BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1128|
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THIRD READING
Bill No: SB 1128
Author: Padilla (D), et al.
Amended: 5/29/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 4/11/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hancock,
Hernandez, Kehoe, La Malfa, Liu
SENATE ENERGY, UTIL. & COMMUNIC. COMM. : 12-0, 4/24/12
AYES: Padilla, Fuller, Berryhill, Corbett, De Le�n,
DeSaulnier, Emmerson, Kehoe, Pavley, Rubio, Simitian,
Wright
NO VOTE RECORDED: Strickland
SENATE APPROPRIATIONS COMMITTEE : 7-0, 5/24/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
SUBJECT : Energy: alternative energy financing
SOURCE : Author
DIGEST : This bill expands until July 1, 2016, the sales
and use tax exemption under the California Alternative
Energy and Advanced Transportation Financing Authority
program to include "advanced manufacturing," as specified.
ANALYSIS : Existing law creates the California
Alternative Energy and Advanced Transportation Financing
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Authority (CAEATFA) for the purpose of promoting the
development and utilization of alternative energy sources
and the development and commercialization of advanced
transportation technologies and authorizes up to $1 billion
in revenue or prepayment bonds to fund projects.
Existing law authorizes CAEATFA to utilize a
sale/lease-back mechanism with manufacturers which results
in a sales and use tax exemption on tangible personal
property utilized for the design, manufacture, production,
or assembly of advanced transportation technologies or
alternative energy source products, components or systems
projects, must meet the "net benefits test" by showing that
the new project will create jobs in the state. The sales
and use tax exemption sunsets on January 1, 2021.
This bill additionally authorizes CAEATFA, until July 1,
2016, to grant the financial assistance to projects that
promote the utilization of advanced manufacturing, as
defined. This bill requires CAEATFA, until July 1, 2016,
to study the efficacy and cost benefit of the sales and use
tax exemption for advanced manufacturing projects.
This bill requires CAEATFA, before January 1, 2017, to
submit to the Legislature a report on the study. Before
January 1, 2014, and within six months of any significant
change to the net benefits test, CAEATFA is to work with
the University of California or the California State
University to perform a fees review of the net benefit test
currently used to evaluate applicants applying for the
program. Before January 1, 2015, CAEATFA is required to
submit to the Legislature an interim report on the efficacy
of the program conducted. The study is to include
recommendations on program changes that will increase the
program's efficacy in creating permanent and temporary
jobs, and whether eligibility for the program should be
extended or narrowed to other manufacturing types. CAEATFA
may work with the Legislative Analyst's Office in preparing
the report and its recommendations. This bill requires
CAEATFA, until July 1, 2016, to work with the Legislative
Analyst's Office to determine the most efficient and cost
effective way for the state to create jobs in advanced
manufacturing. Lastly, this bill clarifies that projects
which are granted shall not exceed $100 million for each
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calendar year.
Background
CAEATFA was created in 1980 with an authorization of $200
million in revenue bonds to finance projects utilizing
alternative sources of energy, such as cogeneration, wind
and geothermal power. It was renamed in 1994 as the CAEATFA
and its charge expanded to include the financing of
"advanced transportation" technologies.
During the energy crisis of 2001, its authority was again
expanded, this time to provide financial assistance to
public power entities, independent generators, and others
for new and renewable energy sources, and to develop clean
distributed generation. CAEATFA's board, composed of the
State Treasurer, State Controller, Director of the
Department of Finance, Chairperson of the Energy Commission
and President of the Public Utilities Commission, decides
which projects to assist.
SB 71 (Padilla), Chapter 10, Statutes of 2010, expanded its
authority which allows CAEATFA to grant a sales and use tax
exemption to an eligible firm that purchases property
necessary to design, produce, manufacture, or assemble
advanced transportation technologies or alternative energy
source products, components, or systems. Selected firms
purchase equipment without paying the sales and use tax
that is normally apply, lowering their cost of capital.
Neither CAEATFA nor the state is a creditor to the selected
firm in any way under the SB 71 program. Instead, CAEATFA
calculates whether the exemption will yield a net
environmental and economic benefit for the state. Thus
far, CAEATFA has approved $104 million to 33 firms that
applied for the SB 71 benefit, of which 33 firms have
monetized $31.6 million in exemptions. Some of the firms
have purchased the property and deployed it in the
manufacturing process, while others have won the award, but
not yet purchased the equipment.
To date, CAEATFA has approved financial assistance for
private entities in the following fields: electric vehicle
manufacturing, solar photovoltaic manufacturing, landfill
gas capture and production, biogas capture and production
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(dairies and waste water treatment plants), demonstration
hydrogen fuel production, electric vehicle battery
manufacturing, biomass processing and fuel production, and
others.
Comments
California prospered for decades on its ability to
research, develop and manufacture products for national and
international markets. Manufacturing led California's
economic strength in the 20th century, pushing the Golden
State to rank among the top eight global economies.
Manufacturing provides employment for millions of
Californians.
However, California's manufacturing sector has declined.
Other states and nations invested in their manufacturing
sectors and created policies to attract and retain
business. At the turn of the 21st century it was cost
effective and easier for manufacturers to invest outside
California and overseas.
Last summer, President Obama launched the Advanced
Manufacturing Program, to "invest in the emerging
technologies that will create high quality manufacturing
jobs". The program directed the U.S. Departments of
Commerce and Energy to invest more than $500 million to
expand manufacturing capabilities, expedite the production
of advanced materials, promote energy and resource
efficiency and provide high wage jobs. The Advanced
Manufacturing Program offers new opportunities for
California to draw down federal dollars, attract new
investment, and employ our workforce. States such as
Massachusetts, Michigan and Georgia are creating
collaborative centers between industry and government to
attract advanced manufactures and draw down the federal
dollars. California must act to remain competitive.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/15/12) (unable to reverify at time
of writing)
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Applied Materials
BayBio
California Healthcare Institute
California Manufacturers and Technology Association, if
amended
California State Association of Electrical Workers
California State Pipe Trades Council
Pharmaceutical Research and Manufacturers of America
Western States Council of Sheet Metal Workers
AGB:DW:do 5/29/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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