BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 1533 Hearing Date: July 6,
2015
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|Author: |Committee on Jobs, Economic Development, and the |
| |Economy |
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|Version: |May 13, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Infrastructure financing.
SUMMARY: Revises the definition of economic development
facilities and port facilities for purposes of the
Bergeson-Peace Infrastructure and Economic Development Bank Act
and authorizes the California Infrastructure and Economic
Development Bank to administer and expend certain federal funds.
Existing law:
1)Establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and economic
growth. GO-Biz also serves as the administrative oversight
for the California Business Investment Service and the Office
of the Small Business Advocate. (Government Code (GC) §§
12096 - 12098.5)
2)Requires the Director of GO-Biz to administer the Economic
Adjustment Assistance Grant (Assistance Grant) funded through
the United States Economic Development Administration under
Title IX of the Public Works and Economic Development Act of
1965 (Grant No. 07-19-02709 and 07-19-2709.1). (GC § 12098.7)
3)Enacts the California Small Business Financial Development
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Corporation Law (FDC Law) with the intention of promoting the
economic development of small businesses by making available
capital, general management assistance, and other resources,
including loan services, personnel, and business education to
small business entrepreneurs, including women and minority
owned businesses, for the purpose of promoting the health,
safety, and social welfare of the citizens of California, to
eliminate unemployment of the economically disadvantaged of
the state, and to stimulate economic development, employment,
minority group, women, and disabled persons entrepreneurship.
(Corporations Code §§ 14000-14024)
4)Authorizes under the Bergeson-Peace Infrastructure and
Economic Development Bank Act (Act) the creation of the
Infrastructure and Economic Development Bank
(I-Bank) within GO-Biz, to promote economic revitalization,
enable future development, and encourage a healthy climate for
jobs in California.
(GC § 63000 et seq.)
5)Defines "Economic development facilities" for purposes of the
Act as real and personal property, structures, buildings,
equipment, and supporting components thereof that are used to
provide industrial, recreational, research, commercial,
utility, or service enterprise facilities, community,
educational, cultural, or social welfare facilities and any
parts or combinations thereof, and all facilities or
infrastructure necessary or desirable in connection therewith,
including provision for working capital, but shall not include
any housing. (GC § 63010 (g))
6)Defines "Executive director" as the Executive Director (ED) of
the I-Bank.
(GC § 63010 (i))
7)Defines "Port facilities" for purposes of the Act as docks,
harbors, ports of entry, piers, ships, small boat harbors and
marinas, and any other facilities, additions, or improvements
in connection therewith. (GC § 63010 (q) (7))
8)Enacts the Small Business Financial Assistance Act of 2013 and
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
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including:
a) Loan guarantees and other credit enhancements;
b) Direct loans and other debt instruments;
c) Disaster loan guarantees; and
d) Surety bond guarantees. (GC §§63088-63089.98)
9)Establishes the California Small Business Expansion Fund
(Expansion Fund) for the purpose of retaining the moneys which
separately capitalize the Small Business Loan Guarantee
Program (SBLGP) and paying out defaulted loan guarantees
issued under the SBLGP. States findings and declarations that
the SBLGP has enabled participating small businesses that do
not qualify for conventional business loans or Small Business
Administration loans to secure funds to expand their
businesses. These small businesses would not have been able to
expand their businesses in the absence of the program. The
program has also provided valuable technical assistance to
small businesses to ensure growth and stability. (GC §
63089.70)
This bill:
1) Adds "goods movement" to the definition of economic
development facilities above.
2) Adds "railports" to the definition of port facilities above.
3) Defines "goods movement-related infrastructure" for purposes
of public development facilities under the Act as port
facilities, roads, rail and other facilities and projects
that move goods, energy and information.
4) Shifts administration of the Assistance Grant from GO-Biz to
the I-Bank.
5) Makes other technical changes.
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FISCAL EFFECT: This bill is keyed "fiscal" by Legislative
Counsel. According to the Assembly Committee on Appropriations
analysis dated May 27, 2015, this bill will result in
administrative costs to the I-Bank, not likely to exceed
$150,000, to administer grant funds as specified.
COMMENTS:
1. Purpose. The Author is the Sponsor of this bill. According
to the Author, over a decade ago, California received $2
million from the federal Economic Development Agency through
an Economic Adjustment Assistance Grant, which provides
funding to serve economically-distressed communities, and the
Sudden and Severe Economic Dislocation Grant Program, which
provides capital to businesses in economically-distressed
areas.
According to the Author, in 2008 the federal funds were
deposited in the Small Business Expansion Fund and the
then-Business, Transportation, and Housing Agency (BTH) was
given oversight responsibility. The Governor's
Reorganization Plan (GRP) 2, submitted to the Legislature in
2012, eliminated the BTH. The technical clean-up bills to
GRP2 transferred the California Small Business Expansion Fund
(including the federal funds) and the program authority to
oversee the federal funds to the I-Bank's parent agency, the
Governor's Office of Business and Economic Development
(GO-Biz). According to the Author, at the same time that
the GRP2 bills were going through, AB 1247 passed. This
established the Small Business Finance Center at the I-Bank
and transferred the Small Business Expansion Fund to the
I-Bank which resulted in the Expansion Fund being under the
I-Bank and the program authority being under GO-Biz.
