BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 1092
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: dickinson
VERSION: 8/30/12
Analysis by: Mark Stivers FISCAL: Yes
Hearing date: August 21, 2012 URGENCY: YES
SUBJECT:
Appropriation for catalyst projects
DESCRIPTION:
This bill appropriates $20 million of Proposition 1C funding for
grants to projects that the Department of Housing and Community
Development previously designated as catalyst projects.
ANALYSIS:
In November 2006, California voters approved Proposition 1C, the
$2.85 billion Housing and Emergency Shelter Trust Fund Act of
2006. Among other things, Proposition 1C included $125 million
for the Building Equity and Growth in Neighborhoods (BEGIN)
Program. Under BEGIN, the Department of Housing and Community
Development (HCD) gives grants to local governments for the
provision of downpayment assistance loans to low or moderate
income homebuyers who purchase a home in a new development that
has received one or more local government development
incentives. HCD has awarded all of the funds allocated to the
BEGIN Program, but because of the recession, awardees have
returned $36 million in awards to the BEGIN Fund. Proposition
1C provides that any BEGIN funds not encumbered by November 17,
2011 shall revert for general use in the CalHome Program, under
which HCD provides grants to local governments and non-profit
organizations for activities that support homeownership for
lower-income households.
Proposition 1C also included $100 million for the Affordable
Housing Innovation Program "to be expended for competitive
grants or loans to sponsoring entities that develop, own, lend,
or invest in affordable housing and used to create pilot
programs to demonstrate innovative, cost-saving approaches to
creating or preserving affordable housing." Proposition 1C
directed the Legislature to establish in statute specific
criteria for use of these funds. Subsequently, SB 586 (Dutton),
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Chapter 652, Statutes of 2007 allocated these funds to a number
of specific purposes, including $10 million to the Innovative
Homeownership Program to be designed and administered by HCD to
increase or maintain affordable homeownership opportunities for
Californians with lower incomes. At the time, HCD suggested
that it would use the funds to create affordable homeownership
opportunities for teachers.
Later, HCD decided to use the funds to create administratively
the Catalyst Projects for California Sustainable Strategies
Pilot Program. HCD's stated purpose for this program was to
incentivize sustainable communities and test innovative
strategies designed to increase housing supply and
affordability, improve jobs and housing relationships, stimulate
job creation and retention, enhance transportation modal choices
that reflect community values, preserve open space and
agricultural resources, promote public health, eliminate toxic
threats, address blighted properties, reduce greenhouse gas
emissions, and increase energy conservation and independence.
HCD allowed applications only from cities and counties under all
of the following criteria:
The project is a livable communities project that includes at
least 1,000 planned housing units and demonstrates an
effective jobs and housing relationship, including housing
affordability relative to wages; or is a revitalization
communities project that includes development, preservation,
or rehabilitation of at least 250 planned housing units,
including housing affordable to lower income households.
The city or county has an HCD-approved housing element.
The project demonstrates consistency with the state's planning
priorities.
The project illustrates support for the general goals of a
sustainable community strategy pursuant to SB 375, Chapter
728, Statutes of 2008.
The city or county demonstrates that it has the commitment of
a private sector partner.
The city or county demonstrates a commitment to identify and
address regulatory barriers to transformative projects
including any regulatory relief to facilitate housing and job
development.
To rate and rank applicants, HCD evaluated applications on the
number of "sustainable strategies policy objectives" the project
meets, readiness, and the applicant's proposed reporting and
evaluation program. In 2009, HCD identified 13 catalyst
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projects in three categories: gold, silver, and bronze.
Designated Catalyst Projects receive targeted technical
assistance from teams of state agencies and bonus points when
applying for specific state funding programs, including the
Department of Transportation's Community Based Transportation
Planning Grants. In addition, HCD awarded gold catalyst
projects $1,350,000 each and silver catalyst communities
$500,000 each from the $10 million available under the SB 586
Innovative Homeownership Program.
