BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 391 (DeSaulnier) - California Homes and Jobs Act of 2013.
          
          Amended: May 7, 2013            Policy Vote: T&H 6-3; G&F 5-2
          Urgency: Yes                    Mandate: Yes
          Hearing Date: May 13, 2013      Consultant: Mark McKenzie
          
          This bill meets the criteria for referral to the Suspense File. 

          
          Bill Summary: SB 391, an urgency measure, would impose a fee of  
          $75 on the recording of real estate documents, except those  
          recorded in connection with a property transfer, as specified.   
          Fee revenues would be available for expenditure for affordable  
          housing purposes, upon appropriation by the Legislature.

          Fiscal Impact: 
              Unknown fee revenue gains ranging from $300 million to $720  
              million per year depending on the volume of recorded  
              documents (California Homes and Jobs Trust Fund - CHJ Trust  
              Fund).

              Estimated annual administrative costs of approximately $5.4  
              million (CHJ Trust Fund) to fund up to 47 positions at the  
              Department of Housing and Community Development (HCD).  All  
              HCD administrative costs are fully covered by fees  
              collected.

              Costs in the range of $250,000 to $350,000 (CHJ Trust Fund)  
              in 2016-17 to the Bureau of State Audits (BSA) to conduct an  
              initial audit.  Ongoing periodic audit costs in the range of  
              $150,000 to $250,000 (CHJ Trust Fund).  All BSA audit costs  
              are fully covered by fees collected.

              Unknown local mandate costs, not state-reimbursable.  The  
              bill authorizes the county recorder to deduct actual and  
              necessary costs to administer to collection of recordation  
              fees prior to transmitting the balance to the state.

          Background: The Department of Housing and Community Development  
          and the California Housing Finance Agency (CalHFA) administer  
          numerous programs designed to make housing more affordable for  
          California families and individuals, including:  the Multifamily  








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          Housing Program, which funds construction, rehabilitation, and  
          preservation of housing for lower income households; the Joe  
          Serna, Jr. Farmworker Housing Program, which funds the  
          development of ownership or rental homes for agricultural  
          workers; the Emergency Housing Assistance Program, which funds  
          emergency shelters and transitional homes for homeless  
          individuals and families; the CalHome Program, which funds  
          downpayment assistance, home rehabilitation, counseling,  
          self-help mortgage assistance programs, and technical  
          assistance; and the California Homebuyer Downpayment Assistance  
          Program, which aids first-time homebuyers with down payment  
          and/or closing costs.

          The state has typically funded state housing programs through  
          the issuance of general obligations bonds.  Most recently,  
          voters approved Proposition 46 in 2002, which provided $2.1  
          billion in housing bonds, and Proposition 1C in 2006, which  
          authorized the issuance of an additional $2.85 billion in  
          general obligation bonds for various housing programs.  Nearly  
          all of the Propositions 46 and 1C bond funds that support  
          affordable housing projects and programs have been allocated,  
          although the State Treasurer has not yet issued bonds to finance  
          all of the programs that have received an allocation.  

          Apart from general obligation bonds, tax increment revenues  
          provided pursuant to the Community Redevelopment Law have also  
          been a major source of affordable housing funds.  Specifically,  
          existing law required redevelopment agencies to deposit 20% of  
          all tax increment revenue available to the agency into their Low  
          and Moderate-Income Housing Funds to increase, improve, and  
          preserve the community's supply of low and moderate income  
          housing available at an affordable housing cost.  In the 2009-10  
          fiscal year, $1.075 billion of redevelopment property tax  
          increment revenues were set aside for affordable housing.  As  
          part of a General Fund solution in the 2011-12 budget, however,  
          ABx1 26 (Blumenfield) was enacted to eliminate redevelopment  
          agencies, thereby eliminating a significant source of housing  
          funds. 

          This bill is intended to provide a permanent source of  
          affordable housing funds to partially offset the loss of funding  
          due to the elimination of redevelopment tax increment funds and  
          the impending depletion of housing bond funds.









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          Proposed Law: SB 391 would enact the California Homes and Jobs  
          Act of 2013.  Specifically, this bill would impose a fee of $75  
          at the time of recording of specified real estate instruments,  
          papers, or notices, not including those recorded in connection  
          with a transfer subject to the imposition of a documentary  
          transfer tax (property transfers).  After deducting  
          administrative costs incurred by the county recorder, the fee  
          revenues would be sent to HCD on a quarterly basis for deposit  
          in the California Homes and Jobs Trust Fund (CHJ Trust Fund),  
          created by the bill.  The funds would be available, upon  
          appropriation by the Legislature, for support of the  
          development, acquisition, rehabilitation, and preservation of  
          housing affordable to low and moderate income households, and to  
          cover HCD administrative costs, as well as costs for periodic  
          audits.  Specified purposes for the funds include foreclosure  
          mitigation, homeownership opportunities, emergency shelters, and  
          transitional and permanent rental housing, including necessary  
          service and operating subsidies.

          This bill would require the Bureau of State Audits (BSA) to  
          conduct periodic audits, beginning two years after enactment, to  
          ensure that the annual allocation to individual programs is  
          awarded by HCD in a timely fashion.  SB 391 would also require  
          HCD to include information in its existing annual report on how  
          the funds provided by the bill were expended in the previous  
          year, including efforts to promote a geographically balanced  
          distribution of funds.

          Related Legislation: SB 1220 (DeSaulnier), a nearly identical  
          bill, failed passage on the Senate Floor in 2012 on a vote of  
          25-13.

          Staff Comments: HCD estimates that revenues from a $75 per  
          document recording fee on the specified real estate related  
          documents would generate approximately $300 million annually  
          during years when real estate transactions are at lowest levels  
          and up to $720 million annually during years when transactions  
          are at their highest point. 

          Based on historical staffing levels for rental and homeowner  
          programs previously administered by HCD, the Department  
          estimates the need for up to 47 positions in the first full year  
          of operation at an estimated cost of $5.4 million as a result of  
          this bill.  This assumes that revenues from the new fee would  








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          primarily be used for expenditure on existing programs.  There  
          could be additional costs associated with structuring new  
          programs or revising existing programs to accommodate the  
          priorities of the Legislature or the Administration when the  
          funds are appropriated.  The bill does not currently provide  
          detail on how the funds would be allocated.  The redirection of  
          existing HCD staff dedicated to current bond-funded programs to  
          any new programs supported by fee revenues would occur as a part  
          of the annual budget process.

          HCD and CalHFA, the likely administrators of the housing  
          programs to be funded by this measure, have historically  
          maintained administrative costs at 5% or less of the funding  
          allocated for existing state-administered housing programs.   
          This bill continues this practice by explicitly authorizing up  
          to 5% of the funds deposited in the CHJ Trust Fund for  
          administering housing programs that receive an appropriation  
          from the fund. 

          Under the Joint Rules of the Senate and Assembly, Rule 37.4 (b)  
          specifies that "any bill requiring action by the Bureau of State  
          Audits shall contain an appropriation for the cost of any study  
          or audit."  To comply with this requirement, the bill explicitly  
          authorizes funds appropriated by the Legislature from the CHJ  
          Trust Fund to be used to pay for costs of periodic audits, as  
          specified. 

          Staff notes that Legislative Counsel has determined that this  
          bill would result in a change in state taxes for the purpose of  
          increasing state revenues within the meaning of Section 3 of  
          Article XIIIA of the California Constitution, and would thus  
          require the approval of 2/3 of the membership of each house of  
          the Legislature for passage.  Prior to 2010, specified fees  
          could be enacted by majority vote, but this authority was  
          significantly limited by Proposition 26 (2010).