Today's Law As Amended

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SB-551 Capital Access Loan Program for Small Businesses.(2017-2018)



SECTION 1.
 The Legislature finds and declares as follows:
(a) In October 2010, Congress passed and the President signed the Small Business Jobs Act. Among other things, the act created the State Small Business Credit Initiative (SSBCI), which allowed expenditures up to $1.5 billion to strengthen state programs that support financing of small businesses.
(b) In April 2011, California entered into an allocation agreement with the United States Treasury for approximately one hundred and sixty-eight million dollars ($168,000,000) pursuant to the State Small Business Credit Initiative (Chapter 54 (commencing with Section 5701) of Title 12 of the United States Code). The federal funds were divided evenly between the administering entities for two state credit enhancement programs with eighty-four million dollars ($84,000,000) being allocated to the California Pollution Control Financing Authority (CPCFA) to establish a federally funded component to the California Capital Access Program (CalCAP) loan loss reserve program and the other half of the state allocation being allocated to the Business, Consumer Services, and Housing Agency to support a federally funded component of the Small Business Loan Guarantee Program.
(c) On April 25, 2017, the Treasurer’s office alerted the public and interested stakeholders that the federal moneys allocated to California to support the California Capital Access Loan Program (CalCAP) for Small Business were near exhaustion. In addition, the notice stated that when the federal moneys are exhausted, the authority will continue to review and approve pending loan applications. For those which are approved, CPCFA will make contributions from the balance remaining from the 2010 General Fund appropriation under the Assembly Bill 1632 of the 2009–10 Regular Session for deposit into each lender’s CalCAP State Loan Loss Reserve Account.
(d) Finally, the notice stated that the authority staff “projects that the balance of the General Fund appropriation will support all current loan enrollment applications in the CPCFA’s possession. However, we also anticipate that these State program funds will be exhausted in the Summer 2017, at which point the CPCFA will no longer be able to enroll loans in the CalCAP for Small Business Program.”
(e) Although the authority has adopted regulations to recapture some funds it has previously contributed to CalCAP for use in the Small Business CalCAP, there remains a significant risk that the authority may elect to permanently modify the California Capital Access Loan Program for Small Businesses to focus more intently on lending programs for pollution control financing projects, a change in direction that would be more consistent with its namesake and its enabling statutes.
(f) Without direction from the Legislature, a distinct possibility exists that federal funds that were allocated for the purpose of assisting small businesses might be redirected to support programs separate and apart from small business assistance, which runs counter to the intent set forth in the federal Small Business Jobs Act of 2010.
(g) In 2013, years after funding was distributed in California from the State Small Business Credit Initiative, the Legislature enacted Assembly Bill 1247 (Medina and Bocanegra) of the 2013–14 Regular Session, which created the Small Business Finance Center (SBFC) at the California Infrastructure and Economic Development Bank. The SBFC helps businesses create and retain jobs, and encourages investment in low- to moderate-income communities. The finance center operates a Small Business Loan Guarantee Program, and provides technical assistance to small businesses and microbusinesses. In 2017, the SBFC created the Jump Start Loan Program which provides direct loans from $500 to $10,000 to small businesses in low-wealth communities.
(h) The SBFC and the California Infrastructure and Economic Development Bank are organized within the Governor’s Office of Business and Economic Development (GO-Biz), which was created in 2012 to serve as California’s single point of contact for economic development and job creation efforts.
(i) (1) The Legislature declares that it is appropriate, as program funding expires, or that the funds have been fully expended or allocated, that the portfolio of the Capital Access Loan Program for Small Businesses and the portfolio of the Collateral Support program be transferred from the CPCFA to the California Small Business Finance Center within the California Infrastructure and Economic Development Bank.
(2) The Legislature declares that all federal and state funds, the source of which was the federal Small Business Jobs Act or the 2010 General Fund appropriation under Assembly Bill 1632 of the 2009–10 Regular Session (Chapter 731 of the Statutes of 2010) including funds that have been returned to or recaptured by the CPCFA and currently under its control, be transferred to the California Small Business Expansion Fund. and be under the administrative control of the California Small Business Finance Center at the California Infrastructure and Economic Development Bank.
(3) The Legislature declares that while originally CalCAP included only one program, over the years other programs were added to CalCAP, including the California Air Resources Board On-Road Heavy-Duty Vehicle Air Quality Loan Program and Electric Vehicle Charging Station Financing Program separately funded by the State Air Resources Board; the California Americans with Disabilities Act Small Business Capitol Access Loan Program established in Section 44559.13 of the Health and Safety Code and funded with ten million dollars ($10,000,000) from the General Fund; and the California Seismic Safety Capitol Access Loan Program established in Section 44559.14 of the Health and Safety Code and funded with ten million dollars ($10,000,000) from the General Fund. It is the intent the Legislature that nothing in this act impede the ability of the CPCFA to operate those and other programs.

