BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 511|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 511
Author: Lieu (D)
Amended: 1/22/14
Vote: 21
PRIOR VOTES NOT RELEVANT
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 1/13/14
AYES: Lieu, Block, Corbett, Galgiani, Hernandez, Hill, Padilla,
Wyland, Yee
NO VOTE RECORDED: Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Trade promotion: California ports
SOURCE : Author
DIGEST : This bill requires the Director of the Governors
Office of Business and Economic-Development (GO-Biz) to convene,
no later than February 1, 2015, a statewide business partnership
for port trade promotion.
ANALYSIS :
Existing law:
1. Establishes GO-Biz within the Governor's Office for the
purpose of serving as the lead state entity for economic
strategy and marketing of California on issues relating to
CONTINUED
SB 511
Page
2
business development, private sector investment and economic
growth. GO-Biz also serves as the administrative oversight
for the California Business Investment Service and the Office
of the Small Business Advocate.
2. The California Tourism Marketing Act establishes the
California Travel and Tourism Commission (Commission) as a
separate, independent California nonprofit mutual benefit
corporation with the purpose of increasing the number of
persons traveling to and within California and requires the
Commission to prepare a written marketing plan.
3. Makes legislative findings and declarations regarding the
importance of strengthening collaborative linkages among
remaining California-based international trade and investment
(ITI) promotion programs operated at federal, state, regional
and local levels in light of the repeal of the statutory
authority for the Technology, Trade and Commerce Agency
(TTCA) in 2003.
4. Specifies that GO-Biz is the primary state agency authorized
to attract foreign investments, cooperate in international
public infrastructure projects, and support California
businesses in accessing markets, and requires the Director of
GO-Biz to develop an ITI program attracting
employment-producing direct foreign investment to the state
and provides support for California businesses in accessing
international markets and increasing exports.
5. Authorizes GO-Biz to establish ITI offices outside of the
U.S. according to certain requirements.
6. Requires GO-Biz to prepare an ITI strategy and provide a
report to the Legislature on or before February 1, 2014,
updated once every five years that includes:
A. Policy goals, objectives and recommendations necessary
to implement a comprehensive ITI program.
B. Measurable outcomes and timelines for the goals,
objectives and actions for the program.
C. Impediments to achieving goals and objectives.
CONTINUED
SB 511
Page
3
D. Key stakeholder partnerships that will be used to
implement the strategy.
E. Options for funding.
F. An organizational structure for state administration
of ITI policies, programs and services.
7. Requires the Director of GO-Biz to prepare (a) a budget for
the ITI program and a separately stated budget for each ITI
office, with specified information; (b) a strategy and
business plan for the ITI program, with specified
information, that is developed with input from California
businesses that shall include, but not be limited to,
measurable goals, objectives, and outcomes and timelines
necessary to attract employment-producing direct foreign
investment to the state and increase California exports; and
(c) a written review of the implementation of the prior
year's strategy and business plan for the ITI program that
addresses the performance of the program and each ITI office.
8. Provides that the State Controller shall not allocate any
state funds to GO-Biz for ITI activities unless the strategy
for ITI has been submitted to the Legislature by May 1, 2014.
9. Establishes processes and accountability measures for GO-Biz
to accept private monies to fund, establish, and operate
international trade offices.
This bill requires GO-Biz to convene a statewide business
partnership that advises GO-Biz on port trade promotion, on or
before February 1, 2015; and requires the partnership to
include, but not be limited, to representatives from (1) ports
of entry; (2) ocean carriers; (3) marine terminal operators; (4)
warehouse operators; (5) railroads; (6) trucking companies; (7)
labor representatives; (8) foreign trade zones; (9)
environmental group representatives; and (10) shippers,
including agricultural exporters, manufacturers, postconsumer
secondary material handlers, and retailers.
Background
CONTINUED
SB 511
Page
4
Ports are local government agencies governed by port commissions
that are responsible for developing, maintaining, and overseeing
the operation of shoreside facilities for the intermodal
transfer of cargo between ships, trucks, and railroads. In some
cases, certain ports have jurisdiction over affiliated airports,
build and maintain terminals for the passenger cruise ship
industry, or manage marinas and other public facilities.
Existing law establishes 11 ports in the state: Hueneme,
Humboldt Bay, Long Beach, Los Angeles, Oakland, Redwood City,
Richmond, Sacramento, San Diego, San Francisco, and Stockton.
The law allows each port to establish a general plan and port
system improvements and prescribe the specifications for such
improvements.
According to the California Marine and Intermodal Transportation
System Advisory Council, more than 40% of the total
containerized cargo entering the United States arrived at
California ports, and almost 30% of the nation's exports flowed
through ports in the Golden State. Port activities employ more
than 500,000 people in California and generate an estimated $7
billion in state and local taxes annually. It is estimated that
nationwide, more than two million jobs are linked to
California's public ports.
