The Chamber

Impending Regulations
AB 32 Implementation Fee Approval Imminent

The California Air Resources Board (CARB) is scheduled, on June 18, 2010, to approve a regulation that will create new fees on California energy producers, importers and carriers, which will be used to implement California's global warming law, AB 32.

The new regulation allows CARB to tax businesses for “the total amount of funds necessary to recover the costs of implementation of the AB 32 program, based on the number of personnel positions, including salaries and benefits. ” Further, the revenues from the fee will be used to annually repay $27 million in CARB Debt for a minimum of 3 years.

The new fee will be applied to the following industries:

• Natural Gas Utilities, Users and Pipeline Owners and Operators that distribute or use natural gas in California.
• Producers and Importers of California Gasoline and California Diesel Fuels.
• Cement Manufacturers.
• First Deliverers of Electricity.

Facilities that Combust or Consume Coal, Petroleum Coke, Catalyst Coke or Refinery Gas. (An additional fee shall be paid on the emissions from catalyst coke and refinery gas)

The net impact of these fees on businesses and families are increased costs for the production and consumption of energy. While the state will raise billions in revenue to maintain and expand the AB 32 program in an effort to reduce the production greenhouse gas (GHG) emissions, the associated fee will further result in “economic leakage. ”

“Economic leakage” occurs when the cost of doing business in California rises; causing businesses to relocate outside of California - not expand within the state - or make similar downsizing adjustments. As a recent Legislative Analyst's Office (LAO) analysis points out, implementation of the AB 32 program will cause energy prices in California to rise and businesses to face new unprecedented costs. As a result, the cost of doing business in California will increase and economic leakage will occur.

In addition, these increased energy costs ultimately will be paid by California families in higher gas and electricity rates. As the producers, importers, and deliverers of natural gas, gasoline, and electricity are required to pay higher fees to operate and deliver their product and services to their consumers; those costs do not simply go away. The prices and rates will also rise to reflect those increased production and delivery costs.

The proposed AB 32 implementation fee will have a devastating impact on California businesses and families. The California Air Resources Board is scheduled to approve the new regulation on June 18, 2010. To read the proposed regulation, please clink the following link: http://www.arb.ca.gov/.

If you would like to learn more about the proposed regulation and its potential impacts, please contact our office at (916) 651-4033 and ask for our consultant responsible for regulatory issues.
 

Correa Supports Senate Passage of Student Transfer Achievement Reform (STAR) Act

June 4, 2010

SACRAMENTO, CA – Senator Lou Correa (Orange County), supported Senate Floor passage of Senate Bill 1440 (SB 1440), introduced by Senator Alex Padilla (Pacoima). This bill will simplify the transfer process and allow California community colleges and the California State University (CSU) system to serve more students.

“By giving additional students access to higher education we are assisting them in obtaining future employment and are taking steps towards closing our state’s projected workforce shortage,” said Senator Lou Correa.

SB 1440 establishes the Student Transfer Achievement Reform (STAR) Act. SB 1440 requires a community college to grant an associate degree that deems the student eligible for transfer into CSU, and requires CSU to guarantee admission with junior status to California Community College students. SB 1440 also imposes specified restrictions on CSU course requirements for transfer students.

Currently, transfer agreements are from college to college, rather than system-wide. Many students have difficulty navigating this transfer process. These difficulties can result in students taking excess courses, taking longer to earn their degree, paying higher tuition costs, and dropping out due to frustration. SB 1440 streamlines the transfer process and guarantees that a community college student who completes the required units will receive an associate degree and automatic acceptance to a CSU campus at junior standing.

SB 1440 will be considered by the Assembly in the next few weeks.

Senator Lou Correa represents the 34th District which includes the cities of Anaheim, Buena Park, Fullerton, Garden Grove, Santa Ana, Stanton and Westminster.

Blight Fight Funds Should Go To Schools

By Assemblyman Chris Norby

May 6, 2010

What is the best way to fight blight in our cities? Subsidize private development or public education? Spend public money on new shopping centers or new schools?

In his CRA vs. Genest ruling, Sacramento Superior Court Judge Lloyd Connolly decided for the kids. He upheld the legislature's authority over redevelopment agency money, an important step in achieving a balanced budget and returning those funds to their original purpose.

This ruling restores $2.7 billion in education revenues previously lost to redevelopment agencies, including $166.9 million for Orange County schools.

Redevelopment was created 60 years ago to end urban blight in California. It was never intended to be a permanent drain on the budget. Agencies are supposed to sunset after 40 years but are routinely extended indefinitely, and their indebtedness now tops $93 billion.

