BILL ANALYSIS Ó AB 2319 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 2319 (Gordon) - As Introduced February 18, 2016 ----------------------------------------------------------------- |Policy |Housing and Community |Vote:|6 - 1 | |Committee: |Development | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Jobs, Economic Development, | |6 - 0 | | |and the Economy | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill authorizes the financing of an affordable housing project by the California Infrastructure and Economic Development Bank (IBank), including financing through the Infrastructure State Revolving Fund (ISRF). Specifically, this bill: 1)Removes the prohibition on the development of housing from the definition of economic development facility. 2)Expands the definition of a project to include affordable AB 2319 Page 2 housing. 3)Authorizes the issuance of bonds and the loaning of funds from ISRF for the financing of affordable housing. 4)Defines "affordable housing" to mean a dwelling available for purchase or lease by persons and families who qualify as low- or moderate-income, very low income households, or extremely low income households, as defined. FISCAL EFFECT: 1)One-time cost of approximately $100 million (GF) to initially fund an affordable housing lending program. GOBiz staff indicate that affordable housing financing is sufficiently different than general infrastructure financing to necessitate a new program within IBank. ISRF was originally funded with $110 million in state general funds that are continuously recycled and bonded against. They anticipate developing a similar affordable housing lending program. 2)One-time costs of approximately $500,000 (GF) to develop criteria, priorities, and guidelines and set up the organizational structure for the program. 3)Ongoing costs of approximately $800,000 (GF) to fund 6 PYs to manage the program, including 2 originating loan officers, an administering loan officer, a compliance officer, a program manager, and an administrative support position. COMMENTS: 1)Purpose. According to the author, "California is in the middle AB 2319 Page 3 of a housing crisis, and affordability is one of the biggest challenges. Over 2.2 million low-income households compete for only 664,000 affordable rental homes. This leaves over 1.5 million in the lowest-income population without access to affordable housing. The elimination of redevelopment agencies, together with the expiration of state housing bonds, has left the state with fewer options to finance housing projects and leverage federal dollars. AB 2319 recognizes that the state requires regional development strategies to incorporate housing, transportation, land use, and anticipated growth into long-term planning. This bill would provide housing developers, agencies, and local governments with access to an existing funding tool by allowing the IBank to accept financing applications for affordable housing projects." 2)Background. The IBank was established in 1994 to finance public infrastructure and private development. Housed within GO-Biz, it is governed by a five-member board of directors comprised of the Director of GO-Biz (chair), the State Treasurer, the Director of the Department of Finance, the Secretary of the Transportation Agency, and an appointee of the Governor. The day-to-day operations are directed by the Executive Director who is an appointee of the Governor and is subject to confirmation by the California State Senate. The IBank does not receive any ongoing GF support, but is financed through fees, interest income and other revenues derived from its public and private sector financing activities. AB 2319 Page 4 The IBank administers three core programs: (1) the ISRF which provides direct low-cost financing for public infrastructure projects and economic development facilities; (2) the Conduit Bond Program which provides financing for manufacturing companies, public benefit nonprofit organizations, public agencies, and other eligible entities; and (3) the Small Business Finance Center which assists small businesses access to private financing through loan guarantees, direct loans, and performance bond guarantees. There is no pledge of IBank or state general funds for any of the conduit revenue bonds. 3)Infrastructure State Revolving Fund: The ISRF provides financing to assist in the development of a wide variety of infrastructure and economic development projects. ISRF Program funding is available in amounts ranging from $50,000 to $25,000,000, with loan terms of up to 30 years. Examples of eligible projects include, but are not limited to: drainage, water supply and flood control; libraries and other educational facilities; environmental mitigation measures; sewage collection and treatment; solid waste collection and disposal; water treatment and distribution; and public safety facilities. The IBank recently approved $56.3 million in loans to state and local governmental entities and local government-sponsored AB 2319 Page 5 not-for-profit organizations for necessary infrastructure and economic expansion projects. The total ISRF loan outstanding balance, as of October 2015, was $294 million. The ISRF Program operates as a "leveraged loan program," which means its funding is derived through the issuance of revenue bonds secured by the repayments received from approved ISRF Program Financings. IBank has issued several series of tax-exempt revenue bonds to provide additional ISRF Program financing. ISRF bonds are paid solely from repayments received from ISRF borrowers, and are neither backed nor guaranteed by the state or other IBank funds. 4)Related Legislation. AB 2475 (Gordon), also before this Committee today, creates the Local Government Affordable Housing Forgivable Loan Program within the IBank. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081 AB 2319 Page 6