BILL ANALYSIS
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|Hearing Date:April 13, 2009 |Bill No: SB |
| |358 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 358Author:Ducheny
As Amended: April 13, 2009 Fiscal: Yes
SUBJECT: Indian tribes: economic development.
SUMMARY: Creates within the Business, Transportation and
Housing Agency (BT&H), the Native American Business Revolving
Loan and Guarantee Program to fund non-gaming business projects
for members of Indian tribes and creates the Native American
Business Finance Council to review applications for program
funding.
Existing law:
1)Promotes the economic self-sufficiency of California Indian
tribes.
2)Establishes the Business, Transportation and Housing Agency to
oversee and coordinate the activities of various departments,
offices, and economic development programs.
3)Creates in the State Treasury a special fund called the
"Indian Gaming Revenue Sharing Trust Fund" (RST Fund) for the
receipt and deposit of moneys derived from gaming device
license fees that are paid into the fund pursuant to the terms
of tribal-state gaming compacts for the purpose of making
distributions to non-compact tribes.
4)Provides that the administration and distribution of RST Fund
moneys to qualifying tribes that do not have gaming, or
operate less than 350 machines, is to be carried out by the
California Gambling Control Commission pursuant to the terms
of the tribal-state gaming compacts ratified and in effect as
provided in subdivision (f) of Section 19 of Article IV of the
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California Constitution.
This bill:
1)Requires the Secretary of BT&H (Secretary) to create the
Native American Business Revolving Loan and Guarantee Program
for the purpose of providing non-gaming business loans and
loan guarantees to federally recognized, non-compacted, and
revenue sharing tribes who are based in California.
2)Creates the Native American Business Revolving Loan and
Guarantee Program Account within the California Small Business
Expansion Fund for the purpose of receiving state, federal, or
local government moneys, other public or private moneys, and
tribal government contributions.
3)Defines the following terms:
a) "Account" means the Native American Business Revolving
Loan and Guarantee Program Account.
b) "Applicant" means an applicant for a loan or loan
guarantee pursuant to the bill.
c) "Council" means the Native American Business Finance
Council.
d) "Program" means the Native American Business Grant and
Revolving Loan Program.
e) "Qualified Indian tribe" means a federally recognized
tribe located in the state that receives payments from the
Indian Gaming Revenue Sharing Trust Fund.
4)Stipulates that the program and the implementation steps
necessary to make it operative shall not be undertaken until
the Secretary determines that funds of a sufficient amount to
create a loan pool and pay program administrative costs have
been received into the account.
5)Requires the Secretary to select a Director to coordinate and
manage the program and requires the Director to do the
following:
a) Provide for the development and implementation of the
application review process for the program, including
defining the eligibility standards and rating and ranking
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criteria, which shall then be approved by the Council.
b) Seek to maximize the ability of applicants to leverage
other public and private funding opportunities to the
extent the addition of these funds furthers the purposes of
the program.
c) Routinely seek the advice of the Council on matters
related to the management and operation of the program.
d) Report annually on the activities of the program to the
Secretary.
e) Submit to the Governor and the Legislature the results
of an audit of the program undertaken by an independent
entity no later than January 1, 2011.
6)Establishes the following eligibility criteria for applicants
for a loan or loan guarantee under the program:
a) Applicant must be a federally recognized Indian tribe
that has or wants to start, acquire, expand, or supply
working capital to a non-gaming business on Native American
or state lands.
b) The maximum loan limit is set at one million dollars
($1,000,000).
c) Applicant must provide matching funding in an amount
equal to one-half of the loan requested.
d) Applicant must be the majority owner of the business
during the term of the loan or loan guarantee.
e) Applicant must demonstrate that they will have
reasonable access to business and management technical
assistance during the term of the loan or loan guarantee.
f) A qualified Indian tribe shall not be eligible to apply
for funds unless any funds previously loaned to the tribe
pursuant to this article have been repaid in full.
7)Requires projects funded by this program to provide for the
general welfare of a non-gaming tribe and its members by
promoting long-term tribal economic development that creates
or retains jobs, provides work skills and business
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development, and training and education for tribe members.
8)Allows BT&H to contract with one or more corporations to make
loans and loan guarantees pursuant to this bill.
9)Creates the Native American Business Finance Council
(Council), consisting of nine members who are appointed by and
serve at the pleasure of the Governor, and who are responsible
for the final approval of funding subject to the following
requirements:
a) The Council must include six members of federally
recognized Indian tribes in California, three representing
tribes from northern California and three representing
tribes from southern California.
b) The Council must include one member with expertise in
each of the following areas: tribal government, business
finance, and economic development related to the purposes
of the program.
c) Prohibits a Council member from voting on the
application of his or her own tribe.
d) Specifies five members constitute a quorum and a member
prohibited from voting on his or her application shall not
be included in the quorum count for a particular
application.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1.Purpose. According to the Sponsor, the California Tribal
Business Alliance , this measure would boost the opportunities
for California Indian tribes to establish a firm economic base
for their members' future. They assert that many tribes have
benefited from tribal gaming, but just as many are not
geographically located in a market that can sustain a casino
operation and those tribes are struggling to develop
non-gaming enterprises with funds they receive from the Indian
Gaming Revenue Sharing Trust Fund (RST Fund). The Alliance
states that a revolving loan fund would help them maximize
their RST Funds and a program to provide expert business
advice will help those tribes get sustaining enterprises off
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the ground.
