Date of Hearing: September 13, 2019

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 1290 (

Author:Gloria) – As Amended Ver:September 6, 2019

SUBJECT: Water projects: financial assistance and construction financing: Pure Water San Diego Program.

SUMMARY: Requires the use of project labor agreements (PLAs) as a condition of receiving construction financing under the Safe Drinking Water State Revolving Fund Law (Drinking Water Fund) or financial assistance from the State Water Pollution Control Revolving Fund (Water Pollution Fund) for work performed for any portion of the Pure Water San Diego Program (Pure Water Program). Specifically, this bill:

1. Requires, as a condition of receiving construction financing from the Drinking Water Fund for work performed at the City of San Diego’s North City Water Reclamation Plant (Reclamation Plant), North City Pure Water Facility (Pure Water Facility), or any other portion of the Pure Water Program, an applicant to ensure that any construction contract awarded on or after January 1, 2020, for any phase of the Pure Water Program, including, but not limited to, expanding or modifying wastewater conveyance, detention, or treatment processes at the Reclamation Plant, work on the Pure Water Facility or the adjacent Pure Water Pump Station, or work on any other portion of the Pure Water Program, requires the contractor to enter into a PLA that meets the requirements of existing law governing public entities’ use of PLAs.
2. Requires, as a condition of receiving financial assistance from the Water Pollution Fund for work performed at the Reclamation Plant, Pure Water Facility, or any other portion of the Pure Water Program, an applicant to ensure that any construction contract awarded on or after January 1, 2020, for any phase of the Pure Water San Diego Program, including, but not limited to, expanding or modifying wastewater conveyance, detention, or treatment processes at the Reclamation Plant, work on the Pure Water Facility or the adjacent Pure Water Pump Station, or work on any other portion of the Pure Water Program, requires the contractor to enter into a PLA that meets the requirements of existing law governing public entities’ use of PLAs.
3. Requires the condition on receiving construction financing and financial assistance imposed pursuant to this bill to remain in effect only until completion of all phases of the Pure Water Program.
4. Finds and declares that a special statute is necessary and that a general statute cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique conditions in the City of San Diego that make it necessary to expeditiously develop and construct the Pure Water Program water facilities described in this measure.

EXISTING LAW:

1. Defines public works contracts as any construction, alteration, demolition, installation or repair work done under contract and paid for in whole or in part from public funds.
2. Establishes the Local Agency Public Construction Act, which sets forth the procedures local agencies are required to use when soliciting and evaluating bids or proposals for the construction of a public work or improvement.
3. Authorizes public entities to use, enter into, or require contractors to enter into a PLA for a construction project only if the agreement includes all of the following taxpayer protection provisions:
   1. The agreement prohibits discrimination based on race, national origin, religion, sex, sexual orientation, political affiliation, or membership in a labor organization in hiring and dispatching workers for the project;
   2. The agreement permits all qualified contractors and subcontractors to bid for and be awarded work on the project without regard to whether they are otherwise parties to collective bargaining agreements;
   3. The agreement contains an agreed-upon protocol concerning drug testing for workers who will be employed on the project;
   4. The agreement contains guarantees against work stoppages, strikes, lockouts, and similar disruptions of the project; and,
   5. The agreement provides that disputes arising from the agreement shall be resolved by a neutral arbitrator.
4. Provides that the members of the governing board of a local public entity may choose by majority vote whether to use, enter into, or require contractors to enter into a PLA that includes all the taxpayer protection provisions specified in 3), above, for a specific project or projects awarded by that entity and whether to allocate funding to a specific project covered by such an agreement. A charter provision, initiative, or ordinance shall not prevent the governing board of a local public entity, other than a charter city, from exercising this authority on a project-specific basis.
5. Provides that, if a charter provision, initiative, or ordinance of a charter city prohibits the governing board’s consideration of a PLA that includes all the taxpayer protection provisions described in 3), above, for a project to be awarded by the city, or prohibits the governing board from considering whether to allocate funds to a city-funded project covered by such an agreement, then state funding or financial assistance shall not be used to support that project.
6. Provides that, if a charter provision, initiative, or ordinance of a charter city prohibits, limits, or constrains in any way the governing board’s authority or discretion to adopt, require, or utilize a PLA that includes all the taxpayer protection provisions described in 3), above, for some or all of the construction projects to be awarded by the city, then state funding or financial assistance shall not be used to support any construction projects awarded by the city.
7. Provides the following definitions:
   1. “PLA” means a prehire collective bargaining agreement that establishes terms and conditions of employment for a specific construction project or projects and is an agreement described in the United States Code governing unfair labor practices and allowable labor agreements in the building and construction industry; and,
   2. “Public Entity” means a state, county, city, city and county, district, public authority, public agency, municipal corporation, or any other political subdivision or public corporation in the state.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. Bill Summary and Author’s Statement. This bill requires the use of PLAs as a condition of receiving construction financing from the Drinking Water Fund or financial assistance from the Water Pollution Fund for work performed for any portion of the Pure Water Program.

