BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 901|
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THIRD READING
Bill No: AB 901
Author: V. Manuel Pérez (D)
Amended: 8/30/11 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INST. COMMITTEE : 7-0, 7/6/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla,
Walters
SENATE APPROPRIATIONS COMMITTEE : 9-0, 8/25/11
AYES: Kehoe, Walters, Alquist, Emmerson, Lieu, Pavley,
Price, Runner, Steinberg
ASSEMBLY FLOOR : 71-7, 6/2/11 - See last page for vote
SUBJECT : Economic development: small business
SOURCE : Assembly Jobs, Economic Development and the
Economy Committee
DIGEST : This bill revises the definition of a financial
institution for purposes of the Capital Access Loan Program
for small business.
ANALYSIS : Existing law provides for the Capital Access
Loan Program (CalCAP), administered by the California
Pollution Control Financing Authority (Authority) (Health
and Safety Code Section 44559 et seq.), authorizes the
Authority to contract with eligible financial institutions
for the purpose of allowing the financial institutions to
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participate in CalCAP, requires the Authority to establish
a loss reserve account for each financial institution with
which the Authority makes a contract, and caps the amount
that may be deposited by any single participating financial
institution into any individual loss reserve account over a
three-year period, in connection with any single borrower
or any group of borrowers among which a common enterprise
exists, at $100,000.
This bill:
1. Amends the definition of a financial institution for
purposes of the California Capital Access Fund to
additionally include a small business financial
development corporation or microbusiness lender that
meets standards established by the Authority, and an
insured depository institution, insured credit unions,
or community development financial institutions.
2. Augments the items that must be included in the CalCAP
annual report, which the Authority must send to the
Governor and Legislature, to additionally include all of
the following for all loans outstanding on the date the
report is issued and for new loans issued since the
prior report: the total number of businesses served,
jobs created, jobs retained, the geographic distribution
of the loans, and the breakdown of businesses served by
industry sector.
3. Defines, for purposes of economic development law,
"microbusiness lender" as a nonprofit or nonbank lender
that serves very small business in low- and moderate-
income communities that experience barriers in accessing
capital.
Background
CalCAP Program . The CalCAP Program was authorized in 1994,
to help small businesses obtain loans for which they would
otherwise be ineligible. CalCAP is run by the Authority,
and, until last year, had received all of its funding from
the sale of bonds by the Authority. Last year, the program
was augmented with a $6 million infusion of General Fund
money (AB 1632 ÝJ. Perez], Chapter 731, Statutes of 2010).
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CalCAP is a loan guarantee program, rather than a direct
lending program. Small businesses that fall outside of
traditional lending or underwriting criteria can apply for
CalCAP loans from participating financial institutions.
The participating financial institutions establish all of
the terms and conditions of the CalCAP loans (i.e., these
terms and conditions are not set by the Authority, nor in
statute).
The maximum loan amount currently available under the
CalCAP program is $2.5 million, although no loan of that
size has been made since 2008, and most loans are far
smaller (the average size loan in 2010 was $82,500, and the
maximum loan was $1 million). Loans may be short- or
long-term, have fixed or variable rates, be secured or
unsecured, and carry any type of amortization schedule.
Loan proceeds may be used to finance the acquisition of
land, construct or renovate buildings, purchase equipment,
or for other capital projects or working capital.
Once it decides to approve a CalCAP loan, a participating
financial institution establishes a loan loss reserve
account, whose size it sets based on the creditworthiness
of the borrower. Funds in the loan loss reserve account
are available for use by the financial institution to
backfill itself for possible losses resulting from the
loan. Borrowers, lenders, and the Authority are each
required to contribute to each CalCAP loan loss reserve
account. Amounts contributed by borrowers and lenders are
identical, are established by the lender, and currently
range from two percent to 3.5 percent of the loan amount,
depending on the lender's perception of the borrower's
creditworthiness. The amount contributed by the Authority
equals or slightly exceeds the contributions made by the
lender and borrower (higher amounts may be contributed by
the Authority, if the loan is being made in a "severely
affected community"). The Authority's contributions
currently range from two percent to 3.5 percent of the loan
amount in areas not deemed to be severely affected
communities, and from three percent to 5.25 percent in
severely affected communities.
Once the Authority contributes to an individual loan loss
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reserve account, it has no further financial exposure in
connection with the loan; any losses experienced by a
financial institution, which are not covered by the loan
loss reserve account, are borne by the financial
institution.
California Small Business Development Center (SBDC)
Program . California SBDCs are private entities funded
through a combination of federal, state, and private
moneys, which exist to help entrepreneurs grow their
businesses. The work of the centers is organized around
six geographic regions, each of which is headed by an
administrative lead center. Each lead center, in turn, has
a director who oversees a group of local service centers.
