BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 858


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          Date of Hearing:  August 10, 2016


                            ASSEMBLY COMMITTEE ON BUDGET


                                 Philip Ting, Chair


          SB  
          858 (Committee on Budget and Fiscal Review) - As Amended August  
          8, 2016


          SENATE VOTE:  2/3 Vote


          SUBJECT:  Budget Act of 2016


          SUMMARY:  Makes necessary statutory and technical changes to  
          implement the Budget Act of 2016 related to the No Place Like  
          Home (NPLH) Program. Specifically, this bill:  


             1)   Provides that the California Health Facilities Financing  
               Authority (CHFFA) may issue taxable or tax exempt revenue  
               bonds in an amount not to exceed $2 billion, for the  
               purposes of financing permanent supportive housing pursuant  
               the NPLH Program or to refund bonds previously issued  
               pursuant to this section.  



             2)   Allows CHFFA to utilize bond proceeds to fund necessary  
               reserves, capitalized interest, credit enhancements or  
               liquidity costs or costs of insurance. 










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             3)   Provides that the CHFFA may make secured or unsecured  
               loans to the Department of Housing and Community  
               Development (HCD) in connection with financing permanent  
               supportive housing pursuant to NPLH Program or to refund  
               bonds previously issued pursuant to the section, in  
               accordance with an agreement between the authority and HCD.  
                



             4)   Allows CHFFA to enter into any agreement for credit  
               enhancement or liquidity, execute any instruments, and do  
               any other acts it deems necessary, convenient, or desirable  
               in connection with revenue bonds issued pursuant to this  
               section.  



             5)   Provides that this section is a complete, additional,  
               and alternative method for performing acts authorized and  
               shall be constructed as supplemental and additional to  
               powers conferred by other laws; provided, however that the  
               issuance of the bonds and refunding bonds and the execution  
               of any agreements under this section are not subject to,  
               and need not comply with, the requirements of any other law  
               applicable to the issuance of those bonds or refunding  
               bonds and the execution of those agreements, including, but  
               not limited to the California Environmental Quality Act  
               (CEQA).

             6)   States that the financing of permanent supportive  
               housing pursuant to the NPLH Program shall not exempt the  
               permanent supportive housing from the requirements of any  
               other law otherwise applicable to the project, except as  
               provided in Section 15463 (e)(1). 

             7)   Includes new findings and declarations related to the  
               Mental Health Services Act, including the following:








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                  a.        HCD is the state entity with sufficient  
                    expertise to implement and oversee a grant or loan  
                    program for permanent supportive housing of the target  
                    population. 
                  b.        CHFFA is authorized by law to issue bonds and  
                    to consult with the Mental Health Services Oversight  
                    and Accountability Commission and the Department of  
                    Health Care Services (DHCS) concerning the  
                    implementation of a grant program for California  
                    counties.  
                  c.        Use of bond funding will accelerate the  
                    availability of funding for the grant or loan program  
                    to provide permanent supportive housing for the target  
                    population as compared to relying on annual  
                    allocations from the Mental Health Services Fund and  
                    better allow counties to provide permanent supportive  
                    housing for homeless individuals living with mental  
                    illness. 

             8)   Defines "authority" to mean CHFFA established pursuant  
               to Part 7.2 (commencing with Section 15430) of Division 3  
               of Title 2 of the Government Code.  

             9)   Defines "Commission" to mean the Mental Health Services  
               Oversight and Accountability Commission established by  
               Section 5845 of the Welfare and Institutions Code.



             10)Amends the definition of "County" to include, but is not  
               limited to, a city and county, and a city receiving funds  
               pursuant to Section 5701.5.



             11)Amends the definitions of "Program" to mean the process  
               for awarding funds and distributing moneys to applicants  
               established in Sections 5849.7, 5849.8, 5849.9 and the  
               ongoing monitoring and enforcement of the applicants'  








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               activities pursuant to Section 5849.8, 5849.9, and 5849.11.  




