BILL ANALYSIS Ó
AB 1533
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Eduardo Garcia, Chair
AB 1533
(Committee on Jobs, Economic Development, and the Economy) As
Introduced March 24, 2015
SUBJECT: Infrastructure financing
SUMMARY: Makes a number of technical changes to the definition
section of the code relating to the Infrastructure and Economic
Development Bank (I-Bank). In addition, the bill makes conforming
changes to the operation and programs of the small business financial
development corporations consistent with the Governor's Reorganization
Plan 2 (GRP 2) and other legislation from 2013.
EXISTING LAW:
1)Establishes the I-Bank within the Governor's Office of Business and
Economic Development (GO-Biz) and authorizes it to undertake a
variety of infrastructure related financial activities including,
but not limited to, the administration of a revolving loan fund,
oversight of the Small Business Finance Center, and the issuance of
tax-exempt and taxable revenue bonds.
2)Establishes the Small Business Finance Center within the I-Bank for
the purpose of assisting businesses seeking capital resources not
otherwise available in the private markets including:
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a) Loan guarantees and other credit enhancements;
b) Direct loans and other debt instruments;
c) Disaster loan guarantees; and
d) Surety bond guarantees.
FISCAL EFFECT: Unknown
POLICY ISSUE FRAME:
This is the I-Bank code maintenance bill from the Assembly Committee
on Jobs, Economic Development, and the Economy. The bill contains
technical and conforming changes to prior legislative actions.
COMMENTS:
1)Updating Definitions: Existing law includes an extended list of
definitions for the operation of the I-Bank including definitions
related to the types of:
Financial actions the I-Bank is authorized to undertake
including bond purchase agreements, financial assistance, and
loan agreement
Projects the I-Bank is authorized to finance including
economic development facilities, education facilities and public
development facilities.
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AB 1533 reorganizes the placement of certain definitions, clarifies
some definitions, and updates cross references within the I-Bank's
definition code sections.
1)Reorganization Update: Over a decade ago, California received $2
million from the federal Economic Development Agency through an
Economic Adjustment Assistance Grant, which funds
economically-distressed communities, and the Sudden and Severe
Economic Dislocation Grant Program, which provides capital to
businesses in economically-distressed areas.
In 2008 the federal funds were deposited in the Small Business
Expansion Fund and the Business, Transportation, and Housing Agency
(BTH) was given oversight responsibility. GRP 2, submitted to the
Legislature in 2012, eliminated BTH. The technical clean-up bills
to GRP2 transferred the California Small Business Expansion Fund
(including the federal funds) to the I-Bank and the program
authority to oversee the federal funds to I-Bank's parent agency,
GO-Biz.
AB 1533 proposes a more streamlined organization structure for the
federal funds by authorizing the I-Bank to oversee both the money
and program implementation responsibility. According to the Author,
this shift is recommended because the:
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I-Bank already operates under the purview of GO-Biz, meaning
GO-Biz will still have oversight
I-Bank already has authority to provide direct loans and
guarantees to businesses seeking capital, meaning they are well
equipped to appropriately expend the funds
I-Bank already has primary responsibility for the funds in the
California Small Business Expansion Fund
1)Infrastructure and the Economy: World class infrastructure plays a
key role in business attraction, as multinational companies
consistently rank the quality of infrastructure among their top four
criteria in making investment decisions. Research shows that U.S.
infrastructure has been in decline while infrastructure in other
countries is rapidly increasing. The 2012-13 Global Competitiveness
Report by the World Economic Forum places U.S. infrastructure 25th
in the world, down from 23rd in 2010 and 7th in 2000.
California's 2013 Infrastructure Report Card by the American Society
for Civil Engineers estimates that California's annual unfunded
infrastructure investment is $65 billion. The impact of this lack
of investment is compounded by the substantial new infrastructure
investments made in other states and nations, including the
expansion of the Panama Canal.
Since the 1980's infrastructure to support economic development
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activities has focused on supporting specific areas of "industry
clusters" where multiple firms and organizations working in the
same, or similar, fields draw on each other's discoveries, products,
and in some cases workforces leading to a highly focused and
productive innovation center with prodigious output. Silicon Valley
and Hollywood are archetypical examples, specializing in electronics
and cinema, respectively.
Globalization is changing the economic paradigm, which makes the
linkages between regional economies more relevant and comparative
advantages are increasingly based on the quality and efficiency of
the technologies that link the location with other areas of the
world.
2)Background on the I-Bank: The I-Bank was established in 1994 to
promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. Housed within
GO-Biz, it is governed by a five-member board of directors comprised
of the Director of GO-Biz (chair), the State Treasurer, the Director
Department of Finance, the Transportation Agency, and a Governor's
appointee. The day-to-day operations of the I-Bank are directed by
the Executive Director who is an appointee of the Governor and is
subject to confirmation by the California State Senate. Currently,
the I-Bank has authority for 25 staff members.
The I-Bank does not receive any ongoing General Fund support, rather
it is financed through fees, interest income and other revenues
derived from its public and private sector financing activities.
According to its Comprehensive Annual Financial Report for the
fiscal year ended June 2013, its programs continued to provide
revenues sufficient to cover operating expenses.
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The I-Bank administers three programs: (1) the Infrastructure State
Revolving Fund which provides direct low-cost financing to public
agencies for a variety of public infrastructure projects; (2) the
Conduit Bond Program which provides financing for manufacturing
companies, public benefit nonprofit organizations, public agencies
and other eligible entities; and (3) the Small Business Finance
Center which helps small businesses access private financing through
loan guarantees, direct loans, and performance bond guarantees.
There is no commitment of I-Bank or state funds for any of the
conduit revenue bonds. Even in the case of default, the state is
not liable.
Since its creation in 1994, the I-Bank has loaned, financed, or
participated in over $34 billion in infrastructure and economic
expansion projects. This includes over $400 million to local and
state agencies, developing a high-level of expertise in the
financing of public infrastructure. The I-Bank also serves as the
state's only general purpose financing authority with broad
statutory powers to issue revenue bonds, make loans, and provide
guarantees. Over $33 billion in conduit revenue bonds have been
issued by the I-Bank since 2000.
3)Related Legislation: Below is a list of related legislation from
current and previous legislative sessions:
a) AB 311 (V. Manuel Pérez) I-Bank California-Mexico Border
Assistance: This bill would have expanded the role of the I-Bank
to include facilitating infrastructure and economic development
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financing activities within the California and Mexico border
region. The bill would have also made related technical changes
to the definitions of eligible projects. Status: Died in the
Assembly Committee on Appropriations, 2014.
b) AB 1247 (Medina and Bocanegra) Small Business Finance Center:
This bill establishes the California Small Business Finance
Center at the I-Bank, within the Governor's Office of Business
and Economic Development, and transfers the authority to
administer the small business loan guarantee program and other
related programs to the I-Bank. Status: Signed by the Governor,
Chapter 537, Statutes of 2013.
REGISTERED SUPPORT / OPPOSITION:
Support Opposition
None received None received
Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090
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