SEC. 2.

 Section 63089.1 of the Government Code is amended to read:

63089.1.
 (a) The program manager acting under the guidance direction  of the executive director shall do all of the following:
(1) Administer this chapter.
(2) (A)  Enter into a contract between the bank and each corporation for services to be provided by the corporations for one or more programs or financial products under this chapter and Chapter 1 (commencing with Section 14000) of Part 5 of Division 3 of Title 1 of the Corporations Code.
(B) Enter into a contract between the bank and any qualified financial institution or financial company participating as lender in the loan loss reserve program under this chapter.
(3) In accordance with available resources, allow the use of branch offices for the purposes of making these programs under this chapter accessible to all areas of the state.
(4) Require each corporation to submit an annual written plan of operation.
(5) Authorize the distribution, transfer, leverage, and withholding of moneys in the expansion fund and trust funds.
(6) Authorize the investment of expansion and trust fund moneys.
(7) Oversee the operations of one or more programs authorized pursuant to this chapter and by Section 8684.2.
(8) Act as liaison between corporations, other state and federal agencies, lenders, and the Legislature.
(9) Act as secretary to the California Small Business Board, and attend meetings of the California Small Business Board and the bank board.
(b) The program manager may attend and participate at corporation meetings. The program manager or his or her designee shall be an ex officio, nonvoting representative on the board of directors and loan committees of each corporation. The program manager shall confer with the board of directors of each corporation as appropriate and necessary to carry out his or her duties, but in no case shall the program manager confer less than once each fiscal year.
(c) In accordance with available resources, assist corporations in applying for public and private funding opportunities, and in obtaining program support from the business community.

SEC. 3.

 Section 63089.4 of the Government Code is amended to read:

63089.4.
 The bank is authorized to:
(a) Approve new corporations recommended by the program manager.
(b) Enter into contracts with corporations for program management and other financial product-related services.
(c) Enter into contracts with any financial institution or financial company for the purpose of participating as a lender in a loss reserve program or another program authorized under this chapter.
(c) (d)  Select a financial institution or financial company to act as trustee of the trust fund as specified in this chapter.
(d) (e)  Invest expansion fund and trust fund moneys as specified in this chapter.
(e) (f)  Affirm, modify, or rescind the determinations of the program manager and the executive director as specified in this chapter.
(f) (g)  Adopt directives and requirements as specified in this chapter.
(g) (h)  Authorize new financial product programs and activities pursuant to this chapter.

SEC. 4.

 Section 63089.5 of the Government Code is amended to read:

