective dates, bear  
            interest at such rate or rates, be payable at such time or  
            times, be in such denominations, be in such form, either  
            coupon or registered, carry such registration privileges, be  
            executed in such manner, be payable in lawful money of the  
            United States of America at such place or places, and be  
            subject to such terms of redemption, as the indenture, trust  
            agreement, or resolution relating to these revenue bonds may  
            provide. The Authority's revenue bonds or notes may be sold by  
            the Treasurer at public or private sale, after giving due  
            consideration to the recommendation of the participating small  
            business, for the price or prices and upon the terms and  








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            conditions as the Authority shall determine. The Treasurer may  
            sell these revenue bonds at a price below the par value  
            thereof. However, the discount on any bonds so sold shall not  
            exceed 6 percent of the par value thereof, except in the case  
            of any bonds payable in whole or in part from moneys held  
            under one or more outstanding resolutions or indentures.  
            Pending preparation of the definitive bonds, the Authority may  
            issue interim receipts or certificates or temporary bonds  
            which shall be exchanged for such definitive bonds.

          10)Allows a resolution or resolutions authorizing the issuance  
            of any revenue bonds or any issue of revenue bonds may contain  
            provisions, which shall be a part of the contract with the  
            holders of the bonds to be authorized, as to pledging all or  
            any part of the revenues of a project or any revenue-producing  
            contract or contracts made by the Authority with an  
            individual, partnership, corporation or association or other  
            body, public or private, to secure the payment of the bonds or  
            of a particular issue of bonds.

          11)Provides that neither the members of the Authority nor any  
            person executing the revenue bonds shall be liable personally  
            on the bonds or be subject to any personal liability or  
            accountability by reason of the issuance thereof.

          12)Permits the Authority to purchase its bonds with any moneys  
            available to the Authority for this purpose. The Authority may  
            exchange bonds for its bonds. The Authority may hold, pledge,  
            exchange, cancel, or resell these bonds, subject to and in  
            accordance with its agreements with bondholders.

          13) Provides that revenue bonds issued shall not be deemed to  
            constitute a debt or liability of the state or of a political  
            subdivision thereof or a pledge of the faith and credit of the  
            state or of that political subdivision, other than the  
            Authority, but shall be payable solely from the moneys in the  
            Fund. These bonds shall contain a statement to the effect that  
            neither the State of California nor the Authority shall be  
            obligated to pay the principal of, or the interest thereon,  








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            except from revenues of the Authority, and that neither the  
            faith and credit nor the taxing power of the State of  
            California or of a political subdivision thereof is pledged to  
            the payment of the principal of or the interest on these  
            bonds. The issuance of revenue bonds shall not directly or  
            indirectly or contingently obligate the state or a political  
            subdivision thereof to levy or to pledge a form of taxation  
            whatever therefor or to make an appropriation for their  
            payment.

          14)Specifies that any holder of revenue bonds issued or any of  
            the coupons appertaining thereto, and the trustee or trustees  
            under any indenture or trust agreement, except to the extent  
            the rights herein given may be restricted by any resolution  
            authorizing the issuance of, or any such indenture or trust  
            agreement securing, such bonds, may, either at law or in  
            equity, by suit, action, mandamus or other proceedings,  
            protect and enforce any and all rights under the laws of the  
            state or granted hereunder or under such resolution or  
            indenture or trust agreement, and may enforce and compel the  
            performance of all duties required or by such resolution,  
            indenture, or trust agreement to be performed by the Authority  
            or by any officer, employee or agent thereof.

          15)Establishes the Americans with Disabilities Act Small  
            Business Compliance Financing Authority Fund (Fund) in the  
            state Treasury with all money in the Fund continuously  
            appropriated to the Authority.

          16)Provides that all moneys in the Fund derived from any source  
            shall be held in trust for the security and payment of bonds  
            of the Authority and shall not be used or pledged for any  
            other purpose so long as the bonds are outstanding and unpaid.

          17)Allows the Authority to pledge any or all of the moneys in  
            the Fund as security for payment of the principal of, and  
            interest on, any secured or unsecured loan made as necessary  
            or convenient to the accomplish any purpose of the Authority.









