BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1116 (Leno) - California Pollution Control Financing
Authority: Capital Access Loan Program.
Amended: April 26, 2012 Policy Vote: B&FI 6-0, EQ 6-0
Urgency: No Mandate: No
Hearing Date: May 14, 2012 Consultant: Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1116 would reduce the minimum contribution paid
by financial institutions and borrowers from two to one percent
of the loan into a loan loss reserve account under the
California Capital Access Program (CalCAP) until April 2, 2007.
This bill would also extend the time that financial institutions
have to enroll a loan into CalCAP.
Fiscal Impact:
Minor and absorbable costs to the California Treasure's
Office from the California Capital Access Fund (General
Fund/special fund/federal funds) beginning in 2013-14
through 2015-16 for the administration of CalCAP.
Unknown, but potentially in the hundreds of thousands of
dollars or more, cost pressures to state funds within the
California Capital Access Fund (General Fund/special
fund/federal funds) beginning in 2013-14 through 2015-16 for
increased participation in CalCAP.
Background: Existing law authorizes the California Capitol
Access Program (CalCAP), which is administered by the California
Pollution Control Financing Authority (CPCFA), within the State
Treasurer's Office. CalCAP is a loan loss insurance program that
aims to help small businesses obtain loans for which they would
otherwise be ineligible. Participating financial institutions
establish all the terms and conditions of CalCAP loans. Once the
financial institution approves a CalCAP loan, it establishes a
loan loss reserve account and has 10 days to notify CPCFA of the
loan. The financial institution and the borrower pay an equal
amount to the reserve account that is equal to 2-3.5%, of the
loan value, depending on the lender's perception of the
borrower's creditworthiness. CPCFA's contribution to the reserve
account depends on whether the project is also eligible for
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federal funds and whether the borrower is located within a
severely affected community (such as areas with high
unemployment and enterprise zones) and can vary between 3 and
10.5% of the loan value. When the project is eligible for
federal funds, the federal funds replace most, if not all, of
the state's contribution, except for the increase associated
with severely affected communities, which comes from state funds
only. The state's contribution comes from the California Capital
Access Fund which has revenues from the General Fund, other
special funds, and fee revenues from CPCFA programs.
If the financial institution sustains a loss resulting from the
loan, it may apply to CPCFA to have these losses covered by the
reserve account. CPCFA has no financial exposure in the loan
other than what it contributes to the reserve account. Losses
that exceed the reserve account are borne by the financial
institution.
As part of the Small Business Credit Initiative Act of 2010,
$168 million of federal funds are available to the state for the
benefit of small business in obtaining loans, $84 million
through CalCAP and $84 million through the Small Business Loan
Guarantee Program. All funds must be used by 2016 or it will
revert to the federal government.
Proposed Law: This bill would lower the minimum contribution to
the loan loss reserve account from financial institutions from
two to one percent under CalCAP. Additionally this bill would
give financial institutions 15 instead of 10 days to notify
CPCFA that a CalCAP loan is being issued.
Staff Comments: The intent of this bill is to lower the minimum
contribution to the reserve account to increase participation in
CalCAP in order to attract more borrowers and thus draw down
more federal dollars under the Small Business Credit Initiative
Act. However, staff notes that this bill reduces the minimum
contributions for all loans eligible under CalCAP, not just
those loans which are eligible for federal funding. To the
extent that this bill increases participation in CalCAP, there
will be increased cost pressures on state funds, especially if
the loan is not eligible for federal funding and if the borrower
is in a severely affected community. The California Treasure's
Office, the sponsor of the bill, predicts that this bill can
increase participation but it does not have an estimate on the
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extent to which this might happen. The ultimate cost of this
bill is uncertain given that the state cost share of the program
is variable dependent on the level of participation and type of
project. However, given that the average loan amount is $60,000
and there was an average of 1,200 loans enrolled in 2010 and
2011, staff estimates that the cost impact of this bill could be
in the hundreds of thousands of dollars or more.
Staff further notes that recent expansions to the program under
AB 901 (V. Manual Perez) Chapter 483/2011 and AB 981 (Hueso)
Chapter 484/2011 are likely to increase cost pressures to the
California Capital Access Fund beginning this year.
The State Treasurer's Office indicates that lowering the minimum
contribution to the reserve account would not increase costs to
administer the program.