63089.5.
 (a) There is hereby continued in existence in the State Treasury the California Small Business Expansion Fund. All or a portion of the funds in the expansion fund may be paid out, with the approval of the Department of Finance, to a financial institution or financial company that will establish a trust fund and act as trustee of the funds.
(b) The expansion fund and the trust fund shall be used for the following purposes:
(1) To pay defaulted loan guarantee or surety bond losses, loan loss reserves,  or other financial product defaults or losses.
(2) To fund direct loans  loans, loan loss reserves,  and other debt instruments.
(3) To pay administrative costs of corporations.
(4) To pay state support and administrative costs.
(5) To pay those costs necessary to protect a real property interest in a financial product default.
(c) The expansion fund and trust fund are created solely for the purpose of receiving state, federal, or local government moneys, and other public or private moneys to make loans, guarantees, and other financial products that the California Small Business Finance Center or a financial development corporation is authorized to provide. The program manager shall provide written notice to the Joint Legislative Budget Committee and to the Chief Clerk of the Assembly and the Secretary of the Senate who shall provide a copy of the notice to the relevant policy committees within 10 days of any nonstate funds being deposited in the expansion fund. The notice shall include the source, purpose, timeliness, and other relevant information as determined by the bank board.
(d) (1) One or more accounts in the expansion fund and the trust fund may be created by the program manager for corporations participating in one or more programs authorized under this chapter and Section 8684.2. Each account is a legally separate account, and shall not be used to satisfy loan guarantees or other financial product obligations of another corporation except when the expansion fund or trust fund is shared by multiple corporations.
(2) The program manager may create one or more holding accounts in the expansion fund or the trust fund, or in both, to accommodate the temporary or permanent transfers of funds pursuant to Section 63089.3.
(e) The amount of guarantee liability outstanding at any one time shall not exceed 10 times the amount of funds on deposit in the expansion fund plus any receivables due from funds loaned from the expansion fund to another fund in state government as directed by the Department of Finance pursuant to a statute enacted by the Legislature, including each of the trust fund accounts within the trust fund.

SEC. 5.

 Section 63089.642 is added to the Government Code, immediately following Section 63089.62, to read:

63089.642.
 (a) (1) There is hereby created in the expansion fund the Loan Loss Reserve Account under the administrative and management control of the California Small Business Finance Center within the bank. Notwithstanding Section 13340 of the Government Code, all moneys in the account are hereby continuously appropriated, without regard to fiscal years, for purposes of this chapter. The Loan Loss Reserve Account shall be established and maintained by the bank for the benefit of any qualified financial company or financial institution participating as a lender in the loan loss reserve program or another program authorized pursuant to this chapter.
(2) The program manager, under the direction of the executive director, may elect to hold all or a portion of the Loan Loss Reserve Account in a financial institution or financial company that establishes a trust fund and acts as trustee for the funds. The financial institution or financial company so designated shall be approved by the Treasurer for the receipt of state funds. Interest earned on a trust fund in financial institutions and financial companies may be utilized by the financial institution, financial company, and the bank pursuant to the purposes of this chapter and subject to the directives and requirements adopted by the bank board.
(b) (1) All federal and state funds, the source of which was the federal Small Business Jobs Act or the 2010 General Fund appropriation under Assembly Bill 1632 of the 2009–10 Regular Session, Chapter 731 of the Statutes of 2010, including funds that have been returned to or recaptured by the CPCFA and currently under its control, in the Pollution Control Financing Authority Fund shall be transferred to the Loan Loss Reserve Account and be under the administrative control of the California Small Business Finance Center.
(2) To initiate the transfer of the funds, the bank board shall adopt a resolution that provides for the terms and conditions of the transfer. The bank shall confer with the California Pollution Control Financing Authority on the terms and conditions of the resolution. The California Pollution Control Financing Authority shall provide requested information in a timely manner. Upon adoption of the resolution by the bank board, the California Pollution Control Financing Authority shall transfer the moneys.
(c) The final transfer of the funds shall occur no later than January 1, 2020.

SEC. 6.

 Section 63089.644 is added to the Government Code, immediately following Section 63089.642, to read:

