Bill Text: CA SB551 | 2017-2018 | Regular Session | Amended

California Senate Bill 551 (Prior Session Legislation)

NOTE: There are more recent revisions of this legislation. Read Latest Draft

Bill Title: Capital Access Loan Program for Small Businesses.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Engrossed - Dead) 2018-08-16 - August 16 hearing: Held in committee and under submission. [SB551 Detail]

Download: California-2017-SB551-Amended.html

Amended IN Assembly June 27, 2017

Amended IN Assembly June 12, 2017

Amended IN Senate April 17, 2017

Amended IN Senate March 27, 2017

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill

No. 551

Introduced by Senator Hueso

February 16, 2017

An act to amend Section 44559.4 of the Health and Safety Code, relating to the Capital Access Loan Program.

LEGISLATIVE COUNSEL'S DIGEST

SB 551, as amended, Hueso. California Pollution Control Financing Authority: Capital Access Loan Program for Small Businesses.

(1) Existing law establishes the Capital Access Loan Program, which is administered by the California Pollution Control Financing Authority, to assist qualifying small businesses in financing the costs of complying with environmental mandates and the remediation of contamination on their properties. Under the program, the authority may enter into contracts with participating financial institutions and is required to establish a loss reserve account with participating financial institutions. Under existing law, a participating financial institution that experiences a default on a qualified loan enrolled in the Capital Access Loan Program may obtain reimbursement from the authority by submitting a claim for reimbursement for a specified amount of the loss covered by that loan, subject to certain procedures. Existing law requires a financial institution, if it decides to enroll a qualified loan in order to obtain the protection against loss provided by its loss reserve account, to notify the authority in writing, as specified, within a specified number of days after the date on which the loan is made. Existing law, commencing April 1, 2017, requires a participating financial institution, when making a qualified loan that will be enrolled under existing law, to require the qualified business to which the loan is made to pay a fee of not less than 2% of the principal amount of the loan, but not more than 3 ½ % of the principal amount, for deposit in the loss reserve account.

This bill would instead require the qualified business to which the loan is made to pay a fee of not less than 1% of the principal loan, but not more than 3 ½ % of the principal amount, for deposit in the loss reserve account.

(2) Existing law requires the authority, when depositing the fees described above into the loss reserve account, to contribute matching funds, if available, subject to certain requirements. Existing administrative regulations authorize the authority to recapture contributions corresponding to a qualified loan if that loan has matured or if 5 years from the date the loan was enrolled have passed, whichever is earlier. Existing law establishes certain other programs administered by the authority that follow the terms and conditions for the Capital Access Loan Program, along with additional program-specific requirements, including provisions that authorize the recapture from the loss reserve account the authority’s contribution for each enrolled loan upon a prescribed date, to be deposited in a fund established for the purpose of the program and applied to future program and administrative expenditures.

This bill would similarly authorize the authority, with regard to the Capital Access Loan Program, to recapture, ~~on or before~~ after July 1, 2018, and ~~annually thereafter,~~ on or before July 1, 2019, from a loss reserve account established by the authority for a participating financial institution, the authority’s contribution for each enrolled loan, upon the maturation of the loan or after 5 years from the date of enrollment, whichever happens first, to be deposited in the California Capital Access Fund and applied to future small business capital access program and administrative expenditures. The bill would prohibit the authority from recapturing its contribution from a loss reserve account unless the balance remaining in that loss reserve account following recapture is greater than a minimum threshold that is calculated as specified percentages of the outstanding principal balance of certain loans enrolled in that account. The bill would limit the application of the recapture provisions and the use of recaptured funds described above to loans made with contributions from specified sources.

Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NO

The people of the State of California do enact as follows:

SECTION 1.

Section 44559.4 of the Health and Safety Code, as amended by Section 192 of Chapter 86 of the Statutes of 2016, is amended to read:

44559.4.

