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 SB 347 (Beall) Page 1 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. SB 347 (Beall) Page 2 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 SB 347 (Beall) Page 3 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.