Amended in Senate August 9, 2016

Amended in Senate August 8, 2016

Amended in Assembly April 14, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 1628

Introduced by Committee on Budget (Assembly Members Ting (Chair), Bloom, Bonta, Campos, Chiu, Cooper, Gordon, Holden, Irwin, McCarty, Mullin, Nazarian, O'Donnell, Rodriguez, Thurmond, and Williams)

January 7, 2016

An act to add Section 15463 to the Government Code, and to amend Sections 5849.1, 5849.2, 5849.3, 5849.4, 5849.5, 5849.7, 5849.8, 5849.9, 5849.11, 5849.14, 5890, and 5891 of, to add Section 5849.35 to, and to repeal and add Section 5849.13 of, the Welfare and Institutions Code, relating to mental health services, and making an appropriation therefor, to take effect immediately, bill related to the budget.

LEGISLATIVE COUNSEL’S DIGEST

AB 1628, as amended, Committee on Budget. No Place Like Home Program: financing.

(1) The Mental Health Services Act (MHSA), an initiative measure enacted by the voters as Proposition 63 at the November 2, 2004, statewide general election, imposes a 1% tax on that portion of a taxpayer’s taxable income that exceeds $1,000,000 and requires that the revenue from that tax be deposited in the Mental Health Services Fund to fund various county mental health programs. The MHSA authorizes the Legislature to amend its provisions by a 2/3 vote, provided that the amendment is consistent with and furthers the intent of the act.

Existing law, known as the No Place Like Home Program, requires the Department of Housing and Community Development to award $2,000,000,000 among counties to finance capital costs, including, but not limited to, acquisition, design, construction, rehabilitation, or preservation, and to capitalize operating reserves, of permanent supportive housing for the target population, as specified. Existing law requires the department to distribute $1,800,000,000 through a competitive program and to allocate $200,000,000 among all counties within this state on an “over-the-counter” population basis.

The bill would authorize the California Health Facilities Financing Authority and the department to, among other things, enter into contracts to provide services pursuant to the No Place Like Home Program related to permanent supportive housing. The bill would also authorize the authority to issue taxable or tax-exempt revenue bonds in an amount not to exceed $2,000,000,000 for these purposes and to make secured or unsecured loans to the department in connection with financing permanent supportive housing pursuant to the No Place Like Home Program. The bill would require that the dollar limit on amounts distributed under the No Place Like Home Program be based on the principal amount of bonds issued by the authority and loaned to the department.

The bill would additionally authorize the use of moneys in the Mental Health Services Fund for the purposes of the No Place Like Home Program. The bill would also establish and continuously appropriate the Supportive Housing Program Subaccount in the Mental Health Services Fund. The bill would require the Controller, prior to any transfer, deposit, or expenditure from the fund for any other purpose, to transfer from the Mental Health Services Fund to the Supportive Housing Program Subaccount an amount necessary to cover the costs the authority is required to pay to the department pursuant to an above-described service contract, as determined by the authority but not to exceed an aggregate amount of begin delete one hundred forty million ($140,000,000) end delete begin insert $140,000,000 end insert per year. The bill would prohibit moneys in the Supportive Housing Subaccount from being loaned to the General Fund pursuant to specified statutes.

The bill would exempt service contracts between the department and the authority pursuant to these provisions from specified public contracting laws. The bill would also exempt loan agreements between the department and the authority and revenue bonds issued by the authority from any other law applicable to the execution of those agreements or issuance of those bonds, including the California Environmental Quality Act.

(2) Existing law establishes the No Place Like Home Fund and continuously appropriates the moneys in this fund to the Department of Housing and Community Development for the purposes of the No Place Like Home Program. Existing law requires the deposit begin insert into the fund end insert of, among other moneys, any proceeds from the issuance of bonds by the Treasurer.

This bill would instead require the department to deposit into the fund the proceeds of loans derived from the issuance of bonds under this bill by the California Health Facilities Financing Authority. The bill would additionally continuously appropriate moneys in the fund to the Treasurer and the authority for purposes of the No Place Like Home Program.

(3) Existing law requires counties to annually report specified information to the Department of Housing and Community Development on activities funded under the No Place Like Home Program, including information on the funded supportive housing development. Existing law also requires the department to report specified information on the program to the Legislature by December 31 of each year, commencing with the year after the first full year in which the program is in effect.

This bill would require the department to monitor compliance by counties with the grant and loan agreements and regulatory agreements pursuant to which funds are distributed pursuant to the competitive portion of the No Place Like Home Program and enforce those agreements to the extent necessary and desirable in order to provide, to the greatest degree possible, the successful provision of permanent supportive housing. The bill would require the department to submit a report to the California Health Facilities Financing Authority by December 31 of each year, commencing with the year after the first full year in which the program is in effect, that contains specified information about the counties participating in the program and the services that have been provided pursuant to any service contracts between the department and the authority, as described above.

(4) Existing law establishes a procedure by which a public agency may bring an action in the superior court to determine the validity of any matter authorized by other law. Existing law authorizes an action under this procedure to determine the legality of any action by the Department of Housing and Community Development related to the No Place Like Home Program. Existing law requires the department to issue its first request for proposal for the competitive program no later than 180 days, and to make its first allocation of “over-the-counter” funds within 60 days, after the deadline for appeals under the validation procedure.

