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HomeMy WebLinkAbout16 - Support for AB 448 - OC Housing Trust - CorrespondenceJuly 11, 2017 Agenda Item No. 16 Correspondence SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Mike McGuire, Chair 2017 - 2018 Regular Bill No: AB 448 Hearing Date: 6/20/18 Author: Daly Tax Levy: No Version: 6/14/18 Amended Fiscal: No Consultant: Grinnell JOINT POWERS AUTHORITIES: ORANGE COUNTYHOUSING TRUST Creates the Orange County Housing Trust. Background The Joint Exercise of Powers Act allows two or more public agencies to use their powers in common if they sign a joint powers agreement. Sometimes an agreement creates a new, separate government called a joint powers agency or joint powers authority (JPA). Agencies that can exercise joint powers include federal agencies, state departments, counties, cities, special districts, school districts, federally recognized Indian tribes, and even other joint powers authorities. Public agencies can also use the JPA law and the related Marks -Roos Local Bond Pooling Act to form bond pools to finance public works, working capital, insurance needs, and other public benefit projects. JPAs can issue one large Marks -Roos Act bond and then loan the capital to local agencies, thus creating a "bond pool." Bond pooling saves money on interest rates and finance charges. It also lets smaller local agencies enter the bond market. Because JPAs are entities separate from its members, voters need not approve bonds issued by JPAs. Orange County in Southern California contains approximately 3.1 million people, with 34 incorporated cities. Like many areas in California, many individuals in Orange County are homeless, recently estimated using a point in time survey at 4,792, according to a report issued by the United States Department of Housing and Urban Development. Recently, advocates for homeless persons camping near the Santa Ana River filed suit in U.S. District Court against Orange County and the Cities of Anaheim, Costa Mesa, and Santa Ana, seeking to halt the ongoing effort to clear homeless encampments along the River. In response, U.S. District Court Judge David O. Carter held a hearing in April concentrated on getting the leaders in the county's 34 cities to take on each's fair share of housing and services for the homeless population. Seeking to create a regional entity to construct permanent supportive housing for its homeless population, the Association of California Cities of Orange County wants to create the Orange County Housing Trust as a joint powers agreement. Proposed Law Assembly Bill 448 creates the Orange County Housing Trust, which can: AB 448 (Daly) 6/14/18 Page 2 of 4 • Fund the planning and construction of housing of all types and tenures for the homeless population and persons and families of extremely low, very low, and low income, including permanent supportive housing, • Receive public and private financing or funds, and • Authorize and issue bonds, certificates of participation or other debt instrument repayable from public and private financing and funds it receives. The County of Orange and any of the cities in the County may enter into the agreement to create and operate the Trust, which must be governed by a board of directors consisting of representation from the County of Orange, the cities within the county, and other community stakeholders. The measure requires the rust to incorporate into its joint powers agreement annual financial reporting and auditing requirements that maximize transparency and public information as to the receipt of the Trust's use of funds. The report must show how the funds have furthered the Trust's purposes. The bill also makes legislative findings and declarations supporting its purposes. No estimate. State Revenue Impact Comments 1. Purpose of the bill. According to the author, "Years of expert research shows that providing people with a stable, affordable place to live, along with services that promote housing stability, helps end homelessness. Supportive housing will help reduce public health costs, and move thousands of homeless persons off our streets. AB 448 establishes the Orange County Housing Trust, which will be a cooperative effort by public agencies and private philanthropists, who are united by the common goal of creating permanent supportive housing throughout Orange County." 2. Governance. The beauty of the Joint Exercise of Powers Act is its flexibility: local agencies can come together to form an agreement of its own design to carry out any power common to each of its members. Agreements specify a JPA's mission, structure, governing board, each member's financial obligations, and provisions for members to enter and exit the JPA, among other items. As such, local agencies do not need legislative authority for a JPA unless it requires powers not common to all its members, or when statutory certainty and specificity is preferable to the agreement's details. Using a model in place in other counties, AB 448 creates a Trust as a JPA in statute that can hopefully finance the construction of housing for Orange County's homeless population. The bill allows the County and any of its cities to participate, and provides that the Trust must be governed by a board that doesn't have a specific structure, but must consist of representation of the County, its cities, as well as community stakeholders. While the measure does not authorize specific community stakeholders to be part of the JPA, there is precedent for allowing non-governmental entities to join a JPA. Specifically, the Legislature has made exceptions to JPA law by allowing nonprofit hospitals to join JPAs on five separate occasions to create efficiencies between the local agencies and relevant private entities: Contra Costa County (AB 3097, Campbell, 1996), Tulare, Kings and San Diego County (SB 850, Kelley, 1997), Tuolumne County (AB 2717, House, 2000), Fresno (AB 1785, Reyes, 2002), and El Dorado (AB 545, Bigelow, 2017). However, to the extent that individuals from non- AB 448 (Daly) 6/14/18 Page 3 of 4 government entities sit on the board and exercise public powers, such as issue bonds and managing funds, then the agreement will have to be carefully crafted to specify the fiduciary duties and responsibilities of these members. 3. Finance. As mentioned above, local agencies do not need legislative authority for a JPA unless it requires powers not common to all its members, or statutory certainty and specificity is preferable to the agreement's provisions. The authority within AB 448 that its members lack is the ability to issue bonds repayable from public and private financing and funds received by the trust, which adds to the current authorities its members have to issue debt, such as general obligation bonds, or the specific Marks -Roos bond issuance authority only possessed by JPAs. The measure's sponsors envision using this authority to securitize Mental Health Services Act funds received annually by the County from the State from its collection of Proposition 63 (2004), in addition to other revenue sources, some of which could be private. Such a bond issuance may be complex, so investors may demand a higher interest rate if they determine the security of future repayments is less certain than general obligation or Marks -Roos bonds. 4. Bonds. AB 448 doesn't specify the specific debt instruments the JPA can issue, only that they be repaid from the public or private funds it receives. Supporters indicate that the JPA may want to issue social impact bonds, where lenders invest in securities that are repaid from reduced public agency costs. Rather than pay investors a specified return, repayment depends on certain milestones in public agency social program performance. However, social impact bonds are in their infancy, and public agency savings are not as secure as actual payments made to investors. Additionally, any savings resulting from reduced public spending on social services assume that these same cannot instead be used to serve additional persons in need. 5. Double -referred. The Senate Rules Committee ordered a double referral of AB 448, first to this Committee because it adds to the Joint Exercise of Powers Act, and second to the Committee on Transportation and Housing to consider its implications on housing policy. 6. Special legislation. Section 16 of Article Four of the California Constitution prohibits special legislation when a general law can apply. AB 448 contains findings and declarations explaining the need for legislation that applies only to Orange County. Assembly Actions Not relevant to this version of the bill. Support and Opposition (6/15/18) Support: Association of California Cities of Orange County; California Apartment Association; California Association of Realtors; California Chamber of Commerce; California Taxpayers Association; Children's Cause Orange County; Families Forward; Junior League of Orange County; Kaiser Permanente; Mercy House Living Centers; LGBT Center OC; Orange County Auditor -Controller; Orange County Communities Organized for Responsible Development; Orange County United Way; Pathways of Hope; People for Housing OC; Women for: Orange County AB 448 (Daly) 6/14/18 Opposition: Unknown. -- END -- Page 4 of 4