BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 347 (Beall) - Youth shelters: funding.
          
          Amended: April 1, 2013          Policy Vote: Public Safety 7-0
          Urgency: No                     Mandate: No
          Hearing Date: April 15, 2013                            
          Consultant: Jolie Onodera       
          
          This bill meets the criteria for referral to the Suspense File.
          
          
          Bill Summary: SB 347 would allow a county to avoid repayment  
          provisions established under the Youth Center and Youth Shelter  
          Bond Act of 1988 for funds initially allocated for shelters for  
          abused and neglected children but were expended for shelters for  
          runaway or homeless youth, as specified.

          Fiscal Impact: 
              Near-term loss of revenue of at least $1 million (General  
              Fund) from the recent sale proceeds of property in Santa  
              Clara County subject to repayment provisions under current  
              law. The actual repayment amount, which has yet to be  
              determined, would be the proportion of the current value of  
              the property equal to the proportional share of state funds  
              contributed to the original cost of the project.
              Potential future loss of revenue of at least $1 million  
              (General Fund) for funds awarded to San Diego County should  
              the county violate its contract obligations prior to  
              September 2014.

          Background: In 1988, the voters approved Proposition 86, the  
          County Correctional Facility Capital Expenditure and Youth  
          Facility Bond Act, which provided for the issuance of $500  
          million in state general obligation bonds for the purpose of  
          financing the construction, reconstruction, remodeling,  
          replacement, and deferred maintenance of county correctional  
          facilities and county juvenile facilities, and to provide funds  
          to youth centers and youth shelters, to be allocated as follows:  
          $410 million for county correctional facilities, $65 million for  
          county juvenile facilities, and $25 million for youth centers  
          and youth shelters.

          Fifteen million of the $25 million allotment was to be available  








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          for youth centers, with the remaining $10 million to be  
          available for youth shelters. Funds were to be distributed by  
          the Division of Youth Authority (now the Division of Juvenile  
          Justice (DJJ)). According to the Board of State and Community  
          Corrections (BSCC), to whom authority was recently transferred  
          from the DJJ, the $25 million was awarded to 41 youth centers  
          and 28 youth shelters, and all funds have been awarded.

          For purposes of administration and allocation of the bond  
          proceeds, funding for youth centers and youth shelters have been  
          treated separately, with at least 70 percent of youth shelter  
          funding awarded to shelters for runaway youth and no more than  
          30 percent to shelters for abused and neglected children.
          Under existing law, the state is entitled to recapture a portion  
          of state funds from the recipient of a contract if, within 10  
          years after acquisition, 20 years after completion of  
          construction, or 3 to 10 years after renovation, as specified,  
          the recipient of a contract ceases to be a public or nonprofit  
          agency, or the facility is no longer used for youth center or  
          youth shelter activities.

          Proposed Law: This bill would provide counties with the  
          following flexibilities regarding funds allocated pursuant to  
          the Youth Center and Youth Shelter Bond Act of 1988:
              Allows a county to avoid repayment provisions under  
              existing law where funds initially allocated for shelters  
              for abused and neglected children were expended for shelters  
              for runaway or homeless youth, as specified.
              Authorizes a county to use unexpended funds awarded to a  
              shelter for abused and neglected children for the purpose of  
              acquiring, renovating, constructing, or purchasing equipment  
              for a shelter for runaway or homeless youth. Requires the  
              revision of contracts as necessary to implement this  
              authority. 
              Authorizes a county to use funds received under a contract,  
              as specified, to provide grant awards to private nonprofit  
              entities for the acquisition, renovation, construction, or  
              purchase of equipment for a youth shelter.

          Related Legislation: AB 2737 (Waters) Chapter 1535/1988 created  
          the Youth Center and Youth Shelter Bond Act of 1988,  
          establishing the authority and process for awarding the bond  
          proceeds for youth shelters and youth centers authorized under  
          Proposition 86.








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          Staff Comments: In 1990, the County of Santa Clara applied for  
          and received $1 million in funding under the Act to help  
          construct a youth shelter for abused and neglected children.  
          Under existing law, the state is entitled to recapture funds  
          from the County if the facility is no longer used for its  
          originally intended purposes within 20 years after completion of  
          construction of the project. Because the County recently sold  
          the property before the 20-year period elapsed (May 2016), the  
          state is entitled to repayment of the funds under current law.  

          Under the provisions of this bill, the state would no longer be  
          entitled to repayment by the County of these funds. The County  
          would be allowed to retain and redirect these funds for the  
          purposes of acquiring, renovating, constructing, or purchasing  
          equipment for a shelter for runaway or homeless youth. As a  
          result, the fiscal impact to the state is estimated to be a loss  
          of revenue of at least $1 million (General Fund). The actual  
          repayment amount, which could be greater than the original state  
          award, is to be based on the current value of the property as  
          agreed upon between the County and the state, and would be the  
          proportion of the current value of the property equal to the  
          proportional share of state funds contributed to the original  
          cost of the project. 

          Based on the estimated cost of construction of the shelter of  
          $17.8 million, the state award of $1 million represents 5.6  
          percent of the initial cost. Applying this factor to the  
          "current value" of the property of $20.4 million ($25.5 million  
          contract sale price less $5.1 million in costs to clear title),  
          the value of the state repayment is estimated at $1.15 million.  
          The actual repayment obligation would be dependent on the  
          documented cost of the original construction and an agreed upon  
          "current value" between the County and the state.

          According to information from the BSCC, apart from the Santa  
          Clara County project, only three youth shelter projects still  
          have time remaining on their contracts to fulfill the useful  
          life requirements under current law. Of those three projects,  
          only one is county-operated (the other two are private nonprofit  
          entities) and would be impacted under the proposed repayment  
          relief provisions of this bill. San Diego County and a private  
          child abuse agency (the Child Abuse Prevention Foundation)  
          submitted a joint proposal for funding and received $1 million  








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          in August 1990 from the state for construction of a facility for  
          abused children. Should San Diego County sell the property or  
          cease its use as a shelter prior to September 2014, no repayment  
          to the state would be required under the provisions of this  
          bill. The fiscal impact is estimated to be a loss of revenue of  
          at least $1 million (General Fund), but potentially greater, and  
          as noted above, would be dependent on the state's proportional  
          share of the initial cost of the project and the agreed upon  
          current value of the property.

          Staff notes the use of any unexpended funds or derivative sale  
          proceeds towards shelters for runaway or homeless youth as  
          authorized under the provisions of this bill does not appear  
          inconsistent with the original intent of the initiative passed  
          by the voters in 1988.