This bill would recast this authorization to instead authorize an action to determine the validity of any service contract or loan agreement between the department and the California Health Facilities Financing Authority, as described above, in accordance with specified provisions governing actions to determine the validity of bonds, warrants, contracts, obligations, or evidences of indebtedness. The bill would instead require the department to issue its first request for proposal no later than 180 days, and to make its first allocation of “over-the-counter” funds as soon as reasonably practical, but no later than 150 days, after the effective date of a final judgment with no further opportunity for appeals, in any court proceeding affirming the validity of the service contracts between the department and the authority and any bonds issued by the authority.

(5) Existing law authorizes the Department of Finance to authorize a loan from the General Fund to the No Place Like Home Fund for cashflow purposes in an amount not to exceed $1,000,000. Existing law requires that a loan comply with certain requirements, including that the purpose of the loan is to allow the department to begin implementation activities related to the No Place Like Home Program, including drafting program guidelines and regulations.

This bill would instead authorize the Department of Finance to authorize one or more loans from the General Fund to the No Place Like Home Fund in an aggregate amount not to exceed $2,000,000. The bill would additionally authorize loans for the purpose of allowing the Department of Housing and Community Development, the California Health Facilities Financing Authority, and the Treasurer to implement the above-described provisions pertaining to service contracts and loan agreements between the department and the authority and revenue bonds issued by the authority.

(6) Existing law makes various findings and declarations regarding the No Place Like Home Program.

This bill would make additional findings and declarations pertaining to the financing and implementation of the No Place Like Home Program. The bill would also make various technical and conforming changes to the No Place Like Home Program.

(7) This bill would declare that its provisions further the intent of the MHSA.

(8) This bill would declare that it is to take effect immediately as a bill providing for appropriations related to the Budget Bill.

Vote: ²⁄₃. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 15463 is added to the Government Code,
to read:

15463.  

(a) For purposes of this section, the following
definitions shall apply:

(1) “No Place Like Home Program” has the same meaning as
“program” as defined in Section 5849.2 of the Welfare and
Institutions Code.

(2) “No Place Like Home Fund” means the No Place Like Home
Fund established pursuant to Section 5849.4 of the Welfare and
Institutions Code.

(3) “Permanent supportive housing” has the same meaning as
“supportive housing” as defined in Section 50675.14 of the Health
and Safety Code, except that “permanent supportive housing” shall
include associated facilities if used to provide services to housing
residents.

(b) The authority may issue taxable or tax-exempt revenue bonds
in an amount not to exceed two billion dollars ($2,000,000,000),
exclusive of refunding bonds but including any net premium
derived from the sale of the bonds, pursuant to Sections 15441 to
15450, inclusive, for the purpose of financing permanent supportive
housing pursuant to the No Place Like Home Program or to refund
bonds previously issued pursuant to this section. The authority
may also utilize bond proceeds to fund necessary reserves,
capitalized interest, credit enhancement or liquidity costs, or costs
of issuance.

(c) The authority may make secured or unsecured loans to the
Department of Housing and Community Development in
connection with financing permanent supportive housing pursuant
to the No Place Like Home Program or to refund bonds previously
issued pursuant to this section, in accordance with an agreement
between the authority and the Department of Housing and
Community Development.

(d) The authority may enter into any agreement for credit
enhancement or liquidity, execute any instruments, and do any
other acts it deems necessary, convenient, or desirable in
connection with revenue bonds issued pursuant to this section or
carry out any power expressly granted pursuant to this section.

(e) (1) This section provides a complete, additional, and
alternative method for performing the acts authorized by this
section and shall be construed as supplemental and additional to
powers conferred by other laws; provided, however, that the
issuance of the bonds and refunding bonds and the execution of
any agreements under this section are not subject to, and need not
comply with, the requirements of any other law applicable to the
issuance of those bonds or refunding bonds and the execution of
those agreements, including, but not limited to, the California
Environmental Quality Act (Division 13 (commencing with Section
21000) of the Public Resources Code).

(2) Except as provided in paragraph (1), the financing of
permanent supportive housing pursuant to the No Place Like Home
Program pursuant to this section shall not exempt the permanent
supportive housing from the requirements of any other law
otherwise applicable to the project.

SEC. 2.  

Section 5849.1 of the Welfare and Institutions Code
is amended to read:

5849.1.  

(a) The Legislature finds and declares that this part is
consistent with and furthers the purposes of the Mental Health
Services Act, enacted by Proposition 63 at the November 2, 2004,
statewide general election, within the meaning of Section 18 of
that measure.

(b) The Legislature further finds and declares all of the
following:

(1) Housing is a key factor for stabilization and recovery to
occur and results in improved outcomes for individuals living with
a mental illness.

(2) Untreated mental illness can increase the risk of
homelessness, especially for single adults.

(3) California has the nation’s largest homeless population that
is disproportionally comprised of women with children, veterans,
and the chronically homeless.

(4) California has the largest number of homeless veterans in
the United States at 24 percent of the total population in our nation.
Fifty percent of California’s veterans live with serious mental
illness and 70 percent have a substance use disorder.

(5) Fifty percent of mothers experiencing homelessness have
experienced a major depressive episode since becoming homeless
and 36 percent of these mothers live with post-traumatic stress
disorder and 41 percent have a substance use disorder.

(6) Ninety-three percent of supportive housing tenants who live
with mental illness and substance use disorders voluntarily
participated in the services offered.

