BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  AB 2327|
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                                    CONSENT


          Bill No:  AB 2327
          Author:   Harkey (R), et al
          Amended:  6/21/10 in Senate
          Vote:     21

           
           SENATE BANKING, FINANCE, AND INS. COMMITTEE  :  10-0, 6/30/10
          AYES:  Calderon, Cogdill, Correa, Florez, Kehoe, Liu,  
            Lowenthal, Padilla, Price, Runner
          NO VOTE RECORDED:  Cox

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8

           ASSEMBLY FLOOR  :  63-0, 5/28/10 (Consent) - See last page  
            for vote


           SUBJECT  :    Affordable housing:  risk retention pool

           SOURCE  :     Housing Authorities Risk Retention Pool


           DIGEST  :    This bill authorizes an affordable housing  
          entity to join with one or more affordable housing entities  
          in an arrangement providing for the pooling of self-insured  
          claims or losses, as specified.

           ANALYSIS  :    

           Existing law  :
           
          1. Authorizes local agencies to enter into a joint pooling  
             agreement to form a single statewide insurance pooling  
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             arrangement for the payment of tort liability or public  
             liability losses incurred by those agencies.  The agency  
             is known as the Local Agency Self-Insurance Authority. 

          2. Authorizes local public agencies to self-insure against  
             liability for injury resulting from an act or omission  
             of their employees in the scope of their employment.

          3. Authorizes two or more local public entities, by a joint  
             powers agreement, to provide insurance through  
             self-insurance, or from an admitted insurer, or from a  
             nonadmitted insurer when obtained through a surplus  
             lines broker.

          4. Specifies that the pooling of self-insured claims or  
             losses among local public entities is not considered  
             insurance and is not subject to regulation by the  
             Insurance Commissioner.

          5. Authorizes two or more public agencies by agreement to  
             jointly exercise any power common to the contracting  
             powers, even though one or more of the contracting  
             agencies are located outside this state.

          This bill:

          1. Authorizes an affordable housing entity to join with one  
             or more other affordable housing entities in an  
             arrangement providing for the pooling of self-insured  
             claims or losses with respect to any of the following:

             A.    Insurance covering all or any part of any tort  
                liability.

             B.    Insurance covering any employee of the  
                affordable housing entity against all or any part  
                of his or her liability for injury resulting from  
                an act or omission in the scope of employment.

             B.    Insurance covering any board member, officer,  
                partner, manager, member, or volunteer of the  
                affordable housing entity against any liability  
                that may arise from any act or omission in the  
                scope of participation with the affordable housing  

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                entity.

             C     Insurance covering any loss arising from  
                physical damage to motor vehicles, personal  
                property, real property, or other property owned or  
                operated by the affordable housing entity.

          2. Specifies the pooling arrangement established by this  
             bill arel not be considered insurance.
          3. Requires all affordable housing entities participating  
             in a pooling arrangement be given written notice, in at  
             least 10-point type, that the pool is not regulated by  
             the Insurance Commissioner and that the state insurance  
             insolvency guaranty funds are not available to safeguard  
             its risk.

          4. Provides any insurance pool may be organized as a  
             nonprofit corporation, limited liability company,  
             partnership, or trust, whether organized under the laws  
             of this state or another state or operating in another  
             state.

          5. Requires any insurance pool have initial pooled  
             resources of not less than $2,500,000 in the form of  
             cash or cash equivalents.

          6. Requires any insurance pool maintain adequate  
             reinsurance to protect against its risks. 

          7. Requires any insurance pool furnish a copy of the pool's  
             annual audited financial statement and most recent  
             actuarial review, by first class mail or by any other  
             method of delivery, including electronic transmission,  
             to the Assembly Committee on Housing and Community  
             Development, the Assembly Committee on Insurance, the  
             Senate Committee on Banking, Finance, and Insurance, and  
             the Senate Committee on Transportation and Housing  
             within 180 days of the close of the pool's fiscal year.   
             If, in the period of time since the last submittal any  
             of the following has occurred, the transmittal letter  
             accompanying the annual audited financial statement and  
             most recent actuarial review shall so indicate and shall  
             provide a brief description of each matter:


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             A.    There has been a change to the pool's plan of  
                financing, management, or operation, including any  
                material amendment to any of those plans.

