BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1545 (V.M. Perez) - Economic development projects:
California-Mexico border region.
Amended: May 25, 2012 Policy Vote: BP&ED 6-1
Urgency: No Mandate: No
Hearing Date: August 16, 2012
Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: AB 1545 would authorize the California
Infrastructure and Economic Development Bank (I-Bank) to
establish a binational financing authority to facilitate and
finance infrastructure and economic development projects in the
California-Mexico border region.
Fiscal Impact: Estimated I-Bank staff costs (1 Program Manager
and 1 other staff PY) to the I-Bank in the range of $250,000 to
establish and administer the program, likely over several fiscal
years (I-Bank Fund). Once the program is fully implemented,
ongoing costs to finance projects could be recovered from fees
associated with financing activities, depending on volume.
Background: Existing law creates the I-Bank within the Business,
Transportation and Housing Agency, to promote economic
revitalization, enable future development, and encourage a
healthy climate for jobs in California. As of July of 2013, the
I-Bank will be relocated to the Governor's Office of Business
and Economic Development (GO-Biz), pursuant to the Governor's
Reorganization Plan No.2. The I-Bank administers the
Infrastructure State Revolving Fund Program, which provides
direct low-cost loan financing for public infrastructure
projects, and several programs that provide tax-exempt revenue
bond financing for manufacturing companies, nonprofit
organizations, and specified public agencies. The I-Bank is
financed by fees, interest income, and other revenue from its
financing activities.
The North American Development (NAD) Bank was created through
the enactment of North American Free Trade Agreement and is
jointly financed by the United States and Mexico. The NAD Bank
AB 1545 (V.M. Perez)
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is authorized to serve communities located within 100 km (about
62 miles) north of the international boundary in the four states
of Texas, New Mexico, Arizona and California and within 300 km
(about 186 miles) south of the border in the six states of
Tamaulipas, Nuevo Leon, Coahuila, Chihuahua, Sonora, and Baja
California. Ninety percent of NADB's authorized capital,
currently $450 million, is used to finance environmental
infrastructure projects in the border region, and 10 percent of
the capital subscribed by each country went to finance community
adjustment and investment.
Proposed Law: AB 1545 would authorize the I-Bank to establish
and participate in a binational financing authority for the
purpose of facilitating and supporting the economic development
of communities within the border region, defined as the area
within 125 miles on each side of the California-Mexico border.
Specifically, this bill would:
Specify that participants may include local entities in
the Imperial Valley, San Diego County, and the Coachella
Valley, the NAD Bank, and governmental entities in the
Mexico border region.
Authorize the I-Bank to enter into any agreement with
any federal, state, local, or foreign economic and
infrastructure authority.
Require the authority to jointly develop an economic
development plan of proposed projects to address existing
and future needs of border crossings to support trade and
tourism.
Require the I-Bank to develop guidelines for the
selection, review, and approval of projects within the
border region.
Limit the use of state funds provided by the I-Bank to
projects in California.
Direct the I-Bank to serve in a role similar to the NAD
Bank.
Authorize the I-Bank to issue tax-exempt or taxable
revenue bonds and deposit proceeds into the Binational
Economic Development Account, as specified, for purposes of
the binational financing authority.
Prohibits the use of General Fund revenues for the
authority's purposes, and specifies that the provisions of
the bill would only become operative if the I-Bank's
executive director determines that sufficient funds are
available to implement the program.
AB 1545 (V.M. Perez)
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Staff Comments: Mexico is California's largest trading partner,
with over $21 million in goods flowing from the state to markets
in Mexico in 2010. This bill is intended to provide a mechanism
to address deficiencies in border infrastructure that serve as
an impediment to the prosperity of businesses and workers in the
border region.
The I-Bank would incur costs in the range of $250,000 for 2 PY
of new staff to establish the program, including costs to
develop and adopt guidelines for the selection, review, and
approval of border region projects. The I-Bank would also be
required to develop and adopt agreements with participating
entities, identify projects for inclusion in an economic
development plan, and conduct meetings with stakeholders.
Ongoing costs would likely be necessary for several fiscal years
until the program is fully implemented, at which time costs to
finance projects could be recovered from fees associated with
financing activities, depending on volume of projects.
It would appear that this program would run parallel to, or in
some cases duplicate, activities conducted by the NAD Bank.
Although the bill directs the I-Bank to serve in a role that is
similar to the NAD Bank, it is unclear that the state program
would add substantial value to the federal activities. In
addition, the NAD Bank activities are limited to an area within
100 km of the north side of the border (approximately 62 miles),
while the activities of the I-Bank's border financing authority
may operate in an area almost twice as large. It is unclear why
the state entity would need to serve a much larger region.