(7) Adults who receive 2 years of “whatever-it-takes,” or Full
Service Partnership services, experience a 68 percent reduction in
homelessness.

(8) For every dollar of bond funds invested in permanent
supportive housing, the state and local governments can leverage
a significant amount of additional dollars through tax credits,
Medicaid health services funding, and other housing development
funds.

(9) Tenants of permanent supportive housing reduced their visits
to the emergency department by 56 percent, and their hospital
admissions by 45 percent.

(10) The cost in public services for a chronically homeless
Californian ranges from $60,000 to $100,000 annually. When
housed, these costs are cut in half and some reports show reductions
in cost of more than 70 percent, including potentially less
involvement with the health and criminal justice systems.

(11) Californians have identified homelessness as their top tier
priority; this measure seeks to address the needs of the most
vulnerable people within this population.

(12) Having counties provide mental health programming and
services is a benefit to the state.

(13) The Department of Housing and Community Development
is the state entity with sufficient expertise to implement and oversee
a grant or loan program for permanent supportive housing of the
target population.

(14) The California Health Facilities Financing Authority is
authorized by law to issue bonds and to consult with the Mental
Health Services Oversight and Accountability Commission and
the Department of Health Care Services concerning the
implementation of a grant begin insert or loan end insert program for California counties
to support the development of programs that increase access to,
and capacity for, crisis mental health services. It is therefore
appropriate for begin insert the authority to issue bonds and contract for
services with end insert the Department of Housing and Community
Development to provide grants or loans to California counties for
permanent supportive housing for the target population.

(15) Use of bond funding will accelerate the availability of
funding for the grant or loan program to provide permanent
supportive housing for the target population as compared to relying
on annual allocations from the Mental Health Services Fund and
better allow begin delete countries end delete begin insert counties end insert to provide permanent supportive
housing for homeless individuals living with mental illness.

(16) The findings and declarations set forth in subdivision (c)
of Section 5849.35 are hereby incorporated herein.

SEC. 3.  

Section 5849.2 of the Welfare and Institutions Code
is amended to read:

5849.2.  

As used in this part, the following definitions shall
apply:

(a) “At risk of chronic homelessness” includes, but is not limited
to, persons who are at high risk of long-term or intermittent
homelessness, including persons with mental illness exiting
institutionalized settings, including, but not limited to, jail and
mental health facilities, who were homeless prior to admission,
transition age youth experiencing homelessness or with significant
barriers to housing stability, and others, as defined in program
guidelines.

(b) “Authority” means the California Health Facilities Financing
Authority established pursuant to Part 7.2 (commencing with
Section 15430) of Division 3 of Title 2 of the Government Code.

(c) “Chronically homeless” has the same meaning as defined
in Section 578.3 of Title 24 of the Code of Federal Regulations,
as that section read on May 1, 2016.

(d) “Commission” means the Mental Health Services Oversight
and Accountability Commission established by Section 5845.

(e) “Committee” means the No Place Like Home Program
Advisory Committee established pursuant to Section 5849.3.

(f) “County” includes, but is not limited to, a city and begin delete county end delete
begin insert county, end insert and a city receiving funds pursuant to Section 5701.5.

(g) “Department” means the Department of Housing and
Community Development.

(h) “Development sponsor” has the same meaning as “sponsor”
as defined in Section 50675.2 of the Health and Safety Code.

(i) “Fund” means the No Place Like Home Fund established
pursuant to Section 5849.4.

(j) “Homeless” has the same meaning as defined in Section
578.3 of Title 24 of the Code of Federal Regulations, as that section
read on May 1, 2016.

(k) “Permanent supportive housing” has the same meaning as
“supportive housing,” as defined in Section 50675.14 of the Health
and Safety Code, except that “permanent supportive housing” shall
include associated facilities if used to provide services to housing
residents.

(l) “Program” means the process for awarding funds and
distributing moneys to applicants established in Sections 5849.7,
5849.8, and 5849.9 and the ongoing monitoring and enforcement
of the applicants’ activities pursuant to Section 5849.8, 5849.9,
and 5849.11.

(1) “Competitive program” means that portion of the program
established by Section 5849.8.

(2) “Distribution program” means that portion of the program
described in Section 5849.9.

(m) “Target population” means individuals or households as
provided in Section 5600.3 who are homeless, chronically
homeless, or at risk of chronic homelessness.

SEC. 4.  

Section 5849.3 of the Welfare and Institutions Code
is amended to read:

5849.3.  

(a) There is hereby established the No Place Like
Home Program Advisory Committee. Membership on the
committee shall be as follows:

(1) The Director of Housing and Community Development, or
his or her designee, who shall serve as the chairperson of the
committee.

(2) The Director of Health Care Services, or his or her designee,
and an additional representative.

(3) The Secretary of Veterans Affairs, or his or her designee.

(4) The Director of Social Services, or his or her designee.

(5) The Treasurer, or his or her designee.

(6) The chair of the Mental Health Services Oversight and
Accountability Commission, or his or her designee.

(7) A chief administrative officer of a small county or a member
of a county board of supervisors of a small county, as provided by
subdivision (d) of Section 5849.6, to be appointed by the Governor.

(8) A chief administrative officer of a large county or a member
of a county board of supervisors of a large county, as provided by
subdivision (b) of Section 5849.6, to be appointed by the Governor.

(9) A director of a county behavioral health department, to be
appointed by the Governor.

