BILL ANALYSIS �
AB 1646
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Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel P�rez, Chair
AB 1646 (Campos) - As Amended: April 11, 2012
SUBJECT : California Demonstration of Emerging Market
Opportunities Act
SUMMARY : Establishes the California Demonstration of Emerging
Market Opportunities Program (CalDEMO) for the purpose of
supporting the testing of innovative products, services and
processes that have been developed by private for-profit and
non-profit entities. Specifically, this bill :
1)Expresses legislative findings and declarations that
California is home to many of the world's leading technology
companies and in order to spur growth within these companies
the state needs to do more than provide traditional businesses
incubators. Rather, the state can support innovation through
streamlining the commercialization of innovative products,
services and processes.
2)Expresses further legislative findings and declarations that a
demonstration program can provide businesses and nonprofit
organizations with:
a) Experience engaging with the state in the process of
planning, deploying, demonstrating, and maintaining their
innovation;
b) High profile public exposure for the business or
nonprofit organization;
c) Data collection on an innovation's real-time performance
in a public setting;
d) An opportunity for a business or nonprofit organization
to demonstrate successfully that its innovation can be
deployed, operated, and maintained in a real-world setting;
and
e) The creation of new markets for innovative businesses
and nonprofit organizations.
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3)Designates the Governor's Office of Business and Economic
Development (GO-Biz) as the administrator of the CalDEMO
Program. Projects are to be selected, after being reviewed by
an investment advisory committee, from applications submitted
by businesses and nonprofit organizations for the use of state
resources, including lands, data and state facilities. A
preference is provided for California start-up companies.
Successful applications are required to be approved by both
GO-Biz and all participating state agencies. Each project is
to be governed through a demonstration agreement and scope of
work, which set the responsibilities of the state and other
key terms of the agreement. Further details on each of these
elements are described below.
4)Provides that the initial request for proposal include, among
other things:
a) Identification of the problem the innovative product,
process, or service is designed to address;
b) An explanation of how the innovative solution or pilot
project can benefit the state;
c) A description and set of goals for the project for the
purpose of demonstrating that the proposed demonstration
agreement will be mutually beneficial to the state and
business or nonprofit organization;
d) Performance measures that will be used to evaluate the
project;
e) A list of state resources that will be used to
demonstrate the innovate solution or pilot project; and
f) A list of relevant industry standards and codes.
5)Authorizes GO-Biz to charge a fee to process the application
that covers applicable costs.
6)Requires the director of GO-Biz to designate a partnership
coordinator that shall provide guidance to state agencies on
CalDEMO. In addition, the partnership coordinator shall:
a) Review applications and investment advisory group
comments to determine that the application meets threshold,
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public benefit and feasibility requirements;
b) Refer applications that pass the first set of reviews to
appropriate state agencies for consideration;
c) Coordinate and oversee the development of the
demonstration agreement, which sets forth the details of
the innovative solution to be demonstrated;
d) Track and report approved demonstration agreements.
Information is required to be posted on the GO-Biz website
and reported to relevant policy committees of the
Legislature; and
e) Develop guidelines for implementing the program.
7)Provides that the demonstration agreement shall, among other
things:
a) Identify the goals and performance measure that can be
used to evaluate the project;
b) Allow a state agency to discontinue the project if it
finds the business or nonprofit has falsified or withheld
key information;
c) Certify that the project is safe to demonstrate;
d) State that the business or nonprofit organization
indemnifies the state against any liability or damages that
result from the project; and
e) State the costs to the state and provide the methodology
used to determine those costs.
8)Authorizes the state to require the business or nonprofit
organization to purchase insurance coverage necessary to cover
the state's risk related to the project.
9)Provides that in supporting the implementation of a
demonstration project, that the state:
a) Authorizes the temporary use of state-owned land,
facilities, equipment, rights-of-way, or data that are
reasonably necessary for the completion of the project;
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b) Absorbs a portion of the costs to implement the
demonstration project, in an amount not to exceed the
anticipated benefits to the state of participating in the
project;
c) Agrees to nondisclosure agreements relating to
proprietary information that the state acquires from a
business or nonprofit organization during the
implementation of a partnership agreement; and
d) Performs a safety assessment of the project. The state
agency may enter into a memorandum of understanding with a
qualified state entity to provide the safety assessment. If
the state agency has reason to believe that the project is
unsafe or likely to cause any danger, the state agency
shall discontinue the project.
