BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 232
Author: V. Manuel Pérez (D), et al.
Amended: 6/14/12 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM. : 9-0, 6/12/12
AYES: DeSaulnier, Gaines, Harman, Kehoe, Lowenthal,
Pavley, Rubio, Simitian, Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 1/26/12 (Consent) - See last page
for vote
SUBJECT : Community Development Block Grant Program
SOURCE : Author
DIGEST : This bill, for the economic development portion
of the Community Development Block Grant (CDBG) Program,
eliminates the dollar-per-job test and the requirement that
benefit to low- and moderate-income persons be a scoring
factor in ranking applications.
ANALYSIS : Existing federal law establishes the CDBG
Program to provide communities with resources to address a
wide range of unique community development needs, including
affordable housing, services to the most vulnerable, and
job creation through the expansion and retention of
businesses. A grantee must use 70% of CDBG funds for
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activities that benefit low- and moderate-income persons.
In addition, each activity must meet one of three national
objectives for the program: (1) benefit low- and
moderate-income persons; (2) prevent or eliminate slums or
blight; and (3) address urgent community development needs
posing a serious and immediate threat to the health or
welfare of the community.
The federal Department of Housing and Urban Development
allocates CDBG funds via formula to "entitlement
jurisdictions" (cities over 50,000 population and counties
over 200,000 population) and to states for non-entitlement
areas. In California, the Department of Housing and
Community Development (HCD) administers the CDBG Program
for non-entitlement areas.
HCD makes CDBG funds available in two general categories:
Community development, which includes housing, public
facilities, public improvements, public services, and
planning.
Economic development, which includes business
assistance, microenterprise activities, and larger scale
economic development projects.
Existing state law requires that HCD make 30% of CDBG funds
available for economic development programs. Cities and
counties use these grants in turn to create or retain jobs
for low- and moderate-income persons by making long-term,
fixed-rate loans available to businesses at reasonable
interest rates and with flexible terms. For each business
assisted, at least 51% of the jobs created or retained must
be for persons of low- or moderate-income.
With respect to these economic development activities,
federal regulations require HCD to meet a two pronged
dollar-per-job test: (1) a maximum of $50,000 per actual
individual job, known as the individual test; and (2) a
maximum average of $35,000 per job statewide over a funding
cycle, known as the aggregate test. Under existing state
law, however, businesses receiving a loan through the CDBG
Program must create or retain at least one job for every
$35,000. In other words, state law sets the maximum for
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the individual test at the same level as the maximum for
the aggregate test.
State law also requires HCD, when developing scoring
factors for CDBG economic development awards, specifically
to use the three national CDBG objectives described above.
This bill:
1. Eliminates, for the economic development portion of the
CDBG Program, the dollar-per-job test in state law, in
effect relying only on the two-pronged federal
dollar-per-job test.
2. Deletes the state law requirement that HCD use benefit
to low- and moderate-income persons as a scoring factor
in ranking economic development applications.
3. Eliminates the requirement that HCD utilize the federal
standards for "blight" and "urgent need" as a scoring
factor, and instead clarifies that HCD develop criteria
which meet the minimum requirements of federal law for
eligible projects and that meet National Objectives.
Comments
Purpose of this bill . According to the author's office,
removing the more restrictive $35,000 dollar-per-job test
from state law conforms with federal law and grants HCD the
flexibility to choose between the two federal tests for
determining the appropriate dollar-per-job standard. The
author's office believes this will allow HCD to more
quickly certify and award funding for economic development
projects across the state.
What allowing larger per job awards will mean in practice .
HCD divides CDBG economic development funds between two
subprograms: the Enterprise Fund and the Over-the-Counter
Program. The former is a competitive program with
applications and awards once a year. As the name implies,
the latter has an open application period, and HCD makes
awards one at a time for major economic development
projects until funds are exhausted.
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While federal regulations allow HCD to award as much as
$50,000 per individual job, they also require HCD to award
no more than $35,000 per job in aggregate over the two
economic development subprograms. Given that there are two
separate subprograms with differing application and award
timeframes, as a practical matter HCD under this bill will
probably have to limit all Enterprise Fund awards and early
Over-the-Counter awards to the $35,000 standard and only
allow more generous awards to later applicants, to the
extent that room under the aggregate cap still exists.
In recent years at least, applicants have not always
exhausted funds available in the Over-the-Counter Program
within a given funding year, and these funds have then
rolled over to the following funding cycle. If that trend
continues, then giving HCD the flexibility to make awards
of up to $50,000 per job late in a funding cycle will not
necessarily prejudice other potential applicants. If the
trend changes, HCD would still have the flexibility to
maintain the $35,000 per job standard for all applicants.
It should be pointed out, however, that allowing awards of
up to $50,000 per job ultimately is likely to mean that
Over-the-Counter funds will support fewer jobs overall.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/25/12)
AFSCME
California Association for Local and Economic Development
ASSEMBLY FLOOR : 75-0, 1/26/12
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Hall, Hayashi, Roger Hernández, Hill, Huber,
Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue,
Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell,
Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan,
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Perea, V. Manuel Pérez, Portantino, Silva, Skinner,
Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. Pérez
NO VOTE RECORDED: Davis, Gorell, Halderman, Harkey, Smyth
JJA:k 6/26/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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