BILL ANALYSIS Ó AB 1920 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1920 (Chau) As Amended June 8, 2016 2/3 vote -------------------------------------------------------------------- |ASSEMBLY: |78-0 |(May 12, 2016) |SENATE: |36-0 |(August 18, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: H. & C.D. SUMMARY: Allows the California Tax Credit Allocation Committee (TCAC) to establish a schedule of fines for violations of the terms and conditions, the regulatory agreement, covenants, or program regulations for affordable housing developments that received low-income housing tax credits (LIHTC). Specifically, this bill: 1)Allows TCAC to charge up to $500 per violation or double the amount of the financial gain to the housing credit application because of the violation, whichever is greater. 2)Allows the fine to be reoccurring if the violation is not corrected within a reasonable period of time, as determined by TCAC. AB 1920 Page 2 3)Requires TCAC to adopt and revise, by resolution at a public meeting, the schedule of fines for specific violations and the fine amounts for each violation. 4)Requires all fines collected to be deposited into the Housing Rehabilitation Loan Fund. 5)Provides that if a fine is not paid within six months from the date when the fine was initially assessed by TCAC and reasonable notice is given to the housing credit applicant, the committee may record a lien against the property. 6)Provides that any lien recorded by TCAC against a property, to secure fines, shall be junior to any liens recorded before it. The Senate amendments: 1)Allow a property owner to appeal a fine levied by TCAC. 2)Gives a property owner 30 days to correct a first-time violation, unless it is a serious violation as defined by TCAC. 3)Provides that a serial violation that occurs prior to discovery is considered one violation for purpose of fines, but fines may be recurring after discovery, if the violation is not corrected. 4)Make technical changes. FISCAL EFFECT: According to the Senate Appropriations Committee: AB 1920 Page 3 1)Minor and absorbable TCAC administrative costs to amend existing program regulations, develop a schedule of fines that would be adopted at a public meeting, impose fees on property owners, and to manage ministerial appeals. (Tax Credit Allocation Fee Account) 2)Unknown, likely minor fine revenue gains. (Housing Rehabilitation Loan Fund) COMMENTS: Background: In 1986, the federal government authorized the LIHTC program to enable affordable housing developers to raise private capital through the sale of tax credits to investors. Two types of federal tax credits are available and are generally referred to as 9% and 4% credits. TCAC administers the program and awards credits to qualified developers who can then sell those credits to private investors who use the credits to reduce their federal tax liability. The developer in turn invests the capital into the affordable housing project. Rental housing developments that receive low-income housing tax credits from TCAC are required to rent to income eligible applicants, limit rents, and maintain the physical condition of the units for 55 years. Owners agree to further commitments, such as more deeply targeting units to be affordable to extremely-low income households, as part of the competitive scoring process. The Internal Revenue Service (IRS) enforces the basic program requirements for 15 years, but does not enforce deeper affordability or other requirements imposed by TCAC during the first 15 years, or any requirements after year 15. TCAC has few enforcement remedies for an owner's failure to comply with program requirements that the IRS does not enforce. AB 1920 Page 4 TCAC can impose negative points, which only work if the owner wants to propose new applications. TCAC can also bring a lawsuit to seek compliance or receivership, however this expensive and time-consuming. This bill would provide TCAC with the legislative authority to levy fines for non-compliance with the terms and conditions, the regulatory agreement, covenants, or program regulations. Fines may not exceed the greater of $500 or double the amount of the financial gain to the violator and could be recurring if the violations are not corrected in a reasonable amount of time. Fines would be deposited in the Housing Rehabilitation Loan Fund and be made available to the Multifamily Housing Program at the Department of Housing and Community Development. TCAC could record a lien on the property, if fines are not paid within six months of being assessed. TCAC would adopt the fine schedule through a public process and provide for due process through appeals to the Committee. Purpose of this bill: According to the author, "AB 1920 would provide TCAC with a more efficient and effective enforcement tool by giving TCAC the legislative authority to levy fines for non-compliance with the terms and conditions, the regulatory agreement, covenants, or program regulations." Analysis Prepared by: Lisa Engel / H. & C.D. / (961) 319-2085, FN: 0003848 AB 1920 Page 5