BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1230


                                                                    Page  1





          Date of Hearing:  May 13, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          1230 (Gomez) - As Amended March 24, 2015


           ----------------------------------------------------------------- 
          |Policy       |Rules                          |Vote:|11 - 0       |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
          |-------------+-------------------------------+-----+-------------|
          |             |Banking and Finance            |     |11 - 1       |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill establishes the California Americans with Disabilities  
          Act Small Business Compliance Financing Authority (Authority) to  
          provide financing to small businesses to comply with the  
          requirements of the Americans with Disabilities Act (ADA).  In  
          summary, this bill:


          1)Establishes membership of the Authority as the Treasurer,  








                                                                    AB 1230


                                                                    Page  2





            Controller, Director of Finance, Director of General Services,  
            one member appointed by the Senate Rules Committee who  
            represents persons with disabilities, one member appointed by  
            the Speaker of the Assembly who represents owners of small  
            businesses, and one member appointed by the Governor, subject  
            to senate confirmation, who is a member of the state bar and  
            has experience with consumer protection laws, each of whom  
            will have four year terms.


          2)Appropriates $50,000,000 from the General Fund for the  
            purposes of funding the initial activities of the Authority,  
            and specifies that all expenses of the Authority shall be  
            payable solely from funds provided to and revenue earned by  
            the Authority.


          3)Authorizes the Authority to make secured and unsecured loans,  
            and purchase loans of any participating small business in  
            connection with financing the costs of an ADA compliance  
            project, subject to a maximum total project cost of $50,000, a  
            maximum loan term of 60 months, and an interest rate equal to  
            the Pooled Money Investment Rate at the time the loan is made,  
            subject to specified limitations and exceptions.


          4)Allows the Authority to issue revenue bonds, payable solely  
            out of revenues of the Authority from financing activities,  
            subject to standard terms and limitations.


          5)Defines "small business" as a California business with fewer  
            than six full-time employees, with less than $1 million in  
            total gross annual income from all sources, and that does not  
            provide overnight accommodations, and requires the Authority  
            to establish eligibility standards for each small business  
            applicant based on credit, debt service coverage, financial  
            impact of ADA compliance project, and related factors.









                                                                    AB 1230


                                                                    Page  3






          6)Allows the Authority to invest any surplus moneys in the Fund  
            in interest bearing accounts or in the Surplus Money  
            Investment Fund, as required.


          








          FISCAL EFFECT:


          1)One-time GF appropriation of $50 million.


          2)Estimated annual costs of approximately $800,000 to the  
            Treasurer to administer the Authority, initially paid from the  
            GF appropriation, and eventually paid from revenue generated  
            by financing activities. 


          COMMENTS:


          1)Purpose.  According to the author, hundreds of lawsuits are  
            filed each year against small businesses for ADA violations,  
            with more than 40% of these occurring in California.  The  
            author claims many of these lawsuits seek only statutory  
            penalty damages and not the injunctive relief that would  
            improve conditions for disabled persons.  The author believes  
            this sort of predatory litigation weakens rights and access  
            for disabled persons by forcing small businesses to pay for  
            legal fees and costs instead of improving their properties.








                                                                    AB 1230


                                                                    Page  4







            AB 1230 creates a finance authority to provide affordable  
            loans to small businesses to finance the alterations and  
            retrofits necessary to comply with ADA.  The bill authorizes  
            the Authority to issue revenue bonds to finance the loans and  
            appropriates $50 million from the General Fund to launch the  
            program, but anticipates the program will be self-sustaining  
            thereafter, funding costs with interest generated from the  
            loans.


          2)Revenue Bonds for Private Activity.  Revenue bonds are an  
            instrument often used to finance public works projects  
            undertaken by private developers.  Revenue bonds are issued by  
            a public agency, but are repaid only with the proceeds of the  
            development activity and are not guaranteed by the state.   
            Typically, the proceeds of the bonds are lent to developers,  
            or in the case of this bill, small businesses, and the bonds  
            are repaid with the interest generated by the loans.   
            Investors in revenue bonds only have recourse to the  
            underlying loan assets.


            Revenue bonds are considered tax free by the Internal Revenue  
            Service if the activity financed is publicly-owned or has  
            public value, allowing the issuer to offer lower interest  
            rates on the bonds and pass those savings to the borrowers.   
            As a result, they are attractive for financing activity that  
            has public value but may not be affordable with private  
            financing.


            There is some risk that the activity being financed in this  
            bill may not qualify the revenue bonds for tax exempt status,  
            making them less attractive for financing the small business  
            loans.  The author may wish to consider whether financing the  
            program solely with the initial $50 million General Fund  
            appropriation is a safer way to achieve the bill's aims. 








                                                                    AB 1230


                                                                    Page  5










          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081