Bill Text: CA AB2619 | 2011-2012 | Regular Session | Amended
Bill Title: Start-Up California Impact Investment Fund program.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2012-05-25 - In committee: Set, second hearing. Held under submission. [AB2619 Detail]
Download: California-2011-AB2619-Amended.html
BILL NUMBER: AB 2619 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 18, 2012
INTRODUCED BY Assembly Member V. Manuel Pérez
FEBRUARY 24, 2012
An act to amend Sections 63010, 63030, 63031, 63034, and 63035 of,
and to add Article 5.5 (commencing with Section 63047.1) to Chapter
2 of Division 1 of Title 6.7 of, the Government Code, relating to
economic development.
LEGISLATIVE COUNSEL'S DIGEST
AB 2619, as amended, V. Manuel Pérez. Start-Up California Impact
Investment Fund program.
The Bergeson-Peace Infrastructure and Economic Development Bank
Act authorizes the California Infrastructure and Economic Development
Bank, governed by a board of directors, to make loans and provide
other assistance to public and private entities for various types of
economic development projects, among other things. The activities of
the bank under these provisions are funded from the California
Infrastructure and Economic Development Bank Fund, which is
continuously appropriated for these purposes.
This bill would create the Start-Up California Impact Investment
Fund program to provide startup equity funds, as defined, to startup
firms and small businesses. This bill would authorize the bank ,
upon appropriation of the Legislature, to make expenditures
from the startup equity fund account, which is created within the
Infrastructure and Economic Development Bank Fund, to invest in
startup firms and small businesses pursuant to certain criteria,
priorities, and guidelines, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature finds and declares all of the
following:
(a) More than 90 percent of all jobs created come from small and
early stage firms, with most of these jobs coming from firms that are
less than five years old. The United States Census Bureau shows that
from 1990 to 2003, inclusive, nearly 80 percent of jobs created came
from firms that employ 20 or fewer employees. Recent studies show
that without entrepreneurs and startups, there was no net job
creation during the period of 1977 to 2005, inclusive.
(b) National government leaders are beginning to take a more
serious look at ways to support business development. The White House
has led these efforts with the Start-Up America initiative to
increase the number and scale of new high-growth firms that are
creating economic growth, innovation, and quality jobs.
(c) Recently, as part of the Start-Up American Initiative, the
federal Small Business Administration has committed up to one billion
dollars ($1,000,000,000) over the next five years to guarantee early
stage venture funds to encourage private sector investment by
lowering the credit risk.
(d) In response to national efforts, several states have recently
created, or will soon create, venture funds to support startups and
early stage firms. A dozen states have used their share of the
federal Small Business Credit Initiative as a source of capital for
their fund.
(e) While historically California has been a national leader in
startups and venture capital, the state's slow recovery from the
recession and the increasing competition from other states
illustrates the need for the Legislature to act.
(f) In order to stimulate the economy and create new quality jobs
in this state, the Legislature must establish a startup equity
investment fund to support startup firms and small businesses.
SEC. 2. Section 63010 of the Government Code is amended to read:
63010. For purposes of this division, the following words and
terms shall have the following meanings unless the context clearly
indicates or requires another or different meaning or intent:
(a) "Act" means the Bergeson-Peace Infrastructure and Economic
Development Bank Act.
(b) "Bank" means the California Infrastructure and Economic
Development Bank.
(c) "Board" or "bank board" means the Board of Directors of the
California Infrastructure and Economic Development Bank.
(d) "Bond purchase agreement" means a contractual agreement
executed between the bank and a sponsor, or a special purpose trust
authorized by the bank or a sponsor, or both, whereby the bank or
special purpose trust authorized by the bank agrees to purchase bonds
of the sponsor for retention or sale.
(e) "Bonds" means bonds, including structured, senior, and
subordinated bonds or other securities; loans; notes, including bond,
revenue, tax or grant anticipation notes; commercial paper; floating
rate and variable maturity securities; and any other evidences of
indebtedness or ownership, including certificates of participation or
beneficial interest, asset backed certificates, or lease-purchase or
installment purchase agreements, whether taxable or excludable from
gross income for federal income taxation purposes.
