Amended in Assembly April 10, 2014

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, begin insert to amend Sections 12098.3, 63035, 63040, 63056, and 63089.5 of, end insert 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 amended, Committee on Jobs, Economic Development, and the Economy. Economic development.

begin delete

Existing

end delete

begin insert (1) end insert begin insert   end insert begin insert Existing end insert 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.

begin insert

(2) The Bergeson-Peace Infrastructure and Economic Development Bank Act establishes the Infrastructure and Economic Development Bank within the Governor’s Office of Business and Economic Development, governed by a board of directors composed of 5 members. The act requires the bank to annually submit to the Governor and the Joint Legislative Budget Committee a report of its activities for the preceding fiscal year. The act also requires the bank to establish criteria, priorities, and guidelines for the selection of projects to receive its assistance that includes compliance with the State Environmental Goals and Policy Report, or its successor. Existing law prohibits review of the expenditures of the bank’s infrastructure bank fund, except for by the Legislature, as specified.

end insert begin insert

This bill would modify the bank’s annual reporting requirement to, among other requirements, be instead transmitted to the Governor and the Legislature, and require the executive director of the bank to post the report on the bank’s Internet Web site. This bill would waive compliance with the State Environmental Goals and Policy Report, or its successor, as a factor for receiving the banks’s assistance, if the report has not been updated, as specified. This bill would modify the Legislature’s review of the bank relating to the infrastructure bank fund, to among other things, include the amount of credit and liabilities of the fund, based on an audit of the fund at the close of the prior fiscal year.

end insert begin insert

(3) Existing law, the Small Business Financial Assistance Act of 2013, until January 1, 2018, continues in existence the California Small Business Expansion Fund, a continuously appropriated fund which includes General Fund moneys, and authorizes all or a portion of the funds in the expansion fund to be paid out to a financial institution or financial company that will establish a trust fund and act as a trustee of the funds, as specified. Existing law authorizes the program manager, as defined, to create one or more accounts in the expansion fund and the trust fund for corporations participating in one or more programs authorized by the Small Business Financial Assistance Act of 2013 and the California Disaster Assistance Act, as specified. Existing law, on and after January 1, 2018, eliminates the authorization to utilize funds in the expansion fund and the trust fund for corporations participating in one or more programs pursuant to the California Disaster Assistance Act.

end insert begin insert

This bill would continue the authorization to utilize funds in the expansion fund and the trust fund for corporations participating in one or more programs pursuant to the California Disaster Assistance Act, as specified.

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

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

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begin insert SECTION 1. end insert   

end insert

begin insert Section 12098.3 of the end insert begin insert Government Code end insert begin insert is
amended to read: end insert

12098.3.  

(a) The Director of the Office of Small Business
Advocate shall be appointed by, and shall serve at the pleasure of,
the Governor.

(b) The Governor shall appoint the employees who are needed
to accomplish the purposes of this article.

(c) The duties and functions of the advocate shall include all of
the following:

(1) Serve as the principal advocate in the state on behalf of small
businesses, including, but not limited to, advisory participation in
the consideration of all legislation and administrative regulations
that affect small businesses, and advocacy on state policy and
programs related to small businesses on disaster preparedness and
recovery including providing technical assistance.

(2) Represent the views and interests of small businesses before
other state agencies whose policies and activities may affect small
business.

(3) Enlist the cooperation and assistance of public and private
agencies, businesses, and other organizations in disseminating
information about the programs and services provided by state
government that are of benefit to small businesses, and information
on how small businesses can participate in, or make use of, those
programs and services.

(4) Consult with experts and authorities in the fields of small
business investment, venture capital investment, and commercial
banking and other comparable financial institutions involved in
the financing of business, and with individuals with regulatory,
legal, economic, or financial expertise, including members of the
academic community, and individuals who generally represent the
public interest.

(5) Seek the assistance and cooperation of all state agencies and
departments providing services to, or affecting, small business,
including the small business liaison designated pursuant to Section
14846, to ensure coordination of state efforts.

