Existing law requires each local agency, as defined, to provide specified information to the public before approving an economic development subsidy within its jurisdiction, and to, among other things, hold hearings and report on those subsidies, as provided. Existing law defines economic development subsidy for these purposes to mean any expenditure of public funds or loss of revenue to a local agency in the amount of $100,000 or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, as provided.

This bill, on and after January 1, 2020, would similarly require each local agency to provide specified information to the public before approving an economic development subsidy for a warehouse distribution center, as defined, and to, among things, hold hearings and report on those subsidies, as provided. The bill would require local agencies to submit a report to the Governors Office of Business and Economic Development providing specified information and would require the office to make those reports available to the public through its internet website. The bill would require a warehouse distribution center to provide a local agency any information necessary to comply with these provisions.

The bill would prohibit a local agency from signing a nondisclosure agreement regarding a warehouse distribution center as part of negotiations or in the contract for any economic development subsidy.

The bill would declare that its provisions address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities.

The California Constitution requires local agencies, for the purpose of ensuring public access to the meetings of public bodies and the writings of public officials and agencies, to comply with a statutory enactment that amends or enacts laws relating to public records or open meetings and contains findings demonstrating that the enactment furthers the constitutional requirements relating to this purpose.

This bill would make legislative findings to that effect.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 485

Author:(Medina)

As Amended Ver:August 19, 2019

Majority vote

SUMMARY:

Requires local agencies to take specified actions to inform the public before approving or granting economic development subsidies of $100,000 or more for warehouse distribution centers, and during the term of such subsidies.

The Senate amendments:

1. Replace a requirement to provide information to the public regarding job classifications and wage rates with a requirement to provide information about wage scales.
2. Replace a requirement to provide information to the public regarding independent contractors with a requirement to provide information about workers employed through temporary agencies.
3. Replace a requirement to provide information to the public regarding the estimated value of benefit packages for each job classification with a requirement to provide information about whether any benefit package is offered.
4. Eliminate a requirement to provide information to the public before an economic development subsidy is approved regarding the estimated number of jobs for disadvantaged workers created by the subsidy.
5. Modify the requirement to provide information to the public regarding the replacement of workers with automated systems.
6. Eliminate requirements to provide information to the public regarding: the amount spent on training, apprenticeship, or other skills development programs for employees; and, the number of employment arbitration agreements signed by employees and independent contractors.
7. Remove enterprise zone or empowerment zone incentives from the definition of "economic development subsidy."
8. Make a number of technical and clarifying changes.

COMMENTS:

A number of recent news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy. Among the publications and research institutes that have reported recently on the issue of local government subsidies, both generally and specifically for Amazon, are the Economic Policy Institute, the Institute for Local Self-Reliance, The Atlantic, the New Republic, the Fresno Bee, the New York Times, Good Jobs First, and others.

According to the Author:

"AB 485 seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation. As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don't become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability.

"In the Economic Policy Institute's report entitled 'Unfulfilled Promises,' EPI economist Ben Zipperer and economic analysts Janelle Jones concluded that on average, 'Amazon's fulfillment centers are ineffective at providing net job growth.' Cities are constantly in a race to the bottom as highlighted by the current bidding wars for warehouse distribution centers. If the jobs and benefits promised do not materialize, the quality of living drops, and the traffic and air quality worsens, what did the city gain? Was the economic subsidy worth the tax revenue loss? Is any job a good job or can cities do better in elevating their attractiveness without sacrificing needed tax revenue?"

Arguments in Support:

The California Labor Federation, sponsor of this bill, writes, "When cities engage in a race to the bottom giving away taxpayer funds in exchange for low-wage, temporary jobs that do nothing to grow the economy or reduce inequality, the state of California loses, as well. AB 485 builds on current law that requires disclosure by companies – specifically warehouse distribution centers – that receive local public subsidies of the amount of the subsidy along with the estimated tax impact on the local government and jobs created. This bill requires companies seeking local subsidies to publicly disclose job quality, plans for automation, and any accountability mechanisms should they fail to live up to their promises.

"The bill then requires the company to file an annual report to its approving city or county that reports on its promise of quality job creation and retention for the life of the subsidy, presented at a public meeting so community members can track progress or lack thereof and recommend corrective measures. It also bans non-disclosure provisions in contracts to allow the public to know the details of a deal before they agree to subsidies. This bill is narrow and targeted to give local government the tools to make smart economic development choices that benefit their residents and to hold warehouse distribution centers accountable for the public dollars they receive."

Arguments in Opposition:

The League of California Cities, in opposition, states, "All other proposed local economic subsidies are required to comply with the transparency provisions established by AB 562 (Williams), Chapter 740, Statutes of 2014. That law, Section 53083 of the Government Code, requires significant upfront transparency prior to any economic subsidy over $100k being provided; permanent posting on the local agency's website; and a periodic five-year report during its term. For a warehouse, however, this bill requires much more detailed information; annual reports and public hearings, and copies sent to the Governor's Office of Business and Economic Development.

"While the bill states that there is a 'statewide concern' it fails to articulate why there is a need for such extensive analysis and reporting specifically on a warehouse as opposed to a myriad of other potential economic development opportunities…Last year, Governor Brown's veto message on a similar bill stated that it '…goes too far by adding reporting rules that will be overly burdensome to a single industry. It may actually hinder efforts to improve business opportunities in local communities, which is an outcome no one desires.' The policy justification for such additional complexity associated with a warehouse remains unclear."

FISCAL COMMENTS:

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM LOCAL GOVERNMENT: 6-2-0

YES: Aguiar-Curry, Bloom, Boerner Horvath, Ramos, Luz Rivas, Robert Rivas

NO: Lackey, Voepel

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Jones-Sawyer, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep, Fong

ASSEMBLY FLOOR: 58-17-5

YES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Muratsuchi, Nazarian, O'Donnell, Obernolte, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NO: Bigelow, Brough, Chen, Choi, Cunningham, Dahle, Diep, Flora, Fong, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Voepel, Waldron

ABS, ABST OR NV: Arambula, Boerner Horvath, Gallagher, Mullin, Quirk

SENATE FLOOR: 29-11-0

YES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NO: Bates, Borgeas, Chang, Dahle, Grove, Jones, Moorlach, Morrell, Nielsen, Stone, Wilk

UPDATED:

VERSION: August 19, 2019

CONSULTANT: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0001565

 THIRD READING  

Bill No: AB 485

Author: Medina (D)

Amended: 8/19/19 in Senate

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 6/26/19

AYES: McGuire, Beall, Hertzberg, Hurtado, Nielsen, Wiener

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 58-17, 5/2/19 - See last page for vote

SUBJECT: Local government: economic development subsidies

SOURCE: California Labor Federation, AFL-CIO

DIGEST:

This bill requires local agencies to publicly report specified information when providing economic development subsidies of $100,000 or more for warehouse distribution centers.

Senate Floor Amendments of 8/19/19 delete a requirement to report on the amount of space being requested for future planned automation.

ANALYSIS:

Existing law:

1. Requires a local agency, before approving any subsidy of $100,000 or more, to provide to the public in written form and on the agency's Web site, if applicable, all of the following information:
   1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy, if applicable;
   2. The start and end dates and schedule, if applicable, for the subsidy;
   3. A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or revenue lost to, the local agency as a result of the subsidy;
   4. A statement of the public purposes for the subsidy;
   5. Projected tax revenue to the local agency as a result of the subsidy; and
   6. Estimated number of jobs created by the subsidy, broken down by full-time, part-time, and temporary positions.
2. Requires a local agency, before it grants a subsidy, to provide public notice and a hearing regarding the subsidy, as specified.
3. Requires the information specified in 1) above, to remain available to the public under existing state and federal law and be posted on the local agency's Web site, if applicable, for the entire term of the subsidy.
4. Requires a local agency, within the term of the subsidy but not later than five years after the action granting it, to issue a report for each subsidy and make it available to the public and through its Web site, if applicable. The report must contain the information described in 1) above, and the following information, if applicable:
   1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy, if applicable;
   2. The start and end dates and schedule for the subsidy;
   3. A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the subsidy;
   4. The net tax revenue accruing to the local agency as a result of the subsidy; and
   5. The net number of jobs created by the subsidy, broken down by full-time, part-time, and temporary positions.
5. Requires the local agency, within the term of the subsidy but no later than five years after the action granting it, to hold a public hearing to consider any written or oral comments on the information contained in the report prepared pursuant to 4) above. For a subsidy with a term of 10 years or more, the local agency must hold a public hearing at the conclusion of each subsidy that must contain the information described in 4) above, in written form available to the public, and through its Web site, if applicable.
6. Defines “economic development subsidy” to mean any expenditure of public funds or loss of revenue to a local agency in the amount of $100,000 or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including specified benefits. “Economic development subsidy” does not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose of providing housing affordable to persons and families of low or moderate income.
7. Defines “local agency” to mean a city, including a charter city, county, or city and county.

