BILL ANALYSIS �
AB 696
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 696 (Hueso)
As Amended June 28, 2011
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |52-24|(June 1, 2011) |SENATE: |22-14|(August 31, |
| | | | | |2011) |
-----------------------------------------------------------------
Original Committee Reference: J., E.D. & E.
SUMMARY : Requires the Infrastructure and Economic Development
Bank (I-Bank), in administering the Infrastructure State
Revolving Fund Program (ISRF) to develop a methodology and
process to measure the economic benefits of a proposed project.
The Senate amendments make technical changes to the process for
developing, adopting and implementing the requirement of the
bill.
AS PASSED BY THE ASSEMBLY , this bill made the following changes
to the ISRF:
1)Required the development of a methodology and process to
measure the economic benefits of a proposed project and
required projects funded after January 1, 2013 have some
quantitative level of economic benefit, as well as meet
certain land use requirements.
2)Required to consult with local and regional revolving loan
funds for the purpose of improving the infrastructure and
small business credit markets.
EXISTING LAW establishes the I-Bank within the Business,
Transportation and Housing Agency (BTH), and authorizes it to
undertake a variety of infrastructure related financial
activities including, but not limited to, the administration of
ISRF and the issuance of tax-exempt and taxable revenue bonds.
FISCAL EFFECT : According to the Senate Appropriations
Committee, the I-Bank will incur one-time administrative costs
of $100,000 and ongoing administrative expenses of $100,000 to
$300,000.
AB 696
Page 2
COMMENTS : In its 2008-09 analysis of the state budget, the
Legislative Analyst's Office (LAO) raised concerns over the
projects being funded under the ISRF Program. The LAO noted
that the current scoring system does not effectively target
funds to projects that provide economic development and promote
better land use. Specifically, a review of approved ISRF loans
indicates: a) the majority of projects that received loans have
little or no economic development impact; and, b) projects do
not need to have much impact on improving land use to receive
loan funds. This bill addresses these concerns by prohibiting
ISRF moneys to be used for projects that do not meet certain
economic development and land use criteria.
Background on I-Bank: The I-Bank was established in 1994 to
promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. Housed
within BTH, it is governed by a five-member board of directors
comprised of the BTH Secretary (chair), State Treasurer,
Director Department of Finance, Secretary of the State and
Consumer Services Agency, and a Governor's appointee. The
day-to-day operations of the I-Bank are directed by the
Executive Director who is an appointee of the Governor and is
subject to confirmation by the California State Senate.
Currently, the I-Bank has authority for 24 staff members.
The I-Bank does not receive any ongoing General Fund support,
rather it is financed through fees, interest income and other
revenues derived from its public and private sector financing
activities. According to its 2009-10 independent audit, its
program continues to provide sufficient revenues to support all
operating expenses.
The I-Bank administers two categories of programs: 1) The
Infrastructure State Revolving Fund (ISRF) which provides direct
low-cost financing to public agencies for a variety of public
infrastructure projects; and, 2) Bond Financed Programs which
provide financing for manufacturing companies, nonprofit
organizations, public agencies and other eligible entities.
There is no commitment of I-Bank or state funds for any of the
conduit revenue bonds. Even in the case of default, the state
is not liable.
Since its creation in 1994, the I-Bank has loaned over $400
million to local agencies, developing a high-level of expertise
AB 696
Page 3
in the financing of public infrastructure. The I-Bank also
serves as the state's only general purpose financing authority
with broad statutory powers to issue revenue bonds. Over $30
billion in conduit revenue bonds have been issued by the I-Bank
since 2000.
The seismic upgrade of the Bay Bridge is an example of how
conduit revenue bonds can be used to raise capital for
infrastructure projects without impacting the state General
Fund. In this example, the repayment of the bonds was based on
a $1 per vehicle surcharge collected on seven Bay Area
state-owned toll bridges. In addition to this type of bonding
activity, the I-Bank has also been involved in other unique
financings including Tobacco Securitization Bonds, Tribal
Compact Asset Securitization Bonds, and Imperial Irrigation
District Preliminary Loan Guarantees.
Oversight hearing: On March 30, 2011, the Assembly Jobs,
Economic Development and the Economy (JEDE) Committee held an
oversight hearing to examine how infrastructure development
impacted local, state and federal economic recovery efforts and
California's economic position in post-recession economy.
Following the hearing, JEDE released a preliminary list of
recommendations to better align the authorities of the I-Bank
with the state's current and future infrastructure needs. Four
measures were advanced by JEDE including: AB 700 (Blumenfield),
which reorganizes the I-Bank as an independent agency; AB 696
(Hueso), which requires the I-Bank to evaluate the economic
development impact of its financing activities; AB 893 (V.
Manuel P�rez), which requires the I-Bank to provide technical
assistance to small and rural communities on its programs; and,
AB 1094 (John A. P�rez), which expands the membership of the
I-Bank board to include legislative representation.
While three of the measures passed the Senate Appropriations
Committee, AB 893 (V. Manuel P�rez) that requires technical
assistance for rural areas was held, possibly drawing into
question whether the reorganization of the I-Bank is appropriate
at this time. From a policy perspective, however, basic
improvements in program accountability, such as those proposed
in this bill, should not necessarily be exclusively linked to
the package as a whole.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
AB 696
Page 4
319-2090
FN: 0002280