BILL ANALYSIS
AB 904
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Date of Hearing: April 29, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
AB 904 (V. Manuel Perez) - As Introduced: February 26, 2009
SUBJECT : Local capital investment incentives: qualified
manufacturing facilities.
SUMMARY : Specifies that a business engaged in the commercial
production of electricity using solar, wind, biomass,
hydropower, or geothermal resources on or after July 1, 2010, is
eligible under the California Investment Incentive Program
(CIIP). Specifically, this bill :
1)Expands the list of eligible businesses to include a business
engaged in the commercial production of electricity using
solar, wind, biomass, hydropower, or geothermal resources.
2)Makes other minor, technical changes to current law.
EXISTING LAW :
1)Authorizes the governing body of a county, city and county, or
a city to establish a capital investment incentive program
whereby the local agency would pay a capital investment
incentive amount to the proponent of a qualified manufacturing
facility for up to 15 consecutive fiscal years upon the
approval of a written request from the proponent.
2)Provides that the annual amount of the capital investment
incentive would be the local agency's share of the property
tax on the facility's assessed value in excess of $150
million.
3)Provides that the proponent must enter into a community
services agreement with the local agency, which shall include
the payment by the proponent to the local agency of a
community services fee equal to 25% of the capital investment
incentive amount, up to
$2 million.
4)Allows multiple agencies to establish the program (i.e., the
county and a city could establish the program for the same
facility).
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FISCAL EFFECT : Unknown
COMMENTS :
1)AB 904, sponsored by Imperial County, will expand the list of
eligible businesses for the CIIP to include those that are
engaged in the commercial production of electricity using
solar, wind, biomass, hydropower, or geothermal resources on
or after July 1, 2010.
2)CIIP authorizes cities and counties to pay a qualified
manufacturing facility a "capital investment incentive amount"
- essentially a property tax rebate on the amount of the
assessed value of the facility in excess of $150 million - for
up to 15 years, if the governing body of the city or county
elects to establish a CIIP in their jurisdiction. To qualify
for this
incentive, the manufacturer must: a) establish a job creation
plan; b) pay the city or county an
annual "community services fee" equal to 25% of the rebated
property taxes, or $2 million, whichever is less; and, c) sign
an agreement to repay the property tax rebate if certain
conditions are not met.
3)The author sites a recent report written by the Center for
Energy Efficiency and Renewable Technologies (CEERT) as
justification for AB 904. The report, released in August of
2008 and entitled "Harvesting California's Renewable Energy
Resources: A Green Jobs Business Plan," notes that Imperial
County is "often described as the "crown jewel" of renewable
resources, not only for its prime geothermal sites, but also
some of the world's best solar resources, as well as
significant wind capacity." The report also highlights the
fact that renewable energy resources can deliver large numbers
of jobs in poverty stricken regions of the state.
In February of 2009, the California Employment Development
Department released the latest round of county unemployment
statistics. Imperial County has one of the highest
unemployment rates in the state, at 24.5%. The author argues
that the expansion of CIIP to include production of energy
from renewable resources could be a great help to solving
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their unemployment problems because the county will have the
means necessary to attract new businesses that can take
advantage of the county's unique attributes specifically aimed
at renewable energy.
4)CIIP was created in 1997 [SB 566 (Thompson), Chapter 616] to
allow local agencies to provide a reduction in property taxes
as a means to attract very large, high-tech manufacturing
plants. The Legislature originally passed CIIP to help Placer
County officials attract an Intel plant, but they never used
the law. In 1999, CIIP was expanded to allow mineral-recovery
geothermal businesses to the list of eligible businesses [SB
133 (Kelley), Chapter 24], with the intent of including
CalEnergy Company's plan to extract minerals from geothermal
brine. While Imperial County paid some property tax rebates
to that project, CalEnergy was unable to bring the mineral
extraction plant into operation and repaid the rebates. With
the exception of this one unsuccessful attempt, the tax rebate
program has never been used.
5)There have been several other attempts to expand the list of
businesses eligible for CIIP.
AB 2129 (Kelley, 2002) would have allowed an electricity
powerplant that uses solar, wind, geothermal, solid-fuel
biomass, or digester gas to be eligible for CIIP. Assembly
Member Garcia carried a similar measure in 2006 (AB 1966),
which would have allowed a business engaged in the operation
of a powerplant used for the production of electricity from
one or more of the following energy resources: solar thermal,
wind, photovoltaic, geothermal, solid-fuel biomass, fuel cells
using renewable fuel, small hydroelectric generation of 30
megawatts or less, municipal solid waste conversion, digester
gas, landfill gas, ocean wave, ocean thermal, and tidal
current to be eligible for CIIP. Both bills failed passage in
the Senate Local Government Committee.
In 2007, Senator Negrete McLeod introduced SB 360, a bill that
would have repealed the entire CIIP. SB 360 was later amended
to remove the CIIP repeal language.
6)Committee staff notes that geothermal, wind, tidal, or solar
energy generation plants develop where those resources are
abundant - communities cannot "attract" such development by
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giving out local property tax rebates. This calls into
question whether it is wise for a local government to rebate
much-needed property tax to attract businesses, especially
given the economic downturn and the resulting fiscal
implications for local governments.
7)CIIP was originally created to attract manufacturing plants,
those plants engaged in the manufacturing of some sort of
"product" whether it is computer chips or equipment.
AB 904 departs from the premise of attracting manufacturing
plants, and instead, subsidizes electricity powerplants for
the explicit purpose of production of energy from a renewable
source. The Committee may wish to consider whether this
shifts the character of the program from a property tax
subsidy to lure manufacturing to a program that subsidizes
electricity production.
The code section AB 904 amends already contains a definition
of "manufacturing," defined as "the activity of converting or
conditioning property by changing the form composition,
quality, or character of the property to be ultimately sold at
retail. Manufacturing includes any improvements to tangible
personal property that result in a greater service life or
greater functionality than that of the original property."
In this case, the production of energy from a renewable source
does not meet the definition of "manufacturing" already
contained in the current CIIP law.
8)COMMITTEE AMENDMENT : To address the issue raised in Comment #7
above, the Committee may wish to consider asking the author to
take the following amendment, which will then fit with the
definition of "manufacturing" contained in the current CIIP:
On page 3, line 2, strike "commercial" and insert:
manufacturing of parts or components related to the
9)TECHNICAL AMENDMENTS :
a) The current code section that AB 904 proposes to amend
includes references to the Technology, Trade and Commerce
Agency, which is now defunct. Committee staff recommends
deleting all references to the "Technology, Trade and
Commerce Agency" in the bill and replacing them with
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"Business, Transportation and Housing Agency."
b) Committee staff recommends replacing outdated references
to the Standard Industrial Classification (SIC) Codes with
references to current North American Industry
Classification System (NAICS) Codes.
REGISTERED SUPPORT / OPPOSITION :
Support
County of Imperial [SPONSOR]
Clean Power Campaign
Ormat Technologies
Ram Power, Inc.
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958