BILL ANALYSIS
AB 1272
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Date of Hearing: April 17, 2007
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
Juan Arambula, Chair
AB 1272 (Arambula) - As Amended: April 11, 2007
SUBJECT : California Infrastructure and Economic Development
Bank: local assistance program.
SUMMARY : Establishes a local assistance program within the
California Infrastructure and Economic Development Bank
(I-Bank), to assist small and rural communities obtain bond
financing for infrastructure projects. Specifically, this bill:
1)Requires the I-Bank to establish a local assistance program to
provide technical support to small and rural communities. The
I-Bank will select communities for the program based on a
competitive process which considers factors such as
remediation of community health and safety problems, and
economic development.
2)Defines technical assistance as extended interaction with a
community for the purposes of developing strategic plans,
writing grants, applying for public and private loans and loan
guarantees, issuing bonds, and other activities related to
obtaining funding for infrastructure projects. Specifies that
technical assistance shall continue throughout the project
financing process and shall encourage public-private
partnerships to the maximum extent possible.
3)Authorizes no fewer than three professional positions within
the I-Bank to implement the program.
4)Authorizes the use of up to one-half of one percent of bond
proceeds derived from bonds issued after January 1, 2008, for
the purpose of funding the costs of the I-Bank to conduct
outreach and technical assistance to small and rural
communities seeking to obtain financing for local
infrastructure projects. Limits this amount to a maximum of
$2 million.
5)Establishes the Community Technical Assistance Fund (CTAF) to
receive bond proceeds transferred by the Bond Committee for
the purpose of funding the I-Banks' outreach and technical
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assistance activities. Authorizes the CTAF to also receive
funding from other programs for the purpose of providing
technical assistance in obtaining infrastructure and community
development financing from those other programs.
6)Requires the Bureau of State Audits conduct periodic audits to
ensure that bond proceeds are awarded in a timely fashion, and
that bond fund recipients are using funds in compliance with
applicable provisions of the bond acts.
EXISTING LAW :
1)Creates the I-Bank, within the Business, Transportation, and
Housing (BT&H) Agency, to promote economic revitalization,
enable future development, and encourage a healthy climate for
jobs in California. The I-Bank has the authority to issue
tax-exempt and taxable revenue bonds to underwrite the costs
of infrastructure development that meet a certain public
purpose.
2)Authorizes the issuance of general obligation bonds for five
distinct infrastructure programs including the Proposition 1B
transportation bond ($19.9 billion), the Proposition 1C
housing bond ($2.9 billion), the Proposition 1D education bond
($10.4 billion), the Proposition 1E flood control bond ($4.1
billion), and the Proposition 84 natural resources bond ($5.4
billion). Collectively, these five bonds are known as the
Infrastructure Bond Acts of 2006. The Infrastructure Bond
Acts create over 60 funding programs for the purpose of
constructing physical infrastructure improvements for roads,
parks, schools, water resources, sewage treatment, and more.
3)Establishes the State General Obligation Bond Law, which, in
part, authorizes proceeds from the sale of bonds to pay costs
of a state agency with responsibility for administering a bond
program.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of the bill : According to the author, AB 1272 will
assist communities that have been traditionally underserved by
state assistance programs, in obtaining state infrastructure
bond funds for critically needed local infrastructure
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projects. The communities this bill seeks to assist are
typically small, rural incorporated and unincorporated areas
that have difficulty affording additional staff or consultants
to prepare complex infrastructure finance packages.
Generally, these communities are competing against larger
urban areas, which have at least two decades of experience in
preparing bond financing grant requests.
The author believes that communities with critical public needs
or significant potential for local economic development and
job creation, should have a reasonable opportunity to secure
infrastructure bond funding, notwithstanding their difficulty
in affording their own experts. The investment of state bond
funds in infrastructure improvements will allow these
communities to begin generating economic activity on their
own, which contributes to the overall state economy.
2)Benefits of technical assistance programs : The Rural
Development Assistance Program (RDAP) was formerly operated by
the Department of Housing and Community Development (HCD) in
the 1970s and 1980s. RDAP, initially established as a pilot
project with the federal government, assigned technical
advisors and loan packagers to rural communities to assist
them in applying for other infrastructure funding.
