BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
595 (Cedillo)
Hearing Date: 05/18/2009 Amended: 05/04/2009
Consultant: Mark McKenzie Policy Vote: VA 5-1, T&H 6-3
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BILL SUMMARY: SB 595 would enact the Homeless Veterans Housing
and Supportive Services Act of 2010 (Bond Act), authorizing the
issuance of $1,500,000,000 in general obligation bonds to
provide funds for supportive housing projects for homeless
veterans or veterans at risk of homelessness. The Bond Act
would only become operative if approved by the voters at
November 2, 2010 statewide general election. This bill would
also revise the specifications of eligible expenditures under
the Multifamily Housing Program (MHP) to include certain
non-capital costs. This latter provision would become operative
even if the bond act election fails.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Bond authorization $1,500,000*Bond
*Principal and interest totaling $2.93 billion over 30 years.
Assuming a bond interest rate of 5.0% and 3% inflation, average
annual payments would be $97.6 million, though early repayments
may be higher.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
The Homeless Veterans Housing and Supportive Services Act of
2010 would authorize the issuance of $1.5 billion in general
obligation housing bonds at the next statewide general election.
Proceeds of bonds would be expended under the Multifamily
Housing Program for purposes of supportive housing projects for
homeless veterans, or veterans at risk of homelessness, with
incomes not exceeding "extremely low income," as determined by
the Department of Housing and Community Development (HCD).
Supportive housing is defined as housing with no limit on length
of stay, occupied by qualified veterans, that is linked to
onsite or offsite supportive services, as specified.
The Bond Act requires HCD to adopt guidelines that would
maximize the number of units assisted, promote the long-term
availability of supportive services, limit the expenditure of
administrative costs, and maximize the leverage of public and
private financing sources. Furthermore, the Bond Act prohibits
expenditure of bond funds for project operating costs or the
costs of supportive services. Supportive services include
onsite or offsite services that assist the tenant to retain
housing, improve his or her mental and physical health status,
employment training, substance abuse recovery, readjustment
counseling, therapy for post-traumatic stress disorder,
traumatic brain injury, and other trauma, and maximize the
ability to live and work in the community. Staff notes that to
the extent that the Bond Act and changes to the MHP promote the
construction of supportive housing, there would be a
corresponding General Fund pressure to increase state funding
for those services linked to supportive housing.
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SB 595 (Cedillo)
SB 595 would also revise the specifications for what qualifies
as an eligible expenditure under the Multifamily Housing Program
to include costs of after school care and the cost of supportive
services integrally linked to units assisted pursuant to the
Bond Act. Furthermore, this provision allows HCD to use
"capitalized operating reserves" for supportive services for
units assisted under the Bond Act. Staff notes that these
provisions would be enacted whether or not the Bond Act is
approved by the voters. These changes would also allow other
MHP expenditures, including previously approved bond funds or
any bond funds approved in the future, to be used for supportive
services, which is an inappropriate use for bond funds.
Staff notes that the fiscal provisions of the Bond Act exempt
the bonds authorized from the provisions of General Obligation
Bond Law that require bond proceeds to be used for "capital
assets" with a specified useful life. Staff recommends an
amendment to delete this exemption to ensure bonds are spent
solely on assets with an appropriate useful life.
HCD, the agency responsible for administering the MHP, indicates
that implementation of the Bond Act would require additional
staffing resources (8 program positions and 2 administrative
positions) at a first year cost of $1.1 million and ongoing
costs over the next 14 years of $1 million. These
administrative costs would be paid out of bond funds.
For purposes of this analysis, staff assumes a 30-year repayment
period, a bond interest rate of 5.0%, and 3% inflation. Under
these conditions, the total principal and interest would be
$2.93 billion with an average annual repayment of $97.6 million.
The ultimate repayment figures will depend on the rate on the
date(s) bonds are sold and the length of the repayment period.
Staff notes that California voters have authorized $121.8
billion in general obligation bonds since 1970 and two-thirds of
that amount has been authorized since 2002. According to
estimates prepared by the Legislative Analyst's Office, the
state's General Fund debt-service costs are expected to rise to
$7.5 billion in 2014-15. If ultimately approved by the voters,
this measure would increase those costs.