BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2437|
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THIRD READING
Bill No: AB 2437
Author: V. Manuel Perez (D)
Amended: 8/2/10 in Senate
Vote: 21
SENATE BUSINESS, PROF & ECON DEVELOP COMM : 6-1, 6/28/10
AYES: Negrete McLeod, Calderon, Corbett, Correa, Florez,
Yee
NOES: Aanestad
NO VOTE RECORDED: Wyland, Walters
SENATE APPROPRIATIONS COMMITTEE : 7-4, 8/12/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Ashburn, Emmerson, Walters, Wyland
ASSEMBLY FLOOR : 74-0, 6/2/10 - See last page for vote
SUBJECT : State government: economic development
SOURCE : California Labor Federation, AFL-CIO
DIGEST : This bill establishes the California
Manufacturing Competitiveness Act of 2010, for the purpose
of supporting the retooling and expansion of California's
manufacturing facilities, supporting a vibrant logistics
network to retain and create jobs.
ANALYSIS : Existing law:
1. Under the California Industrial Development Financing
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Act (CIDF Act) authorizes cities, counties and
redevelopment agencies to establish industrial
development bonds, the proceeds of which may be used to
fund capital projects of private enterprise under terms
and conditions specified in the CIDF Act.
2. Establishes the California Industrial Development
Financing Advisory Commission (Commission) to advise on
and approve specified activities relating to the
industrial development.
3. Authorizes the Commission, upon request of two or more
authorities, to act as a pooling agent to issue bonds on
a joint or composite basis for companies which have
applied for financing to the participating authorities,
in order to share expenses and facilitate bond issuance.
Requires authorities to enter into written agreements
with the Commission specifying the projects which are to
be delegated to the Commission for financing.
4. Authorizes the Commission to issue bonds as requested
and authorizes and gives the Commission all the powers
of an authority and specifies that the Commission is
allowed to enter into project agreements and take all
steps toward the sale, issuance, and security of bonds
in the same matter as other authorities.
This bill:
1. Establishes the California Manufacturing Competitiveness
Act of 2010 (Act of 2010) to authorize the Commission to
make loans or lines of credit available to companies,
directly through a contract with a participating
financial institution, for the purposes of acquiring,
constructing, or rehabilitating facilities or portions
thereof, including, but not limited to, equipment and
furnishings, pursuant to Article 6 (commencing with
Section 91600 of the Government Code), all to the mutual
benefit of the people of the state and to protect their
health, welfare, and safety.
2. Defines various terms relative to the CIDF Act.
3. Authorizes the Commission to establish the California
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Manufacturing Competitiveness Loan and Loan Guarantee
Program (Program) for the purposes of attracting,
retaining, and expanding large manufacturing facilities
and other companies in the state, and requires the
Commission to establish guidelines for the
implementation of the Program, as specified.
4. Requires the Commission to develop the Program to meet
specified objectives.
5. Requires the Commission adopt procedures and criteria to
evaluate and approve applicants for loans, loan
guarantees, or lines of credit and to evaluate and
certify the participating financial institutions that
may make loans, loan guarantees, or extend lines of
credit on its behalf or directly to companies pursuant
to the commission's program. The evaluation and
approval of applicants shall include the assessment of
the applicant's creditworthiness and the valuation of
guarantees and collateral to be posted by the applicant
to secure payment of principal and interest on the loan,
line of credit, or extension of a loan guarantee. The
evaluation and certification of participating financial
institutions shall include an assessment of the
standards for due diligence for each loan, loan
guarantee, or line of credit made on behalf of the
commission or made directly to a company pursuant to the
commission's program. Among other requirements, the
loan, loan guarantee, and line of credit shall be
subject to all of the following provisions:
A. Requires applicants to demonstrate that they are in
compliance with applicable federal, state, and local
laws and regulations, or that the project for which
they are requesting funding will bring them into
compliance.
B. Requires outstanding loans to be paid in full six
months prior to a relocation of a facility outside of
California. If the loan or loan guarantee included a
subsidized amount, then that amount must also be
repaid subject a sliding scale adopted by the
Commission.
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C. Requires applicants demonstrate where the facility
or facilities where the moneys will be expended are
located and where the benefits of the assistance will
be realized in the state.
D. That wages the applicant pays its employees in the
state are on average, equal to or more than the
average monthly wage rate for similar workers in the
same industry subsector.