(f) "Cost," as applied to a project or portion thereof financed
under this division, means all or any part of the cost of
construction, renovation, and acquisition of all lands, structures,
real or personal property, rights, rights-of-way, franchises,
licenses, easements, and interests acquired or used for a project;
the cost of demolishing or removing any buildings or structures on
land so acquired, including the cost of acquiring any lands to which
the buildings or structures may be moved; the cost of all machinery,
equipment, and financing charges; interest prior to, during, and for
a period after completion of construction, renovation, or
acquisition, as determined by the bank; provisions for working
capital; reserves for principal and interest and for extensions,
enlargements, additions, replacements, renovations, and improvements;
and the cost of architectural, engineering, financial and legal
services, plans, specifications, estimates, administrative expenses,
and other expenses necessary or incidental to determining the
feasibility of any project or incidental to the construction,
acquisition, or financing of any project, and transition costs in the
case of an electrical corporation.
(g) "Economic development facilities" means real and personal
property, structures, buildings, equipment, and supporting components
thereof that are used to provide industrial, recreational, research,
commercial, utility, or service enterprise facilities, community,
educational, cultural, or social welfare facilities and any parts or
combinations thereof, and all facilities or infrastructure necessary
or desirable in connection therewith, including provision for working
capital, but shall not include any housing.
(h) (1) "Electrical corporation" has the
meaning set forth in Section 218 of the Public Utilities Code.
(2) "Emerging domestic market" means business enterprises with
growth potential, which, due to their geographic location, have
historically faced capital constraints due to systemic undervaluation
as a result of imperfect market information.
(3) "Emerging money manager" means a money manager on his or her
first or second fund iteration.
(i) "Equity financing" means the shares of common or preferred
stock issued by a startup firm or small business to the bank in
exchange for capital.
(j) "Executive director" means the Executive Director of the
California Infrastructure and Economic Development Bank appointed
pursuant to Section 63021.
(k) "Financial assistance" in connection with a project, includes,
but is not limited to, any combination of grants, loans, the
proceeds of bonds issued by the bank or special purpose trust,
insurance, guarantees or other credit enhancements or liquidity
facilities, and contributions of money, property, labor, or other
things of value, as may be approved by resolution of the board or the
sponsor, or both; the purchase or retention of bank bonds, the bonds
of a sponsor for their retention or for sale by the bank, or the
issuance of bank bonds or the bonds of a special purpose trust used
to fund the cost of a project for which a sponsor is directly or
indirectly liable, including, but not limited to, bonds, the security
for which is provided in whole or in part pursuant to the powers
granted by Section 63025; bonds for which the bank has provided a
guarantee or enhancement, including, but not limited to, the purchase
of the subordinated bonds of the sponsor, the subordinated bonds of
a special purpose trust, or the retention of the subordinated bonds
of the bank pursuant to Chapter 4 (commencing with Section 63060); or
any other type of assistance deemed appropriate by the bank or the
sponsor, except that no direct loans shall be made to nonpublic
entities other than in connection with the issuance of rate reduction
bonds pursuant to a financing order or in connection with a
financing for an economic development facility.
For purposes of this subdivision, "grant" does not include grants
made by the bank except when acting as an agent or intermediary for
the distribution or packaging of financing available from federal,
private, or other public sources.
(l) "Financing order" has the meaning set forth in Section 840 of
the Public Utilities Code.
(m) "Guarantee trust fund" means the California Infrastructure
Guarantee Trust Fund.
(n) (1) "Impact investments" means investments made in companies,
organizations, and funds with the intention to generate financial
risk adjusted returns, as well as measurable social and environmental
impacts.
(n)
(2) "Infrastructure bank fund" means the California
Infrastructure and Economic Development Bank Fund.
(o) "Loan agreement" means a contractual agreement executed
between the bank or a special purpose trust and a sponsor that
provides that the bank or special purpose trust will loan funds to
the sponsor and that the sponsor will repay the principal and pay the
interest and redemption premium, if any, on the loan.
(p) "Participating party" means any person, company, corporation,
association, state or municipal governmental entity, partnership,
firm, or other entity or group of entities, whether organized for
profit or not for profit, engaged in business or operations within
the state and that applies for financing from the bank in conjunction
with a sponsor for the purpose of implementing a project. However,
in the case of a project relating to the financing of transition
costs or the acquisition of transition property, or both, on the
request of an electrical corporation, or in connection with a
financing for an economic development facility, or for the financing
of insurance claims, the participating party shall be deemed to be
the same entity as the sponsor for the financing.
