BILL ANALYSIS Ó
AB 1230
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Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1230 (Gomez) - As Amended March 24, 2015
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|Policy |Rules |Vote:|11 - 0 |
|Committee: | | | |
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| |Banking and Finance | |11 - 1 |
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Urgency: No State Mandated Local Program: NoReimbursable: No
SUMMARY:
This bill establishes the California Americans with Disabilities
Act Small Business Compliance Financing Authority (Authority) to
provide financing to small businesses to comply with the
requirements of the Americans with Disabilities Act (ADA). In
summary, this bill:
1)Establishes membership of the Authority as the Treasurer,
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Controller, Director of Finance, Director of General Services,
one member appointed by the Senate Rules Committee who
represents persons with disabilities, one member appointed by
the Speaker of the Assembly who represents owners of small
businesses, and one member appointed by the Governor, subject
to senate confirmation, who is a member of the state bar and
has experience with consumer protection laws, each of whom
will have four year terms.
2)Appropriates $50,000,000 from the General Fund for the
purposes of funding the initial activities of the Authority,
and specifies that all expenses of the Authority shall be
payable solely from funds provided to and revenue earned by
the Authority.
3)Authorizes the Authority to make secured and unsecured loans,
and purchase loans of any participating small business in
connection with financing the costs of an ADA compliance
project, subject to a maximum total project cost of $50,000, a
maximum loan term of 60 months, and an interest rate equal to
the Pooled Money Investment Rate at the time the loan is made,
subject to specified limitations and exceptions.
4)Allows the Authority to issue revenue bonds, payable solely
out of revenues of the Authority from financing activities,
subject to standard terms and limitations.
5)Defines "small business" as a California business with fewer
than six full-time employees, with less than $1 million in
total gross annual income from all sources, and that does not
provide overnight accommodations, and requires the Authority
to establish eligibility standards for each small business
applicant based on credit, debt service coverage, financial
impact of ADA compliance project, and related factors.
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6)Allows the Authority to invest any surplus moneys in the Fund
in interest bearing accounts or in the Surplus Money
Investment Fund, as required.
FISCAL EFFECT:
1)One-time GF appropriation of $50 million.
2)Estimated annual costs of approximately $800,000 to the
Treasurer to administer the Authority, initially paid from the
GF appropriation, and eventually paid from revenue generated
by financing activities.
COMMENTS:
1)Purpose. According to the author, hundreds of lawsuits are
filed each year against small businesses for ADA violations,
with more than 40% of these occurring in California. The
author claims many of these lawsuits seek only statutory
penalty damages and not the injunctive relief that would
improve conditions for disabled persons. The author believes
this sort of predatory litigation weakens rights and access
for disabled persons by forcing small businesses to pay for
legal fees and costs instead of improving their properties.
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AB 1230 creates a finance authority to provide affordable
loans to small businesses to finance the alterations and
retrofits necessary to comply with ADA. The bill authorizes
the Authority to issue revenue bonds to finance the loans and
appropriates $50 million from the General Fund to launch the
program, but anticipates the program will be self-sustaining
thereafter, funding costs with interest generated from the
loans.
2)Revenue Bonds for Private Activity. Revenue bonds are an
instrument often used to finance public works projects
undertaken by private developers. Revenue bonds are issued by
a public agency, but are repaid only with the proceeds of the
development activity and are not guaranteed by the state.
Typically, the proceeds of the bonds are lent to developers,
or in the case of this bill, small businesses, and the bonds
are repaid with the interest generated by the loans.
Investors in revenue bonds only have recourse to the
underlying loan assets.
Revenue bonds are considered tax free by the Internal Revenue
Service if the activity financed is publicly-owned or has
public value, allowing the issuer to offer lower interest
rates on the bonds and pass those savings to the borrowers.
As a result, they are attractive for financing activity that
has public value but may not be affordable with private
financing.
There is some risk that the activity being financed in this
bill may not qualify the revenue bonds for tax exempt status,
making them less attractive for financing the small business
loans. The author may wish to consider whether financing the
program solely with the initial $50 million General Fund
appropriation is a safer way to achieve the bill's aims.
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Analysis Prepared by:Joel Tashjian / APPR. / (916)
319-2081