California Legislature—2013–14 Regular Session

Assembly Bill No. 2749

Introduced by Committee on Jobs, Economic Development, and the Economy (Medina (Chair), Campos, Fong, Fox, and V. Manuel Pérez)

March 11, 2014

An act to amend and renumber Sections 13997.2 and 13997.7 of, and to add the heading of Article 6.5 (commencing with Section 12100) to Chapter 1.6 of Part 2 of Division 3 of Title 2 of, the Government Code, and to amend Section 44559.1 of the Health and Safety Code, relating to economic development.

LEGISLATIVE COUNSEL’S DIGEST

AB 2749, as introduced, Committee on Jobs, Economic Development, and the Economy. Economic development.

Existing law defines specified terms relating to economic development and authorizes the Business, Transportation and Housing Agency and its secretary to expend specified funds.

This bill would renumber these provisions, and would instead authorize the Governor’s Office of Business and Economic Development and its director to expend these funds.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

begin insert

begin insert SECTION 1. end insert   

end insert

The heading of Article 6.5 (commencing with
Section 12100) is added to Chapter 1.6 of Part 2 of Division 3 of
Title 2 of the Government Code, to read:

 

Article 6.5.  Local Economic Development

 

SEC. 2.  

Section 13997.2 of the Government Code is amended
and renumbered to read:

begin delete 13997.2. end delete
begin insert 12100. end insert   

(a) The Legislature finds and declares all of the
following:

(1) California’s economic development organizations and
corporations are an integral component of the state job creation
effort because they are a critical link between state economic
development activities and the statewide business community,
providing an excellent opportunity to leverage state resources.

(2) Economic development corporations and organizations
provide broad public benefits to the residents of this state by
alleviating unemployment, encouraging private investment, and
diversifying local economies.

(3) Economic development corporations engage in a wide range
of programs and strategies to attract, retain, and expand businesses,
including marketing the community, small business lending, and
other financial services, a wide range of technical assistance to
small business, preparation of economic data, and business
advocacy.

(4) By using public sector resources and powers to reduce the
risks and costs that could prohibit investment, the public sector
often sets the stage for employment-generating investment by the
private sector.

(b) For purposes of this chapter, all of the following definitions
apply:

(1) “Local economic development organization” means a public
or public-private job creation activity recognized by cities and
counties as the lead agency within that city or county for planning
and implementation of job creation involving business expansion,
business retention, and new business development.

(2) “Regional economic development organization” means an
organization comprised of any of the following:

(A) A single county.

(B) More than one county.

(C) A subregion within a county established by the cities and
county within that subregion.

(D) An economic development corporation.

(3) “Economic development corporation” means a local or
regional nonprofit public-private economic development
organization recognized in a defined region by the public and
private sector as the lead agency for the planning and
implementation of job creation involving business retention and
new business development.

(4) “Regional economic development corporation” means a
corporation comprised of any of the following:

(A) A single county.

(B) More than one county.

(C) A subregion within a single county established by a group
of cities and counties.

(5) “Economic development” means any activity that enhances
the factors of productive capacity, such as land, labor, capital, and
technology, of a national, state, or local economy. “Economic
development” includes policies and programs expressly directed
at improving the business climate in business finance, marketing,
neighborhood development, small business development, business
retention and expansion, technology transfer, and real estate
redevelopment. “Economic development” is an investment program
designed to leverage private sector capital in such a way as to
induce actions that have a positive effect on the level of business
activity, employment, income distribution, and fiscal solvency of
the community.

(6) “Local economic development” is a process of deliberate
intervention in the normal economic process of a particular locality
to stimulate economic growth of the locality by making it more
attractive, resulting in more jobs, wealth, better quality of life, and
fiscal solvency. Prime examples of economic development include
business attraction, business expansion and retention, and business
creation.

(7) “Emerging domestic market” means people, places, or
business enterprises with growth potential that face capital
constraints due to systemic undervaluations as a result of imperfect
market information. These markets include, but are not limited to,
ethnic-owned and women-owned firms, urban and rural
communities, companies that serve low-income or
moderate-income populations, and other small- and medium-sized
businesses.

(8) “Financial intermediary” means an institution, firm,
organization, or individual who performs intermediation between
two or more parties in a financial context, such as connecting
sources of funds with users of funds. A financial intermediary is
typically an entity that facilitates the channeling of funds between
lenders, investors, foundations, or other entities that have money
and are interested in connecting with businesses or communities
where their money can be deployed. Financial intermediaries
include, but are not limited to, banks, financial development
corporations, economic developers, microbusiness lenders, and
community development organizations.

