BILL ANALYSIS �
AB 696
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CONCURRENCE IN SENATE AMENDMENTS
AB 696 (Hueso)
As Amended June 28, 2011
Majority vote
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|ASSEMBLY: |52-24|(June 1, 2011) |SENATE: |22-14|(August 31, 2011) |
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|COMMITTEE VOTE: |4-2 |(September 6, 2011) |RECOMMENDATION: |concur |
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Original Committee Reference: J., E.D. & E.
SUMMARY : Requires the Infrastructure and Economic Development Bank
(I-Bank) to develop a methodology and process to measure the
economic benefits of a proposed project, as specified.
The Senate amendments revise the process for developing, adopting
and implementing the economic development requirements for
selecting an Infrastructure State Revolving Fund (ISRF) project,
and expand the application of those provisions to all I-Bank
financed projects.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required the development of a methodology and process to measure
the economic benefits of a proposed ISRF 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 consultation 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
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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.
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: 1)
the majority of projects that received loans have little or no
economic development impact; and, 2) 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 ISRF
Program 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
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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 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.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090
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