E. The applicant's turnover rate has not exceeded 20
percent annually at any facility where moneys obtained
through the program will be used.
F. Requires each applicant to agree to annually report
to the Commission on total capital investment made by
the company and total employment, including wage
levels by the type of work, in the prior year and the
following two years. Also requires the applicant to
estimate the number of jobs created or retained
through the provision of this state assistance, as
well as provide other appropriate performance data, as
determined by the Commission.
1. Requires the Commission develop a process for the
ongoing monitoring of current and outstanding loans,
loan guarantees, and lines of credit and develop and
maintain a data base on loans, loan guarantees, or lines
of credit from the fund.
2. Requires the Commission adopt minimum standards for the
documentation, underwriting, and servicing of loans,
loan guarantees, or lines of credit made by the
commission or made by participating financial
institutions on the commission's behalf or directly by a
participating financial institution pursuant to the
commission's program.
3. Requires the Commission provide technical assistance to
participating financial institutions in order to
increase utilization of the minimum documentation,
underwriting, and servicing standards.
4. Requires the Commission's evaluation criteria for
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reviewing applications and determining financing
approvals include all of the following:
? Whether employment benefits arising out of the
use of the financing secures the employment of
existing employees or increases the overall number
of full-time employees of the company.
? Whether the company provides compensation for
employees at the project facility which exceeds the
average compensation for similar employment within
the company's jurisdiction or within the state.
? Whether the company provides health benefits to
employees employed at the project facility or
contributions to employee retirement benefits.
? Whether the project will provide energy,
mineral or natural, or cultivated resource
conservation benefits.
? Whether the project will include building
certified environmentally beneficial facilities,
bringing existing facilities up to certified
environmentally beneficial status, or implementing
energy efficiency measures and installing renewable
energy equipment.
? Whether the company purchases raw materials or
other products from California-based companies.
1. Requires priority for loans, loan guarantees, or lines
of credit be given to those companies that do all of the
following:
? Retain or create the greatest number of jobs
compensated at a wage rate above the average monthly
wage rate for a similar company in the project
jurisdiction or in the state.
? Have the greatest beneficial economic impact on
the state and local economies as a result of the
financing.
? Have the greatest negative economic impact on
the state and local economies and on other
businesses in the state if it moved its operations
to another state or otherwise ceased operations
within the state.
1. Requires priority for loans, loan guarantees, or lines
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of credit be given to those companies that submit
applications jointly with the union representing workers
at the facility or the union with pending representation
of workers at the facility.
2. Requires any construction, improvement, reconstruction,
or rehabilitation financed, in whole or in part, by
means of loans, loan guarantees, or lines of credit
issued pursuant to this article that, pursuant to a
resolution of intention, all workers employed in that
work, exclusive of maintenance work, shall be paid not
less than the general prevailing rate of per diem wages
for work of a similar character in the locality in which
the work is performed, and not less than the general
prevailing rate of per diem wages for holiday and
overtime work.
3. Requires each applicant to pay a nonrefundable
application that covers the full amount of the cost for
administering the program, including a proportional
share of the development of the program, review of
applications, and the monitoring and oversight of the
program. Requires these moneys to be deposited into the
Account for the purpose of ensuring that funds are
available to the state for the sole purpose of
administration of the program.
4. Requires all moneys received from private and public
funding sources to for the purpose of implementing the
Program to be deposited into the Account and all loan
repayments, interest, and royalties must be deposited
back into the Account.
5. Prohibits General Fund moneys from being deposited in
the Account.
6. Prohibits the Commission from commencing the Program
prior to its adoption of a resolution finding that there
is sufficient money in the Account to cover the costs of
implementing the Program, including, but not limited to,
appropriate oversight costs.
7. Authorizes moneys in the Account to be allocated by the
Commission to a lending institution or financial company
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that will act as trustee of the funds, with the approval
of the Department of Finance, upon appropriation by the
Legislature.
8. Requires the Commission, beginning October 1, 2012, to
annually post on its Internet Web site and provide the
Legislature with a report with specified information on
the Program's activities and impact on the manufacturing
industry, and on the state's economy generally.
9. Sunsets the provisions of the Act of 2010 on January 1,
2016.