(a) If a financial institution that is participating in the Capital Access Loan Program established pursuant to this article decides to enroll a qualified loan under the program in order to obtain the protection against loss provided by its loss reserve account, it shall notify the authority in writing on a form prescribed by the authority, within 15 days after the date on which the loan is made, of all of the following:

(1) The disbursement of the loan.

(2) The dollar amount of the loan enrolled.

(3) The interest rate applicable to, and the term of, the loan.

(4) The amount of the agreed upon premium.

(b) The executive director may authorize an additional five days for a financial institution to submit the written notification described in subdivision (a) to the authority on a loan-by-loan basis for a reason limited to conditions beyond the reasonable control of the financial institution.

(c) The financial institution may make a qualified loan to be enrolled under the program to an individual, or to a partnership or trust wholly owned or controlled by an individual, for the purpose of financing property that will be leased to a qualified business that is wholly owned by that individual. In that case, the property shall be treated as meeting the requirements of paragraph (1) of subdivision (i) of Section 44559.1.

(d) When making a qualified loan that will be enrolled under the program, the participating financial institution shall require the qualified business to which the loan is made to pay a fee of not less than 1 percent of the principal amount of the loan, but not more than 3¹/₂ percent of the principal amount. The financial institution shall also pay a fee in an amount equal to the fee paid by the borrower. The financial institution shall deliver the fees collected under this subdivision to the authority for deposit in the loss reserve account for the institution. The financial institution may recover from the borrower the cost of its payments to the loss reserve account through the financing of the loan, upon the agreement of the financial institution and the borrower. The financial institution may cover the cost of borrower payments to the loan loss reserve account.

(e) When depositing fees collected under subdivision (d) to the credit of the loss reserve account for a participating financial institution, the authority shall do the following:

(1) If matching funds are not available under a federal capital access program or other source, the authority shall transfer to the loss reserve account an amount that is not less than the amount of the fees paid by the participating financial institution. However, if the qualified business is located within a severely affected community, the authority shall transfer to the loss reserve account an amount not less than 150 percent of the amount of the fees paid by the participating financial institution.

(2) If matching funds are available under a federal capital access program or other source, the authority shall transfer, on an immediate or deferred basis, to the loss reserve account the amount required by that federal program or other source. However, the total amount deposited into the loss reserve account shall not be less than the amount which would have been deposited in the absence of matching funds.

(f) (1) Subject to the limitation in paragraph (2), the authority may recapture ~~on or before~~ after July 1, 2018, and ~~annually thereafter,~~ on or before July 1, 2019, from a loss reserve account established by the authority for a participating financial institution the contribution of the authority for each enrolled loan, upon the maturation of the loan or after five years from the date of enrollment, whichever happens first, to be deposited in the California Capital Access Fund and applied to future small business capital access program and administrative expenditures. Recapture shall not apply to contributions on charged-off loans for which a claim has been approved. ~~Except as provided in Sections 44559.13 and 44559.14, the~~ The authority shall not recapture its contribution from a loss reserve account pursuant to this subdivision unless the balance remaining in that loss reserve account following recapture is greater than a minimum threshold that is calculated as a percentage of the outstanding principal balance of loans enrolled in that account within the previous 60 months before the annual recapture, as follows:

(A) Fourteen percent for the 2018 calendar year.

(B) Thirteen percent for the 2019 calendar year.

~~(C)Twelve percent for the 2020 calendar year.~~
~~(D)Eleven percent for the 2021 calendar year.~~
~~(E)Ten percent for the 2022 calendar year, and every year thereafter.~~

(2) The recapture provisions and the use of recaptured funds set forth in this subdivision shall apply only to loans for which the contributions by the authority were made with funds received under the State Small Business Credit Initiative, Chapter 54 (commencing with Section 5701) of Title 12 of the United States Code, or with the six million dollars ($6,000,000) appropriated to the authority for this purpose in subdivision (b) of Section 2 of Chapter 731 of the Statutes of 2010.