BILL ANALYSIS                                                                                                                                                                                                    

                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 325            Hearing Date:     7/7/2015
          |Author:   |Wood                                                  |
          |Version:  |7/1/2015                                              |
          |Urgency:  |No                     |Fiscal:      |Yes             |
          |Consultant|Alison Dinmore                                        |
          |:         |                                                      |

          SUBJECT:  Community Development Block Grant Program

            DIGEST:  This bill makes specified changes to the Community  
          Development Block Grant (CDBG) program application process.  

          Existing Law:

          1)  Provides that the Legislature intends funds to be allocated  
            to the state pursuant to the federal CDBG program, and  
            administered by the Department of Housing and Community  
            Development (HCD), to be of maximum benefit in meeting the  
            housing and economic needs of persons and families of low or  
            moderate income. 

          2)  Requires HCD to administer the state CDBG program to  
            eligible cities and counties.

          3)  Defines "non-entitlement area" as an area which is not a  
            metropolitan city or part of an urban county and does not  
            include Indian Tribes.  "Urban county" generally means having  
            a population greater than 200,000 and "metropolitan city"  
            generally means having a population greater than 50,000.

          4)  Requires HCD to allocate not less than 51% of CDBG funds for  
            purposes of providing or improving housing opportunities for  
            low- or moderate-income households.


          AB 325 (Wood)                                       Page 2 of ?
          5)  Requires HCD to allocate 30% of CDBG funds for purposes of  
            economic development. 

          This bill:

          1)  Requires HCD to provide a grant agreement to an applicant  
            for execution no later than 60 days after HCD notifies the  
            applicant that it was approved for funds.  The 60 days' notice  
            requirement shall not apply if the federal government or the  
            Legislature makes significant changes to the CDBG program. 

          2)  Requires HCD to provide the applicant with a complete and  
            final list of all the activities the applicant must complete  
            to receive a disbursement of funds pursuant to the agreement  
            at the time HCD enters the agreement with the applicant.  HCD  
            may make appropriate and corresponding changes to the complete  
            and final list of activities if the applicant makes changes to  
            the original application or the federal government or  
            Legislature requires changes. 

          3)  Requires HCD to do one of the following no later than 30  
            days after it receives a request for 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 the remaining activities the applicant must complete  
               for disbursement of funds. 


          Purpose of the bill.  According to the author, HCD allocates  
          funds under the federal CDBG program to local municipalities.   
          The small cities and counties that stand to gain the most from  
          this program do not have the expertise or resources to navigate  
          the complicated and drawn-out grant process.  To make the  
          program more accessible, this bill seeks to establish a timeline  
          to improve stability and predictability for grant applicants. 

          Background of the CDBG program.  Existing law established the  
          CDBG program under the U.S. Housing and Community Development  
          Act (the Act) of 1974 and it is administered at the federal  


          AB 325 (Wood)                                       Page 3 of ?
          level by the U.S. Department of Housing and Urban Development  
          (HUD).  The purpose of the CDBG Program is to provide  
          communities with resources to address a wide range of unique  
          community development needs, including affordable housing,  
          services to the most vulnerable, and job creation through the  
          expansion and retention of businesses, particularly 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.

          HUD allocates CDBG funds via formula to "entitlement  
          jurisdictions" (i.e., cities over 50,000 population and counties  
          over 200,000 population).  In 1981, Congress amended the Act to  
          give each state the opportunity to administer federal CDBG funds  
          for smaller cities and counties, known as "non-entitlement  
          areas," which include cities with populations under 50,000 and  
          counties with populations under 200,000.  Since 1983, HCD has  
          developed funding priorities and criteria for selecting projects  
          for the state CDBG program in California for non-entitlement  

          Each year, generally in January, the CDBG program 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 nearly $25 million in  
          state-administered federal CDBG funds.

          State process following application.  Federal and state laws  
          apply to the state CDBG program.  Following the notification to  
          an applicant that the application was approved for funds, HCD  
          prepares a grant agreement between HCD and the applicant.  The  
          grant agreement outlines, among other things, the activities for  
          the use of the awards, federal and state requirements, and an  
          expenditure timeline.  HCD also sends a cover letter describing  
          the next steps and a checklist of required documentation along  
          with the grant agreement before disbursing funds.  These  
          checklists are also available on the HCD website.  Once HCD has  
          received, reviewed, and approved the appropriate documentation,  
          it will disburse the funds to the applicant. 


          AB 325 (Wood)                                       Page 4 of ?
          What's the problem?  The author points to instances in his  
          district in which an applicant was asked on multiple occasions  
          to provide additional documentation, which resulted in  
          months-long delays in the disbursement of funds.  HCD has met  
          with the author's office and is actively working to rectify  
          delays and any ambiguities in the program.  HCD has taken steps  
          to streamline its application process and remove procedural  
          requirements, and posted checklists for the program on its  
          department website.  Additionally, HCD provides standard  
          agreement trainings across the state and has offered to provide  
          webinars for more rural districts.  HCD also has technical  
          assistance advisors available to answer questions to navigate  
          the process.  In the author's view, however, placing timelines  
          in statute will further ensure HCD is notifying applicants of  
          their duties and ensuring the disbursement of funds in a timely  
          This bill would require HCD to provide a grant agreement to an  
          applicant no later than 60 days after approving an applicant for  
          an award.  The bill provides an exception in instances in which  
          substantial changes were made at the federal or state level that  
          require HCD to amend their regulations.  When HCD sends the  
          grant agreement, HCD must provide a complete and final list of  
          all the activities the applicant must complete to receive  
          disbursement of funds.  HCD may make changes to the list of  
          activities in instances in which the applicant makes changes to  
          the original application or if the federal or state government  
          require changes.  Additionally, within 30 days of receiving a  
          grantee's request for 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 the  
          remaining activities the applicant must complete for HCD to  
          approve the disbursement of funds.  

          Inserting regulations into statute.  Program deadlines and  
          procedural requirements such as those in this bill are generally  
          not provided in statute to give the agency flexibility to adopt  
          its own procedures and make necessary changes to align with  
          federal requirements, as needed.  The author believes, however,  
          that these changes are necessary to ensure timely distribution  
          and communication with small cities and counties, as well as  
          make the CBDG program more accessible to those communities.  

          Assembly Votes:
            Floor:    77-0
            Appr:     17-0


          AB 325 (Wood)                                       Page 5 of ?
            H&CD:       6-0

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  No

            POSITIONS:  (Communicated to the committee before noon on  
                          July 1, 2015.)

          California State Association of Counties
          Community Development Commission of Mendocino County
          Leading Age California
          Rural County Representatives of California
          West Company


          None received
                                      -- END --