(10) An administrative officer of a city, to be appointed by the
Governor.

(11) A representative of an affordable housing organization, to
be appointed by the Speaker of the Assembly.

(12) A resident of supportive housing, to be appointed by the
Governor.

(13) A representative of a community mental health
organization, to be appointed by the Senate Rules Committee.

(14) A representative of a local or regional continuum of care
organization that coordinates homelessness funding, to be
appointed by the Governor.

(b) The committee shall do all of the following:

(1) Assist and advise the department in the implementation of
the program.

(2) Review and make recommendations on the department’s
guidelines.

(3) Review the department’s progress in distributing moneys
pursuant to this part.

(4) Provide advice and guidance more broadly on statewide
homelessness issues.

SEC. 5.  

Section 5849.35 is added to the Welfare and
Institutions Code, to read:

5849.35.  

(a) The authority may do all of the following:

(1) Consult with the commission and the Department of Health
Care Services concerning the implementation of the No Place Like
Home Program, including the review of annual reports provided
to the authority by the department pursuant to Section 5849.11.

(2) Enter into one or more contracts with the department for the
department to provide, and the authority to pay the department for
providing, services described in Sections 5849,7, 5849.8, and
5849.9, related to permanent supportive housing for the target
population. Prior to entering into any contract pursuant to this
paragraph, the executive director of the authority shall transmit a
copy of the contract approved by the authority to the commission.
The contract shall be deemed approved by the commission unless
it acts within 10 days to disapprove the contract.

(3) On or before June 15 and December 15 of each year, the
authority shall notify the Controller of the amounts the authority
is required to pay as provided in Section 5890 for the following
six month period to the department pursuant to any service contract
entered into pursuant to paragraph (2).

(b) The department may do all of the following:

(1) Enter into one or more contracts with the authority to provide
services described in Section 5849.7, 5849.8, and 5849.9, related
to permanent supportive housing for the target population.
Payments received by the department under any service contract
begin delete authorizes end delete begin insert authorized end insert by this paragraph shall be used, prior to any
other allocation or distribution, to repay loans from the authority
pursuant to Section 15463 of the Government Code.

(2) Enter into one or more loan agreements with the authority
as security for the repayment of the revenue bonds issued by the
authority pursuant to Section 15463 of the Government Code. The
department shall deposit the proceeds of these loans, excluding
any loans relating to refunding bonds, into the fund. The
department’s obligation to repay these loans shall be limited to
amounts received pursuant to its service contracts with the
authority.

(3) The department may assign its right to receive payments
under the service contracts entered into pursuant to paragraph (1)
directly to the authority or its bond trustee, which may be the
Treasurer.

(c) The Legislature hereby finds and declares both of the
following:

(1) The consideration to be paid by the authority to the
department for the services provided pursuant to the contracts
authorized by paragraph (2) of subdivision (a) and paragraph (1)
of subdivision (b) is fair and reasonable and in the public interest.

(2) The service contracts and payments made by the authority
to the department pursuant to a service contract authorized by
paragraph (2) of subdivision (a) and paragraph (1) of subdivision
(b) and the loan agreements and loan repayments made by the
department to the authority pursuant to a loan agreement authorized
by paragraph (2) of subdivision (b) shall not constitute a debt or
liability, or a pledge of the faith and credit, of the state or any
political subdivision.

(d) The state hereby covenants with the holders from time to
time of any bonds issued by the authority pursuant to Section 15463
of the Government Code that it will not alter, amend, or restrict
the provisions of this section, subdivision (f) of Section 5890, or
subdivision (b) of Section 5891 in any manner adverse to the
interests of those bondholders so long as any of those bonds remain
outstanding. The authority may include this covenant in the
resolution, indenture, or other documents governing the bonds.

(e) Agreements under this section are not subject to, and need
not comply with, the requirements of any other law applicable to
the execution of those agreements, including, but not limited to,
the California Environmental Quality Act (Division 13
(commencing with Section 21000) of the Public Resources Code).

(f) Part 2 (commencing with Section 10290) of Division 2 of
the Public Contract Code shall not apply to any contract entered
into between the authority and the department under this section.

SEC. 6.  

Section 5849.4 of the Welfare and Institutions Code
is amended to read:

5849.4.  

(a) The No Place Like Home Fund is hereby created
within the State Treasury and, notwithstanding Section 13340 of
the Government Code, continuously appropriated to the
department, the authority, and the Treasurer for the purposes of
this part. Up to five percent of the amount deposited in the fund
may be used for administrative expenses in implementing this part.

(b) There shall be paid into the fund the following:

(1) Any moneys from the receipt of loan proceeds by the
department derived from the issuance of bonds by the authority
for the purpose of implementing the program.

(2) Any other federal or state grant, or from any private donation
or grant, for the purposes of this part.

(3) Any interest payment, loan repayments, or other return of
funds.

SEC. 7.  

Section 5849.5 of the Welfare and Institutions Code
is amended to read:

5849.5.  

The department may adopt guidelines or regulations,
including emergency regulations to expedite the award of moneys
pursuant to this part, in consultation with the California State
Association of Counties and other stakeholders, as necessary to
exercise the powers and perform the duties conferred or imposed
on it by this part. Any guideline or regulation adopted pursuant to
this section shall not be subject to the requirements of the
Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code). The department shall consult with key stakeholders,
including, but not limited to, counties.

SEC. 8.  