There are 35 service centers in California, each of which
provides consulting and training out of their center, and
which also provides outreach services to a variety of
smaller communities. In total, California SBDCs provide
services to 105 communities in California. Each year, they
serve over 50,000 small business owners through one-on-one
consulting, mentoring, and workshops.
California's SBDCs receive a total of $12 million in
funding from the federal Small Business Administration
annually. The lead centers then work together to secure
the non-federal funds required of these entities (a portion
of the federal funds must be returned, if the SBDCs are
unable to raise at least $6 million annually through
non-federal sources). Through 2002, these non-federal
matching funds were provided by the state. Since that
time, California SBDCs have had to cobble together funding
from local entities, corporate sponsorships, competitive
one-time grants, and one-time contracts with state
entities. In 2010, $6 million in funding for SBDCs was
included in AB 1632 (Perez), Chapter 731, Statutes of 2010.
Prior/Related Legislation
AB 981 (Hueso), 2011-12 Session, modifies the CalCAP
program by revising the definition of a financial
institution to additionally include insured depository
institutions, insured credit unions, and for-profit
community development financial institutions; authorize the
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Authority to withdraw a portion, rather than all of the
interest credited to an individual loss reserve account at
a participating financial institution; and increase the
amount contributed by the Authority to businesses located
in severely affected communities. The bill is sponsored by
the State Treasurer's Office.
AB 796 (Blumenfield), 2011-12 Session, increases the amount
that can be deposited by a financial institution
participating in the CalCAP program into a loan loss
reserve account to $200,000, over a three-year period, as
specified, if the matching contribution made by the
Authority is funded exclusively from funds made available
pursuant to the federal Small Business Jobs Act of 2010.
The bill also creates the Clean Energy and Jobs Incentive
Program, as specified.
SB 225 (Simitian), 2011-12 Session, authorizes the
Authority to establish CalCAP loss reserve accounts for the
purposes of terminal rental adjustment clause leasing, if
funds are available for contribution into the loss reserve
account from any source other than the Authority.
AB 1632 (J. Perez), Chapter 731, Statutes of 2010,
transfers a total of $32.4 million from the General Fund to
the California Small Business Expansion Fund, California
Capital Access Fund, and the California Economic
Development Fund, to support small businesses and
facilitate matching funds that would ensure a full
complement of federal funding for these programs.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
SBDC Program $43 $85
$85 General
administration
SBDC regulations $100-$150
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General
State matching funds Annual cost pressures of
$6,000 General/
Special
CalCAP expansion minor and absorbable costs
Special*
CPCFA reporting minor costs to collect and
report new Special*
data on annual
report
* California Capital Access Fund
SUPPORT : (Verified 8/25/11)
Assembly Jobs, Economic Development and the Economy
Committee (source)
BinderUp Investments, Inc.
Book Pointe Solutions
Bouchard Business Services
CALASIAN Chamber of Commerce
California Association for Micro Enterprise Opportunity
California SBDC
California SBDC at Cabrillo College
California SBDC Northern CA Regional Network, Solano
California SBDC Orange County/Inland Empire Regional
Network
California SBDC University of California Merced Regional
Network
California SBDC, City College of San Francisco
California SBDC, North Coast Center
California SBDC, San Diego and Imperial Regional Network
California SBDC, Silicon Valley
CDC Small Business Finance
City of Watsonville
Gibson House
Healings in Motion
Inland Empire Economic Partnership
Kendra Renee Handmade Jewelry
Long Beach Community College
Northern California SBDC, San Joaquin Delta College
SBDC Los Angeles Regional Network
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Siskiyou County Economic Development
Star Employment Agency
Woodland Chamber of Commerce
Yuba County - District 2 Supervisor
Yuba Sutter Economic Development Corporation
Yuba-Sutter Indo American
OPPOSITION : (Verified 8/25/11)
Department of Finance
ASSEMBLY FLOOR : 71-7, 6/2/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Hagman, Harkey,
Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman,
Jeffries, Knight, Lara, Logue, Bonnie Lowenthal, Ma,
Mendoza, Miller, Mitchell, Monning, Nestande, Nielsen,
Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva,
Skinner, Smyth, Solorio, Swanson, Torres, Valadao,
Wagner, Wieckowski, Williams, Yamada, John A. Pérez
NOES: Donnelly, Grove, Halderman, Jones, Mansoor, Morrell,
Norby
NO VOTE RECORDED: Gorell, Hall
JJA:kc 8/30/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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