BILL NUMBER: AB 2523 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 18, 2012
INTRODUCED BY Assembly Member Hueso
FEBRUARY 24, 2012
An act to amend Sections 63010 and 63035 of, and to add Section
63025.5 to, the Government Code, relating to economic development.
LEGISLATIVE COUNSEL'S DIGEST
AB 2523, as amended, Hueso. Infrastructure and Economic
Development Bank: participation loans.
Existing law authorizes the Infrastructure and Economic
Development Bank to enter into loan agreements with a sponsor or a
participating party in order to finance a project related to
infrastructure or economic development. Existing law requires the
bank to submit an annual report to the Governor and the Joint
Legislative Audit Committee on various topics related to the
operation of the bank's projects.
This bill would authorize the bank, upon appropriation by the
Legislature, to enter into participation loan agreements, as defined,
with financial institutions for the bank to purchase interests in
loans made or held by financial institutions to small businesses.
This bill would authorize the bank to establish a California
Preferred Broker-Dealer program for the purpose of closing
financial and information gaps within the network of public and
private financial institutions and intermediaries that serve small
businesses. This bill would require the bank to include in its
annual report a summary of the participation loan agreement program.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) The availability of capital for California small businesses
that are engaged in economic development is critical to continued job
growth and development of the economy of California.
(b) Existing state-managed funds constitute a major financial
resource of California. Prudent investment, management, and
coordination of these funds may, together with access to capital
provided in partnership with financial institutions, enhance the
availability of capital for California small businesses and farms and
contribute to sustainable job growth.
(c) This act will help the economic development of this state by
accomplishing the following purposes:
(1) Support the economic development of this state by increasing
access to capital for small businesses and farms in this state in
partnership with local financial institutions and through existing
state agency programs and infrastructure.
(2) Support California employment by encouraging and coordinating
investments that can result in job creation and retention in a
sustainable and efficient manner.
(3) Assist in providing stability to the local financial sector,
but not to compete in any way with banks, credit unions, or other
financial institutions.
(4) Fund related governmental operations with a portion of the
program's earnings, when practical.
SEC. 2. Section 63010 of the Government Code is amended to read:
63010. For purposes of this division, the following words and
terms shall have the following meanings unless the context clearly
indicates or requires another or different meaning or intent:
(a) "Act" means the Bergeson-Peace Infrastructure and Economic
Development Bank Act.
(b) "Bank" means the California Infrastructure and Economic
Development Bank.
(c) "Board" or "bank board" means the Board of Directors of the
California Infrastructure and Economic Development Bank.
(d) "Bond purchase agreement" means a contractual agreement
executed between the bank and a sponsor, or a special purpose trust
authorized by the bank or a sponsor, or both, whereby the bank or
special purpose trust authorized by the bank agrees to purchase bonds
of the sponsor for retention or sale.
(e) "Bonds" means bonds, including structured, senior, and
subordinated bonds or other securities; loans; notes, including bond,
revenue, tax or grant anticipation notes; commercial paper; floating
rate and variable maturity securities; and any other evidences of
indebtedness or ownership, including certificates of participation or
beneficial interest, asset backed certificates, or lease-purchase or
installment purchase agreements, whether taxable or excludable from
gross income for federal income taxation purposes.
(f) "Cost," as applied to a project or portion thereof financed
under this division, means all or any part of the cost of
construction, renovation, and acquisition of all lands, structures,
real or personal property, rights, rights-of-way, franchises,
licenses, easements, and interests acquired or used for a project;
the cost of demolishing or removing any buildings or structures on
land so acquired, including the cost of acquiring any lands to which
the buildings or structures may be moved; the cost of all machinery,
equipment, and financing charges; interest prior to, during, and for
a period after completion of construction, renovation, or
acquisition, as determined by the bank; provisions for working
capital; reserves for principal and interest and for extensions,
enlargements, additions, replacements, renovations, and improvements;
and the cost of architectural, engineering, financial and legal
services, plans, specifications, estimates, administrative expenses,
and other expenses necessary or incidental to determining the
feasibility of any project or incidental to the construction,
acquisition, or financing of any project, and transition costs in the
case of an electrical corporation.
(g) "Economic development facilities" means real and personal
property, structures, buildings, equipment, and supporting components
thereof that are used to provide industrial, recreational, research,
commercial, utility, or service enterprise facilities, community,
educational, cultural, or social welfare facilities and any parts or
combinations thereof, and all facilities or infrastructure necessary
or desirable in connection therewith, including provision for working
capital, but shall not include any housing.
(h) "Electrical corporation" has the meaning set forth in Section
218 of the Public Utilities Code.
(i) "Executive director" means the Executive Director of the
California Infrastructure and Economic Development Bank appointed
pursuant to Section 63021.