Section 5849.7 of the Welfare and Institutions Code
is amended to read:

5849.7.  

(a) In order to finance permanent supportive housing
for the target population, the department may enter into one or
more contracts with the authority as authorized pursuant to Section
5849.35 to provide services for the benefit of the people of the
state as described in this section and Sections 5849.8 and 5849.9.
The department shall use its best efforts to provide or cause to be
provided permanent supportive housing for the target population
in consideration for service contract payments to be received from
the authority.

(b) In furtherance of its service obligations under any service
contract with the authority, the department shall administer a
competitive program, pursuant to Section 5849.8, and distribution
program, pursuant to Section 5849.9, for awarding a total amount
not to exceed two billion dollars ($2,000,000,000) among counties
to finance capital costs including, but not limited to, acquisition,
design, construction, rehabilitation, or preservation, and to
capitalize operating reserves, of permanent supportive housing for
the target population. For purposes of this section and Section
5849.8 and 5849.9, measurement of the dollar limit on amounts
to be distributed by the department shall be based on the principal
amount of bonds issued by the authority and loaned to the
department, exclusive of any refunding bonds but including any
net premium derived from the sale of the bonds, for deposit in the
fund. There shall be no dollar limit on the distribution of moneys
in the fund derived from the sources described in paragraphs (2)
and (3) of subdivision (b) of Section 5849.4.

(c) For the competitive program established by Section 5849.8,
the following shall apply:

(1) A county may apply as the sole applicant if it is the
development sponsor or jointly with a separate entity as
development sponsor.

(2) Funded developments shall integrate the target population
with the general public.

(3) Funded developments shall utilize low barrier tenant
selection practices that prioritize vulnerable populations and offer
flexible, voluntary, and individualized supportive services.

(4) The guidelines may provide for alternative housing models,
such as shared housing models of fewer than five units. Integration
requirements may be modified in shared housing.

(5) Funds shall be offered as deferred payment loans to finance
capital costs including acquisition, design, construction,
rehabilitation, or preservation, and to capitalize operating reserves
of, permanent supportive housing for the target population.

(6) The department shall adopt guidelines establishing income
and rent standards.

SEC. 9.  

Section 5849.8 of the Welfare and Institutions Code
is amended to read:

5849.8.  

(a) In furtherance of the department’s obligations to
the authority under any service contract entered into pursuant to
Section 5849.35, the department may allocate an amount not to
exceed one billion eight hundred million dollars ($1,800,000,000)
from the fund for the purposes of the competitive program
described in this subdivision and the alternative process described
in subdivision (b). The department shall develop a competitive
application process for the purpose of awarding moneys pursuant
to this section. In considering applications, the department shall
do all of the following:

(1) Restrict eligibility to applicants that meet the following
minimum criteria:

(A) The county commits to provide mental health supportive
services and to coordinate the provision of or referral to other
services, including, but not limited to, substance use treatment
services, to the tenants of the supportive housing development for
at least 20 years. Services shall be provided onsite at the supportive
housing development or in a location otherwise easily accessible
to tenants. The county may use, but is not restricted to using, any
of the following available funding sources as allowed by state and
federal law:

(i) The Local Mental Health Services Fund established pursuant
to subdivision (f) of Section 5892.

(ii) The Mental Health Account within the Local Health Welfare
Trust Fund established pursuant to Section 17600.10.

(iii) The Behavioral Health Subaccount within the County Local
Revenue Fund 2011 established pursuant to paragraph (4) of
subdivision (f) of Section 30025 of the Government Code.

(iv) Funds received from other private or public entities.

(v) Other county funds.

(B) The county has developed a county plan to combat
homelessness, which includes a description of homelessness
countywide, any special challenges or barriers to serving the target
population, county resources applied to address the issue, available
community-based resources, an outline of partners and
collaborations, and proposed solutions.

(C) Meet other threshold requirements including, but not limited
to, developer capacity to develop, own, and operate a permanent
supportive housing development for the target population,
application proposes a financially feasible development with
reasonable development costs.

(2) The department shall evaluate applications using, at
minimum, the following criteria:

(A) The extent to which units assisted by the program are
restricted to persons who are chronically homeless or at risk of
chronic homelessness within the target population.

(B) The extent to which funds are leveraged for capital costs.

(C) The extent to which projects achieve deeper affordability
through the use of non-state project-based rental assistance,
operating subsidies, or other funding.

(D) Project readiness.

(E) The extent to which applicants offer a range of on and
off-site supportive services to tenants, including mental health
services, behavioral health services, primary health, employment,
and other tenancy support services.

(F) Past history of implementing programs that use
evidence-based best practices that have led to the reduction of the
number of chronic homeless or at risk of chronic homelessness
individuals within the target population.

(b) The department may establish an alternative process for
allocating funds directly to counties, as calculated in Section
5849.6, with at least five percent of the state’s homeless population
and that demonstrate the capacity to directly administer loan funds
for permanent supportive housing serving the target population
and the ability to prioritize individuals with mental health
supportive needs who are homeless or at risk of chronic
homelessness, consistent with this part and as determined by the
department. The department shall adopt guidelines establishing
the parameters of an alternative process, if any, and requirements
for local administration of funds, including, but not limited to,
project selection process, eligible use of funds, loan terms, rent
and occupancy restrictions, provision of services, and reporting
and monitoring requirements. Counties participating in the
alternative process shall not be eligible for the competitive process
and shall be limited to funds in proportion to their share of the
percentage of the statewide homeless population, as calculated by
the department in Section 5849.6. Funds not committed to
supportive housing developments within two years following award
of funds to counties shall be returned to the state for the purposes
of the competitive program. The department shall consider the
following when selecting participating counties:

(1) Demonstrated ability to finance permanent supportive
housing with local and federal funds, and monitor requirements
for the life of the loan.