(q) "Project" means designing, acquiring, planning, permitting,
entitling, constructing, improving, extending, restoring, financing,
and generally developing public development facilities or economic
development facilities within the state or financing transition costs
or the acquisition of transition property, or both, upon approval of
a financing order by the Public Utilities Commission, as provided in
Article 5.5 (commencing with Section 840) of Chapter 4 of Part 1 of
Division 1 of the Public Utilities Code.
(r) "Public development facilities" means real and personal
property, structures, conveyances, equipment, thoroughfares,
buildings, and supporting components thereof, excluding any housing,
that are directly related to providing the following:
(1) "City streets" including any street, avenue, boulevard, road,
parkway, drive, or other way that is any of the following:
(A) An existing municipal roadway.
(B) Is shown upon a plat approved pursuant to law and includes the
land between the street lines, whether improved or unimproved, and
may comprise pavement, bridges, shoulders, gutters, curbs,
guardrails, sidewalks, parking areas, benches, fountains, plantings,
lighting systems, and other areas within the street lines, as well as
equipment and facilities used in the cleaning, grading, clearance,
maintenance, and upkeep thereof.
(2) "County highways" including any county highway as defined in
Section 25 of the Streets and Highways Code, that includes the land
between the highway lines, whether improved or unimproved, and may
comprise pavement, bridges, shoulders, gutters, curbs, guardrails,
sidewalks, parking areas, benches, fountains, plantings, lighting
systems, and other areas within the street lines, as well as
equipment and facilities used in the cleaning, grading, clearance,
maintenance, and upkeep thereof.
(3) "Drainage, water supply, and flood control" including, but not
limited to, ditches, canals, levees, pumps, dams, conduits, pipes,
storm sewers, and dikes necessary to keep or direct water away from
people, equipment, buildings, and other protected areas as may be
established by lawful authority, as well as the acquisition,
improvement, maintenance, and management of floodplain areas and all
equipment used in the maintenance and operation of the foregoing.
(4) "Educational facilities" including libraries, child care
facilities, including, but not limited to, day care facilities, and
employment training facilities.
(5) "Environmental mitigation measures" including required
construction or modification of public infrastructure and purchase
and installation of pollution control and noise abatement equipment.
(6) "Parks and recreational facilities" including local parks,
recreational property and equipment, parkways and property.
(7) "Port facilities" including docks, harbors, ports of entry,
piers, ships, small boat harbors and marinas, and any other
facilities, additions, or improvements in connection therewith.
(8) "Power and communications" including facilities for the
transmission or distribution of electrical energy, natural gas, and
telephone and telecommunications service.
(9) "Public transit" including air and rail transport of goods,
airports, guideways, vehicles, rights-of-way, passenger stations,
maintenance and storage yards, and related structures, including
public parking facilities, equipment used to provide or enhance
transportation by bus, rail, ferry, or other conveyance, either
publicly or privately owned, that provides to the public general or
special service on a regular and continuing basis.
(10) "Sewage collection and treatment" including pipes, pumps, and
conduits that collect wastewater from residential, manufacturing,
and commercial establishments, the equipment, structures, and
facilities used in treating wastewater to reduce or eliminate
impurities or contaminants, and the facilities used in disposing of,
or transporting, remaining sludge, as well as all equipment used in
the maintenance and operation of the foregoing.
(11) "Solid waste collection and disposal" including vehicles,
vehicle-compatible waste receptacles, transfer stations, recycling
centers, sanitary landfills, and waste conversion facilities
necessary to remove solid waste, except that which is hazardous as
defined by law, from its point of origin.
(12) "Water treatment and distribution" including facilities in
which water is purified and otherwise treated to meet residential,
manufacturing, or commercial purposes and the conduits, pipes, and
pumps that transport it to places of use.
(13) "Defense conversion" including, but not limited to,
facilities necessary for successfully converting military bases
consistent with an adopted base reuse plan.
(14) "Public safety facilities" including, but not limited to,
police stations, fire stations, court buildings, jails, juvenile
halls, and juvenile detention facilities.
(15) "State highways" including any state highway as described in
Chapter 2 (commencing with Section 230) of Division 1 of the Streets
and Highways Code, and the related components necessary for safe
operation of the highway.
