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:
AB 1230
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Support
Disability Rights California
Opposition
None on file.
Analysis Prepared by:Mark Farouk / B. & F. / (916) 319-3081