This bill:

1. Requires each local agency, on and after January 1, 2020, to provide specified information to the public before approving any economic development subsidy (subsidy) for a warehouse distribution center within its jurisdiction. All of the following information must be made available to the public in written form and through its Web site, if applicable:
   1. The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy;
   2. The name and address of all warehouse distribution centers that are the beneficiary of the subsidy;
   3. The information required under existing law for any economic development subsidy;
   4. The estimated number of workers employed through temporary agencies;
   5. Whether any benefit package is offered;
   6. For each warehouse distribution center that is the beneficiary of the subsidy, the outreach, training, and hiring plans, including plans to hire disadvantaged workers, and a description and total value of any state or federal subsidies applied for, or received by, the warehouse distribution center; and
   7. A description of any accountability measures provided in the contract if the warehouse distribution center does not meet the goal outlined in the contract for subsidies
2. Requires each local agency to provide public notice and conduct a hearing before granting a subsidy to a warehouse distribution center, although this is not required if a hearing and notice regarding the subsidy is otherwise required by law.
3. Requires the information specified in 1) above, to remain available to the public under existing state and federal law and to be posted on the local agency's Web site, if applicable, for the entire term of the subsidy.
4. Requires a local agency, after it grants a subsidy for a warehouse distribution center, to issue an annual report for each subsidy during the term of each subsidy and make the report available to the public and through its Web site, if applicable.
5. Requires the report specified in 4) above, to contain the information described in 1) above, and the following information, if applicable:
   1. The information required to be contained in the follow-up report under existing law for any economic development subsidy;
   2. The number of disadvantaged workers employed, if known;
   3. Any net job loss or replacement due to the use of automation, artificial intelligence, or other technologies, if known;
   4. For each warehouse distribution center that is the beneficiary of the subsidy: the retention rate of employees broken down by full-time and part-time positions, and whether turnover rate exceeds 20 percent.
6. Requires each local agency, after it grants a subsidy for a warehouse distribution center, to hold an annual public hearing during the term of the subsidy to consider any written or oral comments on the information contained in the report prepared pursuant to 4) and 5) above.
7. Requires each public hearing required by this bill to be consolidated with a local agency's regularly scheduled hearing.
8. Requires a warehouse distribution center to provide a local agency any information necessary to comply with this bill.
9. Prohibits a local agency from signing a nondisclosure agreement regarding a warehouse distribution center as part of negotiations for any subsidy.
10. Provides the following definitions for the purposes of this bill:
    1. “Disadvantaged worker” means an employee of the warehouse distribution center who satisfies any of the following:
       1. Was unemployed for the six months immediately preceding employment with the warehouse distribution center. In the case of an employee that completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the warehouse distribution center, that employee must have completed that program of study at least 12 months prior to the individual's commencement of employment with the warehouse distribution center;
       2. Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the warehouse distribution center;
       3. Was a recipient of the credit allowed under Internal Revenue Code Section 32, relating to earned income, as applicable for federal purposes, for the previous taxable year;
       4. Is an ex-offender previously convicted of a felony; or,
       5. Is a recipient of either CalWORKs or general assistance, in accordance with the Welfare and Institutions Code, as specified.
    2. “Economic development subsidy” means any expenditure of public funds or loss of revenue to a local agency in the amount of $100,000 or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including, but not limited to, bonds, grants, loans, loan guarantees, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits. “Economic development subsidy” shall not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose of providing housing affordable to persons and families of low or moderate income, as defined in the Health and Safety Code, as specified.
    3. “Local agency” means a city, including a charter city, county, or city and county.
    4. “Warehouse distribution center” means an establishment as defined by any of the following North American Industry Classification System Codes: 493110 for General Warehousing and Storage; 423 for Merchant Wholesalers, Durable Goods; and, 424 for Merchant Wholesalers, Nondurable Goods.
11. Includes findings and declarations to support its purposes.

Background

In response to concerns that local economic development subsidies don’t get the same public scrutiny as budgets and regulatory decisions, the Legislature required additional public disclosures from local agencies prior to approving economic development subsidies of more than $100,000 (AB 562, Williams, Chapter 740, Statutes of 2013).

Online transactions, also called remote sales, are fundamentally changing commerce in America. According to the California Department of Tax and Fee Administration, Internet sales grew 1,321% from 2001 to 2016, compared to 62.8% growth for all sales during the same period. This growth has increased the need for warehousing and distribution centers to deliver products to consumers, as well as the number of individuals employed in this sector.

Since AB 562 was enacted, a number of news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy.

Among other studies, the Economic Policy Institute issued a report on February 1, 2018, stating that Amazon has likely received over $1 billion in state and local subsidies for its facilities. Additionally, although jobs in the warehousing sector increase in counties where a fulfillment center opens by about 30%, other sectors experience job losses such that no new net jobs are created.

Concerned that local governments are granting subsidies to warehouses without commensurate benefit, some organizations want local officials to report more information about local economic development subsidies to warehouses.

Comments

1. Purpose of the bill. According to the author, “As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don’t become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability. Furthermore, future automation of warehouses threatens the future wage growth of middle class jobs. AB 485 is a transparency bill that seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation.”
2. It’s my money. Cities that focus their economic development efforts on warehouse distribution centers view these agreements as valuable economic developments tools that create employment and economic activity that can’t be generated any other way. Even if one of these agreements requires a significant financial contribution to a retailer, that city still may be better off because it gets jobs and tax revenue that it wouldn’t get if the retailer did not locate the distribution center in their city. Local officials are in the best position to evaluate whether spending local dollars for these purposes is worth it. AB 485 imposes burdensome reporting requirements that no other industry has to meet on companies and local governments that want to enter into a mutually beneficial agreement for a warehouse distribution center. The complicated and detailed list of requirements is likely to give rise to litigation from competitors that may have no interest in actually assuring that the reporting is completed. Finally, many areas that offer these subsidies are only recently recovered from the Great Recession. Should the Legislature supplant the judgment of local officials and put up hurdles to their communities’ continued economic development?

Related/Prior Legislation

SB 531 (Glazer, 2019) prohibits a local agency from entering into any agreement that results in a rebate of Bradley-Burns local tax revenues to a retailer in exchange for that retailer locating within that agency’s jurisdiction. SB 531 is currently pending on the Assembly Floor.

AB 2853 (Medina, 2018) was substantially similar to AB 485, but was vetoed by Governor Brown.

SCA 20 (Glazer, 2018) would have amended the California Constitution to provide that the retail sale of tangible personal property transacted online is consummated at the point of delivery. SCA 20 died in the Senate Appropriations Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/19/19)

California Labor Federation, AFL-CIO (source)

American Federation of State, County and Municipal Employees, AFL-CIO

California Teamsters Public Affairs Council

Center on Policy Initiatives

Central Coast Alliance United for a Sustainable Economy

Los Angeles Alliance for a New Economy

Orange County Communities Organized for Responsible Development

Partnership for Working Families

Teamsters Local 1932

United Food and Commercial Workers, Western States Council

Warehouse Worker Resource Center

Working Partnerships USA

Worksafe

OPPOSITION: (Verified 8/19/19)

California Association for Local Economic Development

Chino Valley Chamber of Commerce

City of Murrieta

Fontana Chamber of Commerce

Greater Coachella Valley Chamber of Commerce

Greater Ontario Business Council

Hesperia Chamber of Commerce

Inland Empire Economic Partnership

League of California Cities

Moreno Valley Chamber of Commerce

Murrieta Wildomar Chamber of Commerce

Rancho Cucamonga Chamber of Commerce

Redlands Chamber of Commerce

Victor Valley Chamber of Commerce

ASSEMBLY FLOOR: 58-17, 5/2/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Muratsuchi, Nazarian, Obernolte, O'Donnell, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Dahle, Diep, Flora, Fong, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Voepel, Waldron

NO VOTE RECORDED: Arambula, Boerner Horvath, Gallagher, Mullin, Quirk

Prepared by: Anton Favorini-Csorba / GOV. & F. / (916) 651-4119

8/21/19 15:12:33

**** END ****

 THIRD READING  

Bill No: AB 485

Author: Medina (D)

Amended: 6/17/19 in Senate

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 6/26/19

AYES: McGuire, Beall, Hertzberg, Hurtado, Nielsen, Wiener

NO VOTE RECORDED: Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 58-17, 5/2/19 - See last page for vote

SUBJECT: Local government: economic development subsidies

SOURCE: California Labor Federation, AFL-CIO

DIGEST:

This bill requires local agencies to publicly report specified information when providing economic development subsidies of $100,000 or more for warehouse distribution centers.

