BILL ANALYSIS Ó
AB 1537
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Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT, AND THE ECONOMY
Eduardo Garcia, Chair
AB 1537
(Committee on Jobs, Economic Development, and the Economy) - As
Introduced March 25, 2015
SUBJECT: Small Business Financial Assistance Act of 2013: reports
SUMMARY: Expands the type of information being reported on financial
assistance provided through the Small Business Finance Center. The
bill requires reporting annually by city and county on number and
dollar value of all credit enhancements and debt instruments issued by
the small business financial development corporations (FDCs) and the
Infrastructure and Economic Development Bank (I-Bank).
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.
3)Requires the FDCs to report annually on their activities financed
through the Small Business Finance Center.
4)Requires the I-Bank to prepare an annual report that includes the
information provided by the FDCs.
FISCAL EFFECT: Unknown
POLICY ISSUE FRAME:
California offers a range of financial assistance to small businesses.
One of the largest programs is the Small Business Loan Guarantee,
which is administered through the Small Business Finance Center. As
initially designed, the program was offered locally through a
statewide network of FDCs. Each of the FDCs had a specific geographic
area in which they were assigned.
Today, some FDCs serve small businesses across the state or within
larger and sometimes overlapping geographic areas in the state. This
change in program delivery necessitates a change in reporting. AB
1537, a committee bill, expands reporting requirements for all program
offered through the Small Business Finance Center, including the Small
Business Loan Guarantee Program, to include the city and county where
the business is located.
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The Comment section of the analysis includes additional information on
the I-Bank, $168 million in small business capital being administered
though the under a federal grant, and related legislation.
COMMENTS:
1)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.
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
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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.
2)State Small Businesses Credit Initiative: In October 2010, Congress
passed and the President signed the Small Business Jobs Act (Act).
Among other things, the Act created the State Small Business Credit
Initiative (SSBCI), which is authorized to expend up to $1.5 billion
for state sponsored small business finance programs. Over the life
of this program, every federal dollar must be matched by $10 from
the private sector -- the deadline for using the funds is September
2017. Also, funding for program administration, outreach, and
oversight is primarily the responsibility of the state.
Under the SBCCI funding formula, California is eligible to receive
up to $168 million, which is the largest amount of any state.
California uses its moneys to capitalize the Small Business Loan
Guarantee Program at the I-Bank's Small Business Finance Center and
the California Capital Access Program (CalCAP) loan loss reserve
program and a collateral support program administered through the
California Pollution Control Financing Authority.
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California has received $110 million of the total $168 million
available and, as of June 30, 2014, the state has encumbered roughly
$87.6 million with approximately $40.6 million set aside to cover
loan guarantees; $7.2 million deposited with private financial
institutions through the CalCap and $39.8 million used for the
collateral support program. Approximately $2.4 million has been
used for direct administrative costs, resulting in a cumulative
2.18% administrative cost per dollar allocated by the U.S. Treasury.
Since inception, 47,202 jobs have been created (7,372) or retained
(39,830) by the close of 2013. 2014 job impacts were 2,228 new jobs
and 13,931 retained jobs.
AB 1537 reporting requirements would apply to the FDC administered
portion of the SSBCI funds, as well as the $32 million in state
funds being delivered through the FDC under contract with the Small
Business Finance Center.
3)Related Legislation: Below is a list of related legislation from
current and previous legislative sessions:
a) AB 780 (Bocanegra) Small Business Financial Development
Corporation Funding: This bill would have appropriated $2
million to provide administrative funding to the state's small
business financial development corporations, specifying that each
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is eligible to receive $150,000, and brings them under the
jurisdiction of GO-Biz. Status: Held on the Suspense File of
the Senate Committee on Appropriations, 2013.
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 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
None received
Opposition
None received
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Analysis Prepared by:Toni Symonds / J., E.D., & E. / (916) 319-2090