BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
2437 (V.M. Perez)
Hearing Date: 08/09/2010 Amended: 08/02/2010
Consultant: Mark McKenzie Policy Vote: B P & ED 6-1
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BILL SUMMARY: AB 2437 would authorize the California Industrial
Development Financing Advisory Commission (CIDFAC) to establish
and administer the California Manufacturing Competitiveness Loan
and Loan Guarantee Program until January 1, 2016. CIDFAC would
establish guidelines for implementation of the program, adopt
procedures and criteria for evaluating applicants and
participating financial institutions, and develop a process for
reviewing applications and for ongoing monitoring of loans, loan
guarantees, and lines of credit. The bill would establish the
Manufacturing Program Account within the Industrial Development
Fund to receive funding from the federal government,
foundations, and other public or private sources, excluding the
General Fund. Once sufficient funds are available to implement
and administer the program, CIDFAC would make loans or lines of
credit available to companies for purposes of acquiring,
constructing, or rehabilitating manufacturing facilities and
equipment, as specified. The bill requires each applicant to
pay a nonrefundable fee that covers the full cost of
administering the program. AB 2437 would also require CIDFAC,
beginning October 1, 2012 and annually thereafter, to either
post on its website or report to the Legislature on specified
activities and impacts of the program.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Loan and Loan Guarantees Unknown major costs through
January 1, Special*
2016 to the extent funds are available
CIDFAC administration $221 one-time. Ongoing costs are
likelySpecial*
similar, and would be partially offset by
fees
Costs may vary based upon requirements
of federal legislation providing funding
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* Manufacturing Program Account
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill is intended to provide a framework for a loan and loan
guarantee program that would allow California to submit a timely
application for any federal funds that may become available for
state manufacturing loan programs. The program established by
AB 2437 provides a preference for loan applications that are
jointly developed by manufacturers and the unions that represent
their employees. In addition, it prioritizes companies that
offer higher paying skilled jobs. The bill also provides an
incentive for California manufacturers to stay in this state by
requiring any company with an outstanding loan to pay the loan
in full at least six months prior to relocating out of the state
and to repay any subsidized amounts.
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AB 2437 (V.M. Perez)
U.S. Senator Sherrod Brown has sponsored S.1617, the Investments
for Manufacturing Progress and Clean Technology (IMPACT) Act.
In its current form, the bill would provide five years worth of
funding for grants to states that have established a
manufacturing revolving loan program. The federal bill was
heard in the Committee on Energy and natural Resources
Subcommittee on Energy on December 8, 2009, but there have been
no actions taken on the bill since then. Staff notes that the
IMPACT Act, as currently drafted, would require a state match of
20%, which could create significant cost pressures on various
state funds.
CIDFAC would not be allowed to implement the Manufacturing
Competitiveness Loan and Loan Guarantee Program until it adopts
a resolution finding that sufficient revenues are available in
the Manufacturing Program Account to cover the costs of
implementing the program, including appropriate oversight costs.
CIDFAC indicates that on-time costs associated with developing
the program would be approximately $221,000. The bill requires
applicants to pay a fee to fully cover the cost of administering
the program. It is unclear how many manufacturers would
ultimately apply to the program, but if 25 firms applied for
funds in a given year, fees would need to be set at around
$8,000 per application to fully cover estimated ongoing costs of
approximately $200,000.
There are currently no funds available for this new program, and
it doesn't appear that federal funding will be available in the
near future. However, if 25 applicants were eligible for a loan
of $3 million each, the program would need $75 million in
funding to operate. Any repayments would be deposited back into
the Manufacturing Program Account for payment of any
administrative costs and for future loans and loan guarantees.