(2) Past history of delivering supportive services to the target
population in housing.

(3) Past history of committing project-based vouchers to
supportive housing.

(4) Ability to prioritize the most vulnerable within the target
population through coordinated entry system.

(c) The department shall set aside 8 percent of funds offered in
Rounds 1 through 4, inclusive, for the competitive program for
small counties as provided in subdivision (d) of Section 5849.6.

(d) The department shall award funds for the competitive
program in at least four rounds as follows:

(1) The department shall issue its first request for proposal for
the competitive program no later than 180 days after the effective
date of a final judgment, with no further opportunity for appeals,
in any court proceeding affirming the validity of the contracts
authorized by the authority and the department pursuant to Section
5849.35 and any bonds authorized to be issued by the authority
pursuant to Section 15463 of the Government Code and any
contracts related to those bonds.

(2) The second round shall be completed no later than one year
after the completion of the first round.

(3) The third round shall be completed no later than one year
after the completion of the second round.

(4) The fourth round shall be completed no later than one year
after the completion of the third round.

(5) Subsequent rounds shall occur annually thereafter in order
to fully exhaust remaining funds and the department may
discontinue the use of the competitive groupings in Section 5849.6,
the alternative process in subdivision (b) for any funds not awarded
by the county, and the rural set aside funds as set forth in
subdivision (c).

(e) (1) Any loans made by the department pursuant to this
section shall be in the form of secured deferred payment loans to
pay for the eligible costs of development. Principal and
accumulated interest is due and payable upon completion of the
term of the loan, which shall be established through program
guidelines adopted pursuant to Section 5849.5. The loan shall bear
simple interest at a rate of three percent per annum on the unpaid
principal balance. The department shall require annual loan
payments in the minimum amount necessary to cover the costs of
project monitoring. For the first 15 years of the loan term, the
amount of the required loan payments shall not exceed forty-two
hundredths of 1 percent per annum.

(2) The department may establish maximum loan-to-value
requirements for some or all of the types of projects that are eligible
for funding under this part, which shall be established through
program guidelines adopted pursuant to Section 5849.5.

(3) The department shall establish per-unit and per-project loan
limits for all project types.

(f) (1) The department may designate an amount not to exceed
four percent of funds allocated for the competitive program, not
including funding allocated pursuant to subdivision (b), in order
to cure or avert a default on the terms of any loan or other
obligation by the recipient of financial assistance, or bidding at
any foreclosure sale where the default or foreclosure sale would
jeopardize the department’s security in the rental housing
development assisted pursuant to this part. The funds so designated
shall be known as the “default reserve.”

(2) The department may use default reserve funds made
available pursuant to this section to repair or maintain any rental
housing development assistance pursuant to this part to protect the
department’s security interest.

(3) The payment or advance of funds by the department pursuant
to this subdivision shall be exclusively within the department’s
discretion, and no person shall be deemed to have any entitlement
to the payment or advance of those funds. The amount of any funds
expended by the department for the purposes of curing or averting
a default shall be added to the loan amount secured by the rental
housing development and shall be payable to the department upon
demand.

(g) (1) Prior to disbursement of any funds for loans made
pursuant this section, the department shall enter into a regulatory
agreement with the development sponsor that provides for all of
the following:

(A) Sets standards for tenant selection to ensure occupancy of
assisted units by eligible households of very low and low income
for the term of the agreement.

(B) Governs the terms of occupancy agreements.

(C) Contains provisions to maintain affordable rent levels to
serve eligible households.

(D) Provides for periodic inspections and review of year-end
fiscal audits and related reports by the department.

(E) Permits a developer to distribute earnings in an amount
established by the department and based on the number of units
in the rental housing development.

(F) Has a term for not less than the original term of the loan.

(G) Contains any other provisions necessary to carry out the
purposes of this part.

(2) The agreement shall be binding upon the developer and
successors in interest upon sale or transfer of the rental housing
development regardless of any prepayment of the loan.

(3) The agreement shall be recorded in the office of the county
recorder in the county in which the real property subject to the
agreement is located.

(h) (1) The department shall monitor compliance by counties
of the grant and loan agreements and regulatory agreements
pursuant to which funds are distributed pursuant to this section,
and to which the department may be a third party beneficiary, and
enforce those agreements to the extent necessary and desirable in
order to provide, to the greatest degree possible, the successful
provision of permanent supportive housing.

(2) The department shall annually report to the authority the
status of its efforts pursuant to this section and Section 5849.9, as
set forth in Section 5849.11.

(i) The department may provide technical assistance to counties
or developers of supportive housing to facilitate the construction
of permanent supportive housing for target populations.

SEC. 10.  

Section 5849.9 of the Welfare and Institutions Code
is amended to read:

5849.9.  