According to data from the Department of Commerce, California
exported $159 billion in products in 2011, up from $143.1
billion in 2010. California's largest export market is Mexico,
where the value of exports totals close to $26 billion in 2011.
China is the largest source of imports into California; the 2011
value of Chinese imports was $120 billion.
The threat of expansion of the Panama Canal . Panama is
currently underway with an over $5 billion project to greatly
expand the Panama Canal making it deeper and wider, raising the
possibility of a significant impact on the flow of goods coming
into California's ports. The project will double the capacity
of the existing canal by adding wider, deeper and longer locks
on both the Atlantic and Pacific sides. The expanded Panama
Canal will be able to accommodate larger cargo ships, called
Post Panamax vessels, which could result in large freighters
loaded with goods from Asia destined for the Eastern United
States, thus bypassing California all-together and instead using
the canal to reach the other side of the country. There is some
concern that California ports now have to compete against one
CONTINUED
SB 511
Page
5
another and expansion of the canal holds the potential for
California ports to lose as much as 25% of their cargo business,
by some estimates, which may in turn result in an impact of
millions of dollars to local economies and over 100,000 jobs.
The Panama Canal Authority, which runs the canal, has entered
into memorandums of understandings (MOUs) with 20 ports on the
Gulf and East coasts, including New Orleans, Miami and Baltimore
that are intended to promote freight passage through the canal
to those ports. In the absence of a California effort to market
opportunities throughout the state, ports themselves, like the
Port of Long Beach, are approaching the Panama Canal Authority
individually to enter into their own MOU.
The Senate Business, Professions and Economic Development
Committee held a hearing on February 22, 2013 entitled "What
Does the Expansion of the Panama Canal Mean for Economic
Development and Jobs in California?" Testimony focused on
efforts the state of California should take to remain
competitive with other states and other seaports, including
intermodal connection improvements, streamlined approval for
infrastructure and port improvement projects and promoting trade
at California ports through a comprehensive, collaborative trade
promotion strategy.
International trade efforts in California . Between 1986 and
2004, the TTCA was the responsible government entity for
promoting economic development, international trade, and foreign
investment in California. When the agency was eliminated due to
its poor administrative performance, the authority for all state
trade activity was also eliminated and the few remaining
programs came under the umbrella of the Business, Transportation
and Housing Agency (BT&H). The former International Investment
Division under TTCA had 91 employees and a budget of $43
million, allowing it to engage in activities like formal
marketing. Beginning in the 2005-06 Session, several
legislative measures were introduced to reinstate the state's
trade authority. SB 1513 (Romero, Chapter 663, Statutes of
2006) addressed these concerns by requiring BT&H to undertake a
trade study to determine what role the state should play in
international trade and foreign investment activities and
required them to establish a business advisory committee, and
development of a trade strategy consistent with the study and
acts as the vehicle for implementing the state's trade policy.
CONTINUED
SB 511
Page
6
The first strategy was published in February 2008 and the next
update is required in February 2014.
Until the creation of GO-Biz there were only a very small number
of former International Investment Division staff working on
trade related issues and activities for the state. GO-Biz now
has authority for undertaking international trade and foreign
investment activities, including establishing any ITI office (AB
2012 (Perez), Chapter 294, Statutes of 2012). GO-Biz has
partnered with the Bay Area Council to open a California-China
Trade and Investment office in Shanghai's downtown Yangpu
district. In a March 2013 report to the Legislature on the
status of this effort, GO-Biz described the office's goals "to
drive increased employment, revenues at California enterprises,
tax revenues, and international competitiveness in California"
which will be accomplished through promoting investment in
California; facilitating two-way international business growth,
with an emphasis on expanding foreign sales by California
employers, including not only manufacturers, agricultural
enterprises, and commodity producers, but also service providers
such as universities, banks, consulting companies, and the like;
supporting continued growth of California's role as a gateway
state for goods movement and passenger travel, and; identifying
and addressing barriers to international expansion by California
employers.
Comments
According to the author's office, international trade accounts
for nearly 25% of the state's economy and relies on land ports
of entry and the largest seaport facilities in the U.S. to
maintain California's status as a major gateway for products
entering and leaving the U.S., including many goods moving
through California ports, such as industrial, technology and
postconsumer secondary materials originated in, or destined for
other states. The state has a compelling interest in the
success of ports because of the significant economic benefit in
terms of jobs, personal income, business revenue, and taxes.
Ports are the vital interface between water and land
transportation for trade with the Pacific Rim countries and
other trade.
Related legislation . SB 592 (Lieu, 2013) was identical to this
bill but also required GO-Biz to provide a port trade promotion
CONTINUED
SB 511
Page
7
strategy to the Legislature on or before April 1, 2014. The
bill is being held in the Assembly Appropriations Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
MW:k 1/22/14 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****
CONTINUED