BILL ANALYSIS Ó
AB 2290
Page 1
Date of Hearing: April 22, 2014
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Jose Medina, Chair
AB 2290 (John A. Pérez) - As Introduced: February 21, 2014
SUBJECT : California Infrastructure and Economic Development Bank
SUMMARY : Authorizes the California Infrastructure and Economic
Development Bank (I-Bank) to serve as the primary state agency for
applying to any federal infrastructure bank or financing authority.
Further, the bill expands the membership of the board of directors
from five to seven members and specifies that legislative members will
be nonvoting members and may appoint a designee to serve in his or her
place.
EXISTING LAW:
1)Establishes the I-Bank within the Governor's Office of Business and
Economic Development (GO-Biz) and authorizes it to undertake a
variety of infrastructure related financial activities including,
but not limited to, the administration of a revolving loan fund and
the issuance of tax-exempt and taxable revenue bonds.
2)Provides that the board of directors of the I-Bank is comprised of
five specified people, defines a quorum at three people and
specifies that an affirmative vote of three people is required on
any action taken by the board.
3)Specifies that the I-Bank board of directors shall consist of the
following:
a) The Director of the GO-Biz or a designee (chair);
b) The Director of Finance or a designee;
c) The Treasurer or a designee;
d) The Secretary of Transportation or a designee; and
e) A Governor's appointee.
FISCAL EFFECT : Unknown
COMMENTS :
1)Author's Purpose : According to the author, "This bill is intended
to allow the Legislature to participate in critical decisions
affecting the I-Bank. Given the I-Bank's integral role in issuing
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tax-exempt and taxable revenue bonds, providing financing to public
agencies, and leveraging State and Federal funds, it is important
that the Legislature have input on how those decisions are made. "
2)Framing the Policy Issue : This designates the I-Bank as the state's
primary liaison with the federal government on issues related to a
national infrastructure bank and adds legislative Members to the
board of directors in order to more closely link its activities to
the state's broader development activities.
In advocating for the heightened participation of the state in
federal legislative and congressional activities, the author notes
the importance of finding new sources of capital for upgrading
California's infrastructure and the continuing interest in a
national bank model. Additional information on the role of
infrastructure within the California economy, including the
significant defects and funding gaps are discussed below.
3)Infrastructure and the Economy : World class infrastructure plays a
key role in business attraction, as multinational companies
consistently rank the quality of infrastructure among their top four
criteria in making investment decisions. Research shows that as
U.S. infrastructure has been in decline while, infrastructure in
other countries is rapidly increasing. The 2012-13 Global
Competitiveness Report by the World Economic Forum places U.S.
infrastructure 25th in the world, down from 23rd in 2010 and 7th in
2000.
California's 2013 Infrastructure Report Card by the American Society
for Civil Engineers estimates that California's annual unfunded
infrastructure investment is $65 billion. The impact of this lack
of investment is compounded by the substantial new infrastructure
investments made in other states and nations, including the
expansion of the Panama Canal.
Since the 1980's infrastructure to support economic development
activities has focused on supporting specific areas of "industry
clusters" where multiple firms and organizations working in the
same, or similar, fields draw on each other's discoveries, products,
and in some cases workforces leading to a highly focused and
productive innovation center with prodigious output. Silicon Valley
and Hollywood are archetypical examples, specializing in electronics
and cinema, respectively.
Globalization is changing the economic paradigm, which makes the
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linkages between regional economies more relevant and competitive
advantage is increasingly based on the quality and efficiency of the
technologies that link the location with other areas of the world.
In the 2014 State of the Union Address, President Obama announced
three new infrastructure initiatives including:
A "fix-it-first" proposal to repair existing infrastructure
before building new projects;
A "Rebuild America Partnership" to bring private money off the
sidelines through a new bond program; and
A continued "modernization effort" to speed up permitting and
construction.
The President's plan is to invest $50 billion in the U.S.
transportation infrastructure, with $40 billion targeted to the most
urgent upgrades, and focused on fixing our highways, bridges,
transit systems, and airports most in need of repair.
1)National Infrastructure Bank : Spending on infrastructure by the
federal government has been declining. According to the
Congressional Budget Office, spending on transportation and water
infrastructure as a share of U.S. GDP was 3.1% in 1959 and was only
2.4% in 2007.
The National Surface Transportation Infrastructure Financing
Commission estimates that there is a highway and transit funding gap
of $2.3 trillion. The federal Environmental Protection Agency
similarly finds there is great need to repair and upgrade water
systems including a 2009-19 funding gap of $122 billion for clean
water and $102 billion for drinking water. Not surprising, there
has been a national call for renewed infrastructure investment to
support manufacturing, goods movement, energy production, and
broadband deployment, among other economic and community development
purposes.