(9) “Community development intermediary” means an
institution, firm, organization, or individual that performs
intermediation between two or more parties in a community
development context, such as connecting people and organizations
that have a stake in the future well-being of communities and
individuals who may not easily have access to these stakeholders.
A community development intermediary is typically an entity that
channels financial and nonfinancial resources between government
and foundations and other nonprofit organizations that have
resources and are interested in connecting with small- and
medium-size businesses and low- and moderate-income households
and communities. Community development intermediaries include,
but are not limited to, community development corporations,
microbusiness lenders, and community development financial
institutions.

(10) “Triple bottom line” means the economic, environmental,
and social benefits arising from a project, investment, or
community and economic development activity.

(11) “Small businesses” means a business with less than 100
employees and with a gross revenue of less than five million dollars
($5,000,000), or a business that is otherwise targeted by or
participating in a federal or state program engaged in programs or
services for small businesses. Application of this definition may
only be used pursuant to a direct reference.

(12) “Community development” means a process designed to
create conditions of economic and social prosperity for the whole
community, or a targeted subset of the whole community, with the
fullest possible reliance on the community’s initiative and active
participation.

(13) “Financial institution capital” means resources of a financial
institution, including, but not limited to, a bank or credit union,
that are legally available to be used to generate wealth for the
financial institution.

(14) “California Council on Science and Technology” means
the council established by California academic research institutions,
including the University of California, the University of Southern
California, the California Institute of Technology, Stanford
University, and the California State University, in support of
Assembly Concurrent Resolution No. 162 (Res. Ch. 148, Stats.
1988).

(15) “Microbusiness lender” means a nonprofit or nonbank
lender that serves very small businesses in low- and
moderate-income communities that experience barriers in accessing
capital. These businesses are often owned by minorities,
immigrants, women, and persons with disabilities. Microbusiness
lenders generally provide loans under fifty thousand dollars
($50,000) and offer business technical assistance, both preloan
and postloan, to improve an applicant’s ability to qualify and
successfully repay a loan.

SEC. 3.  

Section 13997.7 of the Government Code is amended
and renumbered to read:

begin delete 13997.7. end delete
begin insert 12098.7. end insert   

(a) Notwithstanding any other begin delete provision of end delete law,
effective January 1, 2008, the Economic Adjustment Assistance
Grant funded through the United States Economic Development
Administration under Title IX of the Public Works and Economic
Development Act of 1965 (Grant No. 07-19-02709 and
07-19-2709.1) shall be administered by the begin delete Director of the
Governor’s Office of Business and Economic Development, end delete
begin insert director, end insert and, for the purpose of state administration of this grant,
the begin delete Director of the Governor’s Office of Business and Economic
Development end delete begin insert director end insert shall be deemed to be the successor to the
begin insert former Secretary of Business, Transportation and Housing and
the end insert former Secretary of Technology, Trade and Commerce. The
begin delete Director of the Governor’s Office of Business and Economic
Development end delete begin insert director end insert may assign and contract administration of
the grant to a public agency created pursuant to Chapter 5
(commencing with Section 6500) of Division 7 of Title 1.

(b) On January 1, 2008, all federal moneys held in the Sudden
and Severe Economic Dislocation Grant Account within the Special
Deposit Fund are hereby transferred to the Small Business
Expansion Fund created pursuant to Section 14030 of the
Corporations Code for expenditure by the begin delete Governor’s Office of
Business and Economic Development end delete begin insert office end insert pursuant to Article 9
(commencing with Section 14070) of the Corporations Code for
purposes of the Sudden and Severe Economic Dislocation Grant
program, or other purposes permitted by the cognizant federal
agency.

(c) All loan repayments received on or after January 1, 2008,
for the Sudden and Severe Economic Dislocation Grant program
loans issued pursuant to former Section 15327 (repealed by Section
1.8 of Chapter 229 of the Statutes of 2003 (AB 1757)) and this
section, shall be deposited into the Small Business Expansion Fund
and shall be available to the begin delete Governor’s Office of Business and
Economic Development end delete begin insert office end insert for expenditure pursuant to the
provisions of Article 9 (commencing with Section 14070) of the
Corporations Code for the Sudden and Severe Economic
Dislocation Grant program, or other purposes permitted by the
cognizant federal agency.

SEC. 4.  

Section 44559.1 of the Health and Safety Code is
amended to read:

44559.1.  

As used in this article, unless the context requires
otherwise, all of the following terms have the following meanings:

(a) “Authority” means the California Pollution Control
Financing Authority.

(b) “California Capital Access Fund” means a fund created
within the authority to be used for purposes of the program.

(c) “Executive director” means the Executive Director of the
California Pollution Control Financing Authority.