10)Provides legislative intent that the state shall not seek to
co-own or procure any share of the rights in the intellectual
property that are developed during the participation period.
11)Authorizes GO-Biz to enter into partnerships with foundations
and private sector sponsors for funding to implement this
measure. GO-Biz may also enter into memorandum of
understandings or interagency agreements to obtain technical,
scientific or administrative services in furthering the
objectives of the CalDemo Program.
12)Sunsets the CalDEMO Program on January 1, 2019.
EXISTING LAW establishes GO-Biz within the Governor's Office for
the purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and economic
growth. GO-Biz also serves as the administrative oversight for
the California Business Investment Service and the Office of the
Small Business Advocate.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "Small business
assistance should be a core function of every state agency's
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mission, given that state agencies are required to have small
business liaisons. However, serving small technology
businesses requires a different set of tools that this bill
will make available. The CalDEMO Act will directly aid small
businesses in emerging technology fields by allowing the state
to become a partner in the public demonstration of their
innovations. Demonstrations will provide demonstrating firms
experience engaging with a public agency, high profile public
exposure for the innovation and innovator, and promote
business development by absorbing some of the costs of
demonstrations."
2)Drivers in California's Future Economy : For decades,
California has been known as a place where innovation and
creativity flourishes. A 2007 study on California's global
competitiveness identified eight key dominant and emerging
industry clusters including high-tech manufacturing, biotech
and clean technologies. While the report found that the state
was uniquely positioned to be a preferred global partner in
the areas of innovation, science, and technology, the study
also stated that California was facing significant challenges
from a growing talent pool in other countries and the global
redistribution of manufacturing abroad.
A number of emerging economies, including China, India, and
Singapore, have already made significant investments in
research and development, which resulted in attracting 54% of
all foreign direct investment (FDI) in Asia. Emerging
economies around the world have strived to become leaders in
innovation and not merely "copycat" economies of the United
States. With software and information technology services
receiving the most FDI among all industry sectors, it is clear
innovation-based companies will continue to drive local, state
and global economies. As one Massachusetts Institute of
Technology report states, "It is not out of the question that
they �emerging economies] may soon be able to 'leapfrog'
developed centers of innovation with new innovations of their
own."
While these dynamics pose challenges to current leading
technology centers, they also offer California new
opportunities for collaboration and cooperation. The state is
already engaged in a number of academic and research
partnerships including agreements with Canada and Iceland on
renewable energy and other clean technologies. AB 1646
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proposes to take the state's commitment to its innovation
based economy to another level by directly engaging with the
business and nonprofit community in the testing and
demonstration of new products, services and processes.
3)Case Study of Government as a Partner in Demonstrating New
Technologies : In June 2008, the City of San Jose (City)
adopted a framework for engaging in and evaluating
public/private technology partnerships for the purpose of
testing and demonstrating innovative products, services and
processes. According to the City's website, these
demonstration partnerships advance the community's goals
related to obtaining a more robust and green economy, as well
as making its ongoing operations more cost effective:
"Through these partnerships, we hope to create new markets and
new jobs or/and support existing local innovators; advance the
City's Green Vision and Economic Development Strategy; and
educate the public about innovative solutions."
Under the demonstration partnership agreements, the City
allows businesses to temporarily utilize City owned land,
facilities, equipment, rights-of-way and data in order to test
innovative solutions at-scale. In some instances, the City
provides financial assistance and/or absorbs some costs for
project implementation. Another key program element is the
ability for the business to request exemption from City
policies.
Examples of the types of projects which the City has approved
include street lighting, electrical charging stations and a
range of energy efficiency pilots and demonstration projects.
According to the City's demonstration program manager, the
program has resulted in mutual benefits to both the companies
who are able to demonstrate the efficacy of their technologies
and the City. During the past few years, the manager reported
that the City gained a better understanding of how
technologies can be used to manage its operational costs,
lower carbon emissions through its everyday activities and
more accurately gauge return on public investment.
