BILL ANALYSIS
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|Hearing Date:June 14, 2010 |Bill No:AB |
| |2798 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 2798Author: Assembly Committee on
Jobs, Economic
Development and the Economy
As Introduced: March 25, 2010 Fiscal: No
SUBJECT: Economic Development.
SUMMARY: Makes technical changes and defines certain terms as it
relates to the state's economic development and emerging domestic
markets.
Existing law:
1) Designates the Business, Transportation and Housing Agency as the
primary state agency responsible for facilitating economic
development in the state.
2) Establishes the California Economic Development Fund in the State
Treasury for the purpose of receiving specified economic
development funds.
3) Authorizes the Secretary of Business, Transportation and Housing
(Secretary) to expend moneys in the fund, upon appropriation by the
Legislature, for specified purposes relating to economic
development.
4) Authorizes the Secretary to administer the federal Economic
Adjustment Assistance Grant, as defined, and defines various terms
for the purposes of these provisions relating to economic
development.
This bill:
1) Clarifies that California's economic development corporations and
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organizations provide broad public benefits to the residents of the
state.
2) Defines the following terms:
a) "Emerging domestic market" means people, places, or business
enterprises with growth potential that face capital constraints
due to systemic undervaluations as a result of imperfect market
information.
b) "Financial intermediary" means an institution, firm,
organization, or individual who performs intermediation between
two or more parties in a financial context, such as connecting
sources of funds with users of funds.
c) "Community development intermediary" means an institution,
firm, organization, or individual that performs intermediation
between two or more parties in a community development context,
such as connecting people and organizations that have a stake in
the future well-being of communities and individuals who may not
easily have access to these stakeholders.
d) "Triple bottom line" means the economic, environmental, and
social benefits arising from a project, investment, or community
and economic development activity.
e) "Small businesses" means a business with less than 100
employees and with a gross revenue of less than five million
dollars ($5,000,000), or a business that is otherwise targeted
by or participating in a federal or state program engaged in
programs or services for small businesses. Application of this
definition may only be used pursuant to a direct reference.
f) "Community development" means a process designed to create
conditions of economic and social prosperity for the whole
community, or a targeted subset of the whole community, with the
fullest possible reliance on the community's initiative and
active participation.
g) "Financial institution capital" means resources of a
financial institution, including, but not limited to, a bank or
credit union, that are legally available to be used to generate
wealth for the financial institution.
h) "California Council on Science and Technology" means the
Council established by California academic research
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institutions, including the University of California, the
University of Southern California, the California Institute of
Technology, Stanford University, and the California State
University, in support of Assembly Concurrent Resolution No. 162
(Res. Ch. 148, Stats. 1988).
FISCAL EFFECT: None. This bill is keyed "non-fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. This bill will make technical non-substantive changes to
the statutes related to economic development. Nothing in this bill
is intended to be controversial. According to the Author, a
similar measure was vetoed in 2008 by the Governor, who stated in
his veto message that "the historic delay in passing the 2008-2009
State Budget has forced me to prioritize the bills sent to my desk
at the end of the year's legislative session. Given the delay, I
am only signing bills that are the highest priority for California.
This bill does not meet that standard and I cannot sign it at this
time."
2. Background. According to information provided by the Committee on
Jobs, Economic Development and the Economy (JEDE), "emerging
domestic market" refers to people, places, or businesses with
growth potential, which have historically faced systematic capital
constraints. The demographics of emerging domestic markets include
ethnic- and women-owned firms, urban and rural communities,
companies which serve low- to moderate-income populations, and
other small- and medium-sized businesses. Over the next 40 years
it is estimated that more than 85% of the U.S. population growth
will come from minority ethnic groups. The shift is already so
significant that the combination of African American and Hispanic
consumer markets is larger than the Gross Domestic Product (GDP) of
all but nine countries in the world. With this growing diversity
comes a change in the make-up of business ownership in the country.
The Milken Institute states that minority-owned firms are growing
at a rate 6 times the growth rate (17% per year) of all other
firms, and sales from minority-owed firms are growing more than
twice the rate (34% per year) of all other firms. Driven by these
significant demographic changes and their related impacts on
markets, institutional investors have begun to target small
portions of their portfolios to emerging domestic markets.
To better understand the dynamics of this new and growing
investment area, JEDE convened an advisory group of economic and
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investment professionals for the purpose of having an extended
conversation about what impediments those individuals encounter
when trying to invest in emerging domestic markets. During these
discussions, it became apparent that, even with the shifts in
market share and business ownership, minority businesses still
experience significant impediments in accessing capital. This bill
was developed to provide key phrases related to emerging domestic
markets, including, "emerging domestic market," "financial
intermediary," "community intermediary," and "triple bottom line."
3. Similar Legislation. AB 3045 (Committee on Jobs, Economic
Development and the Economy, 2008) contained similar language to
this bill, including the addition of definitions and technical,
clarifying changes relating to economic development. That measure
was vetoed by the Governor on September 29, 2008.
SUPPORT AND OPPOSITION:
Support:
None on file as of June 9, 2010.
Opposition:
None on file as of June 9, 2010.
Consultant: Antoinnae Comeaux