ANALYSIS:

Existing law:

1. Requires a local agency, before approving any subsidy of $100,000 or more, to provide to the public in written form and on the agency's Web site, if applicable, all of the following information:
   1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy, if applicable;
   2. The start and end dates and schedule, if applicable, for the subsidy;
   3. A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or revenue lost to, the local agency as a result of the subsidy;
   4. A statement of the public purposes for the subsidy;
   5. Projected tax revenue to the local agency as a result of the subsidy; and
   6. Estimated number of jobs created by the subsidy, broken down by full-time, part-time, and temporary positions.
2. Requires a local agency, before it grants a subsidy, to provide public notice and a hearing regarding the subsidy, as specified.
3. Requires the information specified in 1) above, to remain available to the public under existing state and federal law and be posted on the local agency's Web site, if applicable, for the entire term of the subsidy.
4. Requires a local agency, within the term of the subsidy but not later than five years after the action granting it, to issue a report for each subsidy and make it available to the public and through its Web site, if applicable. The report must contain the information described in 1) above, and the following information, if applicable:
   1. The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy, if applicable;
   2. The start and end dates and schedule for the subsidy;
   3. A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the subsidy;
   4. The net tax revenue accruing to the local agency as a result of the subsidy; and
   5. The net number of jobs created by the subsidy, broken down by full-time, part-time, and temporary positions.
5. Requires the local agency, within the term of the subsidy but no later than five years after the action granting it, to hold a public hearing to consider any written or oral comments on the information contained in the report prepared pursuant to 4) above. For a subsidy with a term of 10 years or more, the local agency must hold a public hearing at the conclusion of each subsidy that must contain the information described in 4) above, in written form available to the public, and through its Web site, if applicable.
6. Defines “economic development subsidy” to mean any expenditure of public funds or loss of revenue to a local agency in the amount of $100,000 or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including specified benefits. “Economic development subsidy” does not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose of providing housing affordable to persons and families of low or moderate income.
7. Defines “local agency” to mean a city, including a charter city, county, or city and county.

This bill:

1. Requires each local agency, on and after January 1, 2020, to provide specified information to the public before approving any economic development subsidy (subsidy) for a warehouse distribution center within its jurisdiction. All of the following information must be made available to the public in written form and through its Web site, if applicable:
   1. The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy;
   2. The name and address of all warehouse distribution centers that are the beneficiary of the subsidy;
   3. The information required under existing law for any economic development subsidy;
   4. The estimated number of workers employed through temporary agencies;
   5. Whether any benefit package is offered;
   6. For each warehouse distribution center that is the beneficiary of the subsidy, the outreach, training, and hiring plans, including plans to hire disadvantaged workers, and a description and total value of any state or federal subsidies applied for, or received by, the warehouse distribution center; and
   7. A description of any accountability measures provided in the contract if the warehouse distribution center does not meet the goal outlined in the contract for subsidies
2. Requires each local agency to provide public notice and conduct a hearing before granting a subsidy to a warehouse distribution center, although this is not required if a hearing and notice regarding the subsidy is otherwise required by law.
3. Requires the information specified in 1) above, to remain available to the public under existing state and federal law and to be posted on the local agency's Web site, if applicable, for the entire term of the subsidy.
4. Requires a local agency, after it grants a subsidy for a warehouse distribution center, to issue an annual report for each subsidy during the term of each subsidy and make the report available to the public and through its Web site, if applicable.
5. Requires the report specified in 4) above, to contain the information described in 1) above, and the following information, if applicable:
   1. The information required to be contained in the follow-up report under existing law for any economic development subsidy;
   2. The number of disadvantaged workers employed, if known;
   3. Any net job loss or replacement due to the use of automation, artificial intelligence, or other technologies, if known;
   4. The amount of space being requested for future planned automation;
   5. For each warehouse distribution center that is the beneficiary of the subsidy: the retention rate of employees broken down by full-time and part-time positions, and whether turnover rate exceeds 20 percent.
6. Requires each local agency, after it grants a subsidy for a warehouse distribution center, to hold an annual public hearing during the term of the subsidy to consider any written or oral comments on the information contained in the report prepared pursuant to 4) and 5) above.
7. Requires each public hearing required by this bill to be consolidated with a local agency's regularly scheduled hearing.
8. Requires a warehouse distribution center to provide a local agency any information necessary to comply with this bill.
9. Prohibits a local agency from signing a nondisclosure agreement regarding a warehouse distribution center as part of negotiations for any subsidy.
10. Provides the following definitions for the purposes of this bill:
    1. “Disadvantaged worker” means an employee of the warehouse distribution center who satisfies any of the following:
       1. Was unemployed for the six months immediately preceding employment with the warehouse distribution center. In the case of an employee that completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the warehouse distribution center, that employee must have completed that program of study at least 12 months prior to the individual's commencement of employment with the warehouse distribution center;
       2. Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the warehouse distribution center;
       3. Was a recipient of the credit allowed under Internal Revenue Code Section 32, relating to earned income, as applicable for federal purposes, for the previous taxable year;
       4. Is an ex-offender previously convicted of a felony; or,
       5. Is a recipient of either CalWORKs or general assistance, in accordance with the Welfare and Institutions Code, as specified.
    2. “Economic development subsidy” means any expenditure of public funds or loss of revenue to a local agency in the amount of $100,000 or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, including, but not limited to, bonds, grants, loans, loan guarantees, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits. “Economic development subsidy” shall not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose of providing housing affordable to persons and families of low or moderate income, as defined in the Health and Safety Code, as specified.
    3. “Local agency” means a city, including a charter city, county, or city and county.
    4. “Warehouse distribution center” means an establishment as defined by any of the following North American Industry Classification System Codes: 493110 for General Warehousing and Storage; 423 for Merchant Wholesalers, Durable Goods; and, 424 for Merchant Wholesalers, Nondurable Goods.
11. Includes findings and declarations to support its purposes.

Background

In response to concerns that local economic development subsidies don’t get the same public scrutiny as budgets and regulatory decisions, the Legislature required additional public disclosures from local agencies prior to approving economic development subsidies of more than $100,000 (AB 562, Williams, Chapter 740, Statutes of 2013).

Online transactions, also called remote sales, are fundamentally changing commerce in America. According to the California Department of Tax and Fee Administration, Internet sales grew 1,321% from 2001 to 2016, compared to 62.8% growth for all sales during the same period. This growth has increased the need for warehousing and distribution centers to deliver products to consumers, as well as the number of individuals employed in this sector.

Since AB 562 was enacted, a number of news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy.

Among other studies, the Economic Policy Institute issued a report on February 1, 2018, stating that Amazon has likely received over $1 billion in state and local subsidies for its facilities. Additionally, although jobs in the warehousing sector increase in counties where a fulfillment center opens by about 30%, other sectors experience job losses such that no new net jobs are created.

Concerned that local governments are granting subsidies to warehouses without commensurate benefit, some organizations want local officials to report more information about local economic development subsidies to warehouses.

Comments

1. Purpose of the bill. According to the author, “As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don’t become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability. Furthermore, future automation of warehouses threatens the future wage growth of middle class jobs. AB 485 is a transparency bill that seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation.”
2. It’s my money. Cities that focus their economic development efforts on warehouse distribution centers view these agreements as valuable economic developments tools that create employment and economic activity that can’t be generated any other way. Even if one of these agreements requires a significant financial contribution to a retailer, that city still may be better off because it gets jobs and tax revenue that it wouldn’t get if the retailer did not locate the distribution center in their city. Local officials are in the best position to evaluate whether spending local dollars for these purposes is worth it. AB 485 imposes burdensome reporting requirements that no other industry has to meet on companies and local governments that want to enter into a mutually beneficial agreement for a warehouse distribution center. The complicated and detailed list of requirements is likely to give rise to litigation from competitors that may have no interest in actually assuring that the reporting is completed. Finally, many areas that offer these subsidies are only recently recovered from the Great Recession. Should the Legislature supplant the judgment of local officials and put up hurdles to their communities’ continued economic development?

