BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1009|
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THIRD READING
Bill No: AB 1009
Author: V. Manuel Perez (D)
Amended: 9/4/09 in Senate
Vote: 27 - Urgency
ALL PRIOR VOTES NOT RELEVANT
SEN. GOVERNMENTAL ORGANIZATION COMM .: 8-0, 10/14/09
AYES: Wright, Calderon, Negrete McLeod, Oropeza, Padilla,
Price, Wiggins, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Bonds
SOURCE : Author
DIGEST : This bill makes substantive changes to the
California Industrial Development Financing Act of 1980 so
that California can take advantage of certain provisions of
the federal stimulus bill.
ANALYSIS : Existing law establishes in state government
the California Debt Limit Allocation Committee, with duties
that include annually determining a state ceiling on the
aggregate amount of private activity bonds that may be
issued, and allocating that amount among state and local
agencies. Existing law defines the term "state ceiling"
for those purposes with regard to an amount specified in
federal law.
CONTINUED
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Existing law, the California Industrial Development
Financing Act, authorizes cities, counties, cities and
counties, and redevelopment agencies to establish
industrial development authorities that are authorized to
issue industrial development bonds, the proceeds of which
may be used to fund capital projects of private enterprise
under terms and conditions specified in the act.
This bill:
1.Expands the permissible projects to include those that
create or produce "intangible" products as well as
traditional tangible products.
2.Provides a uniform mechanism for the issuance of Recovery
Zone Facility Bonds by all cities and counties (and by
"on-behalf-of" entities if permitted) and for a means by
which the state can confirm compliance with the American
Recovery and Reinvestment Act of 2009 (ARRA) and collect
data on the projects funded by these types of Private
Activity Bonds.
3.Provides a means whereby the California Industrial
Development & Financing Advisory Committee (CIDFAC) can
receive grant funds or other monies, from ARRA-initiated
program or other sources, for the purpose of offsetting
the costs of issuing Industrial Development Bonds (IDBs),
thereby making this financing mechanism more economically
accessible to California businesses.
Background
Federal Law . Federal law limits how much tax-exempt debt a
state can issue in a calendar year, with the cap determined
by a population-based formula. The California Debt Limit
Allocation Committee (CDLAC) was created to set and
allocate California's annual debt ceiling, and administers
the tax-exempt bond program to issue the debt.
The primary objective of the CIDFAC is to provide
manufacturers in California with an alternative, low-cost
source of funds to finance capital expenditures. To this
end, CIDFAC reviews the public benefits generated by a
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project, particularly job creation, and determines whether
these benefits will significantly outweigh any detrimental
public effects from the project. In addition, CIDFAC
maintains a statewide perspective to ensure that one entity
of the state is not adversely affected by the issuance of
IDBs by another jurisdiction.
The AARA included two new federal tax credits available to
states and local governments: (1) Recovery Zone Bonds and
(2) Qualified Energy Conservation Bonds. There are two
types of Recovery Zone Bonds: (1) Recovery Zone Economic
Development Bonds (RZEDBs) and (2) Recovery Zone Facility
Bonds (RZFBs). Both are for public infrastructure to
promote economic activity, job training and educational
programs in a designated "recovery zone" area. The
nationwide volume cap for the RZEDBs is $10 billion and
RZFBs is $15 billion, with approximately $806 million of
RZEDBs and $1.21 billion of RZFBs going to California's
cities and counties.
The Qualified Energy Conservation Bonds are for projects
that reduce energy consumption including automotive battery
technologies that reduce reliance on fossil fuel, renewable
energy resources and green community programs.
California's allocation of the QECBs is $381 million of the
$3.2 billion nationwide volume cap.
Comments
According to the State Treasurer's Office the tax credit
bonds will be allocated to states based on a formula laid
out in the ARRA. The state is then to reallocate the funds
to local cities and counties. There is currently not an
authority to administer the new tax credit bonds, and CDLAC
needs statutory language to be able to administer the
funds. This bill expands the definition of "state ceiling"
to include the Recovery Zone Bonds and the Qualified Energy
Conservation Bonds that were made available to states and
local governments through ARRA.
CIDFAC provides manufacturers in California with an
alternative, low-cost source of funds to finance capital
expenditures. ARRA broadened the definition of
'manufacturing facility' to include facilities that are
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used in the creation or production of intangible property
(i.e., patents, copyrights, formulas, processes, designs,
know-how, and other similar items) and created a new type
of bond called the Recovery Zone Facility Bonds (RZFBs) to
promote economic activity in designated "recovery zone"
area . This bill amends CIDFAC's statute to reflect these
aspects of ARRA which would include "intangible" property
in the "manufacturing facility" definition and allow the
Authority to issue RZFBs. These changes permit CIDFAC to
provide low-cost financing to many more companies in
California, which will increase employment or otherwise
contribute to economic development.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 10/14/09)
State Treasurer's Office
TSM:cm 10/14/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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