BILL NUMBER: AB 1359 CHAPTERED 10/01/01 CHAPTER 395 FILED WITH SECRETARY OF STATE OCTOBER 1, 2001 APPROVED BY GOVERNOR SEPTEMBER 29, 2001 PASSED THE ASSEMBLY AUGUST 31, 2001 PASSED THE SENATE AUGUST 28, 2001 AMENDED IN SENATE JULY 5, 2001 AMENDED IN ASSEMBLY MAY 31, 2001 AMENDED IN ASSEMBLY APRIL 23, 2001 INTRODUCED BY Assembly Members Lowenthal and Kehoe FEBRUARY 23, 2001 An act to amend Sections 34052, 50400.5, 50531, 50532, 50545, 50740, and 50748.1 of, to amend the heading of Chapter 3.5 (commencing with Section 50530) of Part 2 of Division 31 of, to amend, renumber, and add Section 50530 of, to repeal Sections 50502.5, 50532.5, and 50740.1 of, and to repeal Chapter 3.1 (commencing with Section 50515) of Part 2 of Division 31 of, the Health and Safety Code, relating to housing, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1359, Lowenthal. Housing: Predevelopment Loan Fund. Existing law creates the Rural Predevelopment Loan Fund and the Urban Predevelopment Loan Fund, which are continuously appropriated to the Department of Housing and Community Development to make loans for specified housing purposes. This bill would repeal the provisions relating to the Rural Predevelopment Loan Fund, except as specified, rename the Urban Predevelopment Loan Fund as the Predevelopment Loan Fund, transfer the balance of specified funds into that fund, and revise various criteria for expenditure of money under the Predevelopment Loan Program, thereby making an appropriation. The bill would repeal obsolete provisions relating to the State Home Retention Account in the Rental Housing Construction Fund. This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 34052 of the Health and Safety Code is amended to read: 34052. For the purpose of providing disaster relief in communities subject to a natural disaster, the department shall award funds pursuant to Chapter 3.5 (commencing with Section 50530) of Part 2 of Division 31 if funds have been made available for this purpose. Notwithstanding subdivision (b) of Section 50531, funds shall be used for housing for persons of low and moderate income, with first priority given to funding housing for persons of low income. SEC. 2. Section 50400.5 of the Health and Safety Code is amended to read: 50400.5. Notwithstanding Section 13340 of the Government Code, or any other provision of law, any money contained in the Rural Predevelopment Loan Fund created pursuant to Section 50516, the Predevelopment Loan Fund created pursuant to Section 50531, the Housing Rehabilitation Loan Fund created pursuant to Section 50661, the Homeownership Assistance Fund created pursuant to Section 50778, and the Rental Housing Construction Fund created pursuant to Section 50740, is hereby continuously appropriated, without regard to fiscal year, for any purposes authorized by statute. It is the intent of the Legislature that this section also supersede the amounts appropriated pursuant to Items 2240-101-635, 2240-101-929, 2240-101-936, 2240-101-938, and 2240-101-980, respectively, of the Budget Act of 1984 (Ch. 258, Stats. 1984). SEC. 2.5. Section 50502.5 of the Health and Safety Code is repealed. SEC. 3. Chapter 3.1 (commencing with Section 50515) of Part 2 of Division 31 of the Health and Safety Code is repealed. SEC. 4. The heading of Chapter 3.5 (commencing with Section 50530) of Part 2 of Division 31 of the Health and Safety Code is amended to read: CHAPTER 3.5. PREDEVELOPMENT LOANS SEC. 5. Section 50530 of the Health and Safety Code is amended and renumbered to read: 50530.5. As used in this chapter: (a) "Housing" includes, but is not limited to, manufactured housing. (b) "Predevelopment loan" means a loan for required expenses, other than administrative and construction, which are incurred by eligible sponsors in the process of, and prior to, securing long-term financing for construction, conversion, preservation, or rehabilitation of assisted housing, and which are recoverable once long-term financing is obtained. The purposes for which predevelopment loans may be made include, but are not limited to, the costs of, or the costs associated with, land purchase or options to buy land; options or deposits to buy or preserve existing government-assisted rental housing for the purpose of preserving the affordability of the units; professional services such as architectural, engineering, or legal services; permit or application fees; and bonding, site preparation, related water or sewer development, or material expenses. In addition, the loans may be made for the purpose of extending the time for exercising an option or extending the time period for repayment of an advance previously obtained. These loan funds may be deposited in banks as compensating balances to establish lines of credit for participating nonprofit corporations. (c) "Fund" means the Predevelopment Loan Fund which is replenished continuously by repayments of principal on loans made from the fund. (d) "Land purchase loan" means a loan for the costs incurred by an eligible sponsor in obtaining an option on, or purchasing suitable land for, the future development of assisted housing, including, but not limited to, costs associated with transfer of title, appraisals, payment of property taxes, surveys, and necessary maintenance of the land. (e) "Eligible sponsors" means local governmental agencies, nonprofit corporations, including cooperative housing