63089.644.
 (a) The program manager, under the direction of the executive director, shall create one or more loan loss reserve accounts in the trust fund for a financial institution or financial company participating as a lender in the loan loss reserve program.
(b) The loan loss reserve account established for the purposes of this section shall be used for the purposes of the following:
(1) Depositing all fees paid by the financial company or financial institution participating as a lender in the loan loss reserve fund, the small business, and any other moneys provided by the bank or other source.
(2) Depositing contributions made by the state and, if applicable, the federal government or other sources.
(3) Covering losses on enrolled loans under the loan loss reserve program, sustained by a financial company or financial institution by disbursing funds accumulated in the loss reserve account in accordance with directives and requirements.
(c) (1) All moneys in a loan loss reserve account established pursuant to this section are the exclusive property of, and solely controlled by, the bank. The bank program manager, under the direction of the executive director, shall manage all moneys in a loan loss reserve account established pursuant to this section. Interest or income earned on money credited to the loan loss reserve account shall be deemed to be part of the loan loss reserve account. The program manager, under the direction of the executive director, may withdraw from the loan loss reserve account all, or a portion, of the interest or other income that has been credited to the account.
(2) Any withdrawal made pursuant to this subdivision may be made before paying any claim and shall be used for the sole purpose of offsetting costs associated with carrying out the program, including administrative costs and loss reserve account contributions.
(d) For purposes of this section, the program manager, under the direction of the executive director, may create one or more holding accounts in the loan loss reserve account or trust account to accommodate the temporary or permanent transfer of funds pursuant to directives and requirements adopted by the bank board relating to the suspension and termination of a financial institution’s or financial company’s participation as a lender in the loan loss reserve program or offering of a financial product authorized under this chapter.

SEC. 7.

 Section 63089.98 of the Government Code is amended to read:

63089.98.
 (a) Annually, not later than January 1 of each year commencing January 1, 2014, and notwithstanding Section 10231.5, the program manager shall prepare and submit to the Governor and the Legislature, pursuant to Section 9795, a report for the preceding fiscal year ending June 30, containing the expansion fund and trust fund financial product activity of each corporation,  corporation administering any direct loans, guarantee, or other financial product and each financial institution and financial company participating as a lender in the loan loss reserve program or another financial product,  including all of the following:
(1) Direct loans, guarantees, loss reserves,  and other financial products awarded and outstanding balances.
(2) Default and loss statistics.
(3) Employment data.
(4) Ethnicity and gender data of participating contractors and other entities, and experience of surety insurer participants in the bond guarantee program.
(5) Geographic distribution by city and county of the direct loans, guarantees, and other financial products awarded and outstanding at the close of the fiscal year.
(6) Significant events.
(b) Semi-annually, the program manager shall prepare and submit to the Governor and the Legislature, pursuant to Section 9795, a progress report for the preceding six months, commencing with the first six months after the transfer of the loan loss reserve program from the California Pollution Control Financing Authority to the California Small Business Finance Center at the bank. The progress report shall be submitted by the program manager within 90 days of each six month anniversary. No progress report shall be required after the first year following the creation of the loan loss reserve program under the California Small Business Finance Center, and the program manager shall include the loan loss reserve program in the annual report pursuant to subdivision (a).
(b) (c)  The program manager shall post the report on the bank’s Internet Web site.

SEC. 8.

 Article 12 (commencing with Section 63090) is added to Chapter 6 of Division 1 of Title 6.7 of the Government Code, to read:

