BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 879 (Beall) - Affordable Housing Bond Act of 2016
          
           ----------------------------------------------------------------- 
          |                                                                 |
          |                                                                 |
          |                                                                 |
           ----------------------------------------------------------------- 
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Version: May 5, 2016            |Policy Vote: T. & H. 9 - 1,     |
          |                                |          GOV. & F. 5 - 1       |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Urgency: Yes                    |Mandate: No                     |
          |                                |                                |
          |--------------------------------+--------------------------------|
          |                                |                                |
          |Hearing Date: May 23, 2016      |Consultant: Mark McKenzie       |
          |                                |                                |
           ----------------------------------------------------------------- 


          This bill meets the criteria for referral to the Suspense File.



          Bill  
          Summary:  SB 879, an urgency measure, would enact the Affordable  
          Housing Bond Act of 2016, which authorizes the sale of $3  
          billion in general obligation bonds, upon approval by voters at  
          the November 8, 2016 statewide general election.


          Fiscal  
          Impact:  
            Bond costs  :  Total principal and interest costs of  
            approximately $4.89 billion to pay off the bonds ($3 billion  
            in principal and $1.89 billion in interest), with average  
            annual debt service payments of $163 million (General Fund),  
            when all bonds are sold, and assuming a 30-year maturity and  
            an interest rate of 3.5%.  If interest rates increase to 5% in  
            the near future, annual debt service would be approximately  
            $195 million (General Fund) and total principal and interest  
            costs over the repayment period would be approximately $5.86  







          SB 879 (Beall)                                         Page 1 of  
          ?
          
          
            billion.  

           Administrative costs  :  The Department of Housing and Community  
            Development (HCD) and the California Housing Finance Agency  
            (CHFA) would incur increased staffing costs, likely in the  
            range of $100 to $150 million in total over multiple fiscal  
            years, to administer the various housing programs funded by  
            this Bond Act.  These funds would represent a portion of the  
            bond funds allocated to HCD and CHFA to fund the specified  
            programs (up to 5% of bond proceeds).   

           Ballot costs  :  One-time costs in the range of $414,000 to  
            $552,000 to the Secretary of State (SOS) for printing and  
            mailing costs to place the measure on the ballot in the  
            November, 2016 statewide election. (General Fund)  


           Background:  Existing law, as enacted by SB 1227 (Burton), Chapter 26/2002,  
          establishes the Housing and Emergency Shelter Trust Fund Act of  
          2002, authorizing the sale of $2.1 billion in general obligation  
          bonds for various affordable housing programs, upon approval by  
          the voters.  Subsequently, the 2002 Act was approved by the  
          voters as Proposition 46 in the November, 2002 general election.  
           According to HCD, Proposition 46 assisted in the construction  
          of 91,000 units of housing, including 10,000 shelter spaces.
          Existing law, as enacted by SB 1689 (Perata), Chapter 27/2006,  
          establishes the Housing and Emergency Shelter Trust Fund Act of  
          2006, authorizing the sale of $2.85 billion in general  
          obligation bonds for various affordable housing programs, upon  
          approval by the voters.  Subsequently, the 2006 Act was approved  
          by the voters as Proposition 1C at the November, 2006 general  
          election.  According to HCD, 92,000 housing units and 3,000  
          shelter spaces were constructed with Proposition 1C bond funds,  
          with $250 million remaining to be spent.


          Since the dissolution of redevelopment agencies, and its  
          associated dedicated funding for affordable housing, there is a  
          critical shortage of permanent funding for those purposes.




          Proposed Law:  








          SB 879 (Beall)                                         Page 2 of  
          ?
          
          
            SB 879, an urgency measure, enacts the Affordable Housing Bond  
          Act of 2016, which places a $3 billion bond on the November,  
          2016, general election ballot.  The measure creates the  
          Affordable Housing Bond Act Trust Fund of 2016, and states the  
          Legislature's intent that all bond proceeds be deposited in the  
          Fund.  The bill allocates funds from the Fund to the following  
          accounts, when the bonds are issued and sold:
                 $1.5 billion to the Multifamily Housing Account, to be  
               continuously appropriated to the existing Multifamily  
               Housing Program to construct, rehabilitate, and preserve  
               traditional and rental housing for persons with incomes of  
               up to 60% of the area median income.  