A National Infrastructure Reinvestment Bank was first proposed by
U.S. Senators Christopher Dodd and Chuck Hagel in 2007. President
Barack Obama supported the legislation in 2008 and again in 2010.
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More recently, in his 2013 State of the Union, President Obama
emphasized the importance of fixing the nation's infrastructure as
part of his "Plan for a Strong Middle Class and A Strong America"
and proposed both a $50 billion "Fix it First" program from peace
dividends and a "Partnership to Rebuild America" initiative, which
would use public policies to attract private investment in upgrading
America's infrastructure. Various members of the U.S. Congress are
also pursuing a national infrastructure bank model. U.S.
Representative Rosa DeLauro (D-CT-3), as an example, introduced AB
2553 in 2013, which has 95 co-authors including 16 from California.
Models for a national infrastructure bank have varied and the state
I-Bank has been asked to Washington D.C. several times to discuss
differing models. In one instance, the federal government would use
$60 billion in seed money over 10 years with an expected return of
$500 billion in private investment. Given the significance of
quality infrastructure within every state's global competitiveness,
it would seem that engaging in the development of the national
program would be within the state's interest. AB 2290 would
specifically designate the state I-Bank as the primary state agency
for applying to the federal infrastructure bank.
2)Background on I-Bank : The I-Bank was established in 1994 to promote
economic revitalization, enable future development, and encourage a
healthy climate for jobs in California. Housed within GO-Biz, it is
governed by a five-member board of directors comprised of the
Director of GO-Biz (chair), the State Treasurer, the Director
Department of Finance, the Transportation Agency, and a Governor's
appointee. The day-to-day operations of the I-Bank are directed by
the Executive Director who is an appointee of the Governor and is
subject to confirmation by the California State Senate. Currently,
the I-Bank has authority for 25 staff members.
The I-Bank does not receive any ongoing General Fund support, rather
it is financed through fees, interest income and other revenues
derived from its public and private sector financing activities.
According to its Comprehensive Annual Financial Report for the
fiscal year ended June 2013, its programs continued to provide
revenues sufficient to cover operating expenses.
The I-Bank administers three programs: (1) the Infrastructure State
Revolving Fund which provides direct low-cost financing to public
agencies for a variety of public infrastructure projects; (2) the
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Conduit Bond Program which provides financing for manufacturing
companies, public benefit nonprofit organizations, public agencies
and other eligible entities; and (3) the Small Business Finance
Center which helps small businesses access private financing through
loan guarantees, direct loans, and performance bond guarantees.
There is no commitment of I-Bank or state funds for any of the
conduit revenue bonds. Even in the case of default, the state is
not liable.
Since its creation in 1994, the I-Bank has loaned, financed, or
participated in over $344 billion in infrastructure and economic
expansion projects. This includes over $400 million to local and
state agencies, developing a high-level of expertise in the
financing of public infrastructure. The I-Bank also serves as the
state's only general purpose financing authority with broad
statutory powers to issue revenue bonds, make loans, and provide
guarantees. Over $33 billion in conduit revenue bonds have been
issued by the I-Bank since 2000.
The seismic upgrade of the Bay Bridge is an example of how conduit
revenue bonds can be used to raise capital for infrastructure
projects without impacting the state General Fund. In this example,
the repayment of the bonds was based on a $1 per vehicle surcharge
collected on seven Bay Area state-owned toll bridges. In addition
to this type of bonding activity, the I-Bank has also been involved
in other unique financings including Tobacco Securitization Bonds,
Tribal Compact Asset Securitization Bonds, and Imperial Irrigation
District Preliminary Loan Guarantees.
3)Board Structure : The I-Bank's board of directors is currently
comprised of five members, four of which are state public officials.
Each of the public officials either has specific program-related
expertise or has access to experts within their respected
departments or agencies.
Under existing law, the Governor has the authority to appoint one
public member to the board. This public member is not required to
have any particular skill set or represent a particular stakeholder
group other than the public-at-large. The chart - Board Structures
from Selected Economic and Workforce Development Entities details,
that there is no consistent board appointment structure.
