BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 639 (J. Perez) - Veterans Housing Bond
Amended: July 3, 2013 Policy Vote: VA 7-0, T&H 11-0
Urgency: Yes Mandate: No
Hearing Date: August 12, 2013
Consultant: Maureen Ortiz
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 639 enacts the Veterans Housing and Homeless
Prevention Bond Act of 2014, subject to approval by the voters,
to authorize the issuance of $600 million in bonds from the
Veterans' Bond Act of 2008 to provide multifamily housing and
services to veterans.
Fiscal Impact:
Total debt service of approximately $25 million annually
(General)
Approximately $220,000 in one-time ballot printing/mailing
costs (General)
Background: In 2008, enacted by SB 1572 (Wyland, Chapter 122,
Statutes of 2008), the voters approved Proposition 12 which
created the Veterans' Bond Act of 2008 authorizing the issuance
of $900 million in general obligations bonds to be used to fund
the Veterans Farm and Home Loan Program (Cal-Vet Home Loan
Program). Prior to that, the voters had approved a $500 million
bond authorization in 2000 (Proposition 32).
The revenue from those bonds is used by the Department of
Veterans Affair (DVA) to purchase farms, homes, units in
cooperative developments, and mobile homes which are then resold
to California veterans. Each veteran makes monthly payments to
the Department which are set in an amount sufficient to do all
of the following:
1) Reimburse the department for its costs in purchasing the
farm home or mobilehome,
AB 639 (J. Perez)
Page 1
2) Pay all of the costs resulting from the sale of the bonds,
including interest on the bonds, and
3) Pay all of the costs of operating the program. The interest
rate on a Cal-Vet loan is generally lower than the national
average for all other 30 year fixed rate loans.
Although the Cal-Vet Home Loan Program is funded through general
obligation loans which are a fiscal responsibility of the state,
it has historically been fully supported by the participating
veterans without any state costs. If, however, payments made by
program participants do not fully cover principal and interest
payments on the bonds, because general obligations bonds are
backed by the state, the difference would come from the General
Fund. However, this has not happened since the creation of the
program, and the default rate is very low. Since the department
actually holds the title to the homes, and the loans are not
sold on the secondary market, if a homeowner does default on a
Cal-Vet loan, the department sells the home to recoup the loan
proceeds. In the rare event that there is a short sale, the DVA
has a mechanism in place referred to as "loan loss reserves"
which is a set-aside that is required by their independent
auditors and can be used to further prevent any costs to the
General Fund.
Since its inception in 1921, the Cal-Vet Home Loan Program has
assisted over 420,000 veterans in purchasing a home or farm.
Over the last decade, however, there has been a sharp decline in
loan activity. In 2003, the program issued 1,130 new loans. In
2012, it issued just 83 loans. In the same time period, the
program's portfolio of outstanding loans declined from 20,169 to
7,913. While recovery in the general housing market may
increase homebuyer demands among veterans, program participation
depends largely on how competitive its interest rates are with
other loan products.
As of this date, all of the $900 million bond authorization from
Proposition 12 in 2008 and approximately $230 million of the
$500 million authorization from Proposition 32 in 2000 remain
unused.
Proposed Law: AB 639 enacts the Veterans Housing and Homeless
Prevention Bond Act of 2014. Specifically, the bill does the
AB 639 (J. Perez)
Page 2
following:
a) Restructures $600 million of the existing $900 million bond
authorized by Proposition 12 of 2008 for the purpose of creating
a fund to provide the acquisition, construction, rehabilitation,
and preservation of affordable multifamily supportive housing,
affordable multifamily transitional housing, or related
facilities and services to veterans and their families.
b) Creates the Housing for Veterans Fund for the deposit of the
proceeds of the bonds issued and sold, and subjects the funds to
an annual appropriation by the Legislature.
c) Creates the Housing for Veterans Finance Committee
consisting of the Controller, Treasurer, Director of Finance,
Secretary of Business, Consumer Services and Housing, and the
Secretary of Veterans Affairs for the purpose of authorizing the
issuance and sale of the bonds.
d) Creates a board consisting of the California Housing Finance
Agency (CHFA), the Department of Housing and Community
Development (HCD), and the Department of Veterans Affairs (DVA)
to do all of the following:
Leverage public, private, and nonprofit program and
fiscal resources,
Prioritize projects the combine housing and supportive
services, such as job training, mental health and drug
treatment, or physical rehabilitation,
Promote public and private partnerships,
Foster innovative financing opportunities,
Adopt guidelines or regulations, and administer the
program, and
Submit an MOU entered into between the DVA and the HCD
and CHFA to the Senate and Assembly Budget Committees by
March 4, 2015.
e) AB 639 authorizes the Legislature, by majority vote, to
AB 639 (J. Perez)
Page 3
amend the provisions of the act for the purpose of improving
program effectiveness and accountability, or for the purpose of
furthering overall program goals.
f) Requires the measure to be submitted to the voters at the
2014 statewide general election.
g) Provides that the proceeds of the bonds will be subject to
an annual appropriation by the Legislature.
h) Requires the DVA to enter into a memorandum of understanding
with the HCD and CHFA to address their respective and shared
responsibilities in implementing, overseeing, and evaluating the
housing program.
Additionally, AB 639 requires the board to convene a stakeholder
process to provide information for the development of guidelines
for the implementation of any program that is developed for the
use of the bond proceeds. Stakeholders may include organizations
that have experience providing housing or homeless services to
veterans, housing developers, and public and private agencies
that serve the veteran population.
Related Legislation: SB 1572 (Wyland, Chapter 122, Statutes of
2008) authorized the issuance of $900 million in general
obligation bonds for the Cal-Vet Home Loan Program.
Staff Comments: California is home to nearly two million
veterans and with the unwinding of the wars in Iraq and
Afghanistan that number is expected to dramatically increase.
Many of these veterans are in need of housing, employment,
mental health and drug treatment, and physical rehabilitation.
California leads the nation in the number of homeless veterans.
AB 639 will restructure Proposition 12 to allow for the
development of multifamily housing for veterans, with a priority
for projects that align housing with services. If enacted,
this measure will preserve approximately $500 million in the
existing bond authority for the Cal-Vet Home Loan Program.
While the current Cal-Vet Home Loan Program works more like
revenue bonds, with the homeowners paying all of the costs of
the debt service, it is more likely that the costs from the
restructure of this $600 million to be used for multi-family
AB 639 (J. Perez)
Page 4
housing will have to be paid from the General Fund.