BILL ANALYSIS Ó
AB 232
Page 1
Date of Hearing: January 10, 2012
ASSEMBLY COMMITTEE ON JOBS, ECONOMIC DEVELOPMENT AND THE ECONOMY
V. Manuel Pérez, Chair
AB 232 (V. Manuel Perez) - As Amended: January 4, 2012
SUBJECT : Community Development Block Grant Program
SUMMARY : Removes the more restrictive $35,000 dollar-for-jobs
state requirement from the small cities portion of the federal
Community Development Block Grant Program (CDBG). The change
conforms the state rules with federal law, allowing the
California Department of Housing and Community Development
(HCD), the program administrator, the flexibility to choose
among two federal options for determining the appropriate
dollar-for-jobs standard.
EXISTING LAW
1)Designates HCD as the administrator of the small cities
portion of the federal CDBG program.
2)Provides Legislative intent that funds be provided to small
and rural counties to encourage new housing and meet local
economic development and needs.
3)Requires HCD to allocate no less than 51% of CDBG funds for
providing or improving housing opportunities to low- or
moderate-income households.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose : According to the author, this bill will provide
flexibility to the small cities portion of the federal CDBG
Program and would allow CDBG grant money to be disbursed more
quickly to local economic development projects. Under the
federal guidelines, states are required to certify that
economic development projects funded through the Small Cities
program generate "a sufficient Ýpublic] benefit." Federal
guidelines afford states several options for certifying public
benefit ranging from the number of jobs created per investment
to the level of goods and services generated for persons of
low and moderate incomes. In California, however, the state
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chose to avail itself of only one of the options afforded
under federal law for certifying public benefit. This measure
removes the more limited requirement from the statute,
allowing HCD the flexibility to more quickly certify and award
funding for economic development projects across the state.
This is an important time to make this statutory change as HCD
is currently taking other actions to streamline the
application process. Among those changes, HCD will be
shifting to a single mega grant application round per year
from the current cycle of six per year. This will allow local
governments to move more quickly through the funding process
and get their projects into the pipeline faster. Local
governments are pleased with this move because it will provide
a significant cost savings for them. As part of the
application process, small size communities often hire
consultants to draft the applications, as well as hold public
hearings. Just at the point the community gets funded, it is
time once again to apply for another portion of the program.
Not having to constantly shift from one application to the
next will relieve pressure on local government staff, enabling
them to focus on other pressing local issues.
2) California Small Business : California's dominance in many
economic areas is based, in part, on the significant role
small businesses play in the state's $1.9 trillion economy.
Businesses with less than 100 employees comprise nearly 98% of
all businesses, and they are responsible for employing more
than 37% of all workers in the state.
Small- and medium-sized businesses are crucial to the state's
international competitiveness and are an important means for
dispersing the positive economic impacts of trade within the
California economy. Of the over 57,461 companies that
exported goods from California in 2008, 96% were small- and
medium-sized enterprises (SME) with fewer than 500 employees.
These SMEs generated nearly two-fifths (44%) of California's
exports in 2008. Nationally, SMEs represented only 31% of
total exports. These numbers include the export of only goods
and not services.
Small businesses function as economic engines, especially in
challenging economic times. During the nation's economic
downturn from 1999 to 2003, microenterprises (businesses with
less than five employees) created 318,183 new jobs or 77% of
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all employment growth, while larger businesses with more than
50 employees lost over 444,000 jobs. From 2000 to 2001,
microenterprises created 62,731 jobs in the state, accounting
for nearly 64% of all new employment growth. According to a
2010 report from the California Senate Office of Research, in
2008 microenterprises employed four million people or 19% of
the state's employment. Common types of microenterprises
include engineering, computer system design, housekeeping,
construction, landscaping, and personnel services.
3)Community Development Block Grant Program : The CDBG Program
was established by federal law in 1974. Large and medium
sized municipalities are provided with allocations from the
federal Housing and Urban Development Department. States
administer allocations for the CDBG program for smaller cities
and counties on a competitive basis. California's small
cities CDBG program administered by HCD, provides funding to
counties with fewer than 200,000 residents in unincorporated
areas and cities with fewer than 50,000 residents that are not
participants in the federal CDBG Program.
The chart below presents recent proposed budget information
for the state's small cities CDBG Program.
