BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2200


                                                                    Page  1





          Date of Hearing:  April 20, 2016


                           ASSEMBLY COMMITTEE ON EDUCATION


                              Patrick O'Donnell, Chair


          AB 2200  
          (Thurmond) - As Amended March 17, 2016


          [The bill was double referred to the Committee on Housing and  
          Community Development and was heard by that committee as it  
          relates to issues under its jurisdiction.]


          SUBJECT:  School Employee Housing Assistance Program


          SUMMARY:  Requires California Housing Finance Agency (CalHFA) to  
          administer a grant program to provide development financing  
          assistance to qualified school districts for the creation of  
          affordable rental housing for school districts employees,  
          including teachers.   Specifically, this bill:  


          1)Defines "affordable rental housing" to mean housing that  
            serves persons and families of low or moderate income as  
            defined in the Health and Safety Code (Section 50093).


          2)Defines "qualified developer" to mean a developer that has  
            partnered with a qualified school district to create  
            affordable rental housing for school district employees,  
            including teachers.










                                                                    AB 2200


                                                                    Page  2





          3)Defines "qualified school district" to mean a school district  
            that satisfies the following:


             a)   Has acquired and designated surplus land from a school  
               district, special district, or city;


             b)   Has a high average cost for the recruitment of teachers;


             c)   Has a low retention rate; and 


             d)   Has 60% of its students participating in the National  
               School Lunch Program.


          4)Provides that CalHFA shall provide financial assistance in the  
            form of predevelopment grants to qualified school districts  
            and loans to qualified developers.


          5)Requires CalHFA to do all of the following to administer the  
            grant program:


             a)   Be responsible for overseeing the program;


             b)   Award predevelopment grants to qualified school  
               districts;


             c)   Make loans to qualified developers; and


             d)   Publish deadlines and written procedures for the  
               program.








                                                                    AB 2200


                                                                    Page  3







          6)Requires a school district seeking a predevelopment grant to  
            apply to the California Department of Education (CDE) for  
            certification as a qualified school district.


          7)Requires the CDE to certify that a school district seeking a  
            predevelopment grant meets the definition of a qualified  
            school district.


          8)Requires a qualified school district seeking a predevelopment  
            grant to do both of the following:  


             a)   Apply for a predevelopment grant in the form and manner  
               prescribed by CalHFA; and


             b)   Submit the certification provided by the California  
               Department of Education (CDE).


          9)Creates the School Employee Housing Assistance Fund (the Fund)  
            in the State Treasury.


          10)Continuously appropriates $100,000,000 from the General Fund  
            to the Fund. 


          11)Requires the CalHFA to make loans to qualified developers  
            using a project selection process it establishes that meets  
            all of the following requirements:


             a)   To the extent feasible, ensures a reasonable geographic  
               distribution of funds








                                                                    AB 2200


                                                                    Page  4







             b)   Requires applications for projects to meet minimum  
               threshold requirements, including, but not limited to, all  
               of the following:


               i)     The proposed project is located within reasonable  
                 proximity to public transportation and services;


               ii)    Development costs for the proposed project are  
                 reasonable compared to costs of comparable projects in  
                 the area; and


               iii)   The proposed project is feasible.


             c)   The proposed project leverages other funds where they  
               are available.


          12)Requires loans to be made for a term on not less than 55  
            years.


          13)Provides that principal and accumulated interest is due and  
            payable upon completion of the term of the loan, and the loan  
            shall bear simple interest at the rate of 3% per year.


          14)Requires any moneys received in repayment of loans, including  
            interest, be deposited in the Fund.


          15)Specifies the maximum loan amount shall be $10 million.










