BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     AB 325

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          Date of Hearing:  April 29, 2015


                                   Ed Chau, Chair

          AB 325  
          Wood - As Amended April 16, 2015

          SUBJECT:  Community Development Block Grant Program:  funds

          SUMMARY:  Makes specified changes to the Community Development  
          Block Grant (CDBG) Program application process. Specifically,  
          this bill:  

          1)Provides that, no later than 60 days after the Department of  
            Housing and Community Development (HCD) notifies an applicant  
            that their CDBG application has been approved, HCD must enter  
            into a grant agreement with the applicant.

          2)Requires HCD, when it enters into a grant agreement with an  
            applicant, to provide the applicant with a complete and final  
            list of all of the activities the applicant must complete in  
            order to receive a disbursement of funds pursuant to the  

          3)Requires HCD to do either of the following no later than 30  
            days after it receives a request for the disbursement of funds  
            from a grantee:


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               a)     Notify the grantee that HCD has approved  
                 disbursement of the funds.

               b)     Provide the applicant with a complete and final list  
                 of all of the remaining activities the applicant must  
                 complete in order for HCD to approve disbursement of the  

          EXISTING LAW:  

          1)Provides that the Legislature intends that funds allocated to  
            the state pursuant to the federal CDBG program, and  
            administered by HCD, be of maximum benefit in meeting the  
            housing and economic development needs of persons and families  
            of low or moderate-income (Health & Safety Code Section  

          2)Requires HCD to administer the State CDBG Program to eligible  
            cities and counties (Health and Safety Code Section 50825, et  
            seq., and the California Code of Regulations, Title 25,  
            Section 7050, et seq.).

          3)Defines the term "non-entitlement area" as an area which is  
            not a metropolitan city or part of an urban county and does  
            not include Indian tribes (42 United States Code Section  

          4)Defines an urban county generally, as having a population  
            greater than 200,000 given certain specified criteria (42  
            United States Code Section 5302).   


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          5)Defines a metropolitan city as having a population greater  
            than 50,000 given certain specified criteria (42 United States  
            Code Section 5302).   
          6)Requires generally, HCD to allocate not less than 51% of CDBG  
            funds for purposes of providing or improving housing  
            opportunities for low or moderate-income households (Health &  
            Safety Code Section 50828).

          7)Requires generally, HCD to allocate 30% of CDBG funds for  
            purposes of economic development (Health & Safety Code Section  

          FISCAL EFFECT:  Unknown.


           Background:   The CDBG program was established by the United  
          States Housing & Community Development Act of 1974 (HCD Act) and  
          is administered at the federal level by the U.S. Department of  
          Housing and Urban Development (HUD).  The primary federal  
          objective of the CDBG program is to develop viable urban  
          communities by providing decent housing and a suitable living  
          environment and by expanding economic opportunities, principally  
          for persons of low and moderate-income.  "Persons of low and  
          moderate-income" are defined as families, households and  
          individuals whose incomes do not exceed 80% of the county median  
          income, with adjustments for family or household size. Among the  
          many uses of CDBG funds are infrastructure improvements and  
          activities in support of the construction of housing. 
           Congress amended the HCD Act in 1981 to give each state the  


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          opportunity to administer CDBG funds for small cities and  
          counties.  Since 1983, HCD has administered the state CDBG  
          program in California.  Under the state CDBG Program, states  
          award grants to smaller cities and counties to develop and  
          preserve decent affordable housing, to provide services to the  
          most vulnerable in our communities, and to create and retain  
          jobs. Annually, each state develops funding priorities and  
          criteria for selecting projects.  Eligible applicants include  
          counties with fewer than 200,000 residents in unincorporated  
          areas and cities with fewer than 50,000 residents that do not  
          participate in the HUD CDBG entitlement program.  These are  
          known as "non-entitlement" areas.

          Each year, generally in January, HCD releases one combined  
          Notice of Funding Availability (NOFA) encompassing all  
          CDBG-eligible activities, including Community Development,  
          Economic Development, and the Native American and Colonia  
          Set-Asides.  The most recent NOFA was issued in January 2015,  
          and announced the availability of $24,983,999 in  
          state-administered federal CDBG funds.