According to the author, “Pure Water is a critically important project for the San Diego region. In the midst of climate change and seemingly endless droughts, Pure Water is critical to our water supply reliability and conservation goals. Right now, this major investment is in jeopardy with millions of taxpayer dollars at stake. This bill will save this project from almost certain failure and get it back on track. Since late June, Pure Water San Diego has been stalled due to frivolous litigation claiming that the project violates Proposition A – a 2012 ballot measure that prevents the City from mandating project labor agreements on construction except when required by state or federal law. AB 1290 would remedy the legal dispute of the Pure Water program, as a condition of receiving state funds, to permit a project labor agreement. According to the City of San Diego’s court filings, costs are projected to increase $4 million for each month of delay beyond August 2019. Additionally, without legal certainty, the City could lose $646.6 million from the State Water Resources Control Board and could receive significant fines if it does not meet key milestones set by regulators.”

This bill is sponsored by the author.

1. Background. A PLA is a pre-hire agreement that establishes the terms and conditions of employment for a specific construction project. PLAs are completed before any workers are hired to determine the wage rates and benefits of all employees working on the project and to agree to prevent any strikes, lockouts, or other work stoppages for the length of the project. The terms of the agreement apply to all contractors and subcontractors who successfully bid on the project, union or non-union, and supersede any existing collective bargaining agreements.

PLAs are used on both public and private projects, and their specific provisions are tailored by the contracting parties to meet the needs of a particular project. By governing and establishing work rules, pay rates, and dispute resolution processes for every worker on the project, PLAs can maximize project stability, efficiency and productivity. PLAs can also help minimize the risks and inconvenience to the public that can accompany public work projects, helping ensure that projects are completed on time and on or under budget.

PLAs are not mandated under California law. However, if a state or local agency chooses to use a PLA for a public construction project, the PLA must include minimum taxpayer-protection criteria. Governing boards of local agencies can choose by majority vote whether or not to use a PLA that includes these taxpayer-protection criteria. Governing boards of local agencies can also decide by majority vote whether or not to fund a project covered by such a PLA. Because of the home-rule provision of the California Constitution, these provisions do not apply to charter cities.

Local agencies, except charter cities, are also prohibited from adopting blanket prohibitions against using PLAs. Local governing boards have the authority to decide on a case-by-case basis whether to use PLAs. If a charter city has banned PLAs for a project to be awarded by the city, state financial assistance must not be used for that project. In addition, if a charter city has an ordinance that prevents the city’s governing body from considering the use of PLAs, state funding cannot be used to support any projects awarded by the city.

1. Proposition A. Voters in the City of San Diego approved Proposition A in 2012 to prohibit the City from requiring a PLA on City construction projects. The text of Proposition A reads (in part):

“Except as required by state or federal law as a contracting or procurement obligation, or as a condition of the receipt of state or federal funds, the City shall not require a Contractor on a Construction Project to execute or otherwise become a party to a Project Labor Agreement as a condition of bidding, negotiating, awarding or the performing of a contract.”

1. Pure Water Program. According to the City of San Diego’s Public Utilities department, “Pure Water San Diego is the City of San Diego’s phased, multi-year program that will provide one-third of San Diego’s water supply locally by 2035. The Pure Water San Diego Program will use proven water purification technology to clean recycled water to produce safe, high-quality drinking water. The Program offers a cost-effective investment for San Diego’s water needs and will provide a reliable, sustainable water supply. Phase 1 includes several projects that will clean recycled water to produce 30 million gallons per day of high-quality purified water starting in 2023, reducing the City of San Diego’s dependence on imported water.”