                                                                    AB 2200


                                                                    Page  5





          EXISTING LAW:  Defines eligible basis certification as a  
          certification from a certified public accountant or tax attorney  
          that project costs included in applicant's calculation of  
          eligible basis are allowed by IRC Section 42, as amended, and  
          are presented in accordance with standard accounting procedures.  
          If the project uses HOME Investment Partnership Program funds,  
          then the tax professional must further certify as to the  
          treatment of HOME Program funds for purposes of eligible basis  
          calculations.  (Tax Credit Allocation Committee regulations for  
          the Low Income Housing Tax Credit Program)


          FISCAL EFFECT:  Total effect unknown. Includes an appropriation  
          from the General Fund of $100,000,000. 


          


          COMMENTS:  


          Background.  California has seen a drastic decline in funding to  
          support the construction of affordable housing for very low-,  
          low- and moderate-income families.  Historically, the state has  
          invested in low- and moderate-income housing primarily by  
          providing funding for construction. Because of the high cost of  
          land and construction and the subsidy needed to keep housing  
          affordable to residents, affordable housing is expensive to  
          build. Developers typically use multiple sources of financing,  
          including voter-approved housing bonds, state and federal  
          low-income housing tax credits, private bank financing, and  
          local matching dollars. 


          Voter-approved bonds have been an important source of funding to  
          support the construction of affordable housing. Proposition 46  
          of 2002 and Proposition 1C of 2006 together provided $4.95  
          billion for affordable housing. These funds financed the  








                                                                    AB 2200


                                                                    Page  6





          construction, rehabilitation, and preservation of 57,220  
          affordable apartments, including 2,500 supportive homes for  
          people experiencing homelessness, and over 11,600 shelter  
          spaces. In addition, these funds have helped 57,290 families  
          become or remain homeowners. Nearly all of these funds have been  
          awarded. In addition, prior to their dissolutions redevelopment  
          agencies generated as much as $1.7 billion a year in local  
          funding to support affordable housing. 


          CalHFA, the state's affordable housing bank, provides down  
          payment assistance to qualified low- and moderate-income buyers  
          through a loan secured on the property that is repaid when a  
          home sells. In addition, CalHFA provides loans to multifamily  
          housing developers to construct housing affordable housing.   
          CalHFA does not receive funding from the General Fund and pays  
          for its programs by issuing bonds which are then repaid from  
          loan proceeds.  The Department of Housing and Community  
          Development (HCD) operates a variety of programs that support  
          the acquisition, rehabilitation and construction of affordable  
          housing to very low-, low- and moderate-income households.  The  
          Multi-Family Housing Program provides gap financing to  
          affordable housing developers. Developments financed using MHP  
          or CalHFA's multi-family loans agree to provide the housing for  
          a term of 55 years.   


          This bill requires CalHFA to create and administer a grant  
          program to provide both predevelopment grants and development  
          grants to qualified school districts for the creation of  
          affordable rental housing for school employees, including  
          teachers.  Only school districts with a high average cost for  
          recruiting teachers and a low retention rate would be eligible  
          for the grant. 


          Purpose of this bill.  According to the author, "There is no  
          existing program that allows financially-strained school  
          districts to receive funding for the development of school  








                                                                    AB 2200


                                                                    Page  7





          employee housing. Some school districts in California have begun  
          to increase teacher retention by providing housing to teachers.  
          School districts in Los Angeles and Santa Clara, with San  
          Francisco considering such a plan, have teachers in  
          district-sponsored housing. However, for financially-strapped  
          districts in high-cost areas, such a proven solution is not an  
          option for attracting new teachers into the district. And while  
          the Extra Credit Teacher Home Purchase Program does incentivize  
          homeownership for school employees, for many new teachers  
          beginning their career, rental housing is the first step prior  
          to homeownership-a step that those in high-cost areas cannot  
          take. AB 2200 seeks to close the achievement gap by allowing  
          school employees, including teachers, to remain in the cities  
          where they work. Specifically, the bill creates a $100 million  
          grant program which will provide financial assistance to school  
          districts that cannot independently fund housing for school  
          employees. Gap financing will be given to school districts  
          which: (1) have acquired land for development (2) can show high  
          recruitment costs and low retention rates (3) have 60% of  
          students participating in the Free and Reduced Lunch Program.   
          The grant allocates 5% of its funds towards predevelopment costs  
          that school districts that cannot independently fund. "


          Arguments in support. According to the sponsor of the bill, the  
          City of Oakland, "statistics show that the price of housing in  
          California has risen exponentially in the last decade, while  
          educator's wages have remained largely stagnant. This is  
          especially true in the Bay Area where starting teacher salaries  
          remain in the low $50,000 range and median home process are over  
          $1,000,000."   