Article  12. Loan Loss Reserves
63090.
 (a) The California Loan Loss Reserve Program for Small Business, a loan loss reserve and credit enhancement program, is hereby established under the administrative and management control of the California Small Business Finance Center.
(b) (1) The loss reserve loan portfolio of the California Capital Access Loan Program, administered by the California Pollution Control Financing Authority pursuant to Article 8 (commencing with Section 44559) of Chapter 1 of Division 27 of the Health and Safety Code comprised of enrolled loans for which the state contributed funding pursuant to the 2010 General Fund appropriation under the Assembly Bill 1632 of the 2009–10 Regular Session, Chapter 731 of the Statutes of 2010, or federal funds awarded to the state pursuant to the State Small Business Credit Initiative (Chapter 54 (commencing with Section 5701) of Title 12 of the United States Code) shall be transferred to the California Small Business Finance Center in the Bank for the California Loan Loss Reserve Program for Small Business.
(2) To initiate the transfer of the portfolio, the bank board shall adopt a resolution which provides for the terms and conditions of the transfer. The bank shall confer with the California Pollution Control Financing Authority on the terms and conditions of the resolution. The California Pollution Control Financing Authority shall provide requested information in a timely manner. Upon the adoption of the resolution, the California Pollution Control Financing Authority shall transfer the portfolio.
(3) The transfer of the portfolio shall occur no later than January 1, 2020.
(c) The program may contract with any qualified financial company or financial institution for the purpose of allowing the financial company or institution to participate as a lender in the California Loan Loss Reserve Program for Small Business.
(d) The priority for loans enrolled in this program shall be for loans and microloans that benefit low-income areas of the state, based on census tracts, and underserved business ownership groups, including minority-owned businesses and women-owned businesses in the state.
(e) The bank shall develop directives and requirements to implement the California Loan Loss Reserve Program for Small Business established by this article, including, but not limited to:
(1) The initiation of new and extension of existing contracts to participate in the program.
(2) The filing of claims for reimbursement for losses incurred as a result of qualified loan defaults.
(3) The terms and conditions for a financial company or financial institution to assign, transfer, pledge or securitize all or a portion of any enrolled loan or loss reserve account, pursuant to directives and requirements developed by the bank.
(4) The terms and conditions by which the program manger may temporarily suspend and terminate a contract with a financial institution or financial company participating in the loan loss reserve program for cause, including provisions for appeals.
(f) The liability of the state and the bank to the financial institution and financial company under contract is limited to the amount of money credited to the loan loss reserve account of the financial institution and financial company under contract.
63091.
 Regulations adopted by the California Pollution Control Financing Authority, pursuant to Article 8 (commencing with Section 44559) of Chapter 1 of Division 27 of the Health and Safety Code relating to the management and control of loan loss reserve funds and claims processing on all loans granted to a qualified small business, as described in Section 44559.16 of the Health and Safety Code and the regulations dated May 15, 2012, approving the development and implementation of a collateral support program, and all subsequent resolutions and regulations adopted by the authority updating or modifying the program shall remain in effect until the bank board adopts directives and requirements relating to the specific policy or activity, but in no case beyond one year following the transfer of the portfolio and funds, pursuant to Section 63090 and 69095. Until the bank adopts its regulations, where an action is required subsequent to October 1, 2018, references to the California Pollution Control Financing Authority are deemed to reference the bank.
63092.
 (a) Upon written notice to the program manager, a financial company or financial institution participating as a lender may withdraw from the program. The notice shall state one of the following, as may be applicable:
(1) All loans secured by its loss reserve account have been repaid, and there are no pending claims for reimbursement for losses incurred as a result of loan defaults.
(2) The financial company or financial institution participating as a lender waives all rights to submit claims for reimbursement for losses incurred as a result of charge-offs or loan defaults with respect to all loans that are enrolled in its loss reserve account that have not been fully repaid as of the date the notice of withdrawal is filed with the bank.
(b) The program manager shall establish the process in accordance with directives and requirements for the distribution of contributions back to a financial company or financial institution that has withdrawn from the loan loss reserve program in directives and regulations.

SEC. 9.

 Article 13 (commencing with Section 69095) is added to Chapter 6 of Division 1 of Title 6.7 of the Government Code, to read:

Article  13. Miscellaneous Credit Enhancements
69095.
 (a) The collateral support loan portfolio of the California Capital Access Loan Program, administered by the California Pollution Control Financing Authority pursuant to Article 8 (commencing with Section 44559) of Chapter 1 of Division 27 of the Health and Safety Code, comprised of enrolled loans for which the state contributed funding pursuant to the 2010 General Fund appropriation under Assembly Bill 1632 of the 2009–10 Regular Session (Chapter 731 of the Statutes of 2010) or federal funds awarded to the state pursuant to the State Small Business Credit Initiative (Chapter 54 (commencing with Section 5701) of Title 12 of the United States Code) is transferred to the California Small Business Finance Center.
(b) To initiate the transfer of the portfolio, the bank board shall adopt a resolution which provides for the terms and conditions of the transfer. The bank may confer with the California Pollution Control Financing Authority on the terms and conditions of the resolution. The California Pollution Control Financing Authority shall provide requested information in a timely manner. Upon the adoption of the resolution, the California Pollution Control Financing Authority shall transfer the portfolio.
(c) The transfer of the collateral support loan portfolio shall occur no later than January 1, 2020.