BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1393 |Hearing |7/8/15 |
| | |Date: | |
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|Author: |Burke |Tax Levy: |No |
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|Version: |5/18/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
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California Pollution Control Financing Authority
Amends CPCFA's statutes to implement new state lending
programs
Background and Existing Law
Founded in 1972, and housed in the State Treasurer's Office, the
California Pollution Control Financing Authority (CPCFA)
provides financial assistance for participating parties seeking
to build pollution control facilities. CPCFA's board is
comprised of the State Treasurer, the State Controller, and the
Director of Finance. CPCFA administers the following programs:
The "Cal Reuse" program to assist in the rejuvenation
and development of brownfield sites by issuing low-interest
loans up to $500,000,
The Rate Reduction Bond Program, which allows joint
powers agencies to issue bonds to finance publicly, owned
utility projects secured by utility property (AB 850,
Nazarian, 2013).
Conduit bond programs, where by CPCFA issues bonds, and
lends the proceeds to both large and small businesses to
acquire, construct, or install pollution control, waste
disposal, and resource recovery facilities. In 2014, CPCFA
approved eight applications to issue $260 million in bonds.
The California Capital Access Program, (CalCAP), which
insures loans made by participating financial institutions
to small businesses. CalCAP is a form of loan portfolio
insurance which may provide up to 100% coverage on certain
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loan defaults. Each lender is entirely liable for its loan
losses; however, those losses can be reimbursed from each
lender's loan loss reserve account, but the lender takes
losses once their specific reserve account is depleted.
The loss reserve accounts are built through contributions
made by the borrower, lender, and CPCFA AB 1496, Peace,
1993).
Historically, CalCAP was funded from small business assistance
fees collected from its bond issuance, but the Legislature
appropriated $6 million from the State General Fund to the
program in 2010. CalCAP loans can be used to buy land,
construct or renovate buildings, purchase equipment, and fund
other projects and working capital. Maximum loan amounts are
$2.5 million. In recent years, CalCAP has grown significantly
due to federal funding under the State Small Business Credit
Initiative: CPCFA received $27.8 million in 2011, the same
amount again in 2013, and expect a third transfer of the same
amount in 2015, half of the total allocated to the state (the
other half went to the Governor's Office of Business and
Economic Development). In 2014, CalCAP recruited 10 new lenders
to participate in the various programs, and 43 lenders enrolled
loans. CalCAP lenders enrolled 3,491 loans totaling $247 million
in 2014, an increase of about 8 percent in the number of loans
and 20 percent in the amount of money loaned compared with 2013.
CPCFA also administers a loan loss reserve program funded by ARB
to assist owners and operators of small fleets of heavy-duty
diesel trucks achieve early compliance with California Air
Resources Board's (ARB's) Statewide Truck and Bus Regulation
designed to reduce diesel particulate matter emission.
Additionally, the California Energy Commission selected CPCFA to
provide financial incentives to both lenders and borrowers to
purchase and install electric vehicle charging stations at
California businesses. The program provides rebates to
borrowers who participate, and may provide lenders with up to
100% coverage on certain loan defaults.
Currently, CPCFA is authorized to issue financial assistance to
participating parties, including loan loss reserves. With the
expansion of CalCAP funding, as well as the AB and CEC programs,
CPCFA wants to amend its statutes to reflect its growing role in
implementing small business credit programs, and provide
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flexibility should other agencies want them to help implement
future programs.
Proposed Law
Assembly Bill 1393 amends CPCFA's statutes to state that it can
provide financial assistance in the form of loans, grants,
credit enhancement, and any other incentive to leverage private
capital. AB 1393 also allows CPCFA to provide loan loss
reserves to any person, company, corporation, public agency,
partnership, or firm engaged in activities in furtherance of a
public or quasi-public entity's policy objectives in the state
that require financing. As part of its participation with
financial institutions to provide loan loss reserves, the
measure allows CPCFA to adopt the policies of those financial
institutions, which it must adopt publicly. The measure
requires a report to the Legislature each year regarding its
alternative financing programs. The bill also makes technical
and conforming changes.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "CalCAP has
been providing financial tools to allow for lending to consumers
who wouldn't qualify for traditional loans. To date, the
financial assistance has been limited to small businesses -
CalCAP partners with different state agencies to provide the
financial mechanism for certain projects like the Air Resources
Board heavy duty truck program, or the Energy Commission's
electric vehicle charging stations. AB 1393 allows CalCAP to
also provide financial assistance for individuals - as programs
like the Charge Ahead initiative or other programs designed to
help individuals purchase cleaner vehicles, CalCAP can make it
more attractive for financial institutions to provide the loans.
2. Alternatives . For the most part, AB 1393 makes technical
changes to update CPCFA statutes. However, the measure does
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seek to provide the legal clarity needed to carry out yet to be
implemented lending programs for individuals sponsored by other
state agencies, such as electric and alternative fuel vehicles
for low-income persons. While the authority can't lend moneys
out of the General Fund, and has very low loss rates, the
measure broadens the population of parties CPCFA can assist to
include anyone. Additionally, the measure states that its
financial assistance can include "other incentives designed to
leverage private capital." CPCFA is governed by a three-member
board consisting of the Treasurer, Controller, and Director of
Finance, and meets and approves any policy changes or projects
publicly; however, changing statute to allow CPCFA to provide
credit to individuals expands its role. While the measure
contains a reporting requirement, and CPCFA is subject to review
in the budget process, the measure doesn't contain a sunset
clause on this additional authority should the Legislature want
to more comprehensively assess CPCFA's expanded role in the
future. The Committee may wish to consider whether AB 1393
should include a sunset clause
3. My name is . CPCFA has evolved from an authority in the
Treasurer's Office for issuing conduit revenue bonds to finance
pollution control facilities into the state's small business
credit provider, a role it partially shares with the
Infrastructure and Economic Development Bank. While CPCFA is
still in the bond business, it now finances a diverse array of
small businesses under several programs, and could assist
individuals should AB 1393 enacted. As such, should its name
still include pollution control? The Committee may wish to
consider CPCFA's changing role, and whether its name should
change too.
Assembly Actions
Assembly Floor 76-0
Assembly Appropriations 15-0
Assembly Jobs, Economic, Development and the Economy 8-0
Assembly Banking and Finance 11-0
Support and
Opposition
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Support : State Treasurer John Chiang, Valley Clean Air Now.
Opposition Unknown
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