BILL ANALYSIS �
AB 696
Page 1
GOVERNOR'S VETO
AB 696 (Hueso)
As Amended June 28, 2011
2/3 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.
AB 696
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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 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. This
bill addresses these concerns.
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
for any of the conduit revenue bonds. Even in the case of default,
the state is not liable.
AB 696
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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.
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. Four measures were
advanced by JEDE reflecting the findings from the hearing 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.
GOVERNOR'S VETO MESSAGE :
This bill, among other things, requires the state
Infrastructure Bank (I-Bank) to create a methodology
to measure the economic development benefits of
projects for both public and private applicants.
Local government applicants already must make findings
that their project promotes economic development and
long-term employment. Requiring the I-Bank to
speculate on the project's benefits is a costly
addition to the application process.
Private entities obtain approval from a bond
underwriter before federal law allows the state to
issue tax-free bonds using its bonding authority. The
state has no financial stake or risk in these
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transactions. Consequently, there is no reason to
incur the expense of calculating economic benefits for
the transactions of private entities.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090 FN:
0002965