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| Board Structures from Selected Economic and Workforce Development |
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| Entities |
-------------------------------------------------------------------
|--------+-----+-----+------+-----+-----------------------------------|
| |Total|Gov |Speake|Senat|Other |
| | |Appts|r |e |Information |
| |Mem-b| |Appts |Rules| |
| |ers | | | | |
| | | | |Appts| |
| | | | | | |
|--------+-----+-----+------+-----+-----------------------------------|
|Waste | | | | |Four Public Members: Four members |
|Manage-m| 6 | 4 | 1 | 1 |are appointed by the Governor, two |
|ent | | | | |of whom represent the public, one |
|Board | | | | |member with industry expertise, |
|and the | | | | |and one with expertise in the |
|Recyclin| | | | |environmental field. One member is |
|g | | | | |appointed by the Senate Committee |
|Market | | | | |on Rules and one is appointed by |
|Develop-| | | | |the Speaker of the Assembly to |
|ment | | | | |represent the public. Reference: |
|Zones | | | | |PRC 404001 |
|--------+-----+-----+------+-----+-----------------------------------|
|Employ-m| | | | |One Public Member: The Speaker |
|ent | 7 | 3 | 2 | 2 |and President pro Tempore each |
|Training| | | | |appoint two members, one being a |
| Panel | | | | |private sector labor |
| | | | | |representative and the other being |
| | | | | |a business representative. |
| | | | | |Governor appoints three members, |
| | | | | |one being a private sector labor |
| | | | | |representative, one being a |
| | | | | |business representative, and one |
| | | | | |public member. |
| | | | | |Reference: UIC 10202.5 |
|--------+-----+-----+------+-----+-----------------------------------|
|Workforc| | | | |There is no statutory limit on the |
|e | No | No | 2 | 2 |number of people who may serve on |
|Investme|limit|limit| | |the board. A majority of Gov |
|nt | | | | |appointments are from business, |
|Board | | | | |including small business. At |
| | | | | |least 15% of the Gov. appointments |
| | | | | |shall be from labor organizations |
| | | | | |nominated by state labor |
| | | | | |federations. In addition to these |
| | | | | |appointments the Governor may |
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| | | | | |place an unlimited number of state |
| | | | | |officials and state government |
| | | | | |representatives. |
| | | | | |Legislature appoints two public |
| | | | | |members each. Reference: UIC |
| | | | | |14012 |
|--------+-----+-----+------+-----+-----------------------------------|
|Californ| | | | |Two public members: Secretary of |
|ia | 11 | 7 | 2 | 2 |BTH serves as chair. Governor |
|Small | | | | |appoints six members from small |
|Business| | | | |business community. Between the |
| Board | | | | |Assembly and the Senate one |
| | | | | |business and one agricultural |
| | | | | |representative is appointed. |
| | | | | |Plus, one Assembly Member and one |
| | | | | |Senator to serve on the board. |
| | | | | |Reference: Corp 14021 |
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4)Related legislation : Below is a list of related legislation from
current and previous legislative sessions:
a) AB 311 (V. Manuel Perez) Bi-National Infrastructure and
Economic Development Bank: This bill expands the role of the
I-Bank to include facilitating infrastructure and economic
development financing activities within the California and Mexico
border region. Status: Pending in Assembly Committee on
Appropriations.
b) AB 701 (John A. Pérez) I-Bank Board Membership: As passed by
JEDE, this bill would have authorized the I-Bank to serve as the
primary state agency for applying to any federal infrastructure
bank or financing authority. Further, the bill would have
expanded the membership of the board of directors from five to
seven members and specified that legislative members will be
nonvoting members. Amendments taken in the Senate deleted the
content of the bill and added language relating to property tax
allocation in Orange County with Assemblymember Quirk-Silva as
the author. Status: Signed by the Governor, Chapter 393,
Statutes of 2013.
c) AB 1094 (John A. Pérez) Board Membership of the California
Infrastructure Bank: This bill, as it was heard by JEDE, would
have added a member of the Assembly and a member of the Senate as
advisory members to the board of administration of the California
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Infrastructure and Economic Development Bank. Amendments were
taken to remove the Bank provisions and the bill was related to a
different topic and a different author at the time the bill was
pulled into the Senate Committee on Rules. Status: Held in the
Senate Committee on Rules in 2012.
d) AB 1272 (Medina) Infrastructure Financing Consortiums: This
bill would have authorized the I-Bank to join regional, state,
national, or international organizations related to
infrastructure financing in order to facilitate infrastructure
financing projects in California. Status: Held on the Suspense
File of the Assembly Committee on Appropriations, 2013.
e) AB 1380 (Bass) California Infrastructure and Economic
Development Bank: Board of Directors: This bill would have
expanded the membership of the board of directors of the I-Bank
from five to seven members. Status: Held in the Senate Rules
Committee, 2010.
REGISTERED SUPPORT / OPPOSITION :
Support
The American Federation of State, County, and Municipal Employees
Opposition
None received
Analysis Prepared by : Toni Symonds / J., E.D. & E. / (916) 319-2090