BILL ANALYSIS                                                                                                                                                                                                    



                                                                SB 869
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        SENATE THIRD READING
        SB 869 (Budget and Fiscal Review Committee)
        As Amended  October 7, 2010
        2/3 Vote.  Urgency

         SENATE VOTE  :Vote not relevant  
         
         SUMMARY  :  Contains necessary statutory and technical changes to  
        implement changes to the Budget Act of 2010.  

        1)Assists with the financing of Bay Area Housing Program (BAHP)  
          homes acquired to serve consumers moving into the community, from  
          the closure of Agnews Developmental Center.

        2)Modifies statute governing the California Health Facilities  
          Financing Authority (CHFFA), to secure alternative financing and  
          results in over $26 million in cost avoidance due to lower  
          interest rates. Statute is amended to allow funding of residential  
          facilities for persons with developmental disabilities who have  
          specialized health care needs. Given the States arrangement with  
          regional centers, clarification is made to the term "participating  
          health institution".

        3)Restructures the bonds as "health facility bonds" and changes the  
          permanent lender to the CHFFA. Changes will allow Cal-Mortgage to  
          offer insurance for the bonds issues by CHFFA. 

        4)Establishes loan criteria for the California Housing Finance Fund  
          (CalHFF), only for the repayment of the line of credit that funded  
          the BAHP loans.  The short-term general fund loan would only be  
          activated should CHFFA fail to enter into a Bond Purchase  
          Agreement prior to January 15, 2011. Should it need to be issued,  
          the loan would be repaid from the proceeds of the California  
          Health Facilities issuance of bonds for the program prior to June  
          30, 2011.

        5)Urgency Clause.  Declares this bill take effect immediately as an  
          urgency statute. 

         EXISTING LAW  :  The homes were purchased under a short-term loan  
        agreement with Bank of America, and with permanent financing tied to  
        a bond issuance by the CalHFA.

        The global credit crisis and housing crisis disrupted the market for  
        taxable and tax-exempt housing bonds resulting in much higher  







                                                                SB 869
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        interest rates than originally estimated.  To avoid paying higher  
        rates, CalHFA has been carrying the properties on a line of credit  
        that expires February 28, 2011. Unless alternative funding is  
        secured, CalHFA will have to sell the bonds as "housing bonds" and  
        at the higher interest rates.


         Analysis Prepared by  :   Daisy Gonzales / BUDGET / (916)319-2099


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