(a) In furtherance of the department’s obligations to
the authority under any service contract entered into under Section
5849.35, in addition to the competitive program established by
Section 5849.8, the department may distribute an amount not to
exceed two hundred million dollars ($200,000,000) from the fund
on an “over-the-counter” basis to finance the construction,
rehabilitation, or preservation, and to capitalize operating reserves,
of permanent supportive housing for individuals in the target
population with a priority for those with mental health supportive
needs who are homeless or at risk of chronic homelessness. Funds
to be awarded pursuant to this section shall be available to all
counties within the state proportionate to the number of homeless
persons residing within each county as calculated in Section 5849.6
or in the amount of five hundred thousand dollars ($500,000),
whichever is greater. A county receiving these funds shall commit
to provide mental health supportive services and coordinate the
provision of, or referral to, other services, including, but not limited
to, substance abuse treatment services, to the tenants of the
supportive housing development for at least 20 years. Services
shall be provided onsite at the supportive housing development or
at a location otherwise easily accessible to the tenants.

(b) Funds not awarded within 18 months following the first
allocation of moneys in accordance with subdivision (d) shall be
used for the purposes of the competitive program.

(c) The moneys described in subdivision (a) shall be
administered either in accordance with the procedures for awarding
funds to local agencies established by the existing Mental Health
Services Act housing program administered by the Department of
Health Care Services and the California Housing Finance Agency
or alternative procedures developed by the department for
distributing these moneys that enhance the efficiency and goals of
the distribution program.

(d) The department shall make the first allocation of moneys
pursuant to this section as soon as reasonably practical and in any
event no later than 150 days after the effective date of a final
judgment, with no further opportunity for appeals, in any court
proceeding affirming the validity of the contracts authorized by
the authority and the department pursuant to Section 5849.35 and
any bonds authorized to be issued by the authority pursuant to
Section 15463 of the Government Code and any contracts related
to those bonds.

SEC. 11.  

Section 5849.11 of the Welfare and Institutions Code
is amended to read:

5849.11.  

(a) The counties shall annually report to the
department on activities funded under this part, including
information on the funded supportive housing development.
Reported information shall include location of projects, number
of units assisted, occupancy restrictions, number of individuals
and households served, related income levels, and homeless,
veteran, and mental health status

(b) The department shall submit a report on the program to the
Legislature by December 31 of each year, commencing with the
year after the first full year in which the program is in effect. The
report shall contain the following:

(1) The processes established for distributing funds.

(2) The distribution of funds among counties.

(3) Any recommendations as to modifications to the program
for the purpose of improving efficiency or furthering the goals of
the program.

(c) The report required to be submitted by subdivision (b) shall
be submitted in compliance with Section 9795 of the Government
Code.

(d) The department shall submit a report to the authority by
December 31 of each year, commencing with the year after the
first full year in which the program is in effect, that contains the
information described in subdivision (a) and paragraphs (1) and
(2) of subdivision (b) for all counties participating in the program
and the services that have been provided pursuant to any service
contracts entered into pursuant to Section 5849.35.

SEC. 12.  

Section 5849.13 of the Welfare and Institutions Code
is repealed.

SEC. 13.  

Section 5849.13 is added to the Welfare and
Institutions Code, to read:

5849.13.  

An action to determine the validity of any contract
or loan authorized pursuant to Section 5849.35 or of any bond
authorized to be issued pursuant to Section 15463 of the
Government Code, and any contracts related to those bonds, may
be brought in accordance with Section 17700 of the Government
Code.

SEC. 14.  

Section 5849.14 of the Welfare and Institutions Code
is amended to read:

5849.14.  

The Department of Finance may authorize one or
more loans from the General Fund to the No Place Like Home
Fund for cashflow purposes in an aggregate amount not to exceed
two million dollars ($2,000,000) subject to the following
conditions:

(a) The loans are for either of the following purposes:

(1) To allow the department to begin program implementation
activities, including, but not limited to, drafting program guidelines
and regulations.

(2) To allow the department, the authority, and the Treasurer
to implement Section 5849.35 of this Code and Section 15463 of
the Government Code, including, but not limited to, payment for
financial advisory and legal services to prepare for, and in
connection with, any validation action pursuant to Section 5849.13
or any other court action regarding this part or Section 15463 of
the Government Code.

(b) The loans are short term, and shall be repaid within 30 days
after the deposit of bond proceeds into the fund pursuant to
paragraph (1) of subdivision (b) of Section 5849.4.

(c) Interest charges may be waived pursuant to subdivision (e)
of Section 16314 of the Government Code.

SEC. 15.  

Section 5890 of the Welfare and Institutions Code is
amended to read:

5890.  

(a) The Mental Health Services Fund is hereby created
in the State Treasury. The fund shall be administered by the state.
Notwithstanding Section 13340 of the Government Code, all
moneys in the fund are, except as provided in subdivision (d) of
Section 5892, continuously appropriated, without regard to fiscal
years, for the purpose of funding the following programs and other
related activities as designated by other provisions of this division:

(1) Part 3 (commencing with Section 5800), the Adult and Older
Adult System of Care Act.

(2) Part 3.2 (commencing with Section 5830), Innovative
Programs.

(3) Part 3.6 (commencing with Section 5840), Prevention and
Early Intervention Programs.

(4) Part 3.9 (commencing with Section 5849.1), No Place Like
Home Program.

(5) Part 4 (commencing with Section 5850), the Children’s
Mental Health Services Act.

