BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 796 (Blumenfield) - Clean Energy Economy and Jobs Incentive
Program.
Amended: August 6, 2012 Policy Vote: G&F 9-0, EU&C 10-0
Urgency: No Mandate: No
Hearing Date: August 16, 2012
Consultant: Mark McKenzie
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: AB 796 would require the California Alternative
Energy and Advanced Transportation Financing Authority (CAEATFA)
to establish the Clean Energy Economy and Jobs Incentive Program
to provide financial assistance to eligible California-based
entities for the manufacturing of eligible technologies until
January 1, 2018.
Fiscal Impact:
Initial administrative costs to CAEATFA of up to $300,000
to implement the new program (unspecified state, federal,
and private funds). Ongoing costs are expected to be
covered by fees and charges on applicants for financial
assistance. Potential ongoing cost pressures if fees and
other charges on applicants are insufficient to fully offset
CAEATFA administrative costs.
Unknown, significant cost pressures of at least several
million dollars to capitalize a financial assistance program
(unspecified state, federal, and private funds). Actual
costs would depend upon the type and structure of financial
assistance program established by CAEATFA.
Background: The California Alternative Energy and Advanced
Transportation Financing Authority (CAEATFA) was established in
1980 in the State Treasurer's Office as a means to encourage the
development and use of equipment using alternative or renewable
energy sources. CAEATFA's authority has since been expanded
several times, including the financing of advanced
transportation technologies. Financial assistance can occur
through the issuance of revenue bonds, loan guarantees, loan
loss reserves, and insurance.
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As a result of the passage of SB 71 (Padilla) Chapter 10/2010,
CAEATFA is authorized to provide financial assistance to
eligible manufacturers in the form of a sales and use tax
exemption on tangible personal property (such as manufacturing
equipment) used for the design, manufacture, production, or
assembly of advanced transportation technologies or alternative
energy products, components, or systems. CAEATFA must evaluate
project applications for eligibility based upon certain criteria
that encourages manufacturing facilities and jobs located in
California and the reduction of greenhouse gases beyond the
reduction required by federal or state law or regulation.
Projects must meet the "net benefits test" by showing that the
new project will create jobs in the state. If CAEATFA approves
more than $100 million in tax exemptions in one year, it must
provide specified notice to the Legislature before approving
further exemptions. The authority provided under SB 71 will
sunset on January 1, 2021.
Proposed Law: AB 796 would require CAEATFA to establish the
Clean Energy Economy and Jobs Incentive Program to provide
financial assistance for California-based manufacturers of
specified clean energy technologies. Financial assistance,
which must be provided in partnership with a financial
institution, is defined as loans, loan loss reserves, interest
rate reductions, insurance, guarantees, credit enhancements, and
contributions of money, property, and labor.
The bill prescribes project eligibility requirements and
requires CAEATFA to evaluate projects using a specified net
benefits test. An applicant may receive up to $5 million in
financial assistance, representing a maximum of 25% of a
project's total capital costs, but CAEATFA may authorize up to
$10 million to an applicant with concurrence from the Joint
Legislative Budget Committee. The bill would also require the
Legislative Analyst's Office to report to the Legislature on the
effectiveness of the program, measured by job creation,
retention or attraction of businesses to California, generation
of revenue and economic activity, and specified environmental
benefits.
The implementation of AB 796 is contingent upon the availability
of unspecified state, federal, and private funds, and CAEATFA
may only initiate the program when the Legislature appropriates
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money for this purpose into the Clean Energy Economy and Jobs
Incentive Program Fund, established by this bill. Up to
$300,000 of this amount may be expended by CAEATFA for initial
costs to implement the program. Ongoing administrative costs
may be funded by fees and charges on program participants. The
bill would sunset on January 1, 2018.
Related Legislation: SB 1128 (Padilla), currently pending in the
Assembly Appropriations Committee, would authorize CAEATFA,
until July 1, 2016, to grant financial assistance to eligible
projects that promote the utilization of "advanced
manufacturing," as defined, thereby expanding the sales and use
tax exemption provided under the existing CAEATFA program.
Staff Comments: In many cases, a financial institution may not
be willing to provide a direct loan to a company that wishes to
manufacture a technology that could be perceived as untested and
a financial risk. This bill is intended to provide a mechanism
to mitigate the risk associated with financing projects
involving the manufacture of emerging clean energy technologies,
and retain or attract clean energy manufacturing jobs in
California.
The authority provided in this bill is contingent upon the
availability of funding for the purpose of developing clean
energy technology, and CAEATFA would not be required to
promulgate regulations to implement the program until funds are
appropriated that would cover initial administrative costs. The
Treasurer's Office estimates that the one-time administrative
startup costs necessitated by this bill would be approximately
$300,000. Once fully implemented, the administration of this
program is intended to be self-funded through a fee imposed on
applicants. The ability of the program to be self-sustaining is
dependent on participation in the program (i.e. there must be
applicants on which a fee may be assessed) and the amount of the
fee.
CAEATFA would also need an infusion of funds to capitalize a
financial assistance program. As an example of potential
startup capital costs, if CAEATFA were to establish a loan loss
reserve program for eligible clean energy technology projects
that is similar to the California Capital Access Program
(CalCAP), the new program would require $200,000 in capital to
contribute to a loan loss reserve account for every $5 million
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in loans financed with a partnering financial institution. This
amount represents a typical 4% state contribution and 2%
contribution by both the lender and applicant on the total loan
amount to establish a loss reserve account. At this level,
staff assumes that CAEATFA would need at least $2 million in
startup capital to establish an effective program. The level of
necessary startup costs could be even greater for a loan
guarantee or interest rate reduction program, which would
provide a more direct subsidy to project applicants. Staff
assumes that CAEATFA would structure the program based upon the
amount of funds appropriated and the needs of stakeholders. It
is unclear what the source of funds would be, but the bill
cannot be implemented until private or federal funds are
identified and appropriated. As proposed to be amended, state
funds may also be used, as long as they are not derived from
electricity ratepayers. Without an identified state funding
source, the bill creates General Fund cost pressures. In
addition, depending on the funding source, the bill could divert
money from other projects to the extent they would be eligible
for financial assistance through CAEATFA's existing programs.
Proposed author amendments would align the definition of
"advanced transportation technologies" to SB 1128 (Padilla), and
to specify that the implementation of the bill is contingent not
only on private and federal funds, but also state funds, as long
as those funds are not derived from ratepayers.