One of the City's first demonstration projects provided for
the installation of a Colomb electrical charging station
across from City Hall. From this first station, installed in
2009, the company currently has stations in over 14 countries.
This demonstration project also helped facilitate other key
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demonstration funding from the federal Department of Energy
(approximately $34 million) and the California Energy
Commission ($4 million) to help with the final installation of
the equipment.
Other local governments in the Bay Area have adopted
demonstration ordinances including the Town of Los Gatos, the
County of Santa Clara and the City of Livermore. AB 1646
would create a similar state program for helping businesses
and nonprofit organizations test and otherwise demonstrate
innovative products, solutions and processes at scale.
Members may want to consider how a similar state demonstration
program could be integrated into this growing network of local
demonstration programs.
4)Technology Commercialization Programs : California faces
competition from other countries and states. While previously
the state was the clear leader in global innovation and
technology, the past decade has seen other regions make
significant strides that can now support technology based
industries. As an example, China and Germany have both
surpassed California as the leaders in equity capital for
solar. Below are two examples of programs from other states
designed to support a vibrant and continually innovating
business sector:
a) The Utah Technology Commercialization & Innovation
Program : The purpose of the Technology Commercialization &
Innovation Program (TCIP) is to accelerate the
commercialization of promising technologies that have
strategic value for Utah. The end goal of the TCIP Program
is to help drive economic development and job creation.
The program is a state funded grant program initially
adopted by the Utah Legislature in 1986 and focuses on
accelerating the process of taking university-developed
cutting-edge technologies to market.
b) The Massachusetts START Program : In March 2012, the
Massachusetts Technology Development Corporation announced
the launch of a $6 million initiative to help startups
commercialize technologies developed under federal Small
Business Innovation Research grants. As designed, the
START program will provide financial support, as well as
coaching, business planning and introductions to potential
investors.
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5)Expansion of GO-Biz and Reorganization : On March 30, 2012,
the Governor submitted a reorganization plan to the Little
Hoover Commission, which proposes to dismantle the Business,
Transportation and Housing Agency (BTH) and the State and
Consumer Services Agency (SCS). Existing programs are
generally moved to other state entities. Overall, the number
of state agencies is reduced from 12 to 10.
The economic development programs at BTH are proposed to be
transferred to GO-Biz including: the Small Business Loan
Guarantee Program; the California Travel and Tourism
Commission; the California Film Commission; the Film
California First Program; and the Infrastructure and Economic
Development Bank.
The Little Hoover Commission has 30 days to analyze the
reorganization plan and submit its recommendations to the
Governor and Legislature. The Legislature then 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 each house voting.
6)Amendments : Committee staff have proposed technical
amendments to the author.
7)Related Legislation : The following is a list of bills related
to this measure from the current and prior sessions.
a) AB 29 (John A. P�rez) - Codification of GO-Biz: This
bill establishes the GO-Biz within the Governor's Office
for the purpose of serving as the lead entity for economic
strategy and marketing of California on issues relating to
business development, private sector investment and
economic growth. Status: The bill was signed by the
Governor, Chapter 475, Statutes of 2011.
b) AB 2506 (V. Manuel P�rez) - Innovation and Job Creation
Act : This bill authorizes a comprehensive set of
enhancements to tax incentive programs and administrative
procedures including a manufacturing sales tax exemption,
increased R&D credits and secondary education donation
credits for the purpose of creating jobs and supporting
innovation-based businesses. Status: The bill is pending
in the Assembly Committee on Business, Professions and
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Consumer Protection.
c) AB 2711 (Portantino, Arambula, Price and Salas) - State
Technology and Innovation Strategy : This bill would have
required the Secretary of the Business, Transportation and
Housing Agency to develop a comprehensive state technology
and innovation strategy to guide future state expenditures
and activities. Status: The bill was held under
submission in the Assembly Committee on Appropriations in
2008.
REGISTERED SUPPORT / OPPOSITION :
Support
Silicon Valley Leadership Group
Switch Lighting
Tech America
Opposition
None Received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916)
319-2090