BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1106 (Fuentes)
Hearing Date: 08/12/2010 Amended: 08/03/2010
Consultant: Mark McKenzie Policy Vote: T&H 8-1
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BILL SUMMARY: AB 1106, an urgency measure, would authorize the
California Energy Commission (CEC) to contract with small
business financial development corporations (FDCs) to expend
funds made available for the Alternative and Renewable Fuel and
Vehicle Technology Program, if the expenditure is consistent
with the program's requirements.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
BT&H administration up to $50, minor ongoing special fund
costs General*
CEC design program up to $50, ongoing costs are
minorSpecial*
FDC administration costs would depend on amounts
allocatedSpecial*
to FDCs, and could be in the range of
$500
----------see staff
comments----------
Loan Guarantees unknown potential redirection of funds
toSpecial*
FDCs for loan guarantees that would
otherwise be used for other projects.
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* Alternative and Renewable Fuel and Vehicle Technology Fund
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
AB 118 (N??ez), Chapter 750 of 2007, created the Alternative and
Renewable Fuel and Vehicle Technology Program, which the CEC
administers to provide grants, revolving loans, loan guarantees,
loans, or other appropriate funding measures to public agencies,
vehicle consortia, businesses, consumers, recreational boaters,
and academic institutions to develop and deploy innovative
technologies that transform California fuel and vehicle types to
help attain the state's climate change policies. The program is
funded through a variety of fees, including smog abatement fees,
vehicle fees, license plate fees, and boat registration fees,
which provide over $100 million annually through 2015. The CEC,
through a competitive process, allocates these funds to
alternative fuel and vehicle technology projects. To set
priorities for the allocation of funds, the CEC must develop an
investment plan in consultation with a wide array of
stakeholders. The CEC adopted its first investment plan at its
April 22, 2009 meeting, which included allocations of $176
million, and is now in the process of updating the plan for
2010-11, which includes proposed allocations of approximately
$108 million. Existing law authorizes the CEC is to contract
with the State Treasurer's Office (STO) until January 1, 2012 to
expend program funds as long as those expenditures are
consistent with program requirements.
Page 2
AB 1106 (Fuentes)
AB 1106 would also authorize CEC to contract with FDCs
established by the Business, Transportation and Housing Agency
(BT&H) to expend program funds through the Small Business Loan
Guarantee Program, as long as expenditures are consistent with
program requirements.
State law authorizes BT&H under its Small Business Loan
Guarantee Program to establish small business FDCs that provide
guarantees for loans that private financial institutions issue
to small businesses. Under the program, loan guarantees cover a
percentage, typically 80 percent, of the loan balance and
interest upon defaults and provide security to banks for
investments that banks may not otherwise issue. BT&H has
designate 11 non profit FDCs that operate in the state to market
and coordinate the packaging of the loan and loan guarantee
applications between the small business and financial
institution, issue the loan guarantees, and ensure that lenders
have followed required procedures before requesting payment on
defaulted loans. The loan guarantee program has historically
been funded by General Fund appropriations, but these resources
have been severely cut back in recent years due to the state's
fiscal crisis. The program is likely to receive approximately
$1.7 million in General Fund revenues in 2010-11.
This bill would expand the opportunities for CEC to partner with
other entities in the allocation of AB 118 funds, providing
another avenue for implementing projects and activities
identified in the Financing Plan of the Alternative and
Renewable Fuel and Vehicle Technology Program. While AB 1106
does not require CEC to contract with FDCs and supplant other
efforts, the bill could represent a redirection of funds to FDCs
that would otherwise be used for other eligible projects. The
CEC indicates that expanding financing options may allow for
program efficiencies.
Prior to contracting with FDCs, the CEC would need to dedicate
extensive time to coordinate with BT&H staff to design a program
and determine which projects in the Financing Plan would be most
suited for financing through an FDC. CEC indicates these
coordination duties would be absorbable, but also recognized
that the staff time involved would be substantial on the front
end, similar to coordination efforts with the STO. Staff
estimates this could be the equivalent of PY of CEC staff time
at a cost of approximately $50,000, as well as an equivalent
amount of staff work at BT&H.
It is unknown whether administrative costs associated with
financing projects through FDCs would be higher or lower than
financing projects through the STO or administering projects
directly through the CEC. The Financing Plan indicates that CEC
would fund up to two percent of total annual allocations for
administering the program. Financing projects through the FDC
program may increase administrative expenditures.
Financing projects through contracts administered by FDCs would
require some administrative oversight by BT&H staff, as well as
local assistance provided directly to FDCs to market and
administer loan guarantees. Actual costs would depend upon the
amount of resources provided by the CEC for FDC loan guarantees
and the demand for loans. Staff estimates that if $10 million
were made available for FDC loan guarantees, up to $500,000 may
be dedicated to BT&H and FDC administrative costs.