(j) "Financial assistance" in connection with a project, includes,
but is not limited to, any combination of grants, loans, the
proceeds of bonds issued by the bank or special purpose trust,
insurance, guarantees or other credit enhancements or liquidity
facilities, and contributions of money, property, labor, or other
things of value, as may be approved by resolution of the board or the
sponsor, or both; the purchase or retention of bank bonds, the bonds
of a sponsor for their retention or for sale by the bank, or the
issuance of bank bonds or the bonds of a special purpose trust used
to fund the cost of a project for which a sponsor is directly or
indirectly liable, including, but not limited to, bonds, the security
for which is provided in whole or in part pursuant to the powers
granted by Section 63025; bonds for which the bank has provided a
guarantee or enhancement, including, but not limited to, the purchase
of the subordinated bonds of the sponsor, the subordinated bonds of
a special purpose trust, or the retention of the subordinated bonds
of the bank pursuant to Chapter 4 (commencing with Section 63060); or
any other type of assistance deemed appropriate by the bank or the
sponsor, except that no direct loans shall be made to nonpublic
entities other than in connection with the issuance of rate reduction
bonds pursuant to a financing order or in connection with a
financing for an economic development facility.
For purposes of this subdivision, "grant" does not include grants
made by the bank except when acting as an agent or intermediary for
the distribution or packaging of financing available from federal,
private, or other public sources.
(k) "Financial institutions" means banking or savings
organizations, including, but not limited to, banks, savings and loan
associations , and credit unions, authorized to conduct
business in California and state-chartered commercial banks, trust
companies, and savings and loan associations.
"Financial institutions " also includes
nonprofit organizations that serve as a financial intermediary or
microbusiness lender, as def ined in Section 13997.2.
(l) "Financing order" has the meaning set forth in Section 840 of
the Public Utilities Code.
(m) "Guarantee trust fund" means the California Infrastructure
Guarantee Trust Fund.
(n) "Infrastructure bank fund" means the California Infrastructure
and Economic Development Bank Fund.
(o) "Loan agreement" means a contractual agreement executed
between the bank or a special purpose trust and a sponsor that
provides that the bank or special purpose trust will loan funds to
the sponsor and that the sponsor will repay the principal and pay the
interest and redemption premium, if any, on the loan.
(p) "Participation loan agreement" means an agreement whereby the
bank would purchase portions of outstanding loans by
providing capital and collecting interest and principal payments on a
pro rata basis or sharing in the ownership of a loan or package of
loans without servicing, managing, or otherwise
administrating the underlying loan . A participation loan
agreement may include an agreement to refinance a loan or package of
loans where the term of the loan or loans to be refinanced
is within 18 months of coming due.
(q) "Participating party" means any person, company, corporation,
association, state or municipal governmental entity, partnership,
firm, or other entity or group of entities, whether organized for
profit or not for profit, engaged in business or operations within
the state and that applies for financing from the bank in conjunction
with a sponsor for the purpose of implementing a project. However,
in the case of a project relating to the financing of transition
costs or the acquisition of transition property, or both, on the
request of an electrical corporation, or in connection with a
financing for an economic development facility, or for the financing
of insurance claims, the participating party shall be deemed to be
the same entity as the sponsor for the financing.
(r) "Project" means designing, acquiring, planning, permitting,
entitling, constructing, improving, extending, restoring, financing,
and generally developing public development facilities or economic
development facilities within the state or financing transition costs
or the acquisition of transition property, or both, upon approval of
a financing order by the Public Utilities Commission, as provided in
Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of
Division 1 of the Public Utilities Code.
(s) "Public development facilities" means real and personal
property, structures, conveyances, equipment, thoroughfares,
buildings, and supporting components thereof, excluding any housing,
that are directly related to providing the following:
(1) "City streets" including any street, avenue, boulevard, road,
parkway, drive, or other way that is any of the following:
(A) An existing municipal roadway.
(B) Is shown upon a plat approved pursuant to law and includes the
land between the street lines, whether improved or unimproved, and
may comprise pavement, bridges, shoulders, gutters, curbs,
guardrails, sidewalks, parking areas, benches, fountains, plantings,
lighting systems, and other areas within the street lines, as well as
equipment and facilities used in the cleaning, grading, clearance,
maintenance, and upkeep thereof.
(2) "County highways" including any county highway as defined in
Section 25 of the Streets and Highways Code, that includes the land
between the highway lines, whether improved or unimproved, and may
comprise pavement, bridges, shoulders, gutters, curbs, guardrails,
sidewalks, parking areas, benches, fountains, plantings, lighting
systems, and other areas within the street lines, as well as
equipment and facilities used in the cleaning, grading, clearance,
maintenance, and upkeep thereof.