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          18)Provides that the Authority may direct the Treasurer to  
            invest moneys in the Fund that are not required for its  
            current needs, including proceeds from the sale of any bonds,  
            in the eligible securities as specified, or in  
            interest-bearing accounts in state or national banks or other  
            financial institutions having principal offices located in the  
            state. The Authority may alternatively require the transfer of  
            moneys in the Fund to the Surplus Money Investment Fund for  
            investment.

          19)Specifies that all expenses of the Authority incurred shall  
            be payable solely from funds and Authority provided to the  
            Authority.

          20)Requires the Authority to establish financial eligibility  
            standards for each small business seeking financing from the  
            Authority by studying the creditworthiness and earning  
            capacity of the small business, the impact of new debt and the  
            completion of the project on the small business, and the  
            amount of pledged revenues, debt service coverage, and basic  
            security.

          21)Allows the Authority to do any of the following:

             a)   Adopt bylaws for the regulation of its affairs and the  
               conduct of its business;

             b)   Adopt an official seal;

             c)   Sue and be sued in its name;

             d)   Receive and accept gifts, grants, or donations of money  
               from any agency of the federal government, another state  
               entity, a city, county, city and county, any other  
               political subdivision of the state, an individual,  
               association, or corporation;

             e)   Engage private consultants to provide professional and  
               technical services and advice;








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             f)   Determine the location and character of any project to  
               be financed; acquire, construct, enlarge, remodel,  
               renovate, alter, improve, furnish, equip, fund, finance,  
               own, maintain, manage, repair, operate, lease as lessee or  
               lessor, and regulate a project and enter into contracts for  
               any or all of those purposes; enter into contracts for the  
               management and operation of a project or other small  
               business facilities owned by the Authority; designate a  
               participating property manager as its agent to determine  
               the location and character of a project undertaken by that  
               participating small business and, as the agent of the  
               Authority, acquire, construct, enlarge, remodel, renovate,  
               alter, improve, furnish, equip, own, maintain, manage,  
               repair, operate, lease as lessee or lessor, and regulate  
               the same and, as the agent of the Authority, to enter into  
               contracts for any or all of those purposes, including  
               contracts for the management and operation of that project  
               or other small business facilities owned by the Authority;

             g)   Receive and accept from any source loans, contributions,  
               or grants for, or in aid of, the construction, financing,  
               or refinancing of a project or any portion of a project in  
               money, property, labor, or other things of value;

             h)   Make secured or unsecured loans to, or purchase secured  
               or unsecured loans of, any participating small business in  
               connection with financing the costs of a project in  
               accordance with an agreement between the Authority and the  
               participating small business. However, the Authority shall  
               not make any loan to a small business to finance the cost  
               of a project that exceeds the lesser of $50,000 or the  
               total cost of the project, as determined by the  
               participating small business and approved by the Authority;

             i)   Enter into any and all agreements or contracts,  
               including agreements for liquidity or credit enhancement,  
               bond exchange agreements, interest rate swaps or hedges;  
               execute any and all instruments; and do and perform any and  








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               all acts or things necessary, convenient, or desirable for  
               the purposes of the Authority or to carry out any power  
               expressly granted; and

             j)   Invest any moneys held in reserve or sinking funds or  
               any moneys not required for immediate use or disbursement,  
               at the discretion of the Authority, in any obligations  
               authorized by the resolution authorizing the issuance of  
               the bonds secured thereof or authorized by law for the  
               investment of trust funds in the custody of the Treasurer.

          22)Prohibits the Authority from making a loan to a small  
            business with a repayment period of 60 months or longer,  
            except if the project is located on real property that is  
            leased. If the project is located on real property that is  
            leased, the repayment period shall not exceed the term of the  
            lease, excluding any option to extend the lease. 

          23)Specifies that the Authority shall only make a loan that  
            includes an interest rate that equals the pooled money  
            investment rate at the time the loan is approved and is  
            sufficient to repay the reasonable pro rata expenses of the  
            Authority to administer the loan, including, but not limited  
            to, the costs of issuing revenue bonds to fund the loan.

