BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 700 (Blumenfield)
Hearing Date: 08/15/2011 Amended: 06/28/2011
Consultant: Mark McKenzie Policy Vote: G&F 8-0
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BILL SUMMARY: AB 700 would establish the independence of the
California Infrastructure and Economic Development Bank
(I-Bank). Specifically, this bill would:
Remove the I-Bank from the Business, Transportation and
Housing Agency (BTH), and establish it as an entity under
state government.
Change the chair of the I-Bank board from the Secretary of BTH
to the Director of Finance.
Authorize the I-Bank to contract with another state agency for
administrative functions.
Require the I-Bank to establish a set of two-year goals and
measurable objectives consistent with specified environmental,
strategic, and infrastructure plans and reports, unless those
plans are more than two years overdue.
Require the I-Bank to annually adopt a work plan that
demonstrates compliance with the two-year goals and
objectives.
Require the I-Bank to maintain an internet website that
includes specified information.
Authorize the I-Bank to coordinate with other state
infrastructure financing entities to facilitate the
development of infrastructure projects.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Transition costs one-time costs in the range of
$100Special*
Independent administration Unknown costs or savings,
depending upon Special*
efficiencies gained or lost by
contracting with
a different agency for administrative
functions
AB 700 (Blumenfield)
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Adoption of goals/objectives up to $50 Special*
Annual work plan $25-$50 $25-$50 Special*
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* California Infrastructure and Economic Development Bank Fund
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STAFF COMMENTS:
Existing law creates the I-Bank within the BTH Agency, to
promote economic revitalization, enable future development, and
encourage a healthy climate for jobs in California. The I-Bank
administers the Infrastructure State Revolving Fund (ISRF)
program, which provides direct low-cost loan financing for
public infrastructure projects, and several programs that
provide tax-exempt revenue bond conduit financing for
manufacturing companies, nonprofit organizations, and specified
public agencies. The I-Bank also serves as the state's only
general purpose financing authority with broad statutory
authority to issue revenue bonds, loans, and loan guarantees.
The BTH Agency oversees and coordinates the activities of 13
state departments and five economic development programs,
including the I-Bank.
AB 700 would remove the I-Bank from the BTH Agency and instead
establish it as an independent entity in state government. This
is intended to enhance the autonomy and flexibility of the
I-Bank in administering its functions, and provide more direct
access to the Governor's office and the Legislature. It is
unclear that the I-Bank's functions have been substantially
hindered by its association with the BTH Agency. Reorganization
of executive functions is costly and benefits generally are
uncertain. Quantifiable costs and benefits of analogous past
examples are largely unavailable. As a consequence, dramatic
reorganization proposals typically entail relatively certain
risks against relatively uncertain gains. Significant
restructuring proposals should focus on agencies exhibiting
clear, persistent and significant policy failures. In the
absence of obvious program failures, the greatest net benefits
from reorganization generally can be found from streamlining the
administration of programs and gathering like functions under a
single administrative roof. This bill goes in the opposite
direction by removing the I-Bank from the consolidated economic
AB 700 (Blumenfield)
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development functions administered by BTH. The author asserts
that removing the I-Bank from the agency will allow it to
respond more swiftly and use resources more effectively.
Furthermore, the I-Bank indicates that increased independence
and flexibility would inspire investor confidence and attract
more private capital with which to capitalize projects in
cooperation with private entities.
As an independent entity, the I-Bank would be required to
develop and adopt administrative policies and procedures,
develop its own independent annual budgets, and enter into
interagency agreements with a state agency for administrative
services. The I-Bank indicates that it currently operates under
its own policies and procedures, but does not have autonomy over
its budget, and its efforts are often slowed by the bureaucracy
of the Agency. In addition, pursuant to BTH policies, the
I-Bank contracts with other entities within BTH for certain
administrative services. Staff estimates that the transition to
an independent entity would require the I-Bank to incur minor
administrative costs of less than $100,000, which includes any
coordination with the Governor's office, the Department of
Finance, and BTH. Staff notes that the BTH Agency currently
provides office space and administrative services for the
I-Bank. If the I-Bank continued to maintain an administrative
agreement with BTH, these costs would remain consistent.
Depending upon efficiencies that may be gained or lost by
performing these functions independently or contracting with a
different state agency, there could be unknown costs or savings
as a result. It is unlikely that the I-Bank would opt for a
more costly arrangement.
AB 700 requires the I-Bank to adopt a set of two-year goals and
measurable objectives, consistent with the mission of the bank
and applicable provisions of specified reports and plans,
including the State Environmental Goals and Policy Report
(EGPR), which has not been updated since 2003, the state's
five-year infrastructure plan, or other relevant reports as
determined by the I-Bank. This provision provides fairly broad
latitude for the I-Bank to determine the most appropriate
reports and documents with which to align goals and objectives.
In addition, the I-Bank has adopted general goals for each of
the programs it administers, so the workload associated with
this provision is expected to be relatively minor, with costs
likely to be less than $50,000, and absorbable within existing
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resources. The bill does not specify that these two-year goals
need to be updated in the future; staff assumes this is a
one-time cost.
The bill also requires the I-Bank to annually adopt a work plan
that supports the bank in meeting the goals and objectives. The
I-Bank indicates that it currently develops annual strategic
plans for marketing purposes, so it would not be difficult or
costly to ensure an annual work plan aligns with adopted goals
and policies. Staff estimates that costs to prepare and adopt
annual work plans would be relatively minor, likely less than
$50,000. Much of the necessary project level data is already
compiled for the I-Bank's annual report to the Legislature and
Governor.