Redevelopment diverts an ever-growing share of property tax dollars into subsidizing private development and bankrolling big box retailers, auto malls, theaters and stadiums. Last year, redevelopment agencies diverted $5.4 billion in local taxes - 12% of all property taxes. That amounted to $2.7 billion taken from public schools and $646 million from counties. There is no money to backfill these losses.

Redevelopment agencies are typically operated by California's cities, who see it as a way to maximize local revenue. But most of that revenue winds up in the pockets of developers to stimulate private projects. None of it can be used for salaries or operations. Tax exemptions, rebates and land acquisition - often under threat of eminent domain - typically benefit developers and giant retailers.

L.A.'s Hollywood/Highland Mall got a $98 million public subsidy and has lost 50% of its original value. Costa Mesa's Triangle Square stands virtually empty after being built with redevelopment funds on land acquired through eminent domain. Cypress used eminent domain to take church property for a Costco. From San Diego to Sacramento, public funds have been used to bankroll sports franchises and plans are on the books to hand out even more.

The state is littered with deserted shopping centers, half-empty malls, abandoned auto dealers and shuttered movie theaters that were originally financed through public redevelopment subsidies. This fiscal free-for-all distorts land use decisions and pits city-against-city to outbid each other for businesses - at public expense.

Far from being the economic engine that boosters claim, redevelopment has produced few benefits that private investors could have accomplished on their own. The Public Policy Institute's study "Subsidizing Redevelopment in California" compared 114 different redevelopment project areas statewide to similar areas without redevelopment. It concluded that redevelopment agencies were not responsible for any net economic growth and that they were being financed at the expense of local schools and public services.

The only legal reason to create a redevelopment agency or spend redevelopment money is to alleviate blight. Yet agencies have been created in some of our most affluent cities. Indian Wells, with a $200,000 per-household income, has three project areas.

Judge Connelly has a good grasp of state and local funding issues. He has served on the Sacramento City Council and the State Legislature. His ruling keeps these funds within the cities from which they came - to fund local schools. Funding education is a far more effective way to relieve blight than building more shopping centers.

This ruling reaffirms that redevelopment agencies are state agencies, and the legislature is ultimately responsible for their spending. It must be spent for the public good, not for private projects.

"If this decision stands permanently, it could be the beginning of the end for redevelopment" said John Shirey, head of the California Redevelopment Association. Let's hope he's right. After six decades, redevelopment has surely had time to cure blight. Now let those revenues flow back to the public services for which they were intended.

"Too-Big-To-Fail Fannie And Freddie Are Dodd-Frank Model For Reform" by Rep. Ed Royce

Washington, April 30, 2010

The following oped by Rep. Ed Royce appeared in Investors Business Daily:

"I do think I do not want the same kind of focus on safety and soundness that we have in OCC (Office of the Comptroller of the Currency) and OTS (Office of Thrift Supervision). I want to roll the dice a little bit more in this situation towards subsidized housing ... ."

Rep. Barney Frank, Sept. 25, 2003

"I just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time .. . ."

Sen. Chris Dodd, Feb. 24, 2004

This "great success story" turned out to be an epic failure. The account of Fannie Mae and Freddie Mac has been splashed all over this paper since that fateful day in the fall of 2008. The GSEs were at the heart of the housing bubble and are major contributors to our current economic malaise.

Today, it is widely understood that in order to grow and expand their profits, they dramatically grew their portfolios. It is also understood that the GSE investment portfolios grew because they were funded by implicitly government-subsidized debt.

This seal of approval absolved these mortgage giants of any type of market discipline, which would have kept in check wholly private firms.

What is often overlooked is the relationship between these two mortgage giants and the federal government. Without their allies in Congress, Fannie and Freddie would not have been able to continue their reckless ways and engage in arbitrage with leverage ratios of 100-to-1.

As Frank's quote suggests, these members' willingness to gamble on safety and soundness sprang from a desire to have the GSEs comply with their aspirations for homeownership. Getting many more Americans into homes was their goal, and the GSEs were their primary vehicle.

Beyond the duopoly over the prime mortgage market, Fannie and Freddie were heavily invested in the subprime and Alt-A market. Through the affordable housing goals put in place by Congress in 1992, the GSEs became the largest purchasers of junk mortgages (well over $1 trillion worth). This meant that despite the low quality of the loans, millions of Americans now had a mortgage they otherwise could not afford.

Believing the GSEs should be doing even more to promote affordable housing, their allies in Congress created a housing slush fund that would have taken a portion of the companies' profits and sent it to like-minded organizations, thus ensuring that this army of affordable housing activists would continue to grow.

Congress is now on the brink of passing legislation which will fundamentally change our financial sector. A product of the reform effort led by Dodd and Frank is the creation of a too-big-to-fail industry.

Within the House bill, regulators would be able to make loans to, or purchase the debt obligations of, any institution it deems systemically risky, purchase its assets, assume or guarantee its obligations, take liens on assets, or sell or transfer the company's assets.