Related/Prior Legislation

SB 531 (Glazer, 2019) prohibits a local agency from entering into any agreement that results in a rebate of Bradley-Burns local tax revenues to a retailer in exchange for that retailer locating within that agency’s jurisdiction. SB 531 is currently pending on the Assembly Floor.

AB 2853 (Medina, 2018) was substantially similar to AB 485, but was vetoed by Governor Brown.

SCA 20 (Glazer, 2018) would have amended the California Constitution to provide that the retail sale of tangible personal property transacted online is consummated at the point of delivery. SCA 20 died in the Senate Appropriations Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/10/19)

California Labor Federation, AFL-CIO (source)

American Federation of State, County and Municipal Employees, AFL-CIO

California Teamsters Public Affairs Council

Center on Policy Initiatives

Central Coast Alliance United for a Sustainable Economy

Los Angeles Alliance for a New Economy

Orange County Communities Organized for Responsible Development

Partnership for Working Families

Teamsters Local 1932

United Food and Commercial Workers, Western States Council

Warehouse Worker Resource Center

Working Partnerships USA

Worksafe

OPPOSITION: (Verified 7/10/19)

California Association for Local Economic Development

Chino Valley Chamber of Commerce

Fontana Chamber of Commerce

Greater Coachella Valley Chamber of Commerce

Greater Ontario Business Council

Hesperia Chamber of Commerce

Inland Empire Economic Partnership

League of California Cities

Moreno Valley Chamber of Commerce

Murrieta Wildomar Chamber of Commerce

Rancho Cucamonga Chamber of Commerce

Redlands Chamber of Commerce

Victor Valley Chamber of Commerce

ASSEMBLY FLOOR: 58-17, 5/2/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bloom, Bonta, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Daly, Eggman, Frazier, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, Maienschein, McCarty, Medina, Muratsuchi, Nazarian, Obernolte, O'Donnell, Petrie-Norris, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Dahle, Diep, Flora, Fong, Kiley, Lackey, Mathis, Mayes, Melendez, Patterson, Voepel, Waldron

NO VOTE RECORDED: Arambula, Boerner Horvath, Gallagher, Mullin, Quirk

Prepared by: Anton Favorini-Csorba / GOV. & F. / (916) 651-4119

7/10/19 14:21:42

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Local government: economic development subsidies

Requires local agencies to publicly report specified information when providing economic development subsidies of $100,000 or more for warehouse distribution centers.

Background

Economic development subsidies. Counties, cities, and their redevelopment agencies engage in a wide variety of economic development activities to build their tax bases. Local officials use various tactics to influence where, when, and how the private sector invests capital and improves real property:

• Regulatory tools, including general plans, zoning, and subdivision standards;
• Direct spending, including building public works projects like dams, water systems, sewers, levees, and roads. Spending also includes grants and loans, and site preparation; and
• Tax policies, including lower rates on local taxes (such as sales taxes or property taxes) for selected taxpayers and tax abatements where officials return the revenues to the taxpayers.

Local officials sometimes use their economic development powers to induce businesses to relocate to their communities. Although state law bans counties, cities, and redevelopment agencies from subsidizing the relocation of big box retailers and auto malls within the same market area (SB 114, Torlakson, 2003), local agencies can otherwise exercise significant latitude in the subsidies they grant.

How local officials use their regulatory powers is relatively transparent because state law requires public notice, public hearings, and environmental reviews. State requirements for local budgets, annual financial reports, and regular audits allow constituents to review most of the direct fiscal decisions.

In response to concerns that local economic development subsidies don’t get the same public scrutiny as budgets and regulatory decisions, the Legislature required additional public disclosures from local agencies prior to approving economic development subsidies of more than $100,000 (AB 562, Williams, 2013). Cities and counties that want to approve these subsidies must report on, in a public hearing and on the local agency’s website, the following information:

• The name and address of all corporations or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy;
• The start and end dates and schedule for the subsidy;
• A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the subsidy;
• A statement of the public purposes for the subsidy;
• The projected tax revenue to the local agency as a result of the subsidy; and
• The estimated number of jobs created by the subsidy, including job classifications and wage rates, broken down by full-time, part-time, and temporary positions.

This information must remain available to the public and be posted on city or county’s website for the entire term of the subsidy. Cities and counties must also issue a report for each subsidy within five years of granting the subsidy that includes the information from the initial report plus:

• The net tax revenue accruing to the local agency as a result of the subsidy; and
• The net number of jobs created by the subsidy, including job classifications and wage rates, broken down by full-time, part-time, and temporary positions.

Current law defines “economic development subsidy” to mean any expenditure of public funds or loss of revenue to a local agency in the amount of one hundred thousand dollars ($100,000) or more, for the purpose of stimulating economic development within the jurisdiction of a local agency, but excludes subsidies for providing moderate- or low-income housing.

Warehouse distribution centers. Online transactions, also called remote sales, are fundamentally changing commerce in America. According to the California Department of Tax and Fee Administration, internet sales grew 1,321% from 2001 to 2016, compared to 62.8% growth for all sales during the same period. This growth has increased the need for warehousing and distribution centers to deliver products to consumers, as well as the number of individuals employed in this sector.

Since the Legislature enacted AB 562, a number of news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy.

Many cities in California enter into agreements with retailers to reallocate or “kickback” sales taxes attributable to that retailer in exchange for a commitment to construct, operate, and maintain a warehouse or distribution center in their jurisdiction that result in an increase in sales tax revenue to the cityand to meet specified levels of employment. The City of Fresno has recently entered into long-term agreements with Amazon, Nordstrom, and the Gap, and the City of Dinuba has done the same with BestBuy. The agreements generally contain similar terms. First, the city must receive a threshold amount of actual revenue from sales or property taxes. Second, the city sends a percentage of the revenue above the threshold amount but under a cap set in the agreement to the retailer if it maintains specified employment levels, generally on a per full-time equivalent position basis.

A December 1, 2012, report by the New York Times found that states and local governments grant more than $80 billion annually in subsidies. The article further noted:

“A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created.”

In addition, focusing on subsidies exclusively for Amazon, the Economic Policy Institute issued a report on February 1, 2018, stating that Amazon has likely received over $1 billion in state and local subsidies for its facilities. Additionally, although jobs in the warehousing sector increase in counties where a fulfillment center opens by about 30%, other sectors experience job losses such that no new net jobs are created. A February 2018 report commissioned by the League of California Cities also noted that over $1 billion in sales taxes annually is estimated to be rebated to corporations.

Recent reports have noted that companies are not the only beneficiary of these subsidies. As reported by Bloomberg Tax on May 8, 2019, a single lawyer in California has brokered numerous sales tax rebate agreements that also divert a portion of the rebate directly to himself, totaling in the millions.

Concerned that local governments are granting subsidies to warehouses without commensurate benefit, some organizations want local officials to report more information about local economic development subsidies to warehouses.

Proposed Law

Assembly Bill 485 requires a city or county, including a charter city to publicly report specified information before approving or granting economic development subsidies of $100,000 or more for warehouse distribution centers within its jurisdiction, as well as during the term of such subsidies. This reporting requirement is in lieu of the information required for economic development subsidies under current law. The information in the report must include:

• The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the economic development subsidy;
• The name and address of all warehouse distribution centers that are the beneficiary of the subsidy;
• The start and end dates and schedule for the subsidy;
• A description of the subsidy, including the estimated total amount of the expenditure of public funds by, or of revenue lost to, the local agency as a result of the subsidy;
• A statement of the public purposes for the subsidy;
• The projected tax revenue to the local agency as a result of the subsidy;
• The estimated number of jobs created by the subsidy, including wage scale, broken down by full-time, part-time, and temporary positions.
• The estimated number of workers employed through temporary agencies;
• Whether any benefit package is offered;
• For each warehouse distribution center that is the beneficiary of the subsidy, the outreach, training, and hiring plans, including plans to hire disadvantaged workers, and a description and total value of any state or federal subsidies in the process of being applied for, or received by, the warehouse distribution center; and
• A description of accountability measures provided in the contract for the subsidy if the warehouse distribution center does not meet the goals in the contract.

