BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 2319


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         Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


         AB  
         2319 (Gordon) - As Introduced February 18, 2016


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         |Policy       |Housing and Community          |Vote:|6 - 1        |
         |Committee:   |Development                    |     |             |
         |             |                               |     |             |
         |             |                               |     |             |
         |-------------+-------------------------------+-----+-------------|
         |             |Jobs, Economic Development,    |     |6 - 0        |
         |             |and the Economy                |     |             |
         |             |                               |     |             |
         |             |                               |     |             |
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         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  






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           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  






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           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.  
            






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           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  






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           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



















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