(6) Receive and respond to complaints from small businesses
concerning the actions of state agencies and the operative effects
of state laws and regulations adversely affecting those businesses.

(7) Counsel small businesses on how to resolve questions and
problems concerning the relationship of small business to state
government.

(8) Maintain, publicize, and distribute an annual list of persons
serving as small business ombudsmen throughout state government.

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(9) Consult with the Department of Transportation in the
development and administration of the Small and Emerging
Contractor Technical Assistance Program established pursuant to
Article 2.6 (commencing with Section 14137) of Chapter 2 of Part
5.

end delete

begin delete SECTION 1. end delete
begin insert SEC. 2. 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

 

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

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

12100.  

(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.

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

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

12098.7.  

(a) Notwithstanding any other 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 director, and, for the purpose of state
administration of this grant, the director shall be deemed to be the
successor to the former Secretary of Business, Transportation and
Housing and the former Secretary of Technology, Trade and
Commerce. The director 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 office 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 office 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.

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begin insert SEC. 5. end insert   

end insert

begin insert Section 63035 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

63035.  

The bank shall, not later than November 1 of each year,
submit to the Governor and the begin delete Joint Legislative Budget Committee
a report of its activities pursuant to this division for the preceding
fiscal year. end delete begin insert Legislature, pursuant to Section 9795, a report for the
preceding fiscal year ending on June 30 containing information
on the bank’s activities relating to the infrastructure bank fund
and programs. end insert The report shall include all of the following:

begin delete

(a) (1) A listing of applications accepted, including a description
of the expected employment impact of each project.

end delete begin delete

(2) A separate summary of applications for the Infrastructure
State Revolving Fund Program, including a summary of the number
of preliminary applications that did not receive funding and the
reason the applicant did not qualify.

end delete begin insert

(a) (1) Information on the infrastructure bank fund, including,
but not limited to, its present balance, moneys encumbered, moneys
allocated, repayments, and other sources of revenues received
during the fiscal year.

end insert begin insert

(2) Information on the impact of the activities funded by the
infrastructure bank fund moneys, including, but not limited to, the
number of jobs created and retained, the environmental impact
that resulted, and economic value provided to the state.

end insert

(b) A specification of begin insert conduit and revenue end insert bonds sold and
interest rates begin delete thereon. end delete begin insert thereon, including, but not limited to, the
use of the bond proceeds. end insert

(c) The amount of other public and private funds leveraged by
the assistance provided.

(d) A report of revenues and expenditures for the preceding
fiscal year, including all of the bank’s costs. The information
provided pursuant to this subdivision shall include, but need not
be limited to, both of the following:

(1) The amount and source of total bank revenues. Revenues
shall be shown by main categories of revenues, including begin insert the
General Fund, special funds, federal funds, end insert interest earnings, fees
collected, and bond proceeds, for each bank program.

(2) The amount and type of total bank expenditures.
Expenditures shall be shown by major categories of expenditures,
including loans provided, debt service payments, and program
support costs, for each bank program.

(e) A projection of the bank’s needs and requirements for the
coming year.

(f) Recommendations for changes in state and federal law
necessary to meet the objectives of this division.

begin insert

(g) The executive director shall post the report on the bank’s
Internet Web site.

end insert

begin insert

begin insert SEC. 6. end insert   

end insert

begin insert Section 63040 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

63040.  

(a) Following consultation with appropriate state and
local agencies, the bank shall establish criteria, priorities, and
guidelines for the selection of projects to receive assistance from
the bank. Projects shall comply with the criteria, priorities, and
guidelines adopted by the bank.

(b) The criteria, priorities, and guidelines shall, at a minimum,
be based upon the following:

(1) The State Environmental Goals and Policy Report, or its
successor, approved pursuant to Article 5 (commencing with
Section 65041) of Chapter 1.5 of Division 1 of Title 7. begin insert If the State
Environmental Goals and Policy Report, or its successor, has not
been adopted within two years of a statutorily required update,
compliance with this end insert begin insert paragraph is not required until the report is
updated. end insert

(2) If the sponsor is a state agency, board, commission, or
department, the Capital and Infrastructure Project Planning Report,
prepared by the Director of Finance pursuant to Article 2
(commencing with Section 13100) of Chapter 2 of Part 3 of
Division 3 of Title 2.