AB 485 requires each local agency to provide public notice and conduct a hearing before granting a subsidy to a warehouse distribution center, although this is not required if a hearing and notice regarding the subsidy is otherwise required by law. The required information must remain available and easily accessible to the public and must be posted on the local agency's website for the entire term of the subsidy.

AB 485 requires a local agency, if it grants a subsidy for a warehouse distribution center on or after January 1, 2020, to issue an annual report (instead of a single report within five years, as under existing law) for each subsidy during the term of each subsidy. This report must be publicly available through its website and include the information requirements from the initial report on the subsidy, plus:

• The information required to be contained in the follow-up report under existing law for any economic development subsidy;
• The number of independent contractors, including contract rates, funded by the subsidy;
• The total value of benefit packages, including health benefits, fringe benefits, and defined benefit pensions, for each job classification created by the subsidy;
• The number of disadvantaged workers employed, if known;
• Any net job loss or replacement due to the use of automation, artificial intelligence, or other technologies, if known;
• The amount of space being requested for future planned automation;
• For each warehouse distribution center that is the beneficiary of the subsidy, the retention rate of employees broken down by full-time, part-time, and temporary positions, and whether the turnover rate of employees exceeds 20%.

AB 485 requires the local agency to hold a hearing annually during the term of the subsidy to consider any written or oral comments on the information contained in the reports. These hearings, and the hearing prior to adopting a subsidy, must be consolidated with a local agency’s regularly scheduled hearing. The local agency must also submit the reports required under the bill to the Governor’s Office of Business and Economic Development, which must make them available to the public and available on its website.

AB 485 prohibits a local agency from signing a nondisclosure agreement regarding a warehouse distribution center within its jurisdiction as a part of negotiations or in the contract for a subsidy.

AB 485 requires a warehouse distribution center to provide a local agency any information necessary to comply with this bill.

AB 485 defines “disadvantaged worker” to mean an employee of the warehouse distribution center who satisfies any of the following:

• Was unemployed for the six months immediately preceding employment with the warehouse distribution center, or, in the case of an employee that completed college and was unemployed for the six months immediately preceding employment with the warehouse distribution center, that employee must have completed that program of study at least 12 months prior to the individual's commencement of employment with the warehouse distribution center;
• Served in the Armed Forces of the United States within 12 months of starting work at the warehouse distribution center;
• Received the federal Earned Income Tax Credit;
• Is an ex-offender previously convicted of a felony; or,
• Is a recipient of certain public assistance programs.

AB 485 defines “warehouse distribution center” to mean an establishment that falls within specified North American Industry Classification System (NAICS) Codes for warehousing and storage and merchant wholesalers, and defines “member of a commonly controlled group” and “member of a combined reporting group” as defined in existing tax law.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don’t become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability. Furthermore, future automation of warehouses threatens the future wage growth of middle class jobs. AB 485 is a transparency bill that seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation.”

2. It’s my money. Cities that focus their economic development efforts on warehouse distribution centers view these agreements as valuable economic developments tools that create employment and economic activity that can’t be generated any other way. Even if one of these agreements requires a significant financial contribution to a retailer, that city still may be better off because it gets jobs and tax revenue that it wouldn’t get if the retailer did not locate the distribution center in their city. Local officials are in the best position to evaluate whether spending local dollars for these purposes is worth it. AB 485 imposes burdensome reporting requirements that no other industry has to meet on companies and local governments that want to enter into a mutually beneficial agreement for a warehouse distribution center. The complicated and detailed list of requirements is likely to give rise to litigation from competitors that may have no interest in actually assuring that the reporting is completed. Finally, many areas that offer these subsidies are only recently recovered from the Great Recession. Should the Legislature supplant the judgment of local officials and put up hurdles to their communities’ continued economic development?

3. Race to the bottom. Economists generally agree that local economic development subsidies are bad policy. Sophisticated corporations have mastered the art of playing local governments against each other to bid up the incentives that they offer to lure economic development into their jurisdiction, even when other factors such as the ability to attract and retain a well-trained labor force, local amenities, proximity to customers, or access to natural resources are the determining factors in a company’s location decisions. Local taxpayers end up footing the bill for these incentives, and would on the whole be better off if their governments didn’t compete against each other to offer subsidies. AB 485 enhances disclosure requirements in an effort to ensure that local governments calculate and make visible the full costs of subsidizing warehouses, but doesn’t do anything to directly stop the behavior. A more impactful approach might be to ban additional forms of economic subsidies, as was done for some big box retailers and auto malls.

4. Mandate. The California Constitution generally requires the state government to reimburse the costs of new or expanded state mandated local programs. Because AB 485 requires local governments to report on additional information prior to approving an economic development subsidy, the Legislative Counsel’s Office says that AB 485 creates a new state-mandated local program. But this bill disclaims the state's responsibility for reimbursing local agencies for this new requirement with a finding that the act ensures the public’s right of access to information about the conduct of their governmental agencies. That’s consistent with the California Constitution because California voters eliminated the state’s responsibility to pay local governments for compliance with the Brown Act and its amendments in 2012 (Proposition 42).

5. Charter city. The California Constitution allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn't define "municipal affairs," the courts determine whether a topic is a municipal affair or whether it's an issue of statewide concern. AB 485 says that its statutory provisions apply to charter cities. To support this assertion, the bill includes a legislative finding and declaration that the right to be informed of economic development subsidies is a matter of statewide concern.

6. Do it again. AB 2853 (Medina, 2018), which the Committee approved at its June 13^th, 2018 hearing on a vote of 6 to 1, was largely identical to AB 485. Governor Brown vetoed AB 2853 with the following message:

“I am returning Assembly Bill 2853 without my signature. This bill requires local governments that provide economic subsidies of $100,000 or more for warehouse distribution centers to publically report on information such as employee wage rates, independent contractor rates, and the value of employee benefit packages for each job classification created by the subsidy. There is value in taxpayers knowing whether economic development incentives ultimately benefit their community. That is why I signed legislation in 2013 that required local agencies to provide information about the expected and actual impacts of approved economic development subsidies. This bill, however, significantly expands current law and goes too far by adding reporting rules that will be overly burdensome to a single industry. It may actually hinder efforts to improve business opportunities in local communities, which is an outcome no one desires.”

7. Related legislation. SB 531 (Glazer), which the Committee approved at its April 25^th meeting on a vote of 5 to 2, prohibits a local agency from entering into any agreement that results in a rebate of Bradley-Burns local tax revenues to a retailer in exchange for that retailer locating within that agency’s jurisdiction. SB 531 is currently pending in the Assembly Local Government Committee. SCA 20 (Glazer, 2018) would have amended the California Constitution to provide that the retail sale of tangible personal property transacted online is consummated at the point of delivery. SCA 20 died in the Senate Appropriations Committee.

Assembly Actions

Assembly Local Government Committee: 6-2

Assembly Appropriations Committee: 14-4

Assembly Floor: 58-17

Support and Opposition

(6/21/19)

Support: American Federation of State, County and Municipal Employees, AFL-CIO; California Labor Federation, AFL-CIO; California Teamsters Public Affairs Council; Teamsters Local 1932; United Food and Commercial Workers, Western States Council; Warehouse.

Opposition: California Association for Local Economic Development; Chino Valley Chamber of Commerce; Fontana Chamber of Commerce; Greater Coachella Valley Chamber of Commerce; Greater Ontario Business Council; Hesperia Chamber of Commerce; Inland Empire Economic Partnership (Ieep); League of California Cities; Moreno Valley Chamber of Commerce; Murrieta Wildomar Chamber of Commerce; Rancho Cucamonga Chamber of Commerce; Redlands Chamber of Commerce; Victor Valley Chamber of Commerce

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 485

Author:(Medina)

As Introduced Ver:February 12, 2019

Majority vote

SUMMARY:

Requires local agencies to take specified actions before approving or granting economic development subsidies of $100,000 or more for warehouse distribution centers, and during the term of such subsidies.

Major Provisions

This bill establishes requirements that local agencies must meet before and during the term of any subsidy exceeding $100,000 for warehouse distribution centers. In addition to the requirements of existing law for all subsidies exceeding $100,000, this bill requires local agencies to provide additional information regarding subsidies specific to warehouse distribution centers. This information includes, but is not limited to, job classifications and wage rates, the number of independent contractors, benefit packages for each job classification, the number of jobs for disadvantaged workers, the timeline for replacement of workers with automated systems, the amount of space being requested for future planned automations, the retention rate of employees, the number of employment arbitration agreements signed by employees and independent contractors, and additional specified information.

