BILL ANALYSIS Ó AB 639 Page 1 ASSEMBLY THIRD READING AB 639 (John A. Pérez) As Introduced February 20, 2013 2/3 vote. Urgency HOUSING 7-0 VETERANS AFFAIRS 8-0 ----------------------------------------------------------------- |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). AB 639 Page 2 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. AB 639 Page 3 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 AB 639 Page 4 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 AB 639 Page 5 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