BILL ANALYSIS
AB 2327
Page 1
Date of Hearing: April 14, 2010
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 2327 (Harkey) - As Amended: April 12, 2010
SUBJECT : Affordable housing: risk retention pool.
SUMMARY : Authorizes affordable housing entities to join in an
arrangement that provides for the pooling of self-insured claims
or losses against tort liability, liability to officers and
employees for their acts or omissions, and physical damage to
motor vehicles, personal property and real property of the
affordable housing entity. Specifically, this bill :
1)Authorizes an "affordable housing entity" to join one or more
other affordable housing entities in an arrangement providing
for the pooling of self-insured claims or losses with respect
to any of the following:
a) Insurance covering any tort liability;
b) Insurance covering any employee of the affordable
housing entity against his or her liability for injury
resulting from an act or omission in the scope of
employment;
c) Insurance covering any board member, officer, member or
volunteer of the affordable housing entity against any
liability from any act or omission in the scope of
participation with the affordable housing entity; and
d) Insurance covering any loss from physical damage to
motor vehicles, personal property, real property, or other
property owned or operated by the affordable housing
entity.
2)Defines the term "affordable housing entity" to mean any of
the following:
a) A housing authority created under the laws of this state
or another jurisdiction and any instrumentality of a
housing authority;
b) A nonprofit corporation organized under the laws of this
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state or another state that is engaged in providing
affordable housing;
c) A partnership or limited liability company that is
engaged in providing affordable housing and that is
affiliated with a housing authority or a nonprofit
corporation that has one or more of the following:
i) A financial or ownership interest in the partnership
or limited liability company or the right to acquire that
interest;
ii) The power to direct the management or policies of
the partnership or limited liability company; or
iii) A contract to lease, manage, or operate the
affordable housing owned by the partnership or limited
liability company.
3)Defines "affordable housing" as housing developments in which
some of the dwelling units may be purchased or rented, with or
without government assistance, on a basis that is affordable
to individuals of low income as defined in state housing law.
4)Specifies that the pooling arrangement established by this
bill will not be considered insurance, and will not be subject
to regulation by the Insurance Commissioner.
5)Authorizes any insurance pool established pursuant to this
bill to include the organization of a separate legal or
administrative entity whose duty is to administer the
insurance pool, which may be a nonprofit corporation, limited
liability company, partnership, trust, or other form of
entity, whether organized under the laws of this state or
another state operating in another state.
6)Requires that any insurance pool established pursuant to this
bill have initial pooled resources of at least $2,500,000
and maintain adequate reinsurance to protect against its
risks.
7)Requires all participating affordable housing entities in
these insurance pools to agree to pay premiums or make other
mandatory financial contributions, as determined by the
governing board, that are necessary to ensure a financially
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sound risk pool.
8)Requires all participating affordable housing entities to be
given written notice, in at least 10-point type, that the pool
is not regulated by the Insurance Commissioner and that the
state insurance insolvency guaranty funds are not available to
safeguard its risk.
9)Prohibits these insurance pools from insuring against workers'
compensation liability.
10)Specifies that nothing in this bill shall be construed to
authorize an affordable housing entity to pay or insure for
any claim or judgment against an employee of the affordable
housing entity for punitive or exemplary damages.
EXISTING LAW
1)Authorizes local agencies to enter into a joint pooling
agreement to form a single statewide insurance pooling
arrangement for the payment of tort liability or public
liability losses incurred by those agencies. The agency is
known as the Local Agency Self-Insurance Authority.
2)Authorizes local public agencies to self-insure against
liability for injury resulting from an act or omission of
their employees in the scope of their employment.
3)Authorizes two or more local public entities, by a joint
powers agreement, to provide insurance through self-insurance,
or from an admitted insurer, or from a nonadmitted insurer
when obtained through a surplus lines broker.
4)Specifies that the pooling of self-insured claims or losses
among local public entities is not considered insurance and is
not subject to regulation by the Insurance Commissioner.
5)Authorizes two or more public agencies by agreement to jointly
exercise any power common to the contracting powers, even
though one or more of the contracting agencies are located
outside this state.
FISCAL EFFECT : Unknown
COMMENTS :
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Public housing authorities have the ability to join together in
multi-state joint self-insurance risk pools to manage property
and liability risks, jointly purchase insurance or reinsurance,
and to contract for risk management, claims, and administrative
services in order to conserve scarce resources. These pools are
limited to participation by public entities.
Affordable housing is increasingly being developed by tax credit
limited partnerships, limited liability companies, and nonprofit
corporations. Public housing projects are being transferred to
these entities (a process called "de-federalization") because of
HUD's asset management restrictions and the decrease in HUD
capital funds and moneys for operating subsidies.
When a tax-credit limited partnership develops affordable
housing, either a housing authority or a nonprofit corporation
acts as the general partner, and institutional financing sources
become the limited partners. Nonprofit corporations have become
more active in the development of affordable housing because
they have access to funding sources that may not be available to
public housing authorities.
AB 2327 creates new statutory requirements on affordable housing
entity insurance pools that would be similar to those now
required of public entity insurance pools (pursuant to Section
6500 et seq. of the Government Code) and for nonprofit
corporation insurance pools (pursuant to Section 5005.1 of the
Corporations Code). The governing board of the pool would be
required to set premium levels necessary to ensure financial
stability. The types of insurance coverage to be provided by
the affordable housing entity insurance pool is consistent with
the insurance coverage that can be provided by a public entity
or nonprofit corporation insurance pool.
The bill is similar to legislation enacted in Oregon and
Washington in 2009. The Oregon and Washington legislation
permits housing authorities, nonprofit corporations, and tax
credit limited partnerships and limited liability companies that
are affiliated with a housing authority or nonprofit corporation
to form a joint self-insurance pool that is not regulated as an
insurance company but does have the attributes of a public
entity.
Arguments in Support
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The bill's sponsor, the Housing Authorities Risk Retention Pool
(HARRP), is a California joint powers authority that operates as
a self-insurance pool comprised of over 90 public housing
authorities from Oregon, Washington, California and Nevada.
HAARP is limited to insuring property where a housing authority
is the sole owner, a situation that is increasingly rare. The
sponsor argues that California needs to update its statutes to
permit other types of entities that develop, acquire, or manage
affordable housing to establish cost-efficient, multi-state
insurance risk pools as a way to maintain the availability of
affordable housing in this state.
According to the sponsor, California affordable housing entities
would benefit from the ability to become a member of a
multi-state self-insurance pool. The ability to provide low
cost insurance, broadened coverage, and effective risk
management tailored to affordable housing risk exposures
translates into more abundant affordable housing for California
residents without any new government expenditures.
Committee Amendments:
1)On page 2, line 32, delete "include the organization of a
separate legal or administrative entity whose duty it is to
administer the insurance pool, which may be" and insert "be
organized as" in order to correct a drafting error.
2)On page 3, line 26, replace the term "individuals of low
income" with "persons or families of low or moderate income."
The latter is the term that is defined in Health & Safety Code
Section 50093, the code section cross-referenced in the
definition of affordable housing in this bill.
Double referred : The Assembly Committee on Rules referred AB
2327 to the Committee on Local Government and Housing and
Community Development. The bill passed the Committee on Local
Government on April 7, 2010 by a vote of 11 to 0.
REGISTERED SUPPORT / OPPOSITION :
Support
Housing Authorities Risk Retention Pool (sponsor)
California Coalition for Rural Housing
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Housing Authority of the County of Alameda
Housing Authority of the County of Monterey
Opposition
None on file
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085