BILL ANALYSIS Ó
AB 1545
Page 1
ASSEMBLY THIRD READING
AB 1545 (V. Manuel Pérez)
As Amended May 25, 2012
Majority vote
ECONOMIC DEVELOPMENT 4-2 APPROPRIATIONS 12-5
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|Ayes:|V. Manuel Pérez, Beall, |Ayes:|Fuentes, Blumenfield, |
| |Block, Hueso | |Bradford, Charles |
| | | |Calderon, Campos, Davis, |
| | | |Gatto, Ammiano, Hill, |
| | | |Lara, Mitchell, Solorio |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Grove, Morrell |Nays:|Harkey, Donnelly, |
| | | |Nielsen, Norby, Wagner |
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SUMMARY : Expands the role of the California Infrastructure and
Economic Development Bank (I-Bank) to include facilitating
infrastructure and economic development financing activities
within the California and Mexico border region. Specifically,
this bill :
1)Expresses legislative intent stating, among other things,
that:
a) The lack of economic development along the border region
with Mexico has caused economic challenges to the state and
that the existence of an economic development authority
that can address these challenges serves a public purpose;
and,
b) There is a need for the federal government to
re-capitalize the North American Development Bank in order
to be a more effective financing partner within the border
region.
2)Authorizes the I-Bank to facilitate and finance infrastructure
and economic development projects within the border region.
The "border region" is defined as the area within 125 miles on
each side of the California-Mexico border, including areas
along the north-south and east-west transportation networks on
AB 1545
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both sides of the border.
3)Prohibits implementation of the BiNational Financing Authority
article until the executive director of the I-Bank makes a
determination that there are sufficient funds available and
submits a letter to the Legislature that such a determination
has been made.
4)Prohibits the use of General Fund moneys from being used to
implement this measure.
EXISTING LAW creates the I-Bank within Business, Transportation
and Housing Agency (BTH), to promote economic revitalization,
enable future development, and encourage a healthy climate for
jobs in California.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, implementation of the bill will become operative when
funds are available so there are not immediate costs, but the
bill will provide cost pressure on the General Fund. When
implemented, the costs for the I-Bank are expected to be
$250,000 to set up program, including developing regulations and
establishing the authority. As the program is established costs
could diminish, depending on the volume of financing activity.
COMMENTS : World class infrastructure plays a key role in
business attraction, as multinational companies consistently
rank the quality of infrastructure among their top four criteria
in making investment decisions. Research shows that as U.S.
infrastructure has been in decline, infrastructure in other
countries is rapidly increasing. The 2010-11 Global
Competitiveness Report by the World Economic Forum places U.S.
infrastructure 23rd in the world, a drop from its rank of 7th in
2000.
California's infrastructure is in a similar state, according to
the American Society of Civil Engineers, California
Infrastructure Report Card 2012, with an estimated $65 billion a
year investment gap. The impact of this lack of investment is
compounded by the substantial new investments made in other
states and nations, including the expansion of the Panama Canal.
With the logistics sector alone employing over 73,000 workers,
failing to remain competitive will impact California jobs.
AB 1545
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Institutional investors have responded to the U.S.'s
infrastructure shortfall and the lack of sufficient public
finance opportunities by adopting new investment mandates to
privately finance public infrastructure. As an example, in the
fall of 2011, the California Public Employees' Retirement System
(CalPERS) Board of Administration approved a motion that would
allow up to $800 million to be invested in California
infrastructure over the next three years. Both public and
private infrastructure facilities are eligible, including, but
not limited to, transportation, energy, natural resources,
utilities, water, communications and other social support
services.
Currently, CalPERS has $203 million invested in a combination of
physical infrastructure investments and infrastructure-targeted
private equity funds around the state. CalPERS has also
provided credit enhancement to more than $326 million in
infrastructure bonds.
Successfully deploying private capital for public infrastructure
can, however, be challenging. Large investors such as CalPERS
can deploy capital anywhere in the world. This bill proposes to
have the I-Bank use its expertise in infrastructure finance to
facilitate private sector-ready infrastructure along the border
region.
Goods movement infrastructure
Mexico is California's largest trading partner, with exports of
products to Mexico of $26 billion (16% of total state exports)
in 2011. One barrier to the continued expansion of trade and
bi-national commerce is the deficit in border infrastructure,
which has not kept pace with increases in trade and transit
since ratification of the North American Free Trade Agreement.
Goods movement supports employment, business profit, and state
and local tax revenue. California businesses rely heavily on
the state's air/sea ports and their related transportation
systems to move manufactured goods. Firms rely on fast,
flexible, and reliable shipping to link national and global
supply chains and bring products to the retail market.
Transportation breakdowns and congestion can idle entire global
production networks. As a result, the capacity and efficiency
of seaports, airports, and multimodal linkages have become
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critical factors in global trade.
For California, expanded supply chains for manufacturing and
product distribution have resulted in congested seaports, where
cargo ships are often delayed for extended periods of time
waiting to unload. Truck access is often cited for the delays.
At international airports, truck access is also a problem, and
expansion of major airports is severely limited by urbanization,
ground access, air quality impacts, and local opposition.
California's land-based border crossing with Mexico is
particularly congested and inhibits trade and commerce within
the region and its access to global markets. There are six land
crossings referred to as Points of Entry (POEs). The San Diego
County-Tijuana/Tecate region is home to the San Ysidro-Puerta
México, the Otay Mesa-Mesa de Otay, and the Tecate-Tecate POEs
while the Imperial County-Mexicali region hosts the
Calexico-Mexicali, Calexico East-Mexicali II, and Andrade-Los
Algodones POEs.
U.S. firms with significant business passing through the three
Imperial Valley POEs report that their logistics-supply chain is
highly time sensitive. Long wait times at border crossings
result in delays in receiving intermediary goods and ultimately
lead to problems in the manufacturing chain. Long wait times
between Mexico and the U.S. along the Imperial County - Baja
California border accounted for an estimated output loss of $1.4
billion and 11,600 lost jobs nationally in 2007. In California
losses were estimated at $436 million and 5,639 jobs.
Reorganization of the 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 of the
Department of Finance, Secretary of 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.
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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.
On May 3, 2012, the Governor submitted a reorganization plan to
the Legislature, which among other things, proposes to dismantle
BTH and move programs to other existing and new government
entities. The I-Bank is proposed to be relocated to the
Governor's Office of Business and Economic Development (GO-Biz),
along with Small Business Loan Guarantee Program; The California
Travel and Tourism Commission; The California Film Commission;
and the Film California First Program. The Secretary of BTH is
replaced by the Director of GO-Biz as Chair of I-Bank. The
newly established Secretary of Transportation replaces the
Secretary of State and Consumer Services on the I-Bank board.
The Legislature has 60 days to consider the plan. The plan goes
into effect unless the Legislature takes an action to disapprove
the plan with a majority of the Members in either house voting.
A repositioned I-Bank within GO-Biz offers a range of cost
effective and innovative options for advancing the state's
economic position.
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090 FN:
0003910