             12)Provides that the authority may do the following:
                  a.        Consult with the commission and DHCS  
                    concerning the implementation of the NPLH Program,  
                    including review of the annual reports provided to the  
                    authority by the department pursuant to this section. 

                  b.        Enter into one or more contracts with HCD for  
                    HCD to provide, and CHFFA to pay HCD for providing  
                    services described in Sections 5849.7, 5849.8, 5849.9,  
                    related to permanent supportive housing for the target  
                    population. Prior to entering into any contract  
                    pursuant to the paragraph, the executive director of  
                    CHFFA shall transmit a copy of the contract approved  
                    by CHFFA to the commission.  The contract shall be  
                    deemed approved by the commission unless it acts  
                    within 10 days to disapprove the contract.

                  c.        On or before June 15 and December 15 of each  
                    year, the authority shall notify the Controller of the  
                    amounts the authority is required to pay as provided  
                    in Section 5890 for the following six month period to  
                    the department pursuant to any service contact  
                    entered.

             13)Provides that HCD may do the following:
                  a.        Enter into one or more contracts with CHFFA to  
                    provide services described in Sections 5849.7, 5849.8,  
                    5849.9, related to permanent supportive housing for  
                    the target population.  Payments received by HCD under  
                    any service contract authorizes by this paragraph  
                    shall be used, prior to any other allocation or  
                    distribution, to repay loans from CHFFA pursuant to  
                    Section 15463 of the Government Code. 









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                  b.        Enter into or more loan agreements with CHFFA  
                    as security for the repayment of the revenue bonds  
                    issued by CHFFA.  HCD shall deposit the proceeds of  
                    these loans, excluding any loans relating to refunding  
                    bonds, into the fund.  HCD's obligation to repay these  
                    loans shall be limited to amounts received pursuant to  
                    its trustee, which may be the Treasurer. 

             14)Includes the following additional findings and  
               declarations:  

                  a.        The consideration to be paid by CHFFA to HCD  
                    for the services provided pursuant to the contracts  
                    authorized by paragraph (2) of subdivision (a) and  
                    paragraph (1) of subdivision (b) is fair and  
                    reasonable and in the public interest. 

                  b.        The services contracts and payments made by  
                    CHFFA to HCD pursuant to a service contract authorized  
                    by paragraph (2) of subdivision (a) and paragraph (1)  
                    of subdivision (b) and the loan agreements and loan  
                    repayments made by HCD to CHFFA pursuant to a loan  
                    agreement authorized by paragraph (2) of subdivision  
                    (b) shall not constitute a debt or liability, or a  
                    pledge of the faith and credit, of the state or any  
                    political subdivision.  

             15)Requires the state to hereby covenant with the holders  
               from time to time of any bonds issued by CHFFA pursuant to  
               Section 15463 of the Government Code that it will not  
               alter, amend, or restrict the provisions of this section,  
               subdivision (f) of Section 5890, or subdivision (b) of  
               Section 5891 in any manner adverse to the interests of  
               those bondholders so long as any of those bonds remain  
               outstanding.  CHFFA may include this covenant in the  
               resolution, indenture or other documents governing the  
               bonds.

             16)Amends the NPLH Fund to be continuously appropriated to  








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               HCD, CHFFA, and the Treasurer, not just HCD.



             17)Amends the language relating to the NPLH Fund, to state  
               that any moneys from the receipt of the loan proceeds by  
               HCD derived from the issuance of bonds by CHFFA (strikes  
               out the Treasurer) for the purposes of implementing the  
               program.  



             18)States that in order to finance permanent supportive  
               housing the target population, HCD may enter into one or  
               more contacts with CHFFA.  States that HCD shall use its  
               best efforts to provide or cause to be provided permanent  
               supportive housing for the target population in  
               consideration for service contract payments to be received  
               from CHFFA.