This bill also requires annual reporting and public hearings regarding subsidies for warehouse distribution centers, and requires such centers to provide local agencies with any information necessary for local agencies to comply with the bill's requirements. Local agencies must submit annual reports required by the bill to GO-Biz, which must make the reports available to the public and through its website. This bill also prohibits local agencies from signing nondisclosure agreements regarding a warehouse distribution center within their jurisdictions as part of negotiations or in the contract for any economic development subsidy. This bill applies to counties and cities, including charter cities.

COMMENTS:

A number of recent news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy. Among the publications and research institutes that have reported recently on the issue of local government subsidies, both generally and specifically for Amazon, are the Economic Policy Institute, the Institute for Local Self-Reliance, The Atlantic, the New Republic, the Fresno Bee, the New York Times, Good Jobs First, and others.

According to the Author:

"AB 485 seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation. As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don't become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability…Cities are constantly in a race to the bottom as highlighted by the current bidding wars for warehouse distribution centers. If the jobs and benefits promised do not materialize, the quality of living drops, and the traffic and air quality worsens, what did the city gain? Was the economic subsidy worth the tax revenue loss? Is any job a good job or can cities do better in elevating their attractiveness without sacrificing needed tax revenue?"

Arguments in Support:

The California Labor Federation, sponsor of this bill, writes, "When cities engage in a race to the bottom giving away taxpayer funds in exchange for low-wage, temporary jobs that do nothing to grow the economy or reduce inequality, the state of California loses, as well. AB 485 builds on current law that requires disclosure by companies – specifically warehouse distribution centers – that receive local public subsidies of the amount of the subsidy along with the estimated tax impact on the local government and jobs created…This bill is narrow and targeted to give local government the tools to make smart economic development choices that benefit their residents and to hold warehouse distribution centers accountable for the public dollars they receive."

Arguments in Opposition:

City of Fresno Mayor Lee Brand, opposed unless amended, writes, "This bill would impose excessively harsh and severe reporting requirements anytime a city or county provides an economic incentive for any type of warehouse distribution project. Making this bill law will affect our ability to be competitive for any new warehouse or e-commerce projects in California, sending those jobs to states such as Nevada and Arizona…If AB 458 becomes law, it will effectively end Fresno's ongoing effort to diversify the economy, raise wages and lower the region's stubbornly high unemployment rate."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

1. Minor costs to GO-Biz, likely less than $50,000 annually, to make reports available to the public and on their website.
2. Proposition 42 was passed by voters on June 3, 2014, and requires all local governments to comply with the Public Records Act and the Ralph M. Brown Act (Brown Act) and with any subsequent changes to those acts. Proposition 42 also eliminated reimbursement to local agencies for costs of complying with the Public Records Act and the Brown Act. This bill furthers this purpose as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies; therefore, any local costs for complying as a result of this bill are not reimbursable by the state.

VOTES:

ASM LOCAL GOVERNMENT: 6-2-0

YES: Aguiar-Curry, Bloom, Boerner Horvath, Ramos, Luz Rivas, Robert Rivas

NO: Lackey, Voepel

ASM APPROPRIATIONS: 14-4-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Jones-Sawyer, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep, Fong

UPDATED:

VERSION: February 12, 2019

CONSULTANT: Angela Mapp / L. GOV. / (916) 319-3958 FN:0000281

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 485

Author:(Medina) – As Introduced Ver:February 12, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill establishes requirements that local agencies must meet before and during the term of any subsidy exceeding $100,000 for a warehouse distribution center. Among the requirements, local agencies must provide the public with specified information regarding a subsidy including the estimated number of jobs created, wage rates, independent contractors, timelines for automation and hiring, and retention plans for employees, among other information.

This bill also requires annual reporting and public hearings regarding subsidies for warehouse distribution centers and requires such centers to provide local agencies with any information necessary for local agencies to comply with the bill's requirements. Local agencies must submit the annual reports regarding the subsidies to the Governor’s Office of Business and Economic Development (GO-Biz), which must make the reports available to the public and through its website. This bill also prohibits local agencies from signing nondisclosure agreements regarding a warehouse distribution center as part of negotiations or in a contract for any economic development subsidy. This bill applies to counties and cities, including charter cities.

FISCAL EFFECT:

1. Minor costs to GO-Biz, likely less than $50,000 annually, to make reports available to the public and on their website.
2. Proposition 42 was passed by voters on June 3, 2014, and requires all local governments to comply with the Public Records Act and the Ralph M. Brown Act (Brown Act) and with any subsequent changes to those acts. Proposition 42 also eliminated reimbursement to local agencies for costs of complying with the Public Records Act and the Brown Act. This bill furthers this purpose as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies; therefore, any local costs for complying as a result of this bill are not reimbursable by the state.

COMMENTS:

1. Purpose. This bill is intended to provide transparency to taxpayers concerning the use of public funds for economic development subsidies to warehouse distribution centers and to help ensure that these subsidies result in job creation and other community benefits.
2. Background. Local governments engage in a wide variety of economic development activities to build their tax bases. In this respect, local officials use their regulatory powers to direct spending and tax policies, which, in turn, influence where, when and how the private sector invests capital and improves real property. There are well documented concerns and numerous studies regarding the community value of local public subsidies to private entities. Focusing on subsidies exclusively for Amazon, the Economic Policy Institute issued a report on February 1, 2018, which states:

Using tax and other incentives to lure businesses to state and local areas is a long-running economic development strategy pursued by subnational governments. In nearly every state, businesses can receive a significantly lighter tax burden for constructing a sports stadium, filming a movie, or building a manufacturing assembly plant. The results on whether these types of community development strategies have a positive impact on job creation and growth is highly debated in popular news outlets and among researchers.

AB 562 (Williams), Chapter 740, Statutes of 2013, established requirements local agencies must meet before approving any economic development subsidy of $100,000 or more. In arguing for the bill, the author noted:

Each year, local governments give out billions of dollars in tax incentives to corporations in hopes of increasing economic growth and drawing jobs for their residents…State requirements for local budgets, annual financial reports, and regular audits allow constituents to review most of the direct fiscal decisions made by local governments. However, local economic subsidies do not receive the same public scrutiny as budgets and regulatory decisions. Additionally, local governments rarely track how many jobs are created and it’s impossible to know whether the jobs would have been created without the aid.

1. Previous Legislation. AB 2853 (Medina) of 2018 was similar to this bill. It was vetoed by the governor. The veto message read, in part:

There is value in taxpayers knowing whether economic development incentives ultimately benefit their community. That is why I signed legislation in 2013 that required local agencies to provide information about the expected and actual impacts of approved economic development subsidies. This bill, however, significantly expands current law and goes too far by adding reporting rules that will be overly burdensome to a single industry. It may actually hinder efforts to improve business opportunities in local communities, which is an outcome no one desires.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 10, 2019

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 485 (

Author:Medina) – As Introduced Ver:February 12, 2019

SUBJECT: Local government: economic development subsidies.