According to the Author, AB 1533 proposes a more streamlined
organization structure for the federal funds by directing the
I-Bank to oversee the money and program implementation
responsibility. The Author states that the shift is
recommended because the I-Bank already operates under the
purview of GO-Biz, meaning GO-Biz will still have oversight;
the 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 and; the
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I-Bank already has primary responsibility for the funds in
the California Small Business Expansion Fund
2. Governor's Office of Business and Economic Development
(GO-Biz).
In February 2010, the Little Hoover Commission undertook a
review of the state's economic and workforce development
programs. In its final report, Making up for Lost Ground:
Creating a Governor's Office of Economic Development, it
analyzed the status and effectiveness of current programs
since the 2003 demise of the Technology, Trade and Commerce
Agency and recommended the creation of a new governmental
entity to fill the void left by the dismantled agency.
The report called for a single entity that would promote
greater economic development, foster job creation, serve as a
policy advisor and deliver specific services (i.e.,
permitting, tax, regulatory, and other information) directly
to the California business community. In April 2010,
Governor Schwarzenegger issued Executive Order S-05-10 as a
means to operationalize the report recommendations including
the creation of the Governor's Office of Economic Development
(GOED).
In October 2011, the Governor signed AB 29 (cited and
described below), which effectively codified GOED and changed
its name to GO-Biz, effective January 1, 2012. Since its
inception, the office has served over 3,000 businesses, 95%
of which are small. The most frequent types of assistance
include help with permit streamlining, starting a businesses,
relocation and expansion of businesses, and regulatory
challenges.
In March 2012, the Governor initiated a reorganization
process to realign the state's administrative structure. Key
changes include dismantling of the Business, Transportation
and Housing Agency (BTH) and the shifting of a number of key
programs and services to GO-Biz including the Small Business
Loan Guarantee Program, the California Travel and Tourism
Commission, the California Film Commission, the Film
California First Program and the Infrastructure and Economic
Development Bank (I-Bank). GO-Biz also administers the "Made
in California" program for the purpose of encouraging
consumer product awareness and to foster the purchases of
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products manufactured in California. GO-Biz now has
authority for undertaking international trade and foreign
investment activities, including establishing any
international trade and investment office ( AB 2012 , Perez,
Statutes of 2012). GO-Biz has partnered with the Bay Area
Council to open a California-China Trade and Investment
office in Shanghai's downtown Yangpu district and is
authorized under current law to accept private monies to
establish, fund and operate these offices.
In 2013, the Governor signed AB 1247 (Medina and Bocanegra,
Chapter 537, Statutes of 2013) establishing a Small Business
Finance Center within the I-Bank. Among other programs, the
Small Business Finance Center offers direct loans, loan
guarantees, letters of credit and surety bond guarantees and
the I-Bank Board of Directors has the authority to approve
new debt and credit enhancement programs to assist small
businesses meet changing market needs.
3. 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), State
Treasurer, Director Department of Finance, 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.
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
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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 $344 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.
4. Related Legislation This Year. AB 1537 (Assembly Committee
on Jobs, Economic Development and the Economy) expands the
reporting requirements of the California Small Business
Finance Center to include the geographic location of
businesses assisted by its programs. ( Status: The measure
is pending in the Senate Committee on Appropriations.)
5. Prior Related Legislation. AB 2749 (Assembly Committee on
Jobs, Economic Development and the Economy, Chapter 132,
Statutes of 2014) made technical changes to the Government
Code relating to the transfer of economic development related
programs from the Business, Transportation and Housing Agency
(BTH) to GO-Biz.
AB 1247 (Medina, Chapter 537, Statutes of 2013) transferred
the administration of the small business FDC managed programs
from BTH to the California Infrastructure and Economic
Development Bank (I-Bank) within GO-Biz.
AB 2523 (Hueso) of 2012 authorized the I-Bank to enter into
participation loan agreements and syndicated loan agreements
with financial institutions for loans they make to small
businesses. ( Status: The bill was held in the Senate
Committee on Appropriations.)
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AB 1104 (Aghazarian, Chapter 624, Statutes of 2007) extended
the authority of the Expansion Fund through a FDC to make
small business loan guarantees in an area affected by a state
of emergency within the state and declared a disaster by the
President of the United States, or by the Administrator of
the federal SBA, or by the United States Secretary of
Agriculture. The bill also modified the provision
authorizing the executive director of the Expansion Fund to
request a trustee of a trust fund to invest funds in
securities issued by the United States Treasury.
AB 1695 (Bass) of 2007 would have appropriated $40 million
from the State Highway Account to be placed within a newly
created Surety Bond Guarantee Account within the Expansion
Fund and required the FDC Director to establish and
administer a surety bond guarantee account within to assist
small contractors with obtaining the necessary bond and
liability guarantees they need to compete for state
infrastructure projects. ( Status: The bill was held in the
Assembly Committee on Appropriations.)
AB 3057 (Assembly Committee on Jobs, Economic Development and
the Economy, 2006) would have extended the sunset from
January 1, 2007 to January 1, 2012 on the Director of DOF's
authority to transfer moneys in the Special Fund for Economic
Uncertainties to the Expansion Fund, and made other technical
changes. ( Status: The bill was held in the Senate Committee
on Appropriations.)
SUPPORT AND OPPOSITION:
Support:
None on file as of June 30, 2015.
Opposition:
None on file as of June 30, 2015.
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