BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1628


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1628 (Committee on Budget)


          As Amended  August 16, 2016


          2/3 vote.  Budget Bill Appropriation Takes Effect Immediately


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                 (vote not relevant)




          Original Committee Reference:  BUDGET


          SUMMARY:  Makes necessary statutory and technical changes to  
          implement the Budget Act of 2016 related to the No Place Like  
          Home (NPLH) Program.


          The Senate amendments delete the Assembly Version of this bill,  
          and instead:


          1)Provides that the California Health Facilities Financing  
            Authority (CHFFA) may issue taxable or tax exempt revenue  
            bonds in an amount not to exceed $2 billion, for the purposes  
            of financing permanent supportive housing pursuant the NPLH  
            Program and through loans under subdivision (d).  









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          2)Allows CHFFA to utilize bond proceeds to fund necessary  
            reserves for principal and interest, capitalized interest,  
            credit enhancements or liquidity costs, costs of insurance,  
            administrative expenses under Welfare and Institutions Code  
            (WIC) Section 5849.4, and to reimburse loans under WIC Section  
            5849.14. 


          3)Adds that the authority may provide for the issuance of bonds  
            of the authority for the purpose of redeeming, refunding, or  
            retiring any bonds or any series or issue of bonds then  
            outstanding issued under subdivision (b), including the  
            payment of any redemption premium and any interest accrued or  
            to accrue to the date of redemption, purchase, or maturity of  
            the bonds.  


          4)Provides that the CHFFA may make secured or unsecured loans to  
            the Department of Housing and Community Development (HCD) in  
            connection with financing permanent supportive housing  
            pursuant to NPLH Program or to refund bonds previously issued  
            pursuant to the section, in accordance with an agreement  
            between the authority and HCD.  


          5)Clarifies that loan proceeds to be used to fund reserves for  
            principal and interest, capitalized interest, credit  
            enhancement and liquidity costs, expenses of funding,  
            financing, and refinancing, administrative expenses under WIC  
            Section 5849.4, and to reimburse loans under WIC Section  
            5849.14. 


          6)Allows CHFFA to 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.  
             


          7)Provides that this section is a complete, additional, and  








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            alternative method for performing acts authorized and shall be  
            constructed 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 (CEQA).


          8)States that the funding or financing under this section shall  
            not exempt the permanent supportive housing from the  
            requirements of any other law otherwise applicable to the  
            permanent supportive housing, except as provided in Government  
            Code (GC)Section 15463(e)(1). 


          9)Includes new findings and declarations related to the Mental  
            Health Services Act, including the following:


             a)   HCD is the state entity with sufficient expertise to  
               implement and oversee a grant or loan program for permanent  
               supportive housing of the target population. 


             b)   CHFFA is authorized by law to issue bonds and to consult  
               with the Mental Health Services Oversight and  
               Accountability Commission and the State Department of  
               Health Care Services (DHCS) concerning the implementation  
               of a grant program for California counties.  


             c)   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 counties to provide  
               permanent supportive housing for homeless individuals  
               living with mental illness. 









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          10)  Defines "authority" to mean CHFFA established pursuant to  
            GC Title 2 Division 3 Part 7.2 (commencing with Section  
            15430).  


          11)  Defines "Commission" to mean the Mental Health Services  
            Oversight and Accountability Commission established by WIC  
            Section 5845.


          12)  Amends the definition of "County" to include, but is not  
            limited to, a city and county, and a city receiving funds  
            pursuant to WIC Section 5701.5.


          13)  Amends the definitions of "Program" to mean the process for  
            awarding funds and distributing moneys to applicants  
            established in WIC Sections 5849.7, 5849.8, 5849.9 and the  
            ongoing monitoring and enforcement of the applicants'  
            activities pursuant to WIC Sections 5849.8, 5849.9, and  
            5849.11. 


          14)  Provides that the authority may do the following:


             a)   Consult with the commission and DHCS concerning the  
               implementation of the NPLH Program, including review of the  
               annual reports provided to the authority by the department  
               pursuant to this section. 


             b)   Enter into one or more contracts with HCD for HCD to  
               provide, and CHFFA to pay HCD for providing services  
               described in WIC Sections 5849.7, 5849.8, 5849.9, related  
               to permanent supportive housing for the target population.   
               Prior to entering into any contract pursuant to the  
               paragraph, the executive director of CHFFA shall transmit  
               to the Commission a copy of the contract in substantially  
               final form.  The contract shall be deemed approved by the  
               commission unless it acts within 10 days to disapprove the  








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               contract.


             c)   On or before June 15 and December 15 of each year, the  
               authority shall certify to the Controller the amounts the  
               authority is required to pay as provided in WIC Section  
               5890 for the following six month period to the department  
               pursuant to any service contact entered.