SUMMARY: Requires local agencies to take specified actions before approving or granting economic development subsidies of $100,000 or more for warehouse distribution centers, and during the term of such subsidies. Specifically, this bill:

1. Requires each local agency, on and after January 1, 2020, to provide specified information to the public before approving any economic development subsidy (subsidy) for a warehouse distribution center within its jurisdiction. All of the following information must be made available to the public in written form and through the local agency’s Internet Web site (website), if applicable:
   1. The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy;
   2. The name and address of all warehouse distribution centers that are the beneficiary of the economic development subsidy;
   3. The start and end dates and schedule, if applicable, for the subsidy;
   4. A description of the subsidy, including the estimated total amount of the expenditure
      of public funds by, or of revenue lost to, the local agency as a result of the subsidy;
   5. A statement of the public purposes for the subsidy;
   6. The projected tax revenue to the local agency as a result of the subsidy;
   7. The estimated number of jobs created by the subsidy, including job classifications and wage rates, broken down by full-time, part-time, and temporary positions;
   8. The estimated number of independent contractors, including contract rates, funded by the subsidy;
   9. The estimated value of benefit packages, including health benefits, fringe benefits, and defined benefit pensions, for each job classification created by the subsidy;
   10. The estimated number of jobs for disadvantaged workers created by the subsidy;
   11. Both of the following regarding each warehouse distribution center that is the beneficiary of the subsidy:
       1. A description of the outreach, training, and hiring plans, including plans to hire disadvantaged workers;
       2. A description and total value of any state or federal subsidies applied for, or received by, the warehouse distribution center; and,
   12. A description of any accountability measures, including, but not limited to, clawbacks of subsidies provided in the contract if the warehouse distribution center does not meet the goal outlined in the contract for subsidies.
2. Requires each local agency to provide public notice and a hearing before granting a subsidy to a warehouse distribution center, although this is not required if a hearing and notice regarding the subsidy is otherwise required by law.
3. Requires the information specified in 1), above, to remain available to the public under existing state and federal law and to be posted on the local agency's website, if applicable, for the entire term of the subsidy.
4. Requires a local agency, after it grants a subsidy for a warehouse distribution center, to issue an annual report for each subsidy during the term of each subsidy and make the report available to the public and through its website, if applicable.
5. Requires the report specified in 4), above, to contain the information described in 1), above, and the following additional information, if applicable:
   1. The net tax revenue accruing to the local agency as a result of the subsidy;
   2. The net number of jobs created by the subsidy, including job classifications and wage rates, broken down by full-time, part-time, and temporary positions;
   3. The number of independent contractors, including contract rates, funded by the subsidy;
   4. The total value of benefit packages, including health benefits, fringe benefits, and defined benefit pensions, for each job classification created by the subsidy;
   5. The net number of jobs for disadvantaged workers created by the subsidy;
   6. The timeline for replacement of workers with automated systems;
   7. The amount of space being requested for future planned automation;
   8. All of the following regarding each warehouse distribution center that is the beneficiary of the subsidy:
      1. The amount spent on training, apprenticeship, or other skills development programs for employees;
      2. The retention rate of employees broken down by full-time, part-time, and temporary positions, and if the turnover rate of employees exceeds 20%; and,
      3. The number of employment arbitration agreements signed by employees and independent contractors, if any.
6. Requires each local agency, after it grants a subsidy for a warehouse distribution center, to hold an annual public hearing during the term of the subsidy to consider any written or oral comments on the information contained in the report prepared pursuant to 4), above.
7. Requires each public hearing required by this bill to be consolidated with a local agency's regularly scheduled hearing.
8. Requires the local agency to submit the reports required pursuant to 4), above, to the Governor’s Office of Business and Economic Development (GO-Biz), and requires GO-Biz to make these reports available to the public and through its website.
9. Prohibits a local agency from signing a nondisclosure agreement regarding a warehouse distribution center within its jurisdiction as part of negotiations or in the contract for any economic development subsidy.
10. Requires a warehouse distribution center to provide a local agency any information necessary to comply with this bill.
11. Provides the following definitions for the purposes of this bill:
    1. "Disadvantaged worker" means an employee of the warehouse distribution center who satisfies any of the following:
       1. Was unemployed for the six months immediately preceding employment with the warehouse distribution center. In the case of an employee that completed a program of study at a college, university, or other postsecondary educational institution, received a baccalaureate, postgraduate, or professional degree, and was unemployed for the six months immediately preceding employment with the warehouse distribution center, that employee must have completed that program of study at least 12 months before the individual's commencement of employment with the warehouse distribution center;
       2. Is a veteran who separated from service in the Armed Forces of the United States within the 12 months preceding commencement of employment with the warehouse distribution center;
       3. Was a recipient of the credit allowed under Section 32 of the Internal Revenue Code, relating to earned income, as applicable for federal purposes, for the previous taxable year;
       4. Is an ex-offender previously convicted of a felony; or,
       5. Is a recipient of either CalWORKs or general assistance, in accordance with the Welfare and Institutions Code, as specified.
    2. "Economic development subsidy" means any expenditure of public funds or loss
       of revenue to a local agency in the amount of $100,000 or more, for the purpose
       of stimulating economic development within the jurisdiction of a local agency, including, but not limited to, bonds, grants, loans, loan guarantees, enterprise zone or empowerment zone incentives, fee waivers, land price subsidies, matching funds, tax abatements, tax exemptions, and tax credits. "Economic development subsidy" shall not include expenditures of public funds by, or loss of revenue to, the local agency for the purpose
       of providing housing affordable to persons and families of low or moderate income,
       as defined in the Health and Safety Code, as specified.
    3. "Local agency" means a city, including a charter city, county, or city and county.
    4. “Members of a combined reporting group” has the same meaning as that term is defined in paragraph (3) of subdivision (b) of Section 25106.5 of Title 18 of the California Code of Regulations, as that section read on January 1, 2019.
    5. “Members of a commonly controlled group” has the same meaning as that term is defined in Section 25105 of the Revenue and Taxation Code.
    6. "Warehouse distribution center" means an establishment as defined by any of the following North American Industry Classification System Codes:
       1. 493110 for General Warehousing and Storage.
       2. 423 for Merchant Wholesalers, Durable Goods.
       3. 424 for Merchant Wholesalers, Nondurable Goods.
12. Finds and declares that the right of the public to be informed of subsidies for warehouse distribution centers approved by their local agencies, as described in and added by this bill, is a matter of statewide concern, and not a municipal affair, as that term is used in Section 5 of Article XI of the California Constitution. Therefore, this bill applies to all cities, including charter cities.
13. Finds and declares that this bill furthers, within the meaning of paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution, the purposes of that constitutional section as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies and declares, pursuant to paragraph (7)
    of subdivision (b) of Section 3 of Article I of the California Constitution, that the Legislature makes the following findings: This bill ensures the public's right of access to information about the conduct of their government agencies relating to subsidies for warehouse distribution centers.

FISCAL EFFECT: This bill is keyed fiscal.

COMMENTS:

1. Author's Statement. According to the author, “AB 485 seeks to give local governments and communities the necessary information to hold warehouse and distribution companies that receive public subsidies accountable for good job creation. As online shopping continues to grow, companies are increasing their warehouse footprints swelling the demand for streamlined logistics centers. These warehouses are often placed in communities desperate for jobs and still recovering from the recession. Many of the jobs in these warehouses are grueling and high-stress. The benefits may be enticing but don’t become available until after a year of employment. Some of the jobs are temporary or seasonal, causing employment opportunities to fluctuate and throwing families into economic instability.

“In the Economic Policy Institutes report entitled ‘Unfulfilled Promises,’ EPI economist Ben Zipperer and economic analysts Janelle Jones concluded that on average, ‘Amazon’s fulfillment centers are ineffective at providing net job growth.’ Cities are constantly in a race to the bottom as highlighted by the current bidding wars for warehouse distribution centers. If the jobs and benefits promised do not materialize, the quality of living drops, and the traffic and air quality worsens, what did the city gain? Was the economic subsidy worth the tax revenue loss? Is any job a good job or can cities do better in elevating their attractiveness without sacrificing needed tax revenue?"

1. Background. Local governments engage in a wide variety of economic development activities to build their tax bases. In this respect, local officials use their regulatory powers to direct spending and tax policies which, in turn, influence where, when and how the private sector invests capital and improves real property.

AB 562 (Williams), Chapter 740, Statutes of 2013, established requirements for local agencies to meet before approving any subsidy and during the term of such subsidies. In arguing for the bill, the author noted, "Each year, local governments give out billions of dollars in tax incentives to corporations in hopes of increasing economic growth and drawing jobs for their residents…State requirements for local budgets, annual financial reports, and regular audits allow constituents to review most of the direct fiscal decisions made by local governments. However, local economic subsidies do not receive the same public scrutiny as budgets and regulatory decisions. Additionally, local governments rarely track how many jobs are created and it’s impossible to know whether the jobs would have been created without the aid. AB 562 seeks to remedy this shortcoming."

AB 562 succeeded, after several years of failed attempts, in requiring local agencies to gather and make available to the public – in writing and on the agency's website – specified information about any subsidy of $100,000 or more, both before the subsidy is approved and during the life of the subsidy. In addition to basic identifying information about each subsidy and public hearing requirements, AB 562 required the following information:

• 1. The estimated total amount of the expenditure of public funds by, or revenue lost to, the local agency as a result of the subsidy;
  2. Projected and actual tax revenue accruing to the local agency as a result of the subsidy; and,
  3. Estimated and actual number of jobs created by the subsidy, broken down by full-time, part-time, and temporary positions.