             19)Provides that for the measurement of dollar limit on  
               amounts to be distributed by HCD shall be based on the  
               principal amount of bonds issued by CHFFA and loaned to  
               HCD, exclusive of any refunding bonds but including any net  
               premium derived from the sale of the bonds, for deposit in  
               the fund. 



             20)Provides that there is no dollar limit on the distribution  
               of moneys in the fund derived from the sources described in  
               paragraphs (2) and (3) of subdivision (b) of Section  
               5849.4. 



             21)Clarifies that the 8% set aside for small counties is for  








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               a competitive program.



             22)Clarifies that HCD shall award funds in at least 4 rounds  
               for the competitive program.



             23)Clarifies that the first request for proposal shall be  
               issued 180 days after the effective date of a final  
               judgment, with no further opportunity for appeals, in any  
               court proceeding affirming the validity of the contracts  
               authorized by the authority and the department.  



             24)Adds that HCD shall monitor compliance by counties of the  
               grant and loan agreements and regulatory agreements to  
               funds distributed to this section, and to which HCD may be  
               a third party beneficiary, and enforce those agreements to  
               the extent necessary and desirable in order to provide to  
               the greatest degree possible, the successful provision of  
               permanent supportive housing.



             25)Requires HCD to report annually to the authority the  
               status of its efforts. 

             26)Allows HCD to provide technical assistance to counties or  
               developers of supportive housing to facilitate the  
               construction of permanent supportive housing for target  
               populations.

             27)Requires a county receiving funds to commit to provide  
               mental health services and coordinate the provision of, or  
               referral to, other services, including, but not limited to,  
               substance abuse treatment services, to the tenants of the  








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               supportive housing development for at least 20 years.   
               Services shall be provided onsite at the supportive housing  
               development or at a location otherwise easily accessible to  
               the tenants. 



             28)Changes from 60 days to150 days, after the effective date  
               of a final judgment, whit no further opportunity for  
               appeals, in any court proceeding affirming the validity of  
               the contracts authorized by the authority and the  
               department for the department to make the first allocation  
               of moneys pursuant to this section. 



             29)Requires HCD to submit a report to CHFFA by December 31 of  
               each year, commencing with the year after the first full  
               year in which the program is in effect, that contains the  
               information, for all counties participating in the program  
               and the services that have been provided.



             30)Repeals Section 5849.13 of the Welfare and Institution  
               Code.



             31)Requires that an action to determine the validity of any  
               contract or loan authorized pursuant to Section 5849.35 or  
               any bond authorized to be issued pursuant to Section 15463  
               of the Government Code, and any contracts related to those  
               bonds, may be brought in accordance with Section 17700 of  
               the Government Code.



             32)Allows the Department of Finance (DOF) to authorize one or  








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               more loans from the General Fund to the NPLH fund for  
               cashflow purposes. Increases from an aggregate amount not  
               to exceed $1 million to an amount not to exceed $2 million,  
               assuming the loans are for either of the following  
               conditions:

                  a.        To allow HCD to begin program implementation  
                    activities, including but not limited to, drafting  
                    program guidelines and regulations.

                  b.        To all HCD, CHFFA, and the Treasurer to  
                    implement Section 5948.35 of this Welfare and  
                    Institutions Code and Section 15463 of the Government  
                    Code, including but not limited to, payment for  
                    financial advisory and legal services to prepare for,  
                    and in connections with, any validation action  
                    pursuant to Section 5849.13 of any other court action  
                    regarding this part or Section 15463 of the Government  
                    Code. 



             33)Creates the Supportive Housing Program Subaccount within  
               the Mental Health Services Fund.  All moneys in the  
               subaccount are continuously appropriated, without regard to  
               fiscal years, to the CHFFA to provide funds to meet its  
               financial obligations pursuant to any service contracts  
               entered into pursuant to Section 58849.35.