          K-12 Policy considerations: 


             1)   This bill requires grants be made for "affordable rental  
               housing" for school district employees including teachers,  
               however it does not define the income levels that would be  








                                                                    AB 2200


                                                                    Page  8





               eligible for the housing.  This bill also does not require  
               that the affordable housing units be restricted by  
               affordability covenants to ensure that the housing remains  
               affordable. 


             2)   This bill requires CalHFA to assist a school district  
               that is not eligible to receive a development grant to  
               apply for other a public funds.  It is unclear what other  
               public funds would be used for; in addition, CalHFA likely  
               does not have the expertise to assist a school district in  
               applying for public funds. 


             3)   This bill requires the CDE to certify that a school  
               district seeking a predevelopment grant meets the  
               definition of a qualified school district.  To meet that  
               definition, a school district must, in addition to other  
               criteria, have a high average cost for the recruitment of  
               teachers and a low retention rate.  These are imprecise  
               metrics, which leaves it to the discretion of the CDE to  
               determine what is a high cost of recruitment and what is a  
               low retention rate.  Moreover, the CDE does not currently  
               collect data on the cost of recruitment or retention rates.  
                Therefore, it is unclear how the CDE would make these  
               certifications.


             4)   This bill defines "qualified districts" to be, among  
               other criteria, a district in which at least 60% of its  
               pupils are enrolled in the National School Lunch Program.   
               According to the author's office, the purpose of this bill  
               is to help "financially strapped" districts provide housing  
               assistance for their employees, but this criterion  
               misidentifies financially strapped districts.  Under the  
               local control funding formula (LCFF) which was enacted in  
               2013, districts that enroll large numbers and percentages  
               of pupils who are eligible for free and reduced-price  
               meals, English learners, or in foster care receive  








                                                                    AB 2200


                                                                    Page  9





               additional funding in the form of supplemental grant and  
               concentration factor funding.  By contrast, districts that  
               have few pupils in these categories receive little or no  
               supplemental grant and concentration factor funding and,  
               under LCFF, are more financially strapped than districts  
               with 60% or more of their pupils in the lunch program.  In  
               addition, a district that does not meet the 60% requirement  
               (such as many Silicon Valley districts) is more likely to  
               be located in an area with higher housing costs and a  
               larger gap between housing costs and employee pay. 


             5)   This bill transfers $100 million from the General Fund  
               to the School Employee Housing Assistance Fund.  Because  
               the original source of the grants would be the General  
               Fund, any predevelopment grants awarded to qualified school  
               districts likely would count toward the Proposition 98  
               minimum school funding guarantee.  Accordingly, funding for  
               ongoing Proposition 98 programs would be reduced by an  
               amount equal to predevelopment grants awarded to school  
               districts.


             6)   This bill requires a school district to acquire and  
               designate surplus land to be eligible for the funds.  Once  
               property is designated as "surplus," existing law requires  
               the property to be offered to charter schools and local  
               governments.  If the author intends to require the use of  
               district property for teacher housing, the author may wish  
               to consider striking the requirement that land be  
               designated as "surplus."


          REGISTERED SUPPORT / OPPOSITION:




          Support








                                                                    AB 2200


                                                                    Page  10







          California Catholic Conference, Inc.


          California Teachers Association


          City of Walnut Creek


          Oakland Unified School District


          State Building and Construction Trades Council of California


          One individual




          Opposition


          None received




          Analysis Prepared by:Rick Pratt / ED. / (916) 319-2087
















                                                                    AB 2200


                                                                    Page  11