(b) Nothing in the establishment of this fund, nor any other
provisions of the act establishing it or the programs funded shall
be construed to modify the obligation of health care service plans
and disability insurance policies to provide coverage for mental
health services, including those services required under Section
1374.72 of the Health and Safety Code and Section 10144.5 of the
Insurance Code, related to mental health parity. Nothing in this
act shall be construed to modify the oversight duties of the
Department of Managed Health Care or the duties of the
Department of Insurance with respect to enforcing these obligations
of plans and insurance policies.

(c) Nothing in this act shall be construed to modify or reduce
the existing authority or responsibility of the State Department of
Health Care Services.

(d) The State Department of Health Care Services shall seek
approval of all applicable federal Medicaid approvals to maximize
the availability of federal funds and eligibility of participating
children, adults, and seniors for medically necessary care.

(e) Share of costs for services pursuant to Part 3 (commencing
with Section 5800), and Part 4 (commencing with Section 5850)
of this division, shall be determined in accordance with the
Uniform Method for Determining Ability to Pay applicable to
other publicly funded mental health services, unless this Uniform
Method is replaced by another method of determining co-payments,
in which case the new method applicable to other mental health
services shall be applicable to services pursuant to Part 3
(commencing with Section 5800), and Part 4 (commencing with
Section 5850) of this division.

(f) The Supportive Housing Program Subaccount is hereby
created in the Mental Health Services Fund. Notwithstanding
Section 13340 of the Government Code, all moneys in the
subaccount are continuously appropriated, without regard to fiscal
years, to the California Health Facilities Financing Authority to
provide funds to meet its financial obligations pursuant to any
service contracts entered into pursuant to Section 5849.35.
Notwithstanding any other law, including any other provision of
this section, starting on the first day of each month, the Controller
shall, prior to any transfer, deposit, or expenditure from the fund
for begin delete only end delete begin insert any end insert other purpose, transfer from the Mental Health
Services Fund to the Supportive Housing Program Subaccount an
amount which has been certified by the California Health Facilities
Financing Authority pursuant to paragraph (3) of subdivision (a)
of Section 5849.35, but not to exceed an aggregate amount of one
hundred forty million ($140,000,000) per year. If in any month
the amounts in the subaccount are insufficient to fully pay the
amount certified by the California Health Facilities Financing
Authority, the shortfall shall be carried over to the next month.
Moneys in the Supportive Housing Subaccount shall not be loaned
the General Fund pursuant to Sections 16310 or 16381 of the
Government Code.

SEC. 16.  

Section 5891 of the Welfare and Institutions Code is
amended to read:

5891.  

(a) The funding established pursuant to this act shall be
utilized to expand mental health services. Except as provided in
subdivision (j) of Section 5892 due to the state’s fiscal crisis, these
funds shall not be used to supplant existing state or county funds
utilized to provide mental health services. The state shall continue
to provide financial support for mental health programs with not
less than the same entitlements, amounts of allocations from the
General Fund or from the Local Revenue Fund 2011 in the State
Treasury, and formula distributions of dedicated funds as provided
in the last fiscal year which ended prior to the effective date of
this act. The state shall not make any change to the structure of
financing mental health services, which increases a county’s share
of costs or financial risk for mental health services unless the state
includes adequate funding to fully compensate for such increased
costs or financial risk. These funds shall only be used to pay for
the programs authorized in Sections 5890 and 5892. These funds
may not be used to pay for any other program. These funds may
not be loaned to the state General Fund or any other fund of the
state, or a county general fund or any other county fund for any
purpose other than those authorized by Section 5890 and 5892.

(b) (1) Notwithstanding subdivision (a), and except as provided
in paragraph (2), the Controller may use the funds created pursuant
to this part for loans to the General Fund as provided in Sections
16310 and 16381 of the Government Code. Any such loan shall
be repaid from the General Fund with interest computed at 110
percent of the Pooled Money Investment Account rate, with interest
commencing to accrue on the date the loan is made from the fund.
This subdivision does not authorize any transfer that would
interfere with the carrying out of the object for which these funds
were created.

(2) This subdivision does not apply to the Supportive Housing
Program Subaccount created by subdivision (f) of Section 5890
or any moneys paid by the California Health Facilities Financing
Authority to the Department of Housing and Community
Development as a service fee pursuant to a service contract
authorized by Section 5849.35.

(c) Commencing July 1, 2012, on or before the 15th day of each
month, pursuant to a methodology provided by the State
Department of Health Care Services, the Controller shall distribute
to each Local Mental Health Service Fund established by counties
pursuant to subdivision (f) of Section 5892, all unexpended and
unreserved funds on deposit as of the last day of the prior month
in the Mental Health Services Fund, established pursuant to Section
5890, for the provision of programs and other related activities set
forth in Part 3 (commencing with Section 5800), Part 3.2
(commencing with Section 5830), Part 3.6 (commencing with
Section 5840), and Part 4 (commencing with Section 5850).

(d) Counties shall base their expenditures on the county mental
health program’s three-year program and expenditure plan or
annual update, as required by Section 5847. Nothing in this
subdivision shall affect subdivision (a) or (b).

SEC. 17.  

The Legislature finds and declares that this act
furthers the intent of the Mental Health Services Act, enacted by
Proposition 63 at the November 2, 2004, statewide general election.

SEC. 18.  

This act is a bill providing for appropriations related
to the Budget Bill within the meaning of subdivision (e) of Section
12 of Article IV of the California Constitution, has been identified
as related to the budget in the Budget Bill, and shall take effect
immediately.