          15)  Provides that HCD may do the following:


             a)   Enter into one or more contracts with CHFFA to provide  
               services described in WIC Sections 5849.7, 5849.8, 5849.9,  
               related to permanent supportive housing for the target  
               population.  Payments received by HCD under any service  
               contract authorizes by this paragraph shall be used, prior  
               to any other allocation or distribution, to repay loans  
               from CHFFA pursuant to GC Section 15463. 


             b)   Enter into or more loan agreements with CHFFA as  
               security for the repayment of the revenue bonds issued by  
               CHFFA.  HCD shall deposit the proceeds of these loans,  
               excluding any refinancing loans to redeem, refund, or  
               retire bonds, into the fund.  HCD's obligation to make  
               payments under these loan agreements shall be limited  
               obligations payable solely from amounts received pursuant  
               to its service contracts with CHFFA.


             c)   May pledge or assign its right to receive all or a  
               portion of the payments under the service contracts entered  
               pursuant to paragraph 1) directly to CHFFA or its bond  
               trustee, for the payment of principal, premiums, if any,  
               and interest under any loan agreement authorized by  
               paragraph 2).  


          16)  Includes the following additional findings and  
            declarations:  








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             a)   The consideration to be paid by CHFFA to HCD 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. 


             b)   The services contracts and payments made by CHFFA to HCD  
               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 HCD to  
               CHFFA 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.  


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


          18)  Amends the NPLH Fund to be continuously appropriated to  
            HCD, CHFFA, and the Treasurer, not just HCD. 


          19)  Allows accounts and subaccounts to be created with the fund  
            as needed. 


          20)  Amends the language relating to the NPLH Fund, to state  
            that any moneys from the receipt of the loan proceeds by HCD  
            derived from the issuance of bonds by CHFFA under GC Section  
            15463(b).   









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          21)  States that in order to finance permanent supportive  
            housing the target population, HCD may enter into one or more  
            contacts with CHFFA.  States that HCD 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 CHFFA.


          22)  Provides that for the measurement of dollar limit on  
            amounts to be distributed by HCD shall be based on the  
            principal amount of bonds issued by CHFFA and loaned to HCD,  
            exclusive of any refunding bonds but including any net premium  
            derived from the sale of the bonds, for deposit in the fund. 


          23)  Provides that there is no dollar limit on the distribution  
            of moneys in the fund derived from the sources described in  
            WIC Section 5849.4(b)(2) and (3). 


          24)  Clarifies that the 8% set aside for small counties is for a  
            competitive program.


          25)  Clarifies that HCD shall award funds in at least 4 rounds  
            for the competitive program.


          26)  Clarifies that the first request for proposal shall be  
            issued 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.  


          27)  Requires HCD to monitor county compliance with applicable  
            program regulations, loan agreements and regulatory agreements  
            and any agreements related to the program that designate HCD  
            as a third party beneficiary, and enforce those regulations  
            and agreements to the extent necessary and desirable in order  
            to provide to the greatest degree possible, the successful  








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            provision of permanent supportive housing.


          28)  Requires HCD to report annually to the authority the status  
            of its efforts. 


          29)  Allows HCD to provide technical assistance to counties or  
            developers of supportive housing to facilitate the  
            construction of permanent supportive housing for target  
            populations.


          30)  Requires a county receiving funds to commit to provide  
            mental health 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. 


          31)  Changes from 60 days to150 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 for  
            the department to make the first allocation of moneys pursuant  
            to this section. 


          32)  Requires HCD to submit a report to CHFFA 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, for all counties participating in the program and  
            the services that have been provided.


          33)  Repeals WIC Section 5849.13.


          34)  Requires that an action to determine the validity of any  








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            contract or loan authorized pursuant to WIC Section 5849.35 or  
            any bond authorized to be issued pursuant to GC Section 15463,  
            and any contracts related to those bonds, may be brought in  
            accordance with GC Section 17700.