1. Subsidies and Warehouse Distribution Centers. Since AB 562 was enacted, a number
   of news reports and studies have focused on Amazon distribution centers and the subsidies state and local agencies have granted in an effort to convince Amazon to locate in their jurisdictions. This followed on the heels of several years of controversy surrounding Amazon's avoidance of sales taxes as a cornerstone of the company's business development strategy. Among the publications and research institutes that have reported recently on the issue of local government subsidies, both generally and specifically for Amazon, are the Economic Policy Institute, the Institute for Local Self-Reliance, The Atlantic, the New Republic, the Fresno Bee, the New York Times, Good Jobs First, and others.

According to a New York Times article dated December 1, 2012, "A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains. The cost of the awards is certainly far higher. A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid…

"A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States. Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors...Questioned about incentives, officials at dozens of other large corporations said they owed it to shareholders to maximize profits. Many emphasized that they employ thousands of Americans who pay taxes and spend money in the local economy."

Focusing on subsidies exclusively for Amazon, the Economic Policy Institute issued a report on February 1, 2018, which states, "The expansion of Amazon’s physical distribution network has coincided with a strategic business plan of negotiating millions in tax abatements, credits, exemptions, and infrastructure assistance from state and local governments in the name of regional economic development. By the end of 2016, Amazon had likely received over $1 billion in state and local subsidies for its facilities, which would include not only fulfillment centers but 'sortation' centers that only sort packages, mailing centers, and other facilities. In return for the incentives each of the fulfillment centers receives, Amazon claims to create hundreds of jobs with competitive pay and benefits.

"Using tax and other incentives to lure businesses to state and local areas is a long-running economic development strategy pursued by subnational governments. In nearly every state, businesses can receive a significantly lighter tax burden for constructing a sports stadium, filming a movie, or building a manufacturing assembly plant. The results on whether these types of community development strategies have a positive impact on job creation and growth is highly debated in popular news outlets and among researchers. And as Amazon has grown, the debate in some cases has specifically focused on Amazon."

The report found that, "When Amazon opens a new fulfillment center, the host county gains roughly 30 percent more warehousing and storage jobs but no new net jobs overall, as the jobs created in warehousing and storage are likely offset by job losses in other industries…State and local governments give away millions in tax abatements, credits, exemptions, and infrastructure assistance to lure Amazon warehouses but don’t get a commensurate 'return' on that investment. Rather than spending public resources on an ineffective strategy to boost local employment (luring Amazon fulfillment centers), state and local governments should invest in public services (particularly in early-childhood education and infrastructure) that are proven to spur long-term economic development."

1. Bill Summary. This bill establishes requirements that local agencies must meet before and during the term of any subsidy exceeding $100,000 for warehouse distribution centers. In addition to the requirements established by AB 562 for all subsidies exceeding $100,000, this bill requires local agencies to provide the following additional information regarding subsidies specific to warehouse distribution centers:
   1. The name and address of all corporations, including members of a commonly controlled group or members of a combined reporting group of which the corporation is a member, or any other business entities, except for sole proprietorships, that are the beneficiary of the subsidy;
   2. Job classifications and wage rates for the estimated and actual number of jobs created by the subsidy;
   3. The estimated and actual number of independent contractors, including contract rates, funded by the subsidy;
   4. The estimated value of benefit packages for each job classification created by the subsidy and the total value of these packages actually created by the subsidy, including health benefits, fringe benefits, and defined benefit pensions;
   5. The estimated and net number of jobs for disadvantaged workers created by the subsidy;
   6. The timeline for replacement of workers with automated systems;
   7. The amount of space being requested for future planned automations;
   8. For each warehouse distribution center that is a beneficiary of a subsidy:
      1. A description of its outreach, training, and hiring plans, including plans to hire disadvantaged workers;
      2. A description and total value of any state or federal subsidies applied for, or received by, the warehouse distribution center;
      3. The amount spent on training, apprenticeship, or other skills development programs for employees;
      4. The retention rate of employees broken down by full-time, part-time, and temporary positions, and if the turnover rate of employees exceeds 20%; and,
      5. The number of employment arbitration agreements signed by employees and independent contractors, if any.

This bill also requires annual reporting and public hearings regarding subsidies for warehouse distribution centers, and requires such centers to provide local agencies with any information necessary for local agencies to comply with the bill's requirements. Local agencies must submit the annual reports required by the bill to GO-Biz, which must make the reports available to the public and through its website. This bill also prohibits local agencies from signing nondisclosure agreements regarding a warehouse distribution center within their jurisdictions as part of negotiations or in the contract for any economic development subsidy. This bill applies to counties and cities, including charter cities.

This bill is sponsored by the California Labor Federation.

1. Proposition 42. Proposition 42 was passed by voters on June 3, 2014, and requires all local governments to comply with the Public Records Act and the Ralph M. Brown Act (Brown Act) and with any subsequent changes to those Acts. Proposition 42 also eliminated reimbursement to local agencies for costs of complying with the Public Records Act and the Brown Act.

This bill contains language that says that the Legislature finds and declares that the bill furthers the purpose of the California Constitution as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies. Pursuant to paragraph (7) of subdivision (b) of Section 3 of Article I of the Constitution, the bill also includes a finding that states, "This act ensures the public's right of access to information about the conduct of their government agencies relating to subsidies for warehouse distribution centers."

1. Previous Legislation. AB 2853 (Medina) of 2018 was similar to this bill. AB 2853 was vetoed by the Governor with the following message:

“This bill requires local governments that provide economic subsidies of $100,000 or more for warehouse distribution centers to publically report on information such as employee wage rates, independent contractor rates, and the value of employee benefit packages for each job classification created by the subsidy. There is value in taxpayers knowing whether economic development incentives ultimately benefit their community. That is why I signed legislation in 2013 that required local agencies to provide information about the expected and actual impacts of approved economic development subsidies. This bill, however, significantly expands current law and goes too far by adding reporting rules that will be overly burdensome to a single industry. It may actually hinder efforts to improve business opportunities in local communities, which is an outcome no one desires.”

1. Arguments in Support. The California Labor Federation, sponsor of this bill, writes,
   "When cities engage in a race to the bottom giving away taxpayer funds in exchange for low-wage, temporary jobs that do nothing to grow the economy or reduce inequality, the state of California loses, as well. AB 485 builds on current law that requires disclosure by companies – specifically warehouse distribution centers – that receive local public subsidies of the amount of the subsidy along with the estimated tax impact on the local government and jobs created. This bill requires companies seeking local subsidies to publicly disclose job quality, plans for automation, and any accountability mechanisms should they fail to live up to their promises.

“The bill then requires the company to file an annual report to its approving city or county that reports on its promise of quality job creation and retention for the life of the subsidy, presented at a public meeting so community members can track progress or lack thereof and recommend corrective measures. It also bans non-disclosure provisions in contracts to allow the public to know the details of a deal before they agree to subsidies. This bill is narrow and targeted to give local government the tools to make smart economic development choices that benefit their residents and to hold warehouse distribution centers accountable for the public dollars they receive."

1. Arguments in Opposition. City of Fresno Mayor Lee Brand, opposed unless amended, writes, “This bill would impose excessively harsh and severe reporting requirements anytime a city or county provides an economic incentive for any type of warehouse distribution project. Making this bill law will affect our ability to be competitive for any new warehouse or e-commerce projects in California, sending those jobs to states such as Nevada and Arizona.

“While Fresno believes in transparency and willingly follows current reporting requirements related to economic incentive agreements, AB 485’s language is clearly designed to stymie such projects. Specifically, the bill requires reporting of data that is unquestionably proprietary information that no company – public or private – would share…In the prior two years, the City of Fresno has seen unprecedented success in attracting three major e-commerce projects, creating an estimated 4,000 new jobs and chipping away at the generational poverty that has long plagued our community…If AB 458 becomes law, it will effectively end Fresno’s ongoing effort to diversify the economy, raise wages and lower the region’s stubbornly high unemployment rate.”

REGISTERED SUPPORT / OPPOSITION:

Support

California Labor Federation [SPONSOR]

American Federation of State, County and Municipal Employees, AFL-CIO

California Teamsters Public Affairs Council

Teamsters Local 1932

Warehouse Worker Resource Center

Opposition

California Chamber of Commerce (unless amended)

City of Fresno Mayor Lee Brand (unless amended)

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958