State Community Development Block Grant Program
---------------------------------------------------------------
|Fiscal Year | Total Funding | Administration | Local |
| | | | Assistance |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2005/06 | $46,832,517 | $1,904,467 | $44,928,050 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2006/07 | $43,037,021 | $1,845,558 | $41,191,463 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2007/08 | $41,503,552 | $1,945,107 | $39,558,445 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
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| 2008/09 | $39,262,869 | $3,226,371 | $36,036,498 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2009/10 | $39,706,909 | $3,944,000 | $35,762,909 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2010/11 | $42,877,288 | $1,551,948 | $41,325,340 |
|------------+----------------+----------------+----------------|
| | | | |
|------------+----------------+----------------+----------------|
| 2011/12 | $35,841,830 | $1,349,614 |$34,492,216 |
---------------------------------------------------------------
The primary objective of the CDBG Program is the development
of viable communities through the provision of decent housing
and suitable living environments, and by expanding economic
opportunities. Pursuant to federal law, at least 51% of a
CDBG project's beneficiaries must have incomes less than 80%
of the area median income. This is known as the Targeted
Income Group.
Each year the CDBG Program makes funds available to eligible
jurisdictions through several allocations, including:
General, Native American and Colonias; Economic Development -
Over the Counter; Economic Development - Enterprise; and
Planning and Technical Assistance allocations.
General, Native American and Colonias Allocations : The
General, Native American and Colonias allocation is the
largest component of the CDBG program. One and one quarter
percent of state CDBG Program funds are awarded to projects
serving Native Americans who do not belong to a federally
recognized tribe or rancheria. Five percent is awarded to
non-entitlement California communities (colonias) located
within 150 miles of the California-Mexico border. Most of the
funds in this allocation are spent for housing, community, and
economic development projects serving lower-income households
in small, typically rural communities.
Economic Development - Enterprise Fund : This allocation is
intended to capitalize local businesses through grants and
revolving loan funds that provide working capital or provide
infrastructure assistance to businesses that create or
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preserve private sector jobs for low and very low income
population. Grants and loans can be made up to $500,000.
Loan terms and conditions can be tailored to meet the
financial needs of each business.
Economic Development - Over the Counter : This allocation is
intended to capitalize a local business loan or finance a
public infrastructure project which will promote business
expansion and result in the creation and/or retention of
permanent private sector jobs. Eligible uses of funds include
business loans and grants to cities and towns for purchase of
land and existing improvements, construction and
rehabilitation of buildings and leasehold improvements,
purchase of equipment, inventory, furniture, fixtures,
materials and supplies, and working capital. Grants can be
made up to $500,000.
Planning and Technical Assistance : The grants made under this
allocation are available for both general and economic
development activities. The grants are intended to help
communities move projects from concept to reality. A total of
$70,000 is available annually to each eligible community --
$35,000 on the economic development side and $35,000 for
general development projects. Typical activities include:
business development feasibility studies; business attraction
and retention plans; housing needs studies; marketing studies;
social service needs assessments; technical assistance for
specific businesses; and infrastructure needs assessments.
4) Related legislation: Below is a list of related bills.
a) AB 1556 (Assembly Committee on Jobs, Economic
Development and the Economy) - Community Development Block
Grant Program: This bill would have required grantees of
Community Development Block Grant (CDBG) funds for local
revolving loan programs to contract with approved financial
intermediaries. Status: Held in Assembly Committee on
Appropriations, 2010.
b) SB 194 (Florez) - Community Equity Investment Act of
2010: This bill would have provided that unless prohibited
by federal regulations, local governments must include
representation from disadvantaged unincorporated
communities in their Citizen Advisory Committee. Status:
Vetoed, September 30, 2010.
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In his veto message, Governor Arnold Schwarzenegger wrote:
"This bill would establish, to the extent permitted by
federal law, requirements governing the use of a citizen
advisory committee (CAC) by a local government that chooses
to use a CAC in the course of preparing plans for the
expenditure of federal Community Development Block Grant
CDBG) funds received directly from the federal Department
of Urban Development (HUD). This bill is unnecessary. The
federal CDBG regulations already mandate a public hearing
with significant outreach elements as part of the grant
recipients' planning processes; further, imposing a state
requirement on a federal program would be inappropriate and
in fact may not be permitted by federal law and
regulations."
REGISTERED SUPPORT / OPPOSITION :
Support
None Received
Opposition
None Received
Analysis Prepared by : Mercedes Flores/Oracio Gonzalez / J.,
E.D. & E. / (916) 319-2090