BILL ANALYSIS Ó AB 325 Page 1 Date of Hearing: May 20, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 325 (Wood) - As Amended May 13, 2015 ----------------------------------------------------------------- |Policy |Housing and Community |Vote:|6 - 0 | |Committee: |Development | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: Yes State Mandated Local Program: NoReimbursable: No SUMMARY: This bill makes specified changes to the Community Development Block Grant (CDBG) Program application process, and provides a two year extension of HCD's Building Equity and Growth in Neighborhoods (BEGIN) program. Specifically, this bill: AB 325 Page 2 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 agreement. 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: 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 funds. 1)Extends the period to liquidate the encumbrances of certain appropriations from the BEGIN fund to HCD until June 30, 2017, and June 30, 2018. Because the bill provides for appropriations related to the budget in the Budget Bill, this bill shall take effect immediately. FISCAL EFFECT: AB 325 Page 3 1)On-going costs to HCD of up to $176,000 (GF) for up to one position to provide additional information to grant applicants. HCD administers approximately 200 CDGB contracts each year. Each contract can have eight or more activities, and each activity can have several individual disbursements. 2)One-time cost exceeding $3.8 million (BEGIN Fund) to extend the program. COMMENTS: 1)Purpose. 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." In addition, it is the intent of the author to assist cities, including Santa Rosa, by extending the period to liquidate encumbrances associated with the BEGIN program. 2)CDBG Program. 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. AB 325 Page 4 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. Since 1983, HCD has administered the state CDBG program in California. Under the state CDBG Program, the state 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 almost $25 million in state-administered federal CDBG funds. 3)BEGIN Program Extension. The BEGIN fund is available, upon appropriation, to HCD for grants to cities and counties for downpayment assistance to qualifying new home buyers in those cities and counties that have taken specific actions to remove barriers to affordable housing. The city of Santa Rosa has worked in partnership with Burbank Housing, a nonprofit that builds affordable housing units for low-income people, to increase the number of affordable homes AB 325 Page 5 in Sonoma County. The BEGIN program awarded Burbank Housing $3.8 million for the project. The construction of 32 homes has started, but Burbank Housing was recently informed by HCD that the $3.8 million award has to be spent by next month, June 30, 2015, the date that the BEGIN program expires. Effectively, the deadline places the entire Catalina Townhomes project in jeopardy. This bill extends the deadline to spend the money so the builder can complete the project. 4)Budget Discussion. The existing periods to liquidate the encumbrances for the BEGIN program were contained in the Budget Act of 2010 and the Budget Act of 2011. The issue of extending the encumbrance dates is also being discussed as part of this year's budget process and may get resolved through budget language. 5)Prior Legislation. a) AB 232 (V. Manuel Pérez), Chapter 386, Statutes of 2012, regarding the economic development portion of the CDBG Program, eliminated the dollar-per-job test and the requirement that benefit to low- and moderate-income persons be a scoring factor in ranking applications. b) AB 2188 (Arambula), Chapter 95, Statutes of 2008, deleted 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 AB 325 Page 6 be set aside for technical assistance and planning grants. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081