             B.    A claims audit report has been filed with any  
                regulatory body with respect to the pool.

             C.    A report of examination issued by any regulatory  
                body with respect to the pool has been received.

             D.    There has been a material change in the scope of  
                the regulation of the pool by other states in which  
                the pool operates.

          8. Requires all participating affordable housing entities  
             in any insurance pool to agree to pay premiums or make  
             other mandatory financial contributions, as determined  
             by the governing board, provided for by the insurance  
             pool arrangement, that are necessary to ensure a  
             financially sound risk pool.

          9. Prohibits these insurance pools from insuring against  
             workers' compensation liability.

          10.Specifies that nothing in this bill shall be construed  
             to authorize an affordable housing entity to pay or  
             insure for any claim or judgment against an employee of  
             the affordable housing entity for punitive or exemplary  
             damages.

          11.Defines "affordable housing entity as specified"

           Comments  

          Public housing authorities have the ability to join  
          together in multi-state joint self-insurance risk pools to  
          manage property and liability risks, jointly purchase  
          insurance or reinsurance, and to contract for risk  
          management, claims, and administrative services in order to  
          conserve scarce resources.  These pools are limited to  
          participation by public entities.
           
          Affordable housing is increasingly being developed by tax  
          credit limited partnerships, limited liability companies,  

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          and nonprofit corporations.  Public housing projects are  
          being transferred to these entities (a process called  
          "de-federalization") because of HUD's asset management  
          restrictions and the decrease in HUD capital funds and  
          moneys for operating subsidies.
           
          When a tax-credit limited partnership develops affordable  
          housing, either housing authority or a nonprofit  
          corporation acts as the general partner, and institutional  
          financing sources become the limited partners.  Nonprofit  
          corporations have become more active in the development of  
          affordable housing because they have access to funding  
          sources that may not be available to public housing  
          authorities.

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

           SUPPORT  :   (Verified  8/4/10)

          Housing Authorities Risk Retention Pool (source)
          California Coalition for Rural Housing
          Housing Authority of the County of Alameda
          Housing Authority of the County of Monterey


           ARGUMENTS IN SUPPORT  :    The bill's sponsor, the Housing  
          Authorities Risk Retention Pool (HARRP), is a California  
          joint powers authority that operates as a self-insurance  
          pool comprised of over 90 public housing authorities from  
          Oregon, Washington, California and Nevada.  HAARP is  
          limited to insuring property where a housing authority is  
          the sole owner, a situation that is increasingly rare.  The  
          HARRP argues that California needs to update its statutes  
          to permit other types of entities that develop, acquire, or  
          manage affordable housing to establish cost-efficient,  
          multi-state insurance risk pools as a way to maintain the  
          availability of affordable housing in this state.

          According to the sponsor, California affordable housing  
          entities will benefit from the ability to become a member  
          of a multi-state self-insurance pool.  The ability to  
          provide low cost insurance, broadened coverage, and  
          effective risk management tailored to affordable housing  

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          risk exposures translates into more abundant affordable  
          housing for California residents without any new government  
          expenditures.


           ASSEMBLY FLOOR  : 
          AYES: Adams, Ammiano, Anderson, Arambula, Beall, Block,  
            Blumenfield, Bradford, Brownley, Buchanan, Caballero,  
            Charles Calderon, Conway, Cook, Coto, Davis, DeVore, Eng,  
            Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Gaines,  
            Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,  
            Hernandez, Hill, Huber, Huffman, Jones, Knight, Lieu,  
            Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning,  
            Nava, Nestande, Niello, Nielsen, Norby, V. Manuel Perez,  
            Portantino, Ruskin, Saldana, Skinner, Solorio, Swanson,  
            Torlakson, Torres, Torrico, Tran, Villines, Yamada, John  
            A. Perez
          NO VOTE RECORDED: Bass, Bill Berryhill, Tom Berryhill,  
            Blakeslee, Carter, Chesbro, De La Torre, De Leon,  
            Emmerson, Furutani, Hall, Jeffries, Salas, Silva, Smyth,  
            Audra Strickland, Vacancy


          JJA:do  8/4/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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