During the period from 1980 to 1982, the state leveraged $30
million for housing and community facility construction with a
state investment of only $272,000, and a federal investment of
only $132,000. HCD estimates that in that period, over $130
million in local economic activity was generated, 2,379 jobs
were created, and over $8 million in local and state taxes
were paid as a result of RDAP.
3)The I-Bank : The Bergeson-Peace Infrastructure and Economic
Development Bank Act was created for the purpose of assisting
private agencies obtain credit enhancements, and acquire or
lease facilities, as well as, leverage state and federal funds
for infrastructure projects that contribute to state and local
economic development. The I-Bank is financed through the
California Infrastructure and Economic Development Bank Fund,
which receives fees, interest income and other revenues and
from which I-Bank expenses are paid. The I-Bank is operated
on a revolving fund basis and thereby generates continuous
funding for new project investments.
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Since its creation approximately a decade ago, the I-Bank has
issued over $300 million to local agencies in infrastructure
related revenue bonds, and has developed a level of expertise
in the implementation of successful local infrastructure
programs. The I-Bank also provides program-specific direct
technical assistance to local communities for infrastructure
projects. This makes the I-Bank a suitable entity within state
government to house the local technical assistance program
this bill creates.
The staffing positions funded by this bill, would travel
throughout the state, assisting rural and other small
communities in applying for bond money. The I-Bank duties set
forth in this bill are consistent with the I-Bank's mission to
encourage economic development activities.
a) Beyond the Bond Acts of 2006 : Notwithstanding the
provisions of the bill which link authorization for
technical assistance to infrastructure financing from the
Bond Acts of 2006, the technical assistance program
established by the bill could extend to other rural
community-based development programs.
The CTAF is authorized to receive funding from other
infrastructure financing and community development programs
to support the I-Bank in providing technical assistance to
rural communities. For example, current law authorizes the
state administered Community Development Block Grant
Program (CDBG) and the United States. Department of
Agriculture (USDA) Rural Development Program. The former
provides funding for technical grants for small counties
and cities to conduct studies and develop proposals for
housing, public works, community facilities, and economic
development activities. The USDA program provides
financing to support essential public facilities and
services such as water and sewer systems, housing, health
clinics, and electric and telecommunications facilities.
Pursuant to the provisions of this bill, funding from these,
and other economic development programs, can be deposited
in the CTAF. If the CTAF were to receive funding from
other programs, technical assistance could be coordinated
through a single state agency the - I-Bank, which could
create efficiencies in small and rural communities' efforts
to obtain community development funding.
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4)Related legislation : More than 100 bills have been introduced
this session related to infrastructure bonds. The following
is a small sampling of bills related to the implementation of
the bonds:
a) AB 633 (Galgiani) : This bill requires that $500 million
in Proposition 1B funds be allocated for the elimination of
dangerous rail grade crossings. Status: Pending in the
Rules Committee.
b) AB 783 (Arambula) : This bill sets $5 million aside for
grant for predevelopment Proposition 84 drinking water
grants, and requires the Department of Health Services
(DHS) to develop a standard application. Status: Pending
in the Environmental and Toxic Safety Committee.
c) AB 909 (Wolk) : This bill provides that State Water
Resources Control Board Proposition 84 matching grants be
used for grants for monitoring and remediation activities
related to mercury contamination. Status: Pending in
Environmental Safety and Toxic Materials Committee.
d) AB 997 (Arambula) : This bill establishes incentives for
Proposition 1C and Proposition 84 funding for infill
incentives in cities with fewer than 30,000 people.
Status: Pending in Assembly Housing and Community
Development Committee.
e) SB 931 (Ridley-Thomas) : This bill establishes a program
to offer competitive grants for Proposition 84 bond funds
for publicly operated museums, aquariums, or research
facilities. Status: Pending in the Senate Natural
Resources Committee.
f) SB 1002 (Perata) : This bill allocates $50 million in
Proposition 84 funds to small community drinking water
system infrastructure improvements. Status: Pending in
the Senate Natural Resources Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Association for Local Economic Development
AB 1272
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CHARO Community Development Corporation
Claggett Wolfe Associates
California Community Economic Development Association
Economic Development Corporation
Tulare County Economic Development Corporation
City of Vista
City of Ceres
City of San Mateo
City of Eureka
Opposition
None on file
Analysis Prepared by : Les Spahnn/ J.,E.D.& E. / (916)
319-2090