Background
According to the author's office, "manufacturing in
California, even prior to the current economic recession,
faced many challenges maintaining global and domestic
competitiveness, including providing a skilled workforce to
support the changing needs of manufacturing and goods
movement, and maintaining cost-effective productivity in
the face of lower safety and wage standards in emerging
foreign markets. Globalization has given rise to economic
clusters in other areas of the US and the world, which
directly compete with California businesses. Many states
have established targeted economic incentives to attract
manufacturing facilities." The Author provides several
examples listed below.
Chickasaw Trail Economic Development Compact (MS/TN) : The
purpose of this compact is to promote the development of an
undeveloped rural area of Marshall County, Mississippi.,
and Fayette County, Tennessee, and to create a development
authority which incorporates public and private
partnerships to facilitate the economic growth of such
areas by providing developed sites for the location and
construction of manufacturing plants, distribution
facilities, research facilities, regional and national
offices with supportive services and facilities, and to
establish a joint interstate authority to assist in these
efforts.
Michigan SmartZones : The program consists of
collaborations among universities, industry, research
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organizations, government and other local institutions that
have resulted in regionally based high-tech zones which
target growth in a specific economic sector that fits the
geographic region's strengths and needs, creating clusters
of high-skilled, high-paying jobs.
Arizona Clean Technology Credit : The goal of the new
program (enacted in 2009) is to encourage business
investment that will produce high quality employment
opportunities and enhance Arizona's position as a center
for production and use of renewable energy products. The
program offers two benefits: up to a 10% refundable income
tax credit and up to a 75% reduction on real and personal
property taxes, for companies that are primarily engaged in
the manufacturing of or headquarters for producing systems
and components that are used or useful in manufacturing
renewable energy equipment. The company must also be
expanding or locating in Arizona, create fulltime
employment positions of which at least 51% are paid at
least 125% of the state's annual median wage (currently
$30,940), offers to pay at least 80% of the health
insurance costs for all net new fulltime employment
positions, and spend at least $250,000 in qualifying
investments during each twelve-month period.
Missouri Life Science Trust Fund : In 2007, Missouri's
General Assembly approved the $13.4 million funding of the
Missouri Life Sciences Research Trust Fund to enhance
research capacity and transform research into commercial
life science technology. In conjunction with Missouri's
universities and industry, $10.5 million was awarded for
research grants and $2.6 million for commercialization
grants. This Trust Fund is in addition to $15 million the
state earmarked to the Missouri Technology Corporation
(MTC) for various programs designed to improve
commercialization of Missouri technologies.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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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 likely
Special*
similar, and would be partially offset
by fees
Costs may vary based upon requirements
of federal legislation providing
funding
* Manufacturing Program Account
SUPPORT : (Verified 8/16/10)
California Labor Federation, AFL-CIO (source)
California Manufacturers & Technology Association
California State Pipe Trades Council
California State Treasurer
California State Association of Electrical Workers
Western States Council of Sheet Metal Workers
ARGUMENTS IN SUPPORT : The California Labor Federation
(CLF) states, "U.S. Congress is considering legislation to
fund state manufacturing loan and loan guarantee programs.
This bill would prepare California to receive such funds
and does not use state General Fund dollars to capitalize
the loan and loan guarantee program."
"Investment in manufacturing, in particular, is a smart way
to spur economic recovery. Manufacturing jobs have the
highest multiplier effect of any job classification in any
industry - for every manufacturing job created, an
additional 2.5 jobs are created in the broader economy.
"California has great potential to generate new
manufacturing activity, especially in the green economy?
However, there is a gap between innovation and the capacity
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to commercialize those innovations and produce in the
state. A manufacturing loan and loan guarantee program
will give business access to the capital it needs to
thrive. Several other states have established similar
manufacturing loan programs using federal dollars to
capitalize the funds. By creating the infrastructure for a
loan and loan guarantee program, California is positioned
to immediately put federal dollars to work when they become
available.
"This measure will help create and retain good jobs because
priority for loans will be given to applicant that meet
wage goals, provide good health benefits and submit joint
labor/management applications. The legislation also
includes important protections for taxpayers by requiring
firms that do not meet job creation goals or that move jobs
out of state to pay back the loan in full plus interest."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill
Berryhill, Blakeslee, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber,
Huffman, Jeffries, Jones, Knight, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, V. Manuel Perez, Portantino, Ruskin,
Salas, Saldana, Silva, Skinner, Smyth, Solorio, Swanson,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, John
A. Perez
NO VOTE RECORDED: Tom Berryhill, DeVore, Lieu, Norby, Audra
Strickland, Vacancy
JA:nl 8/16/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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