BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2475


                                                                    Page  1





          Date of Hearing:  April 13, 2016


               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT


                                  David Chiu, Chair


          AB 2475  
          (Gordon) - As Amended March 18, 2016


          SUBJECT:  Loan program:  California Infrastructure and Economic  
          Development Bank


          SUMMARY:  Creates the Local Government Affordable Housing  
          Forgivable Loan Program with the Infrastructure and Economic  
          Development Bank (IBank).  Specifically, this bill:  


          1)Defines "affordable housing" to mean a dwelling available for  
            purchase or lease by persons and families who qualified as  
            extremely low-, very low-, low- or moderate-income.


          2)Defines "loan program" to mean the Local Government Affordable  
            Housing Forgivable Loan Program.


          3)Defines a "local government" to mean a city, county, or city  
            and county. 


          4)Requires the IBank to develop and administer the loan program  
            to make loans to local government for the development of  
            affordable housing by local government with terms and  
            conditions the IBank deems to be in the best interests of the  








                                                                    AB 2475


                                                                    Page  2





            state.  


          5)Provides that a local government will not be required to repay  
            one-half of the principal of, and accrued interest on a loan,  
            if all of the following requirements have been met to the  
            satisfaction of the board:


             a)   The affordable housing financed is compatible with a  
               local government's sustainable community strategy (SCS).


             b)   The affordable housing financed contributes to the  
               reduction of greenhouse gasses pursuant to local  
               government's sustainable community strategy (SCS).


             c)   Each affordable housing unit financed by the loan is  
               restricted by deed to remain affordable for 55 years. 


             d)   At least 75% of the dwellings in the affordable housing  
               development financed with loan proceeds are affordable to  
               extremely low- and very low income households.


             e)   The local government contributed to the affordable  
               housing development in an amount of funds that are equal  
               to, or infrastructure improvements that are equal in value,  
               to the amount of the loan.


          1)Provides that a local government will not be required to repay  
            any amount of a loan if all of the following requirements have  
            been met to the satisfaction of the IBank: 


             a)   The requirements above in (5) a) through e) have been  








                                                                    AB 2475


                                                                    Page  3





               met;


             b)   The local government waives at least 50% of any  
               development or permitting fees it could have imposed on a  
               developer in the ordinary course of approving the  
               affordable housing development; and 


             c)   The affordable housing development includes onsite  
               access to services needed by residents including but not  
               limited to social and medical services.  


          1)Requires the IBank to determine whether a local government is  
            excused from repaying half or all of a loan after the  
            completion of the development of the affordable housing  
            development.  


          2)Requires the IBank to consult with the Strategic Growth  
            Council (SGC) and the California Housing Finance Agency  
            (CalHFA) to determine if the local government has met the  
            requirements for a partial or total forgiveness of the loan.    



          3)Requires the SGC and CalHFA to respond to a request for  
            consultation from the IBank in a reasonable time. 


          4)Requires the IBank to establish a process for a local  
            government to apply for a reduction in the loan repayment.  


          5)Makes an appropriation by expanding the authority of the IBank  
            to expend funds in a continuously appropriated fund.










                                                                    AB 2475


                                                                    Page  4





          EXISTING LAW:  


          1)Establishes the I-Bank within the Governor's Office of  
            Business and Economic Development (GO-Biz) and authorizes it  
            to undertake a variety of infrastructure related financial  
            activities including, but not limited to, the administration  
            of a revolving loan fund, oversight of the Small Business  
            Finance Center, and the issuance of tax-exempt and taxable  
            revenue bonds.

          2)Defines "project" for purposes of the IBank to mean designing,  
            acquiring, planning, permitting, entitling, constructing,  
            improving, extending, restoring, financing and generally  
            development of  public development facilities or economic  
            development facilities within the state or financing   
            transition costs or the acquisition of property or both upon  
            approval of financing order by the Public Utilities  
            Commission.


          3)Defines "extremely low income households" to mean persons and  
            families whose incomes do not exceed 30% of median area  
            income.


          4)Defines very low-income households" to mean persons and  
            families whose incomes do not exceed 50% of median area  
            income.


          5)Defines "low-income households" means persons and families  
            whose income does not 80% of median area income.


          6)Defines "moderate-income households" means persons and  
            families of low or moderate income whose income exceeds the  
            income limit for lower income households.









                                                                    AB 2475


                                                                    Page  5






          FISCAL EFFECT:  Unknown. 2/3 vote. 


          COMMENTS:  





           


           This bill would direct IBank to develop a new loan program to  
          make loans to local governments for affordable housing  
          developments. If a local government meets certain requirements  
          the IBank would forgive either half of the loan amount or the  
          full loan amount. To qualify to have half of the loan forgiven,  
          a local government would have to:  develop affordable housing  
          that is compatible the communities greenhouse gas reduction  
          plan, or SCS, the affordable housing development would need to  
          contribute to a reduction in greenhouse gases, at least 75% of  
          the affordable housing units in the development would need to be  
          for extremely low- and very low-income households restricted for  
          55 years, and the local government would have to contribute an  
          amount equal to the amount of the loan or infrastructure  
          improvements equal to the amount of the loan. To get the entire  
          loan forgiven, the local government would have to comply with  
          all of the requirements listed above and waive at least 50% of  
          any development or permitting fees it could have imposed on a  
          developer and the development would have to include onsite  
          services for residents including social services and medical  
          services. 


