BILL ANALYSIS Ó
AB 2619
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Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2619 (V. Manuel Perez) - As Amended: April 18, 2012
Policy Committee: JEDE Vote:4-2
Banking and Finance 8-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill creates the Start-Up California Impact Investment Fund
Program within the California Infrastructure and Economic
Development Bank (I-Bank) to provide startup equity funds to
startup firms and small businesses. Specifically, this bill:
1)Allows the I-Bank to make expenditures from the startup equity
fund account.
2)Requires the I-Bank to consult with the appropriate agencies
and investors who impact investment policies that target
businesses in lower income communities, emerging money
managers, or emerging domestic markets.
3)Requires, after the consultation, that the I-Bank shall adopt
an investment policy and establish criteria, priorities and
guidelines for the selection of start-up firms and small
businesses that receive start-up equity funds from the I-Bank.
4)Allows the I-Bank to contract with professional equity fund
managers who have demonstrated expertise in emerging domestic
market investments and impact investment mandates to implement
the Start-Up California Impact Investment Fund program.
5)Requires the I-Bank to adopt guidelines and policies for
overseeing these contracts.
FISCAL EFFECT
AB 2619
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The I-Bank estimates costs to develop and administer this new
program would be approximately $1 million. In addition, the
I-Bank sees a need for $5 to $10 million to provide initial
capital. The I-Bank believes federal funding may provide some
of the necessary funds.
Because the state would be taking an equity stake in small
businesses, these investments would have a higher risk and also
the potential for higher returns than conventional government
investments.
COMMENTS
1)Purpose : According to the author, California has the ability
to do a better job of encouraging private investment in
California's historically underserved capital markets. The
author notes research from the Kaufman Foundation shows more
than 90% of all jobs created between 1977 and 2005 came from
small and early stage firms, therefore it is essential to
address the capital access needs of these businesses.
According to the author, other states have been committing to
a broader range of financing programs, including direct loans,
guarantees and credit enhancements in partnership with private
lenders and equity financing in conjunction with experienced
private sector financial asset managers. The author argues
California has a very limited set of tools and only operates
direct loan and credit enhancement programs to assist small
businesses and start-ups, and that AB 2619 provides an
important tool for small businesses, many of which are woman
and minority owned, to attract early stage private investors.
2)Background. The mission of the I-Bank is to finance public
infrastructure and private development. The I-Bank has
extremely broad statutory powers to issue revenue bonds, make
loans and provide credit enhancements for a wide variety of
infrastructure and economic development projects and other
government purposes. The I-Bank is self-supporting and pays
its cost of operations from service fees and interest earnings
on loans and investments.
3)I-Bank reorganization. On March 30, 2012, the governor
proposed moving the I-Bank from the Business, Transportation
and Housing Agency and relocated it to the Governor's Office
of Business and Economic Development.
AB 2619
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4)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081