BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1222|
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SPECIAL CONSENT
Bill No: AB 1222
Author: Gatto (D), et al.
Amended: 5/12/11 in Assembly
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM. : 8-0, 06/14/11
AYES: DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal,
Pavley, Simitian
NO VOTE RECORDED: Rubio
ASSEMBLY FLOOR : 78-0, 05/19/11 - See last page for vote
SUBJECT : California Housing Finance Agency
SOURCE : Author
DIGEST : This bill requires the California Housing
Finance Agency (CalHFA) board, as opposed to agency staff,
to contract for any salary survey related to executive
management compensation and makes a number of changes to
CalHFAs conflict of interest statutes.
ANALYSIS : Established in 1975, CalHFA is the state's
affordable housing bank. CalHFA issues tax-exempt bonds
and uses the proceeds to make below market-rate loans to
income-eligible first-time homebuyers and the developers of
affordable rental housing. CalHFA is a self-supporting
entity. It does receive money from the state's general
fund, and its debts obligate only CalHFA itself, not the
State of California.
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Salary surveys
SB 257 (Chesbro), Chapter 748, Statutes of 2006, allowed
the CalHFA board of directors to establish the compensation
for seven top CalHFA managers (chief deputy director,
general counsel, director of finance, director of
homeownership programs, director of multifamily programs,
director of insurance, and financial risk management
director), in addition to the executive director whose
compensation the board already set. Moreover, SB 257
exempted the compensation packages of all eight individuals
from review by the Department of Personnel Administration
and deleted the prohibition on the executive director's
salary exceeding the salary of the Secretary of the
Business, Transportation and Housing Agency.
In determining the compensation for these positions,
current law requires the "agency" to contract with an
independent outside advisor to conduct a salary survey of
other state and local housing finance agencies that are
most comparable to CalHFA and of other related labor pools.
The Department of Personnel Administration must review the
methodology used in the salary surveys, and the CalHFA
board is prohibited from setting a salary for one of these
positions that exceeds the highest comparable salary for a
comparable position as determined by the survey.
Conflicts of interest
Current law generally prohibits any state officer or
employee from being financially interested in any contract
that that person makes in his or her official capacity or
that anybody or board of which that person is a member
makes. As applied to CalHFA, this general statute
precludes the CalHFA board from contracting with any entity
with which a board member has a financial interest even
when that board member does not participate in the
decision.
CalHFA's specific statute provides that it shall not be a
conflict of interest for an official of any local public
entity, a resident of any housing development, or an
officer, stockholder, or employee of any association or
corporation to serve as a member of the CalHFA board,
provided that if any board member has a financial interest
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in any matter before the board, the board member must
disclose that interest as a matter of official public
record and must not attempt to influence, participate in
deliberations concerning, or vote on that matter. The
statute also provides that no CalHFA officer or employee
shall be employed by, hold any paid official relation to,
or have any financial interest in, any housing development
financed or assisted by CalHFA.
This bill:
1.Requires the CalHFA board, as opposed to agency staff, to
contract for the salary survey.
2.Provides that the general law provision prohibiting a
board as a whole from entering into a contract with an
entity with which one board member has a financial
interest does not apply to CalHFA, but maintains the
CalHFA-specific statute allowing local officials,
affordable housing residents, and persons affiliated with
corporations or other associations to serve on the CalHFA
board generally, provided that when a conflict of
interest arises, the conflicted board members discloses
the conflict and recuses himself or herself from the
matter.
3.Allows a CalHFA board member who is not an employee of
the agency to be employed by, hold a paid official
relation to, or have a financial interest in a housing
development financed or assisted by CalHFA.
Comments
According to the author's office, current law's reference
to the "agency" when requiring an outside salary survey
could be interpreted as allowing the staff, whose salaries
are the subject of the survey, to select the survey entity.
Given that the salaries are to be established by the
board, the requirement to commission a salary survey also
appropriately rests with the board, as opposed to the
agency. The author is not aware of any impropriety
relating to the last salary survey but believes this should
be clarified to avoid any possibility for future abuse.
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The Assembly Housing and Community Development Committee
recommended the addition of the bill's conflict of interest
provisions. The committee analysis argues that CalHFA does
business with many different lenders through their
single-family mortgage program. The existing conflict of
interest statute prohibits CalHFA board members from having
a financial interest in any entity with whom CalHFA
contracts, even if that board member does not participate
personally in the awarding of the contract. This
prohibition significantly narrows the pool of financial
institutions from which the governor can appoint board
members, potentially depriving the CalHFA board of
knowledge and experience that would be valuable in
governing the agency. The bill allows CalHFA to have board
members from entities with whom the agency does business on
its board provided that the board member discloses and
recuses himself or herself from any matter in which his or
her institution has a financial interest.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
ASSEMBLY FLOOR : 78-0, 05/19/11
AYES: Achadjian, Allen, Ammiano, Atkins, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, Perea, V. Manuel P�rez,
Portantino, Silva, Skinner, Smyth, Solorio, Swanson,
Torres, Valadao, Wagner, Wieckowski, Williams, Yamada,
John A. P�rez
NO VOTE RECORDED: Alejo, Gorell
JJA:nl 6/24/11 Senate Floor Analyses
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SUPPORT/OPPOSITION: NONE RECEIVED
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