(16) (A) Military infrastructure, including, but not limited to,
facilities on or near a military installation, that enhance the
military operations and mission of one or more military installations
in this state. To be eligible for funding, the project shall be
endorsed by the Office of Military and Aerospace Support established
pursuant to Section 13998.2.
(B) For purposes of this subdivision, "military installation"
means any facility under the jurisdiction of the Department of
Defense, as defined in paragraph (1) of subsection (e) of Section
2687 of Title 10 of the United States Code.
(s) "Rate reduction bonds" has the meaning set forth in Section
840 of the Public Utilities Code.
(t) "Revenues" means all receipts, purchase payments, loan
repayments, lease payments, and all other income or receipts derived
by the bank or a sponsor from the sale, lease, or other financing
arrangement undertaken by the bank, a sponsor or a participating
party, including, but not limited to, all receipts from a bond
purchase agreement, and any income or revenue derived from the
investment of any money in any fund or account of the bank or a
sponsor and any receipts derived from transition property. Revenues
shall not include moneys in the General Fund of the state.
(u) "Special purpose trust" means a trust, partnership, limited
partnership, association, corporation, nonprofit corporation, or
other entity authorized under the laws of the state to serve as an
instrumentality of the state to accomplish public purposes and
authorized by the bank to acquire, by purchase or otherwise, for
retention or sale, the bonds of a sponsor or of the bank made or
entered into pursuant to this division and to issue special purpose
trust bonds or other obligations secured by these bonds or other
sources of public or private revenues. Special purpose trust also
means any entity authorized by the bank to acquire transition
property or to issue rate reduction bonds, or both, subject to the
approvals by the bank and powers of the bank as are provided by the
bank in its resolution authorizing the entity to issue rate reduction
bonds.
(v) "Sponsor" means any subdivision of the state or local
government including departments, agencies, commissions, cities,
counties, nonprofit corporations formed on behalf of a sponsor,
special districts, assessment districts, and joint powers authorities
within the state or any combination of these subdivisions that makes
an application to the bank for financial assistance in connection
with a project in a manner prescribed by the bank. This definition
shall not be construed to require that an applicant have an ownership
interest in the project. In addition, an electrical corporation
shall be deemed to be the sponsor as well as the participating party
for any project relating to the financing of transition costs and the
acquisition of transition property on the request of the electrical
corporation and any person, company, corporation, partnership, firm,
or other entity or group engaged in business or operation within the
state that applies for financing of any economic development
facility, shall be deemed to be the sponsor as well as the
participating party for the project relating to the financing of that
economic development facility.
(w) "Startup equity funds" means money and resources invested in
startup firms and small businesses with exceptional growth potential.
In exchange for this capital, the bank receives an equity stake in
the firm or business represented by shares of common or preferred
stock.
(x) "State" means the State of California.
(y) "Transition costs" has the meaning set forth in Section 840 of
the Public Utilities Code.
(z) "Transition property" has the meaning set forth in Section 840
of the Public Utilities Code.
SEC. 3. Section 63030 of the Government Code is amended to read:
63030. (a) Bonds issued by the bank or a special purpose trust
are legal investments for all trust funds, the funds of all insurance
companies, banks, both commercial and savings, trust companies,
executors, administrators, trustees, and other fiduciaries, for state
school funds, pension funds, and for any funds that may be invested
in county, school, or municipal bonds. These bonds are securities
that may legally be deposited with, and received by, any state or
municipal officer or agency or political subdivision of the state for
any purpose for which the deposit of bonds or obligations of the
state is now, or may hereafter be, authorized by law, including,
deposits to secure public funds.
(b) Startup equity funds established by the bank are legal
investments for all trust funds, the funds for all insurance
companies, banks, both commercial and savings, trust companies,
executors, administrators, trustees, and other fiduciaries, for state
and local pension funds.
SEC. 4. Section 63031 of the Government Code is amended to read:
63031. (a) Liability shall not be incurred by the bank beyond the
extent to which funds have been provided under this division.
However, for the purposes of meeting the necessary expenses of
initial organization and operation until the date that the bank
derives revenues or proceeds from bonds as provided under this
division, the bank may borrow money as needed for the purposes of
meeting the necessary expenses of initial organization and operation
from the Pooled Money Investment Account, as specified in subdivision
(w) of Section 63025.1 or from any special funds, including the
special funds of existing financing authorities. The borrowed money
shall be repaid with interest within a reasonable time after the bank
receives revenues or proceeds from bonds as provided under this
division.