                 $600 million to the Transit-Oriented Development and  
               Infill Infrastructure Account, which the bill creates  
               within the Fund.  The bill then allocates funds from the  
               Account as follows:

                  o         $300 million to the Transit-Oriented  
                    Development Implementation Fund pursuant to the  
                    existing Transit-Oriented Development Implementation  
                    Program. 

                  o         $300 million to the Infill Infrastructure  
                    Financing Account, which the bill creates within the  
                    Account, upon appropriation by the Legislature, for  
                    infill incentive grants to assist in the new  
                    construction or rehabilitation of infrastructure that  
                    supports high-density affordable and mixed-income  
                    housing in locations designated as infill, as  
                    specified by statute.

                 $600 million to the Special Populations Housing Account,  
               which the bill creates within the Fund.  The bill then  
               allocates funds from the Account as follows:

                  o         $300 million continuously appropriated for  
                    transfer to the existing Joe Serna, Jr. Farmworker  
                    Housing Grant Fund.

                  o         $300 million to the Local Housing Trust Fund  
                    Matching Grant Program Account, which the bill  
                    creates, upon appropriation by the Legislature, to  
                    provide matching grants to local public agencies and  








          SB 879 (Beall)                                         Page 3 of  
          ?
          
          
                    nonprofit organizations that raise money for  
                    affordable housing, as specified by statute.

                 $300 million to the Home Ownership Development Account,  
               which the bill creates within the Fund, and continuously  
               appropriates to the existing CalHome Program to provide  
               direct, forgivable loans to assist development projects  
               involving multiple ownership units, including single-family  
               subdivisions, for self-help mortgage assistance programs,  
               and for manufactured homes.

          The measure only takes effect if enacted by voters at the  
          November 8, 2016, statewide general election, makes legislative  
          findings and declarations supporting its provisions, and  
          contains an urgency clause giving the measure immediate effect  
          if enacted.  




          Related  
          Legislation:  The following proposals are currently under  
          consideration in budget discussions:

                  Senate Proposal  : Senate pro Tempore De León and a  
               bipartisan group of Senators have proposed a $2 billion  
               bond for permanent supportive housing for the chronically  
               homeless who suffer from mental illness by reallocating  
               funding generated by the surtax on incomes over $1 million  
               imposed by the Mental Health Services Act (Proposition 63).  
                

                  Assembly Democratic Proposal  : Assembly Speaker Rendon  
               and other Assembly Democrats have proposed allocating $1.3  
               billion in funds and tax credits for affordable housing and  
               homeless shelters.




          Staff  
          Comments:  The current market for California general obligation  
          bonds is very favorable.  The State Treasurer recently sold  
          $2.95 billion in general obligation bonds (including refinancing  








          SB 879 (Beall)                                         Page 4 of  
          ?
          
          
          $1.96 billion in existing bond debt) which enjoyed extremely  
          high demand and the lowest borrowing costs on 30-year bonds in  
          the last three decades, with yields of 3.05%.  The estimates  
          noted above reflect a slightly higher interest rate of 3.5%, but  
          also note the difference in debt service costs if the rate rose  
          to historical averages of 5%.
          Staff notes that infrastructure spending results in increased  
          economic activity and employment, which has both one-time and  
          ongoing impacts.  For instance, the author cites a study by the  
          National Association of Home Builders (NAHB) that estimates  
          construction of 100 multifamily housing units has a one-time  
          local impact of $11.7 million in local income, $2.2 million in  
          taxes and other revenue for local governments, and 161 local  
          jobs.  The NAHB study notes additional recurring annual local  
          impacts of $2.6 million in local income, $503,000 in taxes and  
          other local government revenue, and 44 local jobs.  Data is  
          unavailable to substantiate these secondary local impacts.


          SOS indicates that printing and mailing costs associated with  
          placing a measure on the statewide ballot are approximately  
          $69,000 per page, depending on the length of the ballot.  The  
          fiscal estimates noted above reflect the addition of 6-8 pages  
          in the Voter Information Guide.  Actual costs would depend upon  
          the length of the title and summary, analysis by the Legislative  
          Analyst's Office, proponent and opponent arguments, and text of  
          the proposal.  Staff notes that Proposition 1C took up 8 pages  
          in the 2006 Voter Information Guide.




                                      -- END --