The Author argues that without access to capital, both Indian
tribes and individuals have difficultly breaking cycles of
poverty, fostering business activity, and achieving personal
and community economic prosperity. For that reason, it is in
the best interests of California to help non-gaming Indian
tribes achieve economic independence through the Native
American Business Revolving Loan and Guarantee Program. The
Author also suggests that while this measure as a whole
creates a mechanism for the Native American Business Revolving
Loan and Guarantee Program, the program's implementation
remains conditional on the presence of sufficient funds in the
account.
2.Background. According to an article published by the Harvard
Project for American Indian Economic Development, a U.S.
Department of Treasury study found that Native Americans lack
access to capital and financial services, which is a key
barrier to economic advancement. In that study, 66 percent of
Native Americans reported that private equity is difficult or
impossible to obtain for Native American business owners.
Although the article found that the problem can be attributed
to trust-land issues, jurisdictional disputes and cultural
misunderstandings, it identified access to capital as an
important factor to the lack of economic advancement for
Native Americans.
According to U.S. Census data, California Indian reservation
income growth rates vary dramatically and in 2000, the income
inequality between gaming and non-gaming reservations was the
largest income gap in the nation. There was even substantial
variation in growth rates among gaming tribes. Additionally,
the data demonstrates the average income for American Indians
in California remains well below the national average. In
1990, it was 42 percent of the national average and by 2000,
it increased to 53 percent.
In certain respects this program is similar to the State of
Minnesota Indian Business Loan Program. The Minnesota Indian
Business Loan Program supports the development of
Indian-owned and operated businesses and promotes economic
opportunities for Native American people in that state.
Eligible applicants must be enrolled members of the federally
recognized Minnesota-based band or tribe. Businesses may be
located anywhere in the state, although most of the loans are
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made to businesses on a reservation.
3.The Business, Transportation and Housing Agency. The mission
of the Secretary for Business, Transportation and Housing is
to oversee and coordinate the activities of 13 departments and
several important economic development programs and
commissions. These entities seek to improve California's
place in the global marketplace by leveraging the state's
advantages to promote job and business growth, improving
transportation mobility, and increasing affordable housing
opportunities while promoting environmental quality and safe
communities. The Secretary manages the following economic
development programs:
California Film Commission (CFC) is the state's primary
liaison between the film production community and all levels
of government. The CFC's number one goal is to support
California's vital film production industry and to increase
the number of film and TV productions by offering support
services and providing filmmakers with low cost alternatives
when filming in the state.
California Travel and Tourism Commission (CTTC) was created in
1996 to help increase leisure-travel volume, market share and
revenue to California.
Infrastructure and Economic Development Bank (I-Bank) is a
state financing authority that provides low-cost financing to
public agencies, manufacturing companies, nonprofit
organizations and other entities eligible for tax-exempt
financing.
International Trade Promotion The International Trade Program
(ITP) was created in 2006 to establish a mechanism for
monitoring international trade activities. The State of
California has not had an official international trade
capacity since the state Legislature eliminated the
Technology, Trade and Commerce Agency and foreign trade
offices effective January 1, 2004.
Office of Military and Aerospace Support (OMAS) acts as the
official liaison to the U.S. Department of Defense and is the
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state's leader on issues involving military base retention,
conversion and reuse. OMAS is focused on maintaining
California's prominence both as a national military resource
and contributor to the state's economy.
Small Business Loan Guarantee Program provides guarantees on
bank loans to small businesses that would otherwise not be
made. A network of 11 Small Business Financial Development
Corporations, who are working closely with small business
borrowers and local community banks, issues the guarantees on
behalf of the state. The guarantees are backed by a trust fund
that can be leveraged four times.
4.Indian Gaming Revenue Sharing Trust Fund (RST Fund). In 1999,
the state created the RST Fund to provide monetary assistance
to non-gaming tribes. The money generated from the gaming
license fees is deposited in the fund and dispersed to
non-compact tribes. By law, payments to non-compact tribes
are required to be $1.1 million a year. Since it was created,
the RST Fund has lacked sufficient funds to cover the cost of
the payments and other funds have been used to address the
shortfall.
5.Previous Legislation. SB 1200 (Ducheny, 2008) would have
established the Native American Business Revolving Loan
Program (NABRLP) for the purpose of promoting the long-term
economic viability of tribal communities by providing capital
to create or retain jobs, offer business development and
employment training, and provide general education to tribal
members. The measure was held in the Assembly Appropriations
Committee.
SUPPORT AND OPPOSITION:
Support:
California Tribal Business Alliance (Sponsor)
California Communities United Institute
Numerous Individuals
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Opposition:
None on file as of April 6, 2009
Consultant:Yuliya Zeynalova