(3) "Drainage, water supply, and flood control" including, but not
limited to, ditches, canals, levees, pumps, dams, conduits, pipes,
storm sewers, and dikes necessary to keep or direct water away from
people, equipment, buildings, and other protected areas as may be
established by lawful authority, as well as the acquisition,
improvement, maintenance, and management of floodplain areas and all
equipment used in the maintenance and operation of the foregoing.
(4) "Educational facilities" including libraries, child care
facilities, including, but not limited to, day care facilities, and
employment training facilities.
(5) "Environmental mitigation measures" including required
construction or modification of public infrastructure and purchase
and installation of pollution control and noise abatement equipment.
(6) "Parks and recreational facilities" including local parks,
recreational property and equipment, parkways and property.
(7) "Port facilities" including docks, harbors, ports of entry,
piers, ships, small boat harbors and marinas, and any other
facilities, additions, or improvements in connection therewith.
(8) "Power and communications" including facilities for the
transmission or distribution of electrical energy, natural gas, and
telephone and telecommunications service.
(9) "Public transit" including air and rail transport of goods,
airports, guideways, vehicles, rights-of-way, passenger stations,
maintenance and storage yards, and related structures, including
public parking facilities, equipment used to provide or enhance
transportation by bus, rail, ferry, or other conveyance, either
publicly or privately owned, that provides to the public general or
special service on a regular and continuing basis.
(10) "Sewage collection and treatment" including pipes, pumps, and
conduits that collect wastewater from residential, manufacturing,
and commercial establishments, the equipment, structures, and
facilities used in treating wastewater to reduce or eliminate
impurities or contaminants, and the facilities used in disposing of,
or transporting, remaining sludge, as well as all equipment used in
the maintenance and operation of the foregoing.
(11) "Solid waste collection and disposal" including vehicles,
vehicle-compatible waste receptacles, transfer stations, recycling
centers, sanitary landfills, and waste conversion facilities
necessary to remove solid waste, except that which is hazardous as
defined by law, from its point of origin.
(12) "Water treatment and distribution" including facilities in
which water is purified and otherwise treated to meet residential,
manufacturing, or commercial purposes and the conduits, pipes, and
pumps that transport it to places of use.
(13) "Defense conversion" including, but not limited to,
facilities necessary for successfully converting military bases
consistent with an adopted base reuse plan.
(14) "Public safety facilities" including, but not limited to,
police stations, fire stations, court buildings, jails, juvenile
halls, and juvenile detention facilities.
(15) "State highways" including any state highway as described in
Chapter 2 (commencing with Section 230) of Division 1 of the Streets
and Highways Code, and the related components necessary for safe
operation of the highway.
(16) (A) Military infrastructure, including, but not limited to,
facilities on or near a military installation, that enhance the
military operations and mission of one or more military installations
in this state. To be eligible for funding, the project shall be
endorsed by the Office of Military and Aerospace Support established
pursuant to Section 13998.2.
(B) For purposes of this subdivision, "military installation"
means any facility under the jurisdiction of the Department of
Defense, as defined in paragraph (1) of subsection (e) of Section
2687 of Title 10 of the United States Code.
(t) "Rate reduction bonds" has the meaning set forth in Section
840 of the Public Utilities Code.
(u) "Revenues" means all receipts, purchase payments, loan
repayments, lease payments, and all other income or receipts derived
by the bank or a sponsor from the sale, lease, or other financing
arrangement undertaken by the bank, a sponsor or a participating
party, including, but not limited to, all receipts from a bond
purchase agreement, and any income or revenue derived from the
investment of any money in any fund or account of the bank or a
sponsor and any receipts derived from transition property. Revenues
shall not include moneys in the General Fund of the state.
(v) "Small business" has the same meaning as defined in
subdivision (d) of Section 14837. any of the
following:
(1) A small business as defined in subdivision (d) of Section
14837.
(2) A business that meets the requirements of an eligible small
business under Part 121 of Chapter 1 of Title 13 of the Code of
Federal Regulations.
(3) A business that is eligible for a loan guarantee under the
California Small Business Financial Development Corporation Law
(Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of
Title 1 of the Corporations Code).
(4) A qualified business that is eligible for a loan guarantee
under Article 8 (commencing with Section 44559) of Chapter 1 of
Division 27 of the Health and Safety Code.
(5) A nonprofit organization that meets the size limitations of
paragraphs (1) to (4), inclusive.
(w) "Special purpose trust" means a trust, partnership, limited
partnership, association, corporation, nonprofit corporation, or
other entity authorized under the laws of the state to serve as an
instrumentality of the state to accomplish public purposes and
authorized by the bank to acquire, by purchase or otherwise, for
retention or sale, the bonds of a sponsor or of the bank made or
entered into pursuant to this division and to issue special purpose
trust bonds or other obligations secured by these bonds or other
sources of public or private revenues. Special purpose trust also
means any entity authorized by the bank to acquire transition
property or to issue rate reduction bonds, or both, subject to the
approvals by the bank and powers of the bank as are provided by the
bank in its resolution authorizing the entity to issue rate reduction
bonds.