          35)  Allows the Department of Finance (DOF) to authorize one or  
            more loans from the General Fund to the NPLH fund for cash  
            flow purposes. Increases from an aggregate amount not to  
            exceed $1 million to an amount not to exceed $2 million,  
            assuming the loans are for either of the following conditions:


             a)   To allow HCD to begin program implementation activities,  
               including but not limited to, drafting program guidelines  
               and regulations.


             b)   To all HCD, CHFFA, and the Treasurer to implement WIC  
               Section 5948.35 and GC Section 15463, including but not  
               limited to, payment for financial advisory and legal  
               services to prepare for, and in connections with, any  
               validation action pursuant to WIC Section 5849.13 of any  
               other court action regarding this part or GC Section 15463.  



          36)  Creates the Supportive Housing Program Subaccount within  
            the Mental Health Services Fund.  All moneys in the subaccount  
            are reserved and continuously appropriated, without regard to  
            fiscal years, to the CHFFA to provide funds to meet its  
            financial obligations pursuant to any service contracts  
            entered into pursuant to WIC Section 5849.35.


          37)  Requires the Controller, starting no later than the last  
            day of each month, prior to any transfer, or expenditure from  
            the fund for any other purpose for the following month,  
            transfer from the Mental Health Services Fund to the  
            Supportive Housing Program Subaccount an amount which has been  
            certified by the CHFFA, but not to exceed an aggregate amount  
            of $140 million per year. 








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          38)  Requires any shortfall to be carried over to the next month  
            if in any month the amounts in the subaccount are insufficient  
            to fully pay the amount certified by the CHFFA.  


          39)  Prohibits moneys in the Supporting Housing Subaccount to be  
            loaned to the General Fund. 


          40)  Exempts the Supportive Housing Program Subaccount created  
            by WIC Section 5890(f) or any moneys paid by CHFFA to HCD as a  
            service fee pursuant to a service contract authorized by WIC  
            Section 5849.35.   


          41)  Makes various technical amendments necessary to the  
            implementation of the NPLH Program. 


          42)  Makes findings and declarations that this act furthers the  
            intent of the Mental Health Services Act, enacted by  
            Proposition 63 at the November 2, 2004, statewide general  
            election.


          43)  Provides an appropriation related to the budget. 


          EXISTING LAW:  


          1)Existing law includes the Mental Health Services Act (MHSA),  
            an initiative 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  
            million and requires that the revenue from the tax be  
            deposited in the Mental Health Services Fund to fund various  
            county mental health programs.










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          2)Existing law creates the NPLH Program, which requires the  
            Department of Housing and Community Development to award $2  
            billion 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 a target  
            population.


          FISCAL EFFECT:  Includes a continuous appropriation for the  
          Supportive Housing Program Subaccount created in the Mental  
          Health Services Fund. 


          COMMENTS:  


          1)This trailer bill provides the bond financing language  
            necessary to implement the No Place Like Home Program. 


          2)Under this program, up to $140 million is transferred from the  
            first revenues into the Mental Health Services Act Fund to a  
            subaccount for the CHFFA each year.


          3)Through a services contract between CHFFA and HCD, CHFFA  
            agrees to pay HCD up to $140 million annually for HCD to  
            implement and administer grants or loans to counties for  
            supportive housing.  The services contract is a contingent  
            obligation of CHFFA, which is an exception to the  
            constitutional debt limit provision.  Without the exception,  
            the bond language would be subject to approval by the voters.


          4)Under this proposal CHFFA issues bonds and loans the proceeds,  
            not to exceed $2 billion to HCD.  HCD deposits proceeds into  
            the NPLH to fund grants or loans to counties for supportive  
            housing, as administered by HCD.


          5)Under a loan agreement between CHFFA and HCD, CHFFA agrees to  








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            loan bond proceeds to HCD in exchange for HCD agreeing to  
            assign its services payments received to CHFFA for use as debt  
            service on the bonds. 


          6)Under the NPLH Program passed in June, there is a 5% cap on  
            administrative costs. 


          7)With respect to the CEQA language included in WIC 5849.35(e)  
            and GC 15463(e)(1), where the services contract and all the  
            bond documents may be approved much earlier than when the  
            counties may be ready to apply for grants or loans, the  
            language clarifies that the approval of a service contract  
            between HCD and CHFFA is not an "approval of a project  
            triggering (and thereby violating) CEQA.  The language does  
            not exempt the housing projects from the CEQA process.  


          Analysis Prepared by:                                             
                          Genevieve Morelos / BUDGET / (916) 319-2099  FN:  
          0004321