          24)Allows Authority to require any information it deems  
            necessary and prudent prior to providing a loan to a small  
            business and may require any term, condition, security, or  
            repayment provision it deems necessary in the event the  
            Authority chooses to provide a loan.

          25)Provides that all moneys received, whether as proceeds from  
            selling or incurring revenue bonds or as revenues, shall be  
            deemed to be trust funds to be held and applied solely as  
            provided. Until the funds are applied, and notwithstanding any  
            other provision of law, the moneys may be invested in any  
            obligations or securities authorized by resolutions of the  
            Authority authorizing the issuance of the bonds.  Any officer  
            with whom, or any bank or trust company with which, the moneys  








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            are deposited shall act as trustee of the moneys and shall  
            hold and apply the moneys for the purposes hereof, subject to  
            any regulations adopted and the resolution authorizing the  
            issuance of the bonds or the indenture or trust agreement  
            securing the bonds.

          26)Allows the Authority to provide for the issuance of bonds of  
            the Authority for the purpose of redeeming, refunding, or  
            retiring any bonds or any series or issue of bonds then  
            outstanding issued for the benefit of a participating small  
            business to finance or refinance a project, including the  
            payment of any redemption premium thereon and any interest  
            accrued or to accrue to the date of redemption, purchase, or  
            maturity of the bonds.

          27)Provides that the proceeds of any bonds issued for the  
            purpose of refunding of outstanding bonds may, in the  
            discretion of the Authority, be applied to the purchase,  
            redemption prior to maturity, or retirement at maturity of any  
            outstanding bonds on their earliest redemption date or dates,  
            upon their purchase or maturity, or paid to a third person to  
            assume the Authority's obligation or the applicable bond  
            issuer's obligation to make the payments, and may, pending  
            that application, be placed in escrow to be applied to the  
            purchase, retirement at maturity, or redemption on the date or  
            dates determined by the Authority or the participating small  
            business.

          28)Allows any proceeds placed in escrow may, pending their use,  
            be invested and reinvested in obligations or securities  
            authorized by resolutions of the Authority or as determined by  
            the participating small business, payable or maturing at the  
            time or times as are appropriate to assure the prompt payment  
            of the principal, interest, and redemption premium, if any, of  
            the outstanding bonds to be refunded at maturity or redemption  
            of the bonds to be refunded either at their earliest  
            redemption date or dates or any subsequent redemption date or  
            dates or for payment of interest on the refunding bonds on or  
            prior to the final date of redemption or payment of the bonds  








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            to be refunded. After the terms of the escrow have been fully  
            satisfied and carried out, any balance of the proceeds and  
            interest, income and profits, if any, earned or realized on  
            the investments thereof may be returned to the Authority for  
            use by the Authority or the participating small business.

          29)Provides that bonds issued by the Authority are hereby made  
            securities in which all banks, bankers, savings banks, trust  
            companies and other persons carrying on a banking business;  
            all insurance companies, insurance associations and other  
            persons carrying on an insurance business; and all  
            administrators, executors, guardians, trustees and other  
            fiduciaries, and all other persons whatsoever who now are or  
            may hereafter be authorized to invest in bonds or other  
            obligations of the state, may properly and legally invest any  
            funds, including capital belonging to them or within their  
            control; and such bonds, notes or other securities or  
            obligations are hereby made securities which may properly and  
            legally be deposited with and received by any state or  
            municipal officers or agency of the state for any purpose for  
            which the deposit of bonds or other obligations of the state  
            is now or may hereafter be authorized by law.

          30)Specifies that bonds issued by the Authority are tax free.

          31)Appropriates a sum of $50,000,000 from the General Fund to  
            the Fund for the purposes of funding the activities of the  
            Authority.



          EXISTING LAW:  Provides for various financing authorities  
          administered by the state Treasure including:


          1)California Pollution Control Financing Authority (CPCFA):  
            CPCFA is able to facilitate low cost financing to qualified  
            waste and recycling projects. Other projects to control  
            pollution and improve water supply can qualify for tax-exempt  








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            financing as allowed by federal tax law. Examples of recent  
            assistance include projects to purchase clean-air vehicles by  
            waste companies, construct and operate anaerobic digesters,  
            recycle used oil, convert animal waste to clean burning fuel,  
            and develop construction and demolition debris recycling  
            programs.