(x) "Sponsor" means any subdivision of the state or local
government including departments, agencies, commissions, cities,
counties, nonprofit corporations formed on behalf of a sponsor,
special districts, assessment districts, and joint powers authorities
within the state or any combination of these subdivisions that makes
an application to the bank for financial assistance in connection
with a project in a manner prescribed by the bank. This definition
shall not be construed to require that an applicant have an ownership
interest in the project. In addition, an electrical corporation
shall be deemed to be the sponsor as well as the participating party
for any project relating to the financing of transition costs and the
acquisition of transition property on the request of the electrical
corporation and any person, company, corporation, partnership, firm,
or other entity or group engaged in business or operation within the
state that applies for financing of any economic development
facility, shall be deemed to be the sponsor as well as the
participating party for the project relating to the financing of that
economic development facility.
(y) "State" means the State of California.
(z) "Transition costs" has the meaning set forth in Section 840 of
the Public Utilities Code.
(aa) "Transition property" has the meaning set forth in Section
840 of the Public Utilities Code.
SEC. 3. Section 63025.5 is added to the Government Code, to read:
63025.5. (a) (1) The bank may,
may establish a California Preferred Broker-Dealer
program for the purpose of closing financial and information gaps
within the network of public and private financial institutions and
intermediaries that serve small businesses.
(2) In order for a financial institution to be eligible to
participate in the California Preferred Broker-Dealer program, the
financial institution shall demonstrate a long-term relationship with
community development financial institutions, and shall meet all of
the following requirements:
(A) Adhere to a prescribed set of underwriting criteria, which
would be designed to meet the needs of small businesses and provide a
high-quality loan-backed security.
(B) Demonstrate the ability to facilitate participation loan
agreements and the syndication of loans and loan packages that
provide capital to small businesses.
(C) Commit a minimum percent of capital to any syndication or
participation agreement entered into under the auspices of the
program.
(D) Annually report on the number of small businesses served, jobs
created, geographic locations, and industry sectors.
(b) Financial institutions that participate in the California
Preferred Broker-Dealer program shall have priority access to
guarantees under the Small Business Loan Guarantees program under
Article 8 (commencing with Section 44559) of Chapter 1 of Division 27
of the Health and Safety Code.
(c) The bank may, upon an
appropriation by the Legislature for this purpose, enter into
participation loan agreements with financial institutions for the
bank to purchase participation interests in loans made or held by
financial institutions to small businesses.
(b)
(d) The bank may promulgate regulations in
accordance with the Administrative Procedures Act (Chapter 3.5
(commencing with Section 11340) of Part 1 of Division 3 of Title 2 of
the Government Code) guidelines to establish
the procedures and standards for entering into participation
loan agreements in accordance with this act
implementing this section .
SEC. 4. Section 63035 of the Government Code is amended to read:
63035. The bank shall, not later than November 1 of each year,
submit to the Governor and the Joint Legislative Budget Committee a
report of its activities pursuant to this division for the preceding
fiscal year. The report shall include all of the following:
(a) (1) A listing of applications accepted, including a
description of the expected employment impact of each project.
(2) A separate summary of applications for the Infrastructure
State Revolving Fund Program, including a summary of the number of
preliminary applications that did not receive funding and the reason
the applicant did not qualify.
(b) A specification of bonds sold and interest rates thereon.
(c) The amount of other public and private funds leveraged by the
assistance provided.
(d) A report of revenues and expenditures for the preceding fiscal
year, including all of the bank's costs. The information provided
pursuant to this subdivision shall include, but need not be limited
to, both of the following:
(1) The amount and source of total bank revenues. Revenues shall
be shown by main categories of revenues, including interest earnings,
fees collected, and bond proceeds, for each bank program.
(2) The amount and type of total bank expenditures. Expenditures
shall be shown by major categories of expenditures, including loans
provided, debt service payments, and program support costs, for each
bank program.
(e) A projection of the bank's needs and requirements for the
coming year.
(f) Recommendations for changes in state and federal law necessary
to meet the objectives of this division.
(g) A summary of the participation loan agreement program,
including the policies and practices of the bank for the
investment and management of state funds, and a summary of
any participation loan agreements entered into by the bank pursuant
to Section 63025.5 , including, but not limited to, the number
of jobs impacted and created, the number of businesses
assisted, the geographic areas the businesses were located, and the
industry sectors of the businesses served, as defined by the North
American Industry Classification System (NAICS) .