BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 639
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          ASSEMBLY THIRD READING
          AB 639 (John A. Pérez)
          As Introduced  February 20, 2013
          2/3 vote.  Urgency

           HOUSING             7-0         VETERANS AFFAIRS    8-0         
           
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          |Ayes:|Torres, Beth Gaines,      |Ayes:|Muratsuchi, Chávez,       |
          |     |Atkins, Brown, Chau,      |     |Atkins, Brown, Eggman,    |
          |     |Maienschein, Mullin       |     |Fox, Salas, Yamada        |
           ----------------------------------------------------------------- 

           APPROPRIATIONS      16-0                                        
           
           ----------------------------------------------------------------- 
          |Ayes:|Gatto, Harkey, Bigelow,   |     |                          |
          |     |Bocanegra, Bradford, Ian  |     |                          |
          |     |Calderon, Campos, Eggman, |     |                          |
          |     |Gomez, Hall, Ammiano,     |     |                          |
          |     |Linder, Pan, Quirk,       |     |                          |
          |     |Wagner, Weber             |     |                          |
           ----------------------------------------------------------------- 

           SUMMARY  :  Authorizes the issuance of $600 million in general  
          obligation (GO) bonds for the constructions, rehabilitation, and  
          preservation of affordable multifamily, supportive, and  
          transitional housing for veterans, if approved by the voters at  
          the November, 2014, general election.  Specifically,  this bill  :   


          1)Authorizes the issuance of $600 million in GO bonds, the  
            proceeds of which are to be made available to the Department  
            of Housing and Community Development (HCD) for the purpose of  
            constructing, rehabilitating, and preserving affordable  
            multifamily, supportive, and transitional housing for  
            veterans.

          2)Restricts the use of bond proceeds to only those housing units  
            designated for veterans and their families.

          3)Requires the program to be administered by HCD in  
            collaboration with the California Department of Veterans  
            Affairs (CalVet).








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          4)Requires HCD to establish a program to focus on veterans at  
            risk of homelessness or experiencing temporary or chronic  
            homelessness.

          5)Requires HCD, to the extent feasible, to establish and  
            implement programs that, among other things:

             a)   Leverage public, private, and nonprofit program and  
               fiscal resources;

             b)   Prioritize projects that combine housing and supportive  
               services, such as job training, mental health and drug  
               treatment, or physical rehabilitation;

             c)   Promote public and private partnerships; and

             d)   Foster innovative financing opportunities.

          6)Allows the Legislature, by majority vote, to amend the  
            provisions of the act for the purpose of improving program  
            efficiency, effectiveness, and accountability, or for the  
            purpose of furthering overall program goals.

          7)Creates the Housing for Veterans Fund and requires the  
            proceeds of bonds issued and sold pursuant to the bill to be  
            deposited in the fund.

          8)Subjects bonds deposited in Housing for Veterans Fund to  
            annual appropriation, as determined by the Legislature.

          9)Requires the measure to be submitted to the voters at the  
            November 4, 2014, general election.

          10)Contains an urgency clause.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:


          1)One-time General Fund costs of about $220,000 to include in  
            the voter pamphlet the text and analysis of the bond measure  
            and any arguments for and against the measure.









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          2)Total debt service would be about $25 million a year,  
            depending on the interest rate and the timing of the sales.   
            This is a new obligation of the state because this bill  
            redirects debt authorization rather than increasing it.


          3)GO bonds are backed by the full faith and credit of the state.  
            Most GO bonds are paid off from the General Fund. The bonds  
            authorized for the CalVet Home Loan Program are unusual  
            because the payments made by the veterans participating in the  
            program have been sufficient to retire the bonds, so the  
            General Fund has been protected.  However, if payments made by  
            veterans participating in the program do not fully cover  
            principal and interest payments on the bonds, the General Fund  
            would pay the difference. It is unknown if the program  
            proposed by this bill can achieve the same record of  
            repayment. 


           COMMENTS  :  Various studies indicate that veterans are more  
          likely than the general population to become homeless, and make  
          up a disproportionate share of the homeless population.   
          Although veterans are only about 8% of the U.S. population, they  
          make up approximately 15% to 20% of the homeless population.  
          Veterans' homelessness is particularly acute in certain parts of  
          the country, including California, which is home to 25%, or  
          about 19,000, of the nation's homeless veterans. Los Angeles  
          alone is home to over 8,000 homeless veterans. With respect to  
          the nation's homeless veterans who are unsheltered, nearly 44%  
          are located in California. 