corporations, and limited liability corporations or limited partnerships where all of the general partners are nonprofit mutual or public benefit corporations. SEC. 6. Section 50530 is added to the Health and Safety Code, to read: 50530. (a) Large numbers of Californians face excessive housing costs and live in overcrowded or substandard housing units. In order to facilitate an increase in the supply of housing, the state has created and funded several predevelopment loan programs, the purposes of which have been to provide interim financing to housing sponsors to cover the planning and development costs associated with the development of new housing. (b) A more efficient method to address the need to provide interim financing would be through the operation of a single omnibus predevelopment loan program. (c) It is the intent of the Legislature that the Predevelopment Loan Program as contained in this chapter be used as the vehicle for the department's ongoing urban and rural predevelopment programs as well as specially directed programs as may be funded by the Legislature from time to time. In particular, the Predevelopment Loan Program, as amended, is intended to take the place of the following department programs: (1) The Rural Predevelopment Loan Program previously established by Chapter 3.1 (commencing with Section 50515). (2) The preservation predevelopment loans authorized by and subject to Item 2240-101-0001 of the Budget Act of 1999, Item 2240-106-0001 of the Budget Act of 2000, and Item 2240-106-0001 of the Budget Act of 2001. (3) The jobs-housing predevelopment loans provided for in Chapter 3.7 (commencing with Section 50540). SEC. 7. Section 50531 of the Health and Safety Code is amended to read: 50531. (a) The Urban Predevelopment Loan Fund is hereby renamed the Predevelopment Loan Fund. (b) Notwithstanding Section 13340 of the Government Code, all money in the fund, including any interest on loans made from the fund, is hereby continuously appropriated to the department for carrying out the purposes of this chapter, together with interest as provided in that section. The fund shall be a revolving loan fund that shall be used to make predevelopment loans and land purchase loans to eligible sponsors for assisted housing for occupancy primarily by persons of low income. (c) All interest, dividends, and pecuniary gains from investments or deposits of moneys in the fund shall accrue to the fund, notwithstanding Section 16305.7 of the Government Code. There shall be paid into the fund all of the following: (1) Any moneys appropriated and made available by the Legislature for the purposes of the fund. (2) Any moneys that the department receives in repayment of loans made from the fund, including any interest on loans made from the fund. (3) Any other moneys that may be made available to the department for the purposes of this chapter from any other source. (d) Notwithstanding any other provision of law, on the effective date of this subdivision, or as otherwise specified in this section, the following fund balances, as well as any subsequent income derived from loans, including principal and interest, or grants made for the programs identified below, shall be transferred from the funds in which they are currently deposited into the Predevelopment Loan Fund: (1) Any funds remaining in the Rural Predevelopment Loan Fund established by Section 50516 and any repayments of these funds. (2) Any unencumbered funds remaining for the preservation predevelopment loans authorized by and subject to Item 2240-101-0001 of the Budget Act of 1999 and Item 2240-106-0001 of the Budget Act of 2000 and deposited in the Rental Housing Construction Fund established by Section 50740 and any repayments of these loaned funds. (3) All funds appropriated by and subject to Item 2240-106-0001 of the Budget Act of 2001. (4) Any unencumbered funds remaining and any income and repayments from these loaned funds made for the jobs-housing predevelopment loans authorized by Item 2240-114-0001 of the Budget Act of 2000 to the extent that those funds remain unencumbered in the Rental Housing Construction Fund established by Section 50740. (5) Any unencumbered funds, or any loan repayments, of the former Urban Predevelopment Loan Program that may have been received on or after June 30, 1999, and transferred or deposited into the Rental Housing Construction Fund established by Section 50740. SEC. 8. Section 50532 of the Health and Safety Code is amended to read: 50532. The fund shall be administered by the director and any persons within the department designated by the director, in accordance with all of the following requirements: (a) The department shall not commit more than 20 percent of the total moneys appropriated to the fund to any single borrower at any point in time. (b) The department shall require adequate security for all loans made from the fund. For the purposes of this subdivision, "adequate security" includes, but need not be limited to, a security interest in any property purchased with fund moneys, a promissory note, or an assignment of a land option, except that in the case of Indian trust land a mortgage on a leasehold interest in the property shall be acceptable. (c) No predevelopment loan may be made pursuant to this chapter unless the department may reasonably anticipate that a commitment can be obtained by an eligible sponsor for