(c) When the bank establishes or makes changes to the criteria,
priorities, and guidelines, the bank shall notify the Governor, the
fiscal and policy committees of the Legislature that exercise
legislative oversight of the bank, and appropriate state and local
agencies.

(d) The resolution required in Section 63041 shall have been
adopted prior to the project’s selection by the bank.

begin insert

begin insert SEC. 7. end insert   

end insert

begin insert Section 63056 of the end insert begin insert Government Code end insert begin insert is amended to
read: end insert

63056.  

begin insert (a) end insert begin insert   end insert Notwithstanding Chapter 2 (commencing with
Section 12850) of Part 2.5 of Division 3 of Title 2 and Article 2
(commencing with Section 13320) of Chapter 3 of Part 3 of
Division 3 of Title 2, expenditures of the infrastructure bank fund
shall not be subject to the supervision or approval of any other
officer or division of state government, with the exception of the
Legislature. However, the bank’s budget shall be prepared and
reviewed not later than November 1 of each year and the begin delete agency end delete
begin insert bank end insert shall submit to the Legislature a report of its activities for
the prior fiscal begin delete year. However, the bank’s budget regarding the
infrastructure bank fund shall be prepared and reviewed in
accordance with Section 50913, and, not later than November 1
of each year, the agency shall submit to the Legislature a report
of its activities for the prior fiscal year. The bank’s operating
budget shall be subject to review and appropriation in the annual
Budget Act. end delete begin insert year, as specified in Section 63035. end insert

begin insert

(b) The bank’s budget regarding the infrastructure bank fund
shall include the amount of credit and liabilities of the fund, based
on an audit of the fund at the close of the prior fiscal year. The
bank’s operating budget shall be subject to review and
appropriation in the annual Budget Act.

end insert

begin insert

begin insert SEC. 8. end insert   

end insert

begin insert Section 63089.5 of the end insert begin insert Government Code end insert begin insert , as added
by Section 4 of Chapter 537 of the Statutes of 2013, is amended
to read: end insert

63089.5.  

(a) There is hereby continued in existence in the State
Treasury the California Small Business Expansion Fund. All or a
portion of the funds in the expansion fund may be paid out, with
the approval of the Department of Finance, to a financial institution
or financial company that will establish a trust fund and act as
trustee of the funds.

(b) The expansion fund and the trust fund shall be used for the
following purposes:

(1) To pay defaulted loan guarantee or surety bond losses, or
other financial product defaults or losses.

(2) To fund direct loans and other debt instruments.

(3) To pay administrative costs of corporations.

(4) To pay state support and administrative costs.

(5) To pay those costs necessary to protect a real property
interest in a financial product default.

(c) The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government moneys,
and other public or private moneys to make loans, guarantees, and
other financial products that the California Small Business Finance
Center and a small business financial development corporation are
authorized to provide.

(d) One or more accounts in the expansion fund and the trust
fund may be created by the program manager for corporations
participating in one or more programs authorized under this chapter
begin insert and Section 8684.2 end insert . Each account is a legally separate account,
and shall not be used to satisfy loan guarantees or other financial
product obligations of another corporation except when the
expansion fund or trust fund is shared by multiple corporations.

(e) The amount of guarantee liability outstanding at any one
time shall not exceed four times the amount of funds on deposit
in the expansion fund plus any receivables due from funds loaned
from the expansion fund to another fund in state government as
directed by the Department of Finance pursuant to a statute enacted
by the Legislature, including each of the trust fund accounts within
the trust fund.

(f) This section shall become operative on January 1, 2018.

begin delete SEC. 4. end delete
begin insert SEC. 9. end insert   

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 12100 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.