BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1629|
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THIRD READING
Bill No: AB 1629
Author: Assembly Budget Committee
Amended: 10/6/10 in Senate
Vote: 27-Urgency
PRIOR VOTES NOT RELEVANT
SUBJECT : Developmental Services Budget Trailer Bill
SOURCE : Author
DIGEST : Senate Floor Amendments of 10/6/10 delete the
prior version of the bill which expressed the intent of the
Legislature to enact statutory changes relating to the
Budget Act of 2010-11, and add the current content relating
to Developmental Services.
This bill is now the Developmental Services Budget Trailer
Bill which contains provisions necessary to implement the
2010-11 Budget.
ANALYSIS : Due to the eminent expiration (i.e., February
28, 2011) of the California Housing Finance Agency's
(CalHFA) line of credit for financing the Agnews/Bay Area
Housing Plan, legislation is needed to implement
alternative financing to lower interest rates and avoid up
to $26 million in debt service costs (according to Merrill
Lynch).
This bill:
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1. Restructures bond financing to allow funding of
residential facilities for persons with developmental
disabilities who have specialized health care needs and
receive services through the Regional Center system.
2. Modifies the Small Facilities Loan Guarantee Program for
facilities serving people with developmental
disabilities to address the unique financing structure
of the Agnews/Bay Area Housing Plan. These changes
allow Cal-Mortgage to offer insurance for bonds issued
by California Health Facilities Financing Authority
(CHFFA).
3. Allows for loans to be insured for the cost of
construction, improvement, and expansion, which may
exceed the current value of the health facility when
supported by other security for, or guaranty of, the
debt. It increases the total amount of loans that may
be insured pursuant to the program to $100,000,000.
4. Requires the Golden Gate Regional Center, Regional
Center of the East Bay, and San Andreas Regional Center
to provide for, secure and ensure the full payment of a
lease or leases developed for the Agnews/Bay Area
Housing Plan (as defined in Section 4688.5 of Welfare
and Institutions Code).
5. Authorizes the Director of the Department of Finance
(DOF) to provide a short-term General Fund loan not to
exceed the unpaid principal balance of the homes but not
more than $88 million. The loan may not be made any
sooner than January 15, 2011 and only if the CHFFA has
failed to complete the sale and issuance of bonds to
provide funding prior to January 15, 2011.
If the DOF issues the loan, it shall be repaid from
proceeds of the CHFFA's issuance of bonds for the program
prior to June 30, 2011.
Background
To assist with the closure of Agnews Developmental Center
(Agnews), Chapter 831, Statutes of 2004, authorized the
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acquisition of homes in the greater Bay Area to serve
consumers transitioning from Agnews into the community.
This Agnews/Bay Area Housing Plan is a long-term
cost-avoidance mechanism for the State since it maintains
ownership of property within the developmental services
system. The public's tax dollar is used to purchase the
housing once an inventory of stable community housing
designed for special needs individuals is maintained.
In 2005, the CalHFA agreed to issue municipal bonds to
finance 60 homes that were purchased, remodeled, and
occupied by 189 former residents of Agnews Developmental
Center. CalHFA estimated that a blended interest rate for
taxable and tax exempt bonds would be issued at a blended
rate of 7.5 percent.
As a result of the global market crisis, CalHFA has not
issued bonds to finance these loans but instead has been
carrying these properties on a bank line of credit for the
past two-years. The State and Regional Centers have
benefited from the use of these short-term financing
alternatives by making loan payments based on extremely low
interest rates (between two percent and five percent) on
these homes. Unfortunately, this bank line of credit
expires on February 28, 2011. No extension is being
offered by the bank.
Unless alternative financing is secured, CalHFA will have
to sell bonds as "housing bonds" at a very high interest
rate in the next few months before the expiration of the
line of credit. According to the DDS, based on information
provided by Merrill Lynch, the interest rate could be 11
percent or more if this legislation is not enacted.
Comments
After discussions with the Department of Developmental
Services (DDS), Department of Finance, State Treasurer's
Office and Cal-Mortgage, the preferred alternative is to
restructure the bonds as "health facility" bonds (rather
than "housing" bonds) and to change the permanent lender to
CHFFA.
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The mortgage payments are made through DDS funding of
Regional Centers for the cost of residential services for
consumers.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
CTW:do 10/6/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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