Beyond the clear competitive advantage these firms will gain compared with their smaller counterparts in terms of lower cost of capital, the Dodd-Frank approach will ensure that an inextricable link is created between big business and big government.

Given human nature, favors will be offered in exchange for leniency toward this new class of too-big-to-fail institutions. Instead of focusing on providing the best possible service to their customers, these banks will focus their efforts on appeasing the federal government and their allies in Congress.

Whether it is striving toward another altruistic goal while defying the principles of sound banking, or funneling cash into friendly organizations, the closer big government gets to big business, the more likely these favors will become the rule instead of the exception. Political pull replaces market forces and vanquishes market discipline.

The great failure of Fannie and Freddie should have taught us that big business paired with big government produces big problems. Allowing Washington to arbitrarily deem institutions systemically risky will bifurcate our financial system between those with the implied government backstop and everyone else.

Instead of institutionalizing this Too Big to Fail model, the federal government should abolish it. Instead of authorizing regulators to bail out creditors and counterparties, it should be known that no shareholder, creditor or counterparty will ever again be shielded from losses of a failed firm. Market discipline, a cornerstone of any well-functioning market, must be strengthened, not weakened.

Over the last couple of weeks, Frank has issued a series of press releases attempting to place the blame for the failure of Fannie and Freddie on Republicans. In one, he even alleges that it was the "Republican Congress that promoted homeownership at all costs." The irony of this statement is irresistible.

When the House GSE reform bill was on the floor in 2005, I offered an amendment authorizing their regulator to rein in the GSEs based on the systemic threat they posed — obviously a necessary step given recent events.

Through the work of an army of lobbyists employed by the GSEs and activist organizations like Acorn, my amendment was portrayed as an attack on affordable housing. Unfortunately, this argument won out, and Frank joined with the majority of the House in opposing my amendment and several others that would have reined in the GSEs' excessive risk-taking.

Dodd and his fellow Senate Democrats stonewalled the companion GSE reform legislation from getting to the floor, which ultimately killed our reform efforts.

It is abundantly clear that Frank and Dodd were central in protecting the two original Too Big to Fail institutions. Instead of following their lead and creating an industry of these firms, Congress should take a step back and reconsider this approach. Once that link between big business and big government is established, it will never be broken.

• Royce, a Republican, represents California's 40th Congressional District (northern Orange County) and is a senior member of the House Financial Services Committee.

Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers

IR-2010-33, March 18, 2010

WASHINGTON — Two new tax benefits are now available to employers hiring workers who were previously unemployed or only working part time. These provisions are part of the Hiring Incentives to Restore Employment (HIRE) Act enacted into law today.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls. New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the employer get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period. The IRS is currently developing a form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010. Revised forms and further details on these two new tax provisions will be posted on IRS.gov during the next few weeks.

 
CA STATE ASSEMBLYMAN VAN TRAN

Assemblyman Van Tran Applauds DGS Decision To Reject OC Fairgrounds Bids

 (SACRAMENTO) - Assemblyman Van Tran praised the Department of General Services on their decision to reject all of the bids for the Orange County Fairgrounds.

"I want to applaud the Department of General Services on making a wise decision and rejecting all bids submitted to purchase the Orange County Fairgrounds," said Tran.  "Although the fairgrounds can certainly be used more efficiently, this sale was fraught with problems and not in the best interests of our community."

In January, Assemblyman Tran joined with 10 other legislators in submitting a letter calling for an end to the sale of the fairgrounds.  The letter was co-signed by Assemblymembers Solorio, Harkey, Jones, Miller, Nava, Silva along with Senators Correa, Huff, and Wyland.

Assemblyman Tran took legislative action by introducing AB 1790 with Assemblyman Solario and 6 other co-authors to stop the sale of the fairgrounds, following the stalled AB 1590 by Assemblyman Solario and Tran.  AB 1790 is pending hearing in committee.

The sale was initially intended to benefit the state in financial gain, but at the same time, it was clear that the property would be offered for sale to local entities, allowing the property to continue to operate as a fair in a more efficient and profitable manner. 

As the RFP and bidding process was completed in January, the top bid for the OC Fairgrounds was $56.5 million.  Previous estimates value this property at $96 to $180 million.  

Assemblyman Van Tran proudly serves the people of the 68th Assembly District, which includes portions of Anaheim, Costa Mesa, Fountain Valley, Garden Grove, Newport Beach, Santa Ana, Stanton, and Westminster.


ED ROYCE- CONGRESSMAN CALIFORNIA’S 40TH DISTRICT

Unfortunately, despite bipartisan opposition, the Democrat leadership passed a bill that attempts to solve our healthcare problems by putting Washington at the center of our healthcare system. The bill is now back before the Senate, which must reconsider the bill due to the changes the House would like to adopt.