The San Diego City Council decided in November of 2018 to require contractors to use union apprentices on two of the project’s 11 contracts. Bidders were provided four options for complying with this requirement, one of which was the submission of a PLA in their bid documents. The City began soliciting construction contract proposals in February of this year. The San Diego chapter of the Associated General Contractors of America sought a preliminary injunction in May to enjoin the City from requiring bidding contractors to use union apprentices, arguing that this contract requirement violated Proposition A. In granting the injunction in June, Judge John S. Meyer wrote (in part, citations omitted):

“According to the City, the City of San Diego has been allocated $30 million in state grants to various Pure Water San Diego Phase 1 projects, including the North Bay Pure Water Facility. The City also applied to the California State Water Resources Control Board for a Clean Water State Revolving Fund (“SRF”) loan…Although there is evidence of state funding (for the project), there is no evidence that the State has conditioned receipt of these funds by requiring a Contractor (to) execute or be a party to a PLA. The exception set forth (in Proposition A) applies in cases when there is a State requirement as a condition to receiving state funds.”

1. Drinking Water Fund and Water Pollution Fund. The Drinking Water Fund was established by an amendment to the federal Safe Drinking Water Act in 1996, and provides low-interest loans, additional subsidy (principal forgiveness), and technical assistance to public water systems for infrastructure improvements that correct system deficiencies and improve drinking water quality.

The Water Pollution Fund was established by 1987 amendments to the Clean Water Act as a financial assistance program for a wide range of water infrastructure projects. The fund provides loans and other types of financial assistance to eligible recipients to construct municipal wastewater facilities, control nonpoint sources of pollution, build decentralized wastewater treatment systems, create green infrastructure projects, protect estuaries, and fund other water quality projects.

Both funds are administered by the State Water Resources Control Board.

1. Arguments in Support. The State Building and Construction Trades Council, in support, writes, “Although the City of San Diego has led the way on water conservation, a frivolous lawsuit places the project’s future at risk. AB 1290 will provide the Pure Water Project with legal certainty by requiring this project to be completed using a project labor agreement (PLA). Without AB 1290, the City could lose nearly $200 million in State Revolving Loan Funds, jeopardizing the viability of the project. Additionally, each month of delay is estimated to cost the City of San Diego $4 million unnecessarily.

“AB 1290 represents an urgent need to move forward with Pure Water – not only to increase water reliability, but to maintain important financial controls on this critical infrastructure investment. We believe this project would greatly benefit the City of San Diego by incorporating a project labor agreement to ensure it employs local workers, veterans, women, foster youth and justice-involved individuals that deserve a second chance.”

1. Arguments in Opposition. The California Chapters of the Associated General Contractors of America, in opposition, state, “AB 1290 was adopted to resolve a legal dispute over the City of San Diego’s contract requirements on the ‘Pure Water’ Wastewater Treatment Project. Setting aside the merits of that legal dispute, and the legislation’s potential effect to ongoing settlement efforts, AB 1290 is a violation of local control…

“If enacted into law, AB 1290 would immediately be challenged in court over the long-standing legal precedent of ‘home rule,’ which allows local governments control of their own Municipal affairs under the California Constitution. This legislation is also likely to be preempted by federal labor law. In summary, AB 1290, if passed, would compound the legal issues at stake, create uncertainty in the construction industry, and invite additional federal interference into state and local affairs.”

1. Previous Legislation. SB 829 (Rubio), Chapter 11, Statutes of 2012, prohibited the use of state funds for any charter city construction projects if the charter city has banned the consideration of the use of PLAs.

SB 922 (Steinberg), Chapter 431, Statutes of 2011, established parameters for the use of PLAs in public contracting, and prohibited state funding or financial assistance from supporting specified non-PLA projects.

REGISTERED SUPPORT / OPPOSITION:

Support

California State Association of Electrical Workers

California State Pipe Trades Council

International Brotherhood of Electrical Workers, Local Union 569

San Diego Audubon Society

San Diego 350

San Diego Coastkeeper

San Diego County Supervisor Nathan Fletcher

San Diego County Water Authority

Sierra Club California

State Building and Construction Trades Council

United Association of Plumbers and Steamfitters, Local Union #230

Western States Council of Sheet Metal Workers

Opposition

Associated General Contractors of America, San Diego Chapter

Independent Roofing Contractors of California

Western Electrical Contractors Association

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 1290

Author:(Gloria)

As Amended Ver:September 6, 2019

Majority vote

SUMMARY:

Requires the use of project labor agreements (PLAs) as a condition of receiving construction financing under the Safe Drinking Water State Revolving Fund Law (Drinking Water Fund) or financial assistance from the State Water Pollution Control Revolving Fund (Water Pollution Fund) for work performed for any portion of the Pure Water San Diego Program (Pure Water Program).

