BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     AB 325

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          Date of Hearing:  May 20, 2015


                                 Jimmy Gomez, Chair

          325 (Wood) - As Amended May 13, 2015

          |Policy       |Housing and Community          |Vote:|6 - 0        |
          |Committee:   |Development                    |     |             |
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          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  


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          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:

             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:


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          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.


          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.  


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            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  

            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  


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            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  


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               be set aside for technical assistance and planning grants.

          Analysis Prepared by:Jennifer Swenson / APPR. / (916)