(d) (1) “Financial institution” means a federal- or state-chartered
bank, savings association, credit union, not-for-profit community
development financial institution certified under Part 1805
(commencing with Section 1805.100) of Chapter XVIII of Title
12 of the Code of Federal Regulations, or a consortium of these
entities. A consortium of those entities may include a nonfinancial
corporation, if the percentage of capitalization by all nonfinancial
corporations in the consortium does not exceed 49 percent.

(2) (A) “Financial institution” also includes a lending institution
that has executed a participation agreement with the Small Business
Administration under the guaranteed loan program pursuant to
Part 120 (commencing with Section 120.1) of Chapter I of Title
13 of the Code of Federal Regulations and meets the requirements
of Section 120.410 of Chapter I of Title 13 of the Code of Federal
Regulations, a small business investment company licensed
pursuant to Part 107 (commencing with Section 107.20) of Chapter
I of Title 13 of the Code of Federal Regulations, and a small
business financial development corporation, as defined in Chapter
1 (commencing with Section 14000) of Part 5 of Division 3 of
Title 1 of the Corporations Code, or microbusiness lender, as
defined in Section begin delete 13997.2 end delete begin insert 12100 end insert of the Government Code, that
meets standards that shall be established by the authority. For loans
where all or part of the fees and matching contributions are paid
by an entity participating in the program pursuant to subdivision
(e) of Section 44559.2, “financial institution” also includes
financial lenders, as defined in Section 22009 of the Financial
Code, making commercial loans, as defined in Section 22502 of
the Financial Code.

(B) A financial institution described in this paragraph shall be
domiciled or have its principal office in the State of California.

(3) “Financial institution” also includes an insured depository
institution, insured credit union, or community development
financial institution, as these terms are defined in Section 4702 of
Title 12 of the United States Code.

(e) “Loss reserve account” means an account in the State
Treasury or any financial institution that is established and
maintained by the authority for the benefit of a financial institution
participating in the Capital Access Loan Program established
pursuant to this article for the purposes of the following:

(1) Depositing all required fees paid by the participating
financial institution and the qualified business.

(2) Depositing contributions made by the state and, if applicable,
the federal government or other sources.

(3) Covering losses on enrolled qualified loans sustained by the
participating financial institution by disbursing funds accumulated
in the loss reserve account.

(f) “Participating financial institution” means a financial
institution that has been approved by the authority to enroll
qualified loans in the program and has agreed to all terms and
conditions set forth in this article and as may be required by any
applicable federal law providing matching funding.

(g) “Passive real estate ownership” means ownership of real
estate for the purpose of deriving income from speculation, trade,
or rental, but does not include any of the following:

(1) The ownership of that portion of real estate being used or
intended to be used for the operation of the business of the owner
of the real estate.

(2) The ownership of real estate for the purpose of construction
or renovation, until the completion of the construction or renovation
phase.

(h) “Program” means the Capital Access Loan Program created
pursuant to this article.

(i) “Qualified business” means a small business concern that
meets both of the following criteria, regardless of whether the
small business concern has operations that affect the environment:

(1) It is a corporation, partnership, cooperative, or other entity,
whether that entity is a nonprofit entity or an entity established for
profit, that is authorized to conduct business in the state.

(2) It has its primary business location within the boundaries of
the state.

(j) (1) “Qualified loan” means a loan or a portion of a loan
made by a participating financial institution to a qualified business
for any business activity that has its primary economic effect in
California. A qualified loan may be made in the form of a line of
credit, in which case the participating financial institution shall
specify the amount of the line of credit to be covered under the
program, which may be equal to the maximum commitment under
the line of credit or an amount that is less than that maximum
commitment. A qualified loan made under the program may be
made with the interest rates, fees, and other terms and conditions
agreed upon by the participating financial institution and the
borrower.

(2) “Qualified loan” does not include any of the following:

(A) A loan for the construction or purchase of residential
housing.

(B) A loan to finance passive real estate ownership.

(C) A loan for the refinancing of an existing loan when and to
the extent that the outstanding balance is not increased.

(D) A loan, the proceeds of which will be used in any manner
that could cause the interest on any bonds previously issued by
the authority to become subject to federal income tax.

(k) “Severely affected community” means any area classified
as an enterprise zone pursuant to the Enterprise Zone Act (Chapter
12.8 (commencing with Section 7070) of Division 7 of Title 1 of
the Government Code), any area, as designated by the executive
director, contiguous to the boundaries of a military base designated
for closure pursuant to Section 2687 of Title 10 of the United States
Code, as amended, and any other comparable economically
distressed geographic area so designated by the executive director
from time to time.

(l) “Small Business Assistance Fund” means a fund created
within the authority pursuant to Section 44548.

(m) “Small business concern” has the same meaning as in
Section 632 of Title 15 of the United States Code, or as otherwise
provided in regulations of the authority.