The Senate Amendments:

Delete the Assembly version of this bill and, instead:

Require, as a condition of receiving construction financing from the Drinking Water Fund for work performed at the City of San Diego's North City Water Reclamation Plant (Reclamation Plant), North City Pure Water Facility (Pure Water Facility), or any other portion of the Pure Water Program, an applicant to ensure that any construction contract awarded on or after January 1, 2020, for any phase of the Pure Water Program requires the contractor to enter into a PLA that meets the requirements of existing law governing public entities' use of PLAs.

Require, as a condition of receiving financial assistance from the Water Pollution Fund for work performed at the Reclamation Plant, Pure Water Facility, or any other portion of the Pure Water Program, an applicant to ensure that any construction contract awarded on or after January 1, 2020, for any phase of the Pure Water Program requires the contractor to enter into a PLA that meets the requirements of existing law governing public entities' use of PLAs.

Provide that the condition on receiving construction financing and financial assistance imposed pursuant to this bill shall remain in effect only until completion of all phases of the Pure Water Program.

COMMENTS:

Voters in the City of San Diego approved Proposition A in 2012 to prohibit the City from requiring a PLA on City construction projects, except where required by state or federal law or as a condition of the receipt of state or federal funds.

According to the City of San Diego's Public Utilities department, "Pure Water San Diego is the City of San Diego's phased, multi-year program that will provide one-third of San Diego's water supply locally by 2035. The Pure Water San Diego Program will use proven water purification technology to clean recycled water to produce safe, high-quality drinking water. The Program offers a cost-effective investment for San Diego's water needs and will provide a reliable, sustainable water supply. Phase 1 includes several projects that will clean recycled water to produce 30 million gallons per day of high-quality purified water starting in 2023, reducing the City of San Diego's dependence on imported water."

The San Diego City Council decided in November of 2018 to require contractors to use union apprentices on two of the project's 11 contracts, and the City began soliciting proposals in February of this year. The San Diego chapter of the Associated General Contractors of America sought a preliminary injunction in May to enjoin the City from requiring bidding contractors to use union apprentices, alleging that this contract requirement violated Proposition A. In granting the injunction in June, Judge John S. Meyer wrote (in part, citations omitted):

"According to the City, the City of San Diego has been allocated $30 million in state grants to various Pure Water San Diego Phase 1 projects, including the North Bay Pure Water Facility. The City also applied to the California State Water Resources Control Board for a Clean Water State Revolving Fund ("SRF") loan…Although there is evidence of state funding (for the project), there is no evidence that the State has conditioned receipt of these funds by requiring a Contractor execute or be a party to a PLA. The exception set forth (in Proposition A) applies in cases when there is a State requirement as a condition to receiving state funds

According to the Author:

"Pure Water is a critically important project for the San Diego region. In the midst of climate change and seemingly endless droughts, Pure Water is critical to our water supply reliability and conservation goals. Right now, this major investment is in jeopardy with millions of taxpayer dollars at stake. This bill will save this project from almost certain failure and get it back on track. Since late June, Pure Water San Diego has been stalled due to frivolous litigation claiming that the project violates Proposition A – a 2012 ballot measure that prevents the City from mandating project labor agreements on construction except when required by state or federal law. AB 1290 would remedy the legal dispute of the Pure Water program, as a condition of receiving state funds, to permit a project labor agreement. According to the City of San Diego's court filings, costs are projected to increase $4 million for each month of delay beyond August 2019. Additionally, without legal certainty, the City could lose $646.6 million from the State Water Resources Control Board and could receive significant fines if it does not meet key milestones set by regulators."

Arguments in Support:

The State Building and Construction Trades Council, in support, writes, "Although the City of San Diego has led the way on water conservation, a frivolous lawsuit places the project's future at risk. AB 1290 will provide the Pure Water Project with legal certainty by requiring this project to be completed using a project labor agreement (PLA). Without AB 1290, the City could lose nearly $200 million in State Revolving Loan Funds, jeopardizing the viability of the project. Additionally, each month of delay is estimated to cost the City of San Diego $4 million unnecessarily.

"AB 1290 represents an urgent need to move forward with Pure Water – not only to increase water reliability, but to maintain important financial controls on this critical infrastructure investment. We believe this project would greatly benefit the City of San Diego by incorporating a project labor agreement to ensure it employs local workers, veterans, women, foster youth and justice-involved individuals that deserve a second chance."