           Overview of the IBank:  The I-Bank was established in 1994 to  
          promote economic revitalization, enable future development, and  
          encourage a healthy climate for jobs in California.  Housed  
          within GO-Biz, it is governed by a five-member board of  








                                                                    AB 2475


                                                                    Page  6





          directors comprised of the Director of GO-Biz (chair), the State  
          Treasurer, the Director Department of Finance, the  
          Transportation Agency, and a Governor's appointee.  The I-Bank  
          does not receive any ongoing General Fund support, rather it is  
          financed through fees, interest income and other revenues  
          derived from its public and private sector financing activities.  
           According to its Comprehensive Annual Financial Report for the  
          fiscal year ended June 2013, its programs continued to provide  
          revenues sufficient to cover operating expenses.  The I-Bank  
          administers three programs:  (1) the Infrastructure State  
          Revolving Fund which provides direct low-cost financing to  
          public agencies for a variety of public infrastructure projects;  
          (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 helps small businesses access  
          private financing through loan guarantees, direct loans, and  
          performance bond guarantees.  There is no commitment of I-Bank  
          or state funds for any of the conduit revenue bonds.  Since its  
          creation in 1994, the I-Bank has loaned, financed, or  
          participated in over $34 billion in infrastructure and economic  
          expansion projects.  This includes over $400 million to local  
          and state agencies.  


            Overview of the California Housing Finance Agency (CalHFA)  :   
          CalHFA is the state's affordable housing lender, supporting  
          homeownership and rental housing for low- and moderate income  
          families. CalHFA funds its programs by issuing bonds and then  
          repays the bonds with loan proceeds. The agency is completely  
          self-supporting and receives no General Fund money.  The agency  
          provides low interest rate mortgages to low and moderate income  
          homebuyers in California, as well as down payment and closing  
          costs assistance. Since inception, CalHFA has provided $19.6  
          billion in mortgages to 153,000 first-time homebuyers.  CalHFA  
          provides loans for the acquisition, rehabilitation, and  
          permanent financing to preserve, maintain, and increase the  
          supply of affordable multi-family rental housing.  Since its  
          creation, CalHFA has made $192 million in loans to local  








                                                                    AB 2475


                                                                    Page  7





          agencies for affordable housing.  


           Purpose of this bill  :  According to the author, "AB 2475 creates  
          a forgivable loan program, housed within the IBank, to assist  
          local governments in financing critical new affordable housing  
          projects. The program will hold loan recipients accountable to  
          meeting required criteria that contribute positive outcomes back  
          to the state as well as local communities. Through working  
          together, local governments, developers, and the state can  
          integrate major regional planning and development targets into  
          much needed affordable housing projects. In return, loans will  
          be eligible for partial or full forgiveness upon project  
          completion. AB 2475 takes advantage of the IBank's expertise in  
          development financing, and places responsibility for  
          administering this new program there. However, the bill also  
          recognizes that meeting the specific requirements of the program  
          are essential to its success. Because of this, the loan  
          forgiveness determination occurs after project completion, and  
          requires that IBank consults with the Strategic Growth Council  
          (SGC) and California Housing Finance Agency (CalHFA) on whether  
          the project meets the required criteria.  By integrating these  
          entities into the final project review, the IBank will be able  
          to leverage experts in sustainable development and housing  
          finance to ensure that the criteria of the program have been  
          met."

           Staff Comments: 


            Who builds affordable housing  ? This bill would make loans to  
            local governments for the development of affordable housing  
            for low and moderate income families that support state and  
            local efforts to reduce greenhouse gas reduction. Local  
            governments don't build affordable housing. 


             Who should operate this new program  ?   The state has an  
            affordable housing lender in CalHFA with expertise lending to  








                                                                    AB 2475


                                                                    Page  8





            developers who construct affordable housing. The committee may  
            wish to consider whether it makes sense to house this program  
            within CalHFA rather than the IBank. 





           Committee amendments:


           


          The committee may wish to consider an amendment to require  
          CalHFA to operate this new program rather than the IBank.  


           





          Double referred: If AB 2475 passes this committee, the bill will  
          be referred to the Committee on Local Government 


          


          REGISTERED SUPPORT / OPPOSITION:




          Support










                                                                    AB 2475


                                                                    Page  9





          California State Association of Counties (CSAC)


          City of Oakland


          League of California Cities




          Opposition


          None on file




          Analysis Prepared by:Lisa Engel / H. & C.D. / (916) 319-2085,   
          Lisa Engel / H. & C.D. / (961) 319-2085