BILL ANALYSIS Ó AB 1230 Page 1 ASSEMBLY THIRD READING AB 1230 (Gomez) As Amended May 28, 2015 2/3 vote ----------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+--------------------| |Banking |11-1 |Dababneh, Travis |Hadley | | | |Allen, Achadjian, | | | | |Brown, Chau, Gatto, | | | | |Kim, Low, Perea, | | | | |Ridley-Thomas, Mark | | | | |Stone | | | | | | | |----------------+------+--------------------+--------------------| |Appropriations |17-0 |Gomez, Bigelow, | | | | |Bonta, Calderon, | | | | |Chang, Daly, | | | | |Eggman, Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, | | | | |Gordon, Holden, | | | | |Jones, Quirk, | | | | |Rendon, Wagner, | | | | |Weber, Wood | | | | | | | | | | | | AB 1230 Page 2 ----------------------------------------------------------------- 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 $1 million in total gross annual income from all sources; and, 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 AB 1230 Page 3 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 Rules Committee, 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 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)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. AB 1230 Page 4 8)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. 9)Provides that the Authority may direct the Treasurer to invest moneys in the Fund that are not required for its current needs, 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. 10)Specifies that all expenses of the Authority incurred shall be payable solely from funds and Authority provided to the Authority. 11)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. 12)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; AB 1230 Page 5 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; 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 AB 1230 Page 6 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, interest rate swaps or hedges; execute any and all instruments; and do and perform any and 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 law for the investment of trust funds in the custody of the Treasurer. 13)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. 14)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. 15)Allows the Authority to require any information it deems AB 1230 Page 7 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. 16)Appropriates a sum of $50 million from the General Fund (GF) to the Fund for the purposes of funding the activities of the Authority. EXISTING LAW: Provides for various financing authorities administered by the state Treasury 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 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. AB 1230 Page 8 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: According to the Assembly Appropriations Committee: 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: Need for the bill. 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 AB 1230 Page 9 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. This bill establishes a system to help small businesses become ADA compliant. 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. Initial costs of setting up this program would be covered via a transfer of $50 million from the General Fund to the Authority. Recent amendments. When this bill was heard in Assembly Banking and Finance Committee on April 27, 2015 the committee analysis noted several issues that needed repair concerning the bond issuance authority created via this bill. The amendments adopted May 28, 2015, have addressed those concerns. AB 1230 Page 10 Analysis Prepared by: Mark Farouk / B. & F. / (916) 319-3081 FN: 0000794