BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1330 (Salas)
Hearing Date: 8/27/2009 Amended: 7/13/2009
Consultant: Maureen Ortiz Policy Vote: VA 6-0 TH 10-0
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BILL SUMMARY: AB 1330 authorizes the Department of Veterans
Affairs (DVA) to establish a pilot project for the purpose of
establishing one cooperative housing project. The housing
project will be restricted for use and occupancy by military
veterans and their families for a period of 55 years.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Coop housing -----unknown, potentially
multi-million----- Special*
*Cal-Vet Home Loan Fund
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STAFF COMMENTS: SUSPENSE FILE.
AB 1330 authorizes the DVA to use existing home loan funds to
establish the pilot project. There is currently nearly $1
billion available in the Cal-Vet home loan program. However,
expanding the eligibility of the use of those funds to
cooperative housing projects could place cost pressure on the
availability of funds in the future.
AB 1330 requires the DVA to prescribe the rules, regulations,
and conditions necessary to implement the housing project. DVA
will be required to work in conjunction with the Department of
Housing and Community Development to implement the pilot
project.
In 1921 the Legislature created the Cal-Vet Program to provide
farm and home buying assistance to the veterans returning from
WWI. Since that time, the state has assisted over 400,000
veterans in the purchase of single-family homes, farms, mobile
homes, and condominiums. The program is operated by the
Department of Veterans Affairs which purchases a new or existing
home that has been selected by the eligible veteran, and then
resells the property to that veteran. The monthly payments are
set in an amount sufficient to do all of the following: 1)
reimburse the department for its costs in purchasing the farm,
home, or mobile home, 2) cover all costs resulting from the sale
of the bonds, including interest on the bonds, and 3) cover the
costs of operating the program. The Cal-Vet Home Loan Program
has been funded through a series of voter-approved,
self-supporting bonds - the latest being one in the amount of
$900 million approved under the Veterans Bond Act of 2008
(Proposition 12).
The Cal-Vet Program has historically been fully supported by
participating veterans. If, however, payments made by program
participants do not fully cover principal and interest payments
on the bonds, because general obligation bonds are backed by the
state, the difference would come from the General Fund.
This, however, has not been
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AB 1330 (Salas)
necessary since the inception of this program. The default rate
on the Cal-Vet home loans is very little as compared to
conventional home loans (the most recent information available
indicates there were only 5 in total in 2007). These loans are
not sold on the secondary market, and because the DVA holds the
papers on the homes, if there is a foreclosure, they then sell
the home to recoup the loan proceeds. In the rare event that
there is a short sale, the DVA has a mechanism in place referred
to as "loan loss reserves" which is a set-aside that is required
by their independent auditors and can be used to further prevent
any costs to the General Fund.
In a cooperative housing project, people collaborate to own or
control the housing facilities in which they live. The
cooperative is comprised of members who own stock in a nonprofit
public benefit corporation. Rather than paying just a mortgage
payment each month, the tenant pays his or her share of the
total operating costs of the corporation which is formed,
thereby benefiting from such things as controlled maintenance
costs, and resident participation and control.
AB 2266 (Chapter 834, Statutes of 2004) authorized the Cal-Vet
program to offer loans for the purchase of individual shares of
stock in cooperative housing corporations. This bill goes one
step further by allowing the DVA to finance an entire
cooperative development that will be occupied exclusively by
veterans and their families for a period of 55 years.