This massive new entitlement program will cost future generations dearly. Over the next decade, operating this program will cost $2.4 trillion. Much of this revenue will be generated through tax hikes and fees. However, a large portion of the funding is unaccounted for. To make the bill appear "budget neutral" the proponents leave out large spending provisions that will be included later. Further, they double count hundreds of billions of dollars reserved for other programs, including $52 billion out of Social Security, $72 billion out of long-term care insurance program and more than $500 billion out of Medicare.

Instead of using disingenuous accounting tactics, Congress should have focused on alternatives that actually lower costs and avoid putting our country on a path toward bankruptcy. I have been arguing for three simple, low cost solutions. Any reform effort must include tort reform to rein in junk lawsuits that make the cost of healthcare skyrocket. I want to allow small business and individuals to purchase healthcare across state lines and access one broad national market. We should also allow small businesses to band together to purchase health care for their employees at a more affordable price, just as large corporations and unions do.

Instead of including these provisions, the bill that passed on Sunday relies solely on more government, more regulation, more spending and more borrowing. This is not the right approach. For your interest, I have included a link to a recent op-ed I wrote on the topic for the Orange County Register:

http://royce.house.gov/News/DocumentSingle.aspx?DocumentID=177136

 

CALIFORNIA STATE SENATOR LOU CORREA

Correa Calls for Senate to Send Governor Homeowner Tax Protection Bill He Can Sign

Thursday, March 11, 2010

From File: State Senator Lou Correa working in his Capitol office

SACRAMENTO, CA – State Senator Lou Correa (Orange County) is pressing his fellow State Senators to protect thousands of California families by sending the Governor vital legislation that would prevent needless harm from falsely taxing phantom gains of former homeowners.

According to Senator Correa, “The Governor has made it abundantly clear that the onerous anti-business provisions included in Senate Bill X8 32 would compel him to veto the entire measure. Accordingly, the measure’s well-intentioned taxpayer protections must be regarded as a purely illusory action.”

The Orange County Senator continued by stating that a reform bill he is jointly authoring (SB 25),  is in place and ready to be adopted, if only other members would put aside differences and act quickly to put the reforms in place before the April 15 tax filing deadline.  “We have passed similar legislation before and we can do it again today,” said Senator Correa. In 2008, Senators Correa and Michael Machado authored Senate Bill 1055 (SB 1055) which established California's conformity to the federal cancellation of debt (COD) income exclusion. This provided state income tax relief to distressed California homeowners who had to terminate mortgage loans for a principal residence due to a short sale or a loan restructure. The tax relief provision of this law expired in January 2009.

Senators Correa and Ron Calderon are jointly authoring Senate Bill 25 in the eighth extraordinary session (SB8X 25) which would extend relief to California homeowners who continue to be plagued by the injustices of tax on a phantom gains, a taxable event generated by foreclosure.  

According to Realtytrac®, a real estate research firm, 632,573 properties in our state received a foreclosure filing in 2009, creating a severe economic impact on California families. In Orange County alone, 38,576 families faced foreclosure in the same year.

The Correa and Calderon measure to extend the provisions of the previous measure, from January 1, 2009 until January 1, 2013, and would also increase the qualifying amount of excluded income from $250,000 to $500,000 (from $125,000 to 250,000 in the case of a married individual filing a separate return).

“You have a family that just lost their home, then the state tells you that you owe taxes on the amount you lost, which makes no economic sense," said Senator Correa. “The housing and mortgage crisis is not over yet. We need to press harder to make sure that homeowners are not taxed on income that never existed. Senator Calderon and I are working together with our fellow lawmakers to have this bill approved by both houses and by the Governor.”

Senator Lou Correa represents the 34th District, which includes the cities of Anaheim, Buena Park, Fullerton, Garden Grove, Santa Ana, Stanton and Westminster. ####

CONGRESSMAN GARY MILLER- CALIFORNIA’S 42nd ASSEMBLY DISTRICT

1) Letter to House Administration Regarding Reclaim American Jobs Caucus

BACKGROUND:  The Reclaim American Jobs Caucus is dedicated to the promotion of policies that will help citizens and legal immigrants reclaim the nearly eight million jobs that illegal immigrants have stolen.

SUMMARY:  The letter notifies the House Committee on Administration on staff changes to the Reclaim American Jobs Caucus roster.

Cosigners:  Led by Rep. Smith (R-TX), Miller (R-CA), and Myrick (R-NC)

Date Sent:  March 10, 2010

2). http://www.rightsidenews.com/201003068944/border-and-sovereignty/fair-endorses-commonsense-immigration-legislation.html