          In addition to the veterans who are already experiencing  
          homelessness, there are many more veterans who have unstable  
          housing situations that place them at risk of homelessness.  For  
          some, remaining housed may be as basic as having more affordable  
          housing options. For others, the challenges are more complex and  
          may involve a range of issues from lack of job training to  
          needing ongoing treatment for substance abuse or mental health  
          issues.  

          Numerous studies have shown that providing housing along with  
          the supportive services individuals need to address mental  
          health, substance abuse, and other issues has a net benefit in  








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          terms of public costs. For example, in 2009, the Los Angeles  
          Economic Roundtable compared the public costs for individuals in  
          supportive housing compared to similar individuals who were  
          homeless. The study concluded that the typical public cost for a  
          homeless person is $2,897 per month, compared with just $605 per  
          month in public cost for a resident in supportive housing. The  
          stabilizing effect of housing plus supportive services is  
          demonstrated by a 79% reduction in public costs. In short,  
          public costs go down when people are no longer homeless.

          Despite California's high number of homeless veterans, the state  
          does not have any programs that are directly targeted at serving  
          this population, or at serving lower-income veterans who are at  
          risk of homelessness. HCD offers various programs that support  
          the development of multifamily rental housing for low income  
          Californians, including supportive and transitional housing, but  
          none are veteran-specific. HCD's programs have been funded since  
          2002 from two voter-approved housing bonds, Proposition 46 of  
          2002 and Proposition 1C of 2006. These funds are nearly gone and  
          it is unclear when additional funds will be available. In  
          addition, the elimination of redevelopment agencies meant a loss  
          of around $1 billion per year in affordable housing funding,  
          funds that generally worked in concert with state dollars and  
          other sources of funding to produce affordable units for  
          lower-income Californians.

          CalVet runs the California Veteran Farm and Home Purchase  
          Program, often referred to as the CalVet Home Loan Program,  
          which was established in 1921 and reauthorized in 1943 and again  
          in 1974.  The program provides loans to veterans for  
          single-family residences, including condominiums and planned  
          unit developments; farms; units in cooperative developments; and  
          mobilehomes in rental parks or on land owned by the veteran.  
          While the program has assisted over 420,000 veterans over the  
          years, it has seen a sharp decline in activity over the last  
          decade. In 2003, the program issued 1,130 new loans; in 2012 it  
          issued just 83. In the same time period, the program's portfolio  
          of outstanding loans declined from 20,169 to 7,913. 

          CalVet's Home Loan Program is funded primarily by veterans'  
          bonds, a type of tax-exempt GO bond. Although GO bonds are  
          always backed by the full faith and credit of the state, the  
          bonds issued for the CalVet home loan program are unusual  
          because the payments made by the veterans participating in the  








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          program always have been sufficient to retire the bonds. The  
          program has never had a General Fund cost. The Legislature has  
          placed on the ballot and California voters have approved 23  
          veterans' bonds since 1943 to provide funding for the program.  
          The most recent was Proposition 12 in 2008, which authorized  
          $900 million in bonding authority. The prior bond, Proposition  
          32 of 2000, authorized $500 million in bonding authority. To  
          date, CalVet has not issued any of the bonds approved under  
          Proposition 12, and has about $230 million in bonding authority  
          left under Proposition 32.

          This bill establishes the Veterans Housing and Homeless  
          Prevention Act to restructure $600 million of the $900 million  
          in bonds approved by the voters for the CalVet Home Loan Program  
          in 2008 and use them to fund the construction and rehabilitation  
          of affordable multifamily, supportive, and transitional housing  
          for veterans. The move would leave CalVet with $530 million in  
          bonds for its home loan program. The bill tasks HCD with  
          administering the new funding program in collaboration with  
          CalVet and restricts the use of bond proceeds to housing units  
          designated for veterans and their families. The focus of the  
          program would be on housing for veterans who are homeless or at  
          risk for homelessness and in need of services such as mental  
          health counseling, substance abuse treatment, job training, and  
          physical therapy. Restructuring the bonds requires voter  
          approval, which would be sought at the 2014 general election. 


           Analysis Prepared by  :    Anya Lawler / H. & C.D. / (916)  
          319-2085                                     FN: 0000874