             34)Requires the Controller, starting on the first day of each  
               month, to prior to any transfer, deposit or expenditure  
               from the fund for only other purpose, transfer from the  
               Mental Health Services Fund to the Supportive Housing  
               Program Subaccount an amount which has been certified by  
               the CHFFA, but not to exceed an aggregate amount of $140  
               million per year. 









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             35)Requires any shortfall to be carried over to the next  
               month if in any month the amounts in the subaccount are  
               insufficient to fully pay the amount certified by the  
               CHFFA.  



             36)Prohibits moneys in the Supporting Housing Subaccount to  
               be loaned to the General Fund. 



             37)Exempts the Supportive Housing Program Subaccount created  
               by subdivision (f) of Section 5890 or any moneys paid by  
               CHFFA to HCD as a service fee pursuant to a service  
               contract authorized by Section 5849.35.   



             38)Makes various technical amendments necessary to the  
               implementation of the NPLH Program. 



             39)Makes findings and declarations that this act furthers the  
               intent of the Mental Health Services Act, enacted by  
               Proposition 63 at the November 2, 2004, statewide general  
               election.



             40)Provides an appropriation related to the budget. 

          EXISTING LAW: 











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             1)   Existing law includes the Mental Health Services Act  
               (MHSA), an initiative enacted by the voters as Proposition  
               63, at the November 2, 2004, statewide general election,  
               imposes a 1% tax on that portion of a taxpayer's taxable  
               income that exceeds $1 million and requires that the  
               revenue from the tax be deposited in the Mental Health  
               Services Fund to fund various county mental health  
               programs.

             2)   Existing law creates the NPLH Program, which requires  
               the Department of Housing and Community Development to  
               award $2 billion among counties to finance capital costs,  
               including but not limited to, acquisition, design,  
               construction, rehabilitation, or preservation, and to  
               capitalize operating reserves, of permanent supportive  
               housing for a target population.




          FISCAL EFFECT: 


             1)   Includes a continuous appropriation for the Supportive  
               Housing Program Subaccount created in the Mental Health  
               Services Fund. 



          COMMENTS: 


             1)   This trailer bill provides the bond financing language  
               necessary to implement the No Place Like Home Program. 

             2)   Under this program, up to $140 million is transferred  
               from the first revenues into the Mental Health Services Act  








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               Fund to a subaccount for the CHFFA each year.

             3)   Through a services contract between CHFFA and HCD, CHFFA  
               agrees to pay HCD up to $140 million annually for HCD to  
               implement and administer grants or loans to counties for  
               supportive housing.  The services contract is a contingent  
               obligation of CHFFA, which is an exception to the  
               constitutional debt limit provision.  Without the  
               exception, the bond language would be subject to approval  
               by the voters.

             4)   Under this proposal CHFFA issues bonds and loans the  
               proceeds, not to exceed $2 billion to HCD.  HCD deposits  
               proceeds into the NPLH to fund grants or loans to counties  
               for supportive housing, as administered by HCD.

             5)   Under a loan agreement between CHFFA and HCD, CHFFA  
               agrees to loan bond proceeds to HCD in exchange for HCD  
               agreeing to assign its services payments received to CHFFA  
               for use as debt service on the bonds. 

             6)   Under the NPLH Program passed in June, there is a 5% cap  
               on administrative costs. 

             7)   With respect to the CEQA language included in WIC  
               5849.35 (e) and GC 15463 (e)(1), where the services  
               contract and all the bond documents may be approved much  
               earlier than when the counties may be ready to apply for  
               grants or loans, the language clarifies that the approval  
               of a service contract between HCD and CHFFA is not an  
               "approval of a project triggering (and thereby violating)  
               CEQA.  The language does not exempt the housing projects  
               from the CEQA process.  



          REGISTERED SUPPORT / OPPOSITION:










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          Support


          >




          Opposition


          >




          Analysis Prepared by:Genevieve Morelos / BUDGET / (916)  
          319-2099