BILL ANALYSIS Ó AB 1230 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1230 (Gomez) As Amended September 3, 2015 2/3 vote -------------------------------------------------------------------- |ASSEMBLY: |77-1 |(June 2, 2015) |SENATE: |39-0 |(September 8, | | | | | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: B. & F. SUMMARY: Establishes the California Americans with Disabilities Act Small Business Capital Access Loan Program (Program) to provide loans to small businesses so they can comply with the requirements of the Americans with Disabilities Act (ADA). Specifically, this bill: 1)Establishes the Program within the California Pollution Control Financing Authority (CPCFA). 2)States that it is the intent of Legislature to establish a self-sustaining program within CPCFA to provide loans to assist small businesses in complying with the ADA. a) Defines "small business" as a business located in California that meets all of the following criteria: i) Fifteen or fewer full-time equivalent employees; ii) Less than $1 million in total gross annual income AB 1230 Page 2 from all sources; and, iii) Does not provide overnight accommodations. 3)Provides that CPCFA may direct the Treasurer to invest moneys in the Americans with Disabilities Act Small Business Compliance Financing Authority Fund (Fund) that are not required for its current needs, in the eligible securities as specified, or in interest-bearing accounts in state or national banks or other financial institutions having principal offices located in the state. The CPCFA may alternatively require the transfer of moneys to the Surplus Money Investment Fund for investment. 4)Requires CPCFA adopt regulations that do the following: a) Establish a new loss reserve account for each participating lender enrolling loans in this program; b) Obtain a certification from each participating lender and small business upon enrollment of a qualified loan that the proceeds of the loan will be used for the eligible costs of an eligible project; c) Contribute an additional incentive from the fund for each loan enrolled for a qualified business located in a severely affected community; d) Restrict the enrollment of a qualified loan in any other Capital Access Loan Program for small business offered by the authority as long as funds are available for this program; e) Limit the term of loss coverage for each qualified loan to no more than five years; and f) Recapture from the loss reserve account the authority's AB 1230 Page 3 contribution for each enrolled loan upon the maturation of such loan or after five years from the date of enrollment, which ever happens first, to be deposited in the fund and applied to program and administrative costs. 5)Appropriates a sum of $10 million from the General Fund (GF) to the Fund for the purposes of funding the activities of the California Americans with Disabilities Act Small Business Compliance Financing Authority (Authority). 6)Defines the following: a) "Eligible cost" means and includes all or any part of the price of construction, purchase price of real or personal property, the price of demolishing or removing any buildings or structures, the price of all machinery and equipment, the amount of financing charges and interest prior to, during, and for a period not to exceed the later of one year or one year following completion of construction, as determined by the authority, the price of insurance during construction, the amount of funding or financing noncapital expenses, the amount of reserves for principal and interest and for extensions, enlargements, additions, replacements, renovations and improvements, the price of engineering, financial and legal services and other service contracts, the price of plans, specifications, studies, surveys, estimates, administrative expenses, and any other expenses of funding or financing, that are necessary and allocable to the eligible project, and shall not include costs not directly related to physical alterations necessary for compliance with the ADA. b) "Eligible project" means the physical alterations or retrofits to an existing small business facility of less than 10,000 square feet necessary to ensure that facility is in compliance with the ADA, and the financing necessary to pay eligible costs of the project. c) "Qualified loan" means a loan or portion of loan where the proceeds of the loan or portion of loan are limited to the eligible costs for an eligible project under this AB 1230 Page 4 program, and where the loan or portion of loan does not exceed $50,000. 7)Provides that all moneys in the fund derived from any source shall be held in trust for the life of the program. a) Specifies that program expenditures shall include both of the following: b) Contributions paid by the authority in support of qualified loans; and, c) Reasonable costs to educate the small business community and participating lenders about the program, including travel within the state. 8)Requires administrative expenditures to be limited to 5% of the initial appropriation plus 5% of all moneys recaptured, and shall include all of the following: a) Personnel costs; b) Service and vending contracts necessary to carry out the program; and, c) Other reasonable direct and indirect administrative costs. The Senate amendments: 1)Place administration of the loan program within CPCFA. 2)Change the name of the program from "California Americans with Disabilities Act Small Business Compliance Financing Act" to the "California Americans with Disabilities small Business Capital Access Loan Program." AB 1230 Page 5 3)Lower the amount of one-time GF appropriation from $50 million to $10 million. 4)Define and limit administrative expenditures. EXISTING LAW: Provides for various financing authorities administered by the state Treasury including: 1)CPCFA: CPCFA is able to facilitate low cost financing to qualified waste and recycling projects. Other projects to control pollution and improve water supply can qualify for tax-exempt financing as allowed by federal tax law. Examples of recent assistance include projects to purchase clean-air vehicles by waste companies, construct and operate anaerobic digesters, recycle used oil, convert animal waste to clean burning fuel, and develop construction and demolition debris recycling programs. 2)The California Health Facilities Financing Authority (CHFFA) was established to be the state's vehicle for providing financial assistance to public and non-profit health care providers through loans, grants and tax-exempt bonds. 3)The California Educational Facilities Authority (CEFA) administers programs that provide tax-exempt, low-cost financing to private, non-profit higher educational facilities. 4)Additionally, CEFA manages the California Student Loan Authority, which has the authority to issue tax-exempt bonds to fund student loans and to purchase federally reinsured student loans from eligible lending institutions. 5)California Transportation Financing Authority (CTFA). CTFA is AB 1230 Page 6 authorized to issue, or approve the issuance of, revenue bonds to finance transportation projects. The CTFA will review proposed projects to ensure they are financially sound, and has the ability to approve tolls as part of the financing plans to repay revenue bonds. FISCAL EFFECT: According to the Senate Appropriations Committee: 1)The bill includes a one-time GF appropriation of $50 million. 2)CPCFA would incur annual administrative costs of $376,000 (special funds). COMMENTS: Need for this bill. Every year, hundreds of lawsuits are filed against small businesses and "mom and pop stores," claiming they are violating disability regulations. In fact, more than 40 percent of the nation's ADA cases are filed in California. Often, these lawsuits are filed by a handful of attorneys, usually in limited jurisdiction, seeking only statutory penalty damages, as opposed to injunctive or remedial relief centered on securing substantial public value for the disabilities community. This type of predatory litigation arguably weakens the rights of the disabilities community by compelling small businesses to spend more money on legal fees and costs than on improving their establishments to improve accessibility. Our solution is to create the California Americans with Disabilities, Small Business Compliance Financing Authority, a self-sustaining program to provide affordable loans to assist small businesses finance the costs of facility alterations and retrofits necessary to comply with the ADA. AB 1230 Page 7 AB 1230 would establish a related authority and continuously appropriate fund to finance the activities of the authority, while transferring $50,000,000 from the state's GF to the California Americans with Disabilities Act Small Business Compliance Financing Authority Fund. This initial investment would be seed money for the loans and repayments will make the program self-sustaining. This bill establishes a system to help small businesses become ADA compliant. It establishes a direct loan program that would allow loans or the purchase of loans in connection with the financing of projects pursuant to an agreement between the Authority and qualifying businesses. Initial costs of setting up this program would be covered via a transfer of $50 million from the GF to the Authority. Analysis Prepared by: Mark Farouk / B. & F. / (916) 319-3081 FN: 0002246