          2)The California Health Facilities Financing Authority (CHFFA)  
            was established to be the State's vehicle for providing  
            financial assistance to public and non-profit health care  
            providers through loans, grants and tax-exempt bonds.

          3)The California Educational Facilities Authority (CEFA)  
            administers programs that provide tax-exempt, low-cost  
            financing to private, non-profit higher educational  
            facilities.

          4)Additionally, CEFA manages the California Student Loan  
            Authority, which has the authority to issue tax-exempt bonds  
            to fund student loans and to purchase federally reinsured  
            student loans from eligible lending institutions.

          5)California Transportation Financing Authority (CTFA). CTFA is  
            authorized to issue, or approve the issuance of, revenue bonds  
            to finance transportation projects. The CTFA will review  
            proposed projects to ensure they are financially sound, and  
            has the ability to approve tolls as part of the financing  
            plans to repay revenue bonds.

          FISCAL EFFECT:  Provides an appropriation from the General Fund  
          of $50,000,000.


          COMMENTS:  


           Need for the bill.










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             Every year, hundreds of lawsuits are filed against small  
            businesses and "mom and pop stores," claiming they are  
            violating disability regulations. In fact, more than 40  
            percent of the nation's ADA cases are filed in California.  
            Often, these lawsuits are filed by a handful of attorneys,  
            usually in limited jurisdiction, seeking only statutory  
            penalty damages, as opposed to injunctive or remedial relief  
            centered on securing substantial public value for the  
            disabilities community. This type of predatory litigation  
            arguably weakens the rights of the disabilities community by  
            compelling small businesses to spend more money on legal fees  
            and costs than on improving their establishments to improve  
            accessibility.


            Our solution is to create the California Americans with  
            Disabilities, Small Business Compliance Financing Authority, a  
                                                        self-sustaining program to provide affordable loans to assist  
            small businesses finance the costs of facility alterations and  
            retrofits necessary to comply with the ADA.


            AB 1230 would establish a related authority and continuously  
            appropriate fund to finance the activities of the authority,  
            while transferring $50,000,000 from the state's General fund  
            to the California Americans with Disabilities Act Small  
            Business Compliance Financing Authority Fund. This initial  
            investment would be seed money for the loans and repayments  
            will make the program self-sustaining. 


          AB 1230 establishes a two part system to help small businesses  
          become ADA compliant. First, it establishes a direct loan  
          program that would allow loans or the purchase of loans in  
          connection with the financing of projects pursuant to an  
          agreement between the Authority and qualifying businesses.  In  
          order to fund the operations and lending capacity of the  
          Authority, the Authority would be able to issue revenue bonds.   
          Initial costs of setting up this program would be covered via a  








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          transfer of $50 million from the General Fund to the Authority.


           Issues for consideration.


           AB 1230 is a work in progress intended to address an important  
          issue that effects Californian's with disabilities and small  
          businesses.  However as this bill moves forward the author may  
          wish to consider resolving a few issues.


          1)The process for loan repayment is unclear.  Moving forward,  
            the language should specify the repayment processes and loan  
            servicing provisions.

          2)AB 1230 specifies that bonds issued in accordance with the  
            Program would be tax-exempt, yet these bonds may not fit the  
            Internal Revenue Code requirements to receive tax-exempt  
            status.  From Internal Revenue Service Publication 4079:

            Governmental bonds are tax-exempt bonds issued by a state or  
            local government, the proceeds of which are generally used to  
            finance activities or facilities owned, operated, or used by  
            that or another government for its own purposes. This can  
            include financing the building, maintenance, or repair of  
            various types of public infrastructure such as highways,  
            schools, fire stations, libraries, or other types of municipal  
            facilities.  Ultimately, though, a tax-exempt governmental  
            bond is a state or local bond that is neither a private  
            activity bond, as defined in section 141 of the Code, nor an  
            arbitrage bond within the meaning of section 148 of the Code.




          REGISTERED SUPPORT / OPPOSITION:










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          Support


          Disability Rights California




          Opposition


          None on file.




          Analysis Prepared by:Mark Farouk / B. & F. / (916) 319-3081