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 --