          Federal and state laws and regulations apply to the state CDBG  
          program, and HCD issues a grant management manual and numerous  
          memoranda, checklists, and other documents that further expand  
          on the CDBG application and grant management process and  
          requirements.  Applicants that receive award letters later  
          receive a grant agreement, which is entered into between a local  
          representative and HCD.  The grant agreement reserves monies  
          from the CDBG allocation approved for funding by HCD.  Grant  
          payments are made to grantees by an advance or a reimbursement,  
          and the grant payment process must minimize the time between the  
          transfer of funds to the applicant and the applicant then  
          disbursing the funds.  Grantees must submit funds request forms  
          to HCD to request contract funds.  According to HCD's grant  
          management manual, HCD reviews each funds request and will  
          return it if corrections are needed.   


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          Need for this bill:   The author contends that certain CDBG  
          grantees are facing obstacles when applying for fund  
          disbursements with HCD, leading to confusion about what steps  
          need to be taken in order for the application to be acceptable.  
          According to the author, "the small cities and counties that  
          stand to gain the most from this program do not have the  
          expertise or the resources to navigate this unnecessarily  
          complicated and drawn out process.  In order to make the program  
          more accessible to some of our most underserved constituencies  
          we need to approve these efficiencies."

          The Rural County Representatives of California, a supporter of  
          the bill, states that "current practice in the grant program has  
          no limitation as to how long HCD has to respond to a completed  
          application, nor is there any requirement to give any reason or  
          justification as to denial or rejection of that application."   
          Additionally, "CDBG grants generate economic development  
          opportunities within our rural and remote communities, but small  
          local governments with minimal resources have difficulty  
          engaging in the initial process, let alone working through and  
          recovering from a rejection from a state agency."

          The author points out that there have been attempts to address  
          this issue non-legislatively with HCD.  The author points to  
          previous instances where local governments throughout the state  
          "have met several times over the past two years along with past  
          legislators and staff from HCD in attempts to make the program  
          more effective.  Each time HCD has promised action and the  
          problems have only become worse."

           Staff comment:   AB 325 would provide statutory authority for  
          when and how HCD is required to respond to grantees in two  
          situations.  First, upon approving an applicant for an award,  
          HCD would be required to enter into a grant agreement with the  
          applicant no later than 60 days after it notifies the applicant  


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          that their CDBG application has been approved.  When it enters  
          into a grant agreement with an applicant, HCD must provide a  
          complete and final list of all of the activities the applicant  
          must complete in order to receive a disbursement of funds.   
          Second, within 30 days of receiving a grantee's request for the  
          disbursement of funds, HCD must either notify the grantee that  
          it has approved the disbursement or provide the grantee with a  
          complete and final list of all of the remaining activities the  
          applicant must complete in order for HCD to approve disbursement  
          of the funds.  

           Generally these types of program deadlines are not provided for  
          in statute in order to give agencies the flexibility to adopt  
          their own procedures.  In the author's view, AB 325 is needed to  
          better streamline the grant process, so as to make the CDBG  
          program more accessible to small cities and counties.

           Related legislation:

           AB 232 (V. Manuel Pérez), Chapter 386, Statutes of 2012:  This  
          bill, for the economic development portion of the CDBG Program,  
          eliminates the dollar-per-job test and the requirement that  
          benefit to low- and moderate-income persons be a scoring factor  
          in ranking applications.  

          AB 2188 (Arambula), Chapter 95, Statutes of 2008:  This bill  
            deletes the sunset on provisions allowing HCD to annually  
            establish the maximum grant amounts under the General Program  
            and Economic Development Allocations of the CDBG program and  
            to determine the amount of funding that will be set aside for  
            technical assistance and planning grants.


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          Community Development Commission of Mendocino County

          Leading Age California

          Rural County Representatives of California (RCRC)

          West Company



          None on file


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          Analysis Prepared by:Rebecca Rabovsky / H. & C.D. / (916)