BILL ANALYSIS                                                                                                                                                                                                    



                                                                       AB 325


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          ASSEMBLY THIRD READING


          AB  
          325 (Wood)


          As Amended  May 28, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Housing         |6-0   |Chau, Steinorth,    |                      |
          |                |      |Burke, Chiu, Beth   |                      |
          |                |      |Gaines, Lopez       |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Appropriations  |17-0  |Gomez, Bigelow,     |                      |
          |                |      |Bonta, Calderon,    |                      |
          |                |      |Chang, Daly,        |                      |
          |                |      |Eggman, Gallagher,  |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Eduardo Garcia,     |                      |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Jones, Quirk,       |                      |
          |                |      |Rendon, Wagner,     |                      |
          |                |      |Weber, Wood         |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
           ------------------------------------------------------------------- 










                                                                       AB 325


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          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  
            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.


          FISCAL EFFECT:  According to the Assembly Committee on  
          Appropriations, on-going costs to HCD of up to $176,000 (General  
          Fund) for up to one position to provide additional information to  
          grant applicants. HCD administers approximately 200 CDBG contracts  
          each year. Each contract can have eight or more activities, and  
          each activity can have several individual disbursements.









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          COMMENTS:  


          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  
          this 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 contends 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."


          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 United States  








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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 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  
          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  








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          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.  


          This bill 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 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.




          Analysis Prepared by:                                               
                          Rebecca Rabovsky / H. & C.D. / (916) 319-2085  FN:  
          0000782














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