(b) Liability shall not be incurred by the bank or the state as
related to a startup equity fund beyond the money that is available
for expenditure in the startup equity fund account.
SEC. 5. Section 63034 of the Government Code is amended to read:
63034. The bank shall establish a reasonable schedule of
administrative fees, which shall be paid by the sponsor or the
participating party pursuant to Section 63074 and by the startup firm
or small business pursuant to Section 63047.2, to reimburse the
state for the costs of administering this division.
SEC. 6. Section 63035 of the Government Code is amended to read:
63035. The bank shall, before November 2 of each year, submit to
the Governor and the Joint Legislative Budget Committee a report of
its activities pursuant to this division for the preceding fiscal
year. The report shall include all of the following:
(a) (1) A listing of applications accepted, including a
description of the expected employment impact of each project.
(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.
(3) A separate summary of the investment firms that were
awarded startup equity fund investments, including the
number of investments, moneys, including their
industry sector and geographic focus, and a list of the investments
made with startup equity fund moneys by asset manager, including
the size of each investment, and the type of firm, by industry
sector and geographic location of headquarters , that
received an investment. The summary shall also include a description
of the expected direct and indirect employment impact of the
investments.
(b) A specification of bonds sold and interest rates thereon.
(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 interest earnings,
compensation received from startup equity fund investments, the
amount of startup equity funds, available for distribution, 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 startup
equity fund investments made, 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.
SEC. 7. Article 5.5 (commencing with Section 63047.1) is added to
Chapter 2 of Division 1 of Title 6.7 of the Government Code, to read:
Article 5.5. Start-Up California Impact Investment Fund
Program
63047.1. (a) There is created at the bank the Start-Up California
Impact Investment Fund program to provide startup equity funds to
startup firms and small businesses.
(b) The bank may make expenditures , upon appropriation of
the Legislature, from the startup equity fund account, which is
hereby created within the Infrastructure and Economic Development
Bank Fund, to invest in startup firms and small businesses pursuant
to the criteria, priorities, and guidelines adopted by the bank
pursuant to Section 63047.2.
63047.2. (a) After consulting The bank
shall consult with appropriate state and local agencies and
investors who have impact investment policies that target
businesses in lower income communities, the bank shall
establish criteria, priorities, and guidelines for the selection of
startup firms and small businesses to receive startup equity funds
from the bank. Startup equity fund investments shall comply with the
criteria, priorities, and guidelines adopted by the bank.
emerging money managers, or emerging domestic markets.
(b) After the consultation pursuant to subdivision (a), the bank
shall adopt an investment policy and establish criteria, priorities,
and guidelines for the selection of startup firms and small
businesses to receive startup equity funds from the bank. Startup
equity fund investments shall comply with the criteria, priorities,
and guidelines adopted by the bank.
(b)
(c) The criteria, priorities, and guidelines shall, at
a minimum, do all of the following:
(1) Encourage the establishment of startup firms and growth of
early stage small businesses.
(2) Offer financial opportunities to emerging money
managers who have mentoring agreements with equity asset
managers with proven track records, have been in business for more
than five years, and have raised two or more equity funds of five
hundred million dollars ($500,000,000) or more .
(3) Encourage mentoring relationships of emerging money managers
by equity asset managers with proven track records, including having
been in business for more than five years, and having raised three or
more equity funds of five hundred million dollars ($500,000,000) or
more. This may include the bank partnering with investors, such as
CalPERS and CalSTRS, that have impact investment programs or emerging
manager programs, or both.
(3)
(4) Support business development in lower income areas
of the state.
(4)
(5) Require reporting of the social and environmental
impacts of the investments on an annual basis.
(5)
(6) Encourage business development that includes the
export of products from California.
(6)
(7) Encourage businesses that are manufacturing
overseas to bring production lines back to the United States and
products to be made in California.
(c)
(d) (1) The bank may contract
with professional equity fund managers who have demonstrated
expertise in economically targeted emerging
domestic market investments and impact investment mandates to
implement the Start-Up California Impact Investment Fund program.
(2) The bank shall adopt appropriate guidelines and policies for
overseeing these contracts that shall provide for an effective
program while ensuring transparency and accountability of public
moneys.
63047.3. This section The authority provided
in this article shall not apply to any other financing
provided by the bank.