construction financing or long-term financing that will permit occupancy primarily by persons of low income, as specified in subdivision (b) of Section 50531. The department may make land purchase loans to eligible sponsors to enable those sponsors to exercise options or to purchase land on which no option can be obtained even though the sponsor is not able at the time the loan is made to proceed with the development of assisted housing on the purchased site. If the eligible sponsor is unable to proceed with the development of assisted housing on the purchased site within three years of its acquisition, the sponsor, upon demand of the department, shall convey the site to the department. The department shall dispose of the site in accordance with subdivision (o) of Section 50406, and the net proceeds shall be paid into the fund. (d) The department may establish alternate project selection processes, threshold requirements, and priorities for funds appropriated for special purposes. These alternate processes, requirements, and priorities shall be tied to the specific needs and objectives for which the funds have been appropriated. (e) The department shall, from time to time, direct the Treasurer to invest moneys of the fund which are not required for its current needs in eligible securities which the department designates from among those specified in Section 16430 of the Government Code. The department may direct the Treasurer to deposit moneys from the fund in interest-bearing accounts in state or national banks or other financial institutions having principal offices in this state. The department may alternatively require the transfer of moneys in the fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest, dividends, and pecuniary gains from those investments or deposits shall accrue to the fund. (f) In complying with Section 50408, the department shall also report annually to the Legislature and the Governor on the administration of the fund. The report shall include, but need not be limited to, all of the following information: (1) The number of units assisted. (2) The average income of households assisted and the distribution of annual incomes among assisted households. (3) The rents in assisted units. (4) The number and amount of loans made to each eligible sponsor in the preceding year. (5) Data on the number of delinquencies and defaults. (6) Recommendations, as needed, to improve the operation of the fund. (7) The number of loans made at interest rates lower than 7 percent per annum, and the income of households assisted by those loans. (8) The public transportation services conveniently available to assisted households. (9) The number of manufactured housing units assisted under Section 50531 and this section. (10) The location, size, and cost of land, and option rights purchased with land purchase loans. (g) (1) Except as provided in paragraph (2), the balance of any loan made from the fund or its predecessor fund which remains unpaid on September 22, 1983, except any portion which is delinquent, and all loans made from the fund on or after that date, shall bear interest at a rate of 3 percent per annum. (2) The department may reduce or eliminate interest on the loans, if, in the exercise of sound discretion, the department determines that action is necessary for the provision of decent housing to very low income households, as described in Section 50105. However, if the department eliminates interest on a loan, it shall charge a loan origination fee not to exceed 2 percent of the loan amount. (h) To the extent feasible, the department shall ensure a reasonable geographic distribution of the funds. Other things being equal, the department shall give priority to assisting development that meets either of the following requirements: (1) It will be located in public transit corridors. (2) It will be used for the preservation and acquisition of existing government-assisted rental housing at risk of conversion to market-rate use. Within this category, the department shall give priority to those applications that include matching financing from local redevelopment agencies or federal programs. (i) The department may make predevelopment loans or land purchase loans for the development of mobilehome parks and manufactured housing subdivisions. SEC. 9. Section 50532.5 of the Health and Safety Code is repealed. SEC. 10. Section 50545 of the Health and Safety Code is amended to read: 50545. Five million dollars ($5,000,000) of the funds appropriated for the purposes of this chapter in Item 2240-114-0001 of the Budget Act of 2000 shall be transferred to the Rental Housing Construction Fund created pursuant to Section 50740 to be used for predevelopment loans pursuant to Chapter 3.5 (commencing with Section 50530), subject to the following provisions: (a) All projects shall be located within one-half mile of an existing or planned transit station proposed for development. For these purposes, a transit station is a site where two or more mass transit modes, or one transit mode with three or more mass transit lines, are accessible to the public. (b) Notwithstanding any other provision of law, the department may establish interest rates between 3 and 7 percent based on the department's analysis of project need. (c) In addition to the activities eligible under the Predevelopment Loan Program, funds awarded pursuant to this section