This bill appropriates $20 million from the BEGIN Fund for
grants to previously designated catalyst projects. The bill
prohibits HCD from awarding more than $5 million to any single
project.
COMMENTS:
1.Purpose of the bill . According to the author, this bill is a
proactive attempt to provide a moderate amount of financial
assistance to flagship housing projects that illustrate
California's commitment to sustainable planning and
development. The $20 million appropriation will ensure these
flagship, priority projects receive the funding they need in
order to complete development. The author believes that these
projects are closest to being ready and will put real people
to work at the local level creating livable, balanced
communities.
2.Highest priority use ? To the extent that the Legislature may
reprogram bond allocations approved by voters, the committee
may wish to consider whether catalyst projects are the best
investment of scarce remaining bond funds. By definition,
catalyst projects are large and complicated projects,
including hundreds or thousands of housing units as well as
other commercial uses. Despite the author's contention, it is
not clear that these projects are ready to proceed to
construction or that $5 million awards will be enough to
complete the financing packages.
In addition, while each catalyst project includes some
affordable housing, it is often less than 20% of the
residential units, and some of these units are only affordable
at the moderate-income level. Most other HCD programs limit
the use of bond funds exclusively to affordable housing units.
Absent this bill, this $20 million will be available for the
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BEGIN program or the CalHome Program. Alternatively, the
committee may wish to consider reprogramming the money to
HCD's Multifamily Housing Program, which finances deeply
affordable rental housing units and for which there are
clearly a list of projects ready to construct that now have
financing gaps as a result of the demise of redevelopment.
3.No criteria to prioritize awards . The bill appropriates $20
million for previously designated catalyst projects and sets a
$5 million limit on individual awards. If HCD makes awards at
the $5 million level, it will fund only 4 projects. HCD,
however, has designated 13 catalyst projects. The bill
establishes no criteria for how to select awardees for these
new funds, basically granting HCD unlimited discretion. The
committee may wish to consider whether it is desirable to give
HCD unlimited discretion over the award of these funds.
4.Does the bill create a legal risk ? While the language of
Proposition 1C allowed for the Legislature to determine the
use of some fund allocations, it expressly appropriated funds
for the BEGIN Program. In addition, it stated that
unencumbered BEGIN funds shall revert to the CalHome Program.
The bond bill does allow for the Legislature to "amend the
provisions of law related to programs to which funds are, or
have been, allocated ? for the purpose of improving the
efficiency and effectiveness of the program, or for the
purpose of furthering the goals of the program." It is not
clear, however, that this bill improves the efficiency or
effectiveness, or furthers the goals of the BEGIN Program. As
a result, the bill may create a legal risk for HCD and the
State of California, which has already issued most of the
Proposition 1C bonds.
5.Arguments in opposition . The League of California Cities
opposes shifting additional Proposition 1C funding to a list
of specific projects, many of which have already received
Proposition 1C awards, rather than making the funding
available to all cities and counties in an open and
competitive process. The League believes that the bill raises
questions of equity and favors some communities at the
disadvantage of others.
Likewise, the California Housing Consortium believes that all
projects, not just the 12 eligible catalyst projects, should
have equal access to compete for unused bond funds.
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6.Urgency clause . This bill now includes an urgency clause
stating that the urgency is necessary "to ensure that state
bond funds are expended to fund vital projects throughout the
state in an expeditious manner."
7.Regular hearing . This Rules Committee referred this bill to
this committee in the normal fashion, not under joint rule
29.10. As a result, the committee is free to take any actions
it is authorized to take at a regular hearing, including
amending the bill.
Previous votes irrelevant.
POSITIONS: (Communicated to the committee before 1 p.m. on
Friday,
August 31, 2012)
SUPPORT: City of Sacramento
Town of Truckee
Township 9
OPPOSED: California Housing Consortium
League of California Cities