may be used for master environmental impact reports or other environmental documents that would access potential impacts in advance and propose measures to mitigate negative impacts. (d) Awards made pursuant to this section shall require a 50 percent match from the local agency in which the site is located. (e) In addition to those eligible sponsors specified in subdivision (e) of Section 50530.5, eligible sponsors shall include limited liability corporations and limited partnerships where all managing members or general partners are nonprofit organizations. SEC. 11. Section 50740 of the Health and Safety Code is amended to read: 50740. (a) The Rental Housing Construction Incentive Fund established in the State Treasury is hereby renamed the Rental Housing Construction Fund. Notwithstanding Section 13340 of the Government Code, all money in the fund is hereby continuously appropriated to the Department of Housing and Community Development, and, except as provided in subdivisions (b) and (c), shall be utilized for purposes of this chapter, Section 50775.5, and Chapter 15 (commencing with Section 50880). All interest or other increment resulting from investment or deposit of moneys in the fund shall be deposited in the fund, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund shall not be subject to transfer to any other fund pursuant to Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, except the Surplus Money Investment Fund. (b) An amount not to exceed four million dollars ($4,000,000) of the moneys from the fund utilized by the agency for development costs which is repaid to the agency or disencumbered on or after July 1, 1983, shall be deposited in a separate account and utilized and apportioned in accordance with the following percentages as it becomes available: (1) Fifty percent of the moneys shall be transferred by the agency to the department and deposited in the Housing Rehabilitation Loan Fund, established pursuant to Section 50661, and utilized for making deferred payment loans for residential hotels as authorized by subdivision (b) of Section 50661 and for purposes of subdivision (c) of that section. (2) Twenty-five percent of the moneys shall be transferred by the agency to the department for deposit in the Emergency Housing and Assistance Fund, established pursuant to Section 50800. (3) Twenty-five percent of the moneys shall be transferred by the agency to the department for deposit in the annuity fund, established pursuant to Section 50738.5. (c) Notwithstanding any other provision of law, effective with the date of the act adding this subdivision, appropriations authorized for support of the department from the Family Housing Demonstration Account shall instead be authorized for expenditure from the Rental Housing Construction Fund. SEC. 12. Section 50740.1 of the Health and Safety Code is repealed. SEC. 13. Section 50748.1 of the Health and Safety Code is amended to read: 50748.1. (a) The department shall from time to time direct the Treasurer to invest moneys set aside or otherwise deposited in the annuity fund established by Section 50748 as an account in the Rental Housing Construction Fund, which are not required for its current needs, in the eligible securities specified in Section 16430 of the Government Code that are designated by the department. The department may direct the Treasurer to deposit moneys in interest-bearing accounts in state or national banks or other financial institutions having principal offices in this state, or in other investments which are consistent with state policy and achieve returns adequate to fulfill the requirements of this chapter. The department may alternatively require the transfer of moneys in the annuity fund to the Surplus Money Investment Fund for investment pursuant to Article 4 (commencing with Section 16470) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code. All interest or other increment resulting from the investment or deposit shall be deposited in the annuity fund account, notwithstanding Section 16305.7 of the Government Code. Moneys in the fund are not subject to transfer to any other fund pursuant to Part 2 (commencing with Section 16300) of Division 4 of Title 2 of the Government Code, except the Surplus Money Investment Fund. (b) Upon request of the department, the Controller shall transfer from the annuity fund account in the Rental Housing Construction Fund, an aggregate amount not exceeding five million dollars ($5,000,000) to the Predevelopment Loan Fund. The department shall determine the respective amount to be deposited in these funds. Transfers made pursuant to this subdivision shall be treated as advances and shall be repaid, with interest specified in this subdivision, within three years of the effective date of transfer of the moneys, except that the department may defer repayment if (1) the balance of moneys in the annuity fund account is sufficient to meet current or anticipated financial obligations and (2) the financial integrity of any component or fund of the Rental Housing Construction Program is not at risk. Moneys advanced pursuant to this subdivision shall be repaid with interest at the rate of 7 percent. SEC. 14. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to facilitate an increase in the state's critically short supply of housing as soon as possible, it is necessary that this act take effect immediately.