Arguments in Opposition:

The California Chapters of the Associated General Contractors of America, in opposition, state, "AB 1290 was adopted to resolve a legal dispute over the City of San Diego's contract requirements on the 'Pure Water' Wastewater Treatment Project. Setting aside the merits of that legal dispute, and the legislation's potential effect to ongoing settlement efforts, AB 1290 is a violation of local control…

"If enacted into law, AB 1290 would immediately be challenged in court over the long-standing legal precedent of 'home rule,' which allows local governments control of their own Municipal affairs under the California Constitution. This legislation is also likely to be preempted by federal labor law. In summary, AB 1290, if passed, would compound the legal issues at stake, create uncertainty in the construction industry, and invite additional federal interference into state and local affairs."

FISCAL COMMENTS:

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Chiu, Diep, Gabriel, Gloria, Kiley, Limón, Maienschein, Quirk-Silva

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ASSEMBLY FLOOR: 74-0-6

YES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

ASM LOCAL GOVERNMENT: 6-2-0

YES: Aguiar-Curry, Bloom, Boerner Horvath, Ramos, Luz Rivas, Robert Rivas

NO: Lackey, Voepel

UPDATED:

VERSION: September 6, 2019

CONSULTANT: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0002458

 THIRD READING  

Bill No: AB 1290

Author: Gloria (D), et al.

Amended: 9/6/19 in Senate

Vote: 21

PRIOR VOTES NOT RELEVANT

SENATE GOVERNANCE & FIN. COMMITTEE: 6-1, 9/11/19 (Pursuant to Senate Rule 29.10)

AYES: McGuire, Beall, Hertzberg, Hurtado, Nielsen, Wiener

NOES: Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Water projects: financial assistance and construction financing: Pure Water San Diego Program

SOURCE: Author

DIGEST:

This bill requires contractors for the Pure Water San Diego program to enter into a project labor agreement as a condition of receiving specified state funds.

ANALYSIS:

Existing law:

1. Requires local agencies to invite bids for construction projects and award contracts to the lowest responsible bidder.
2. Authorizes a local agency’s governing board to decide by majority vote whether to use, enter into, or require contractors to enter into a project labor agreement (PLA) that includes required taxpayer protection provisions for a specific project or projects that local agency awards. A local agency’s governing board can then decide whether to allocate funds to a specific project covered by such a PLA.
3. Prohibits any charter provision, initiative, or ordinance that prevents the local agency’s governing board from exercising this authority on a project-specific basis, except in charter cities.
4. Prohibits the use of state funds to all city construction projects where a charter provision, initiative, or ordinance precludes the use of PLAs for some or all of the construction projects the city awards.
5. Creates the Drinking Water State Revolving Fund to assist public water systems in financing drinking water infrastructure projects needed to comply with state and federal law.
6. Creates the State Water Pollution Control Revolving Fund to manage funds for a state and federal match program to construct wastewater treatment facilities and associated projects.

This bill:

1. Requires, as a condition of receiving construction financing from the Safe Drinking Water State Revolving Fund or the State Water Pollution Control Revolving Fund, the contractor of any construction project associated with the Pure Water San Diego Program awarded on or after January 1, 2020, to enter into a PLA that conforms to existing law.
2. Provides that the condition on receiving construction financing remains in effect until completion of all phases of the Pure Water San Diego Program.

Background

Project labor agreements. A project labor agreement (PLA) is an agreement that a construction project’s managers and its workers complete before a project starts. PLAs establish wage rates and benefits of all employees working on the project and prevent strikes, lockouts, or other work stoppages during the project. The terms of the agreement apply to all contractors and subcontractors, union or non-union, who successfully bid on the project, and supersede any existing collective bargaining agreements. Some critics of PLAs want to ban their use for public construction projects, arguing that PLA requirements are inconsistent with the principle of awarding public contracts to the lowest bidder. In recent years, voter-approved initiatives have banned PLAs in San Diego County and in the Cities of Chula Vista, Oceanside, and San Diego. Ordinances adopted by the Fresno City Council, and Boards of Supervisors in Orange County, Placer County, and Stanislaus County have also banned PLAs.

San Diego. In 2012, voters in the City of San Diego approved Proposition A, which made it illegal for city construction projects to require that contractors use PLAs, unless they are required by state or federal law, or as a condition of receiving state or federal funding. In 2014, the San Diego City Council adopted an ordinance in response to SB 922 and SB 829 that stated the City was not prohibited from adopting, requiring, or utilizing PLAs for city construction projects that include the taxpayer protection provisions the legislation requires.

Pure Water San Diego Program. The goal of the Pure Water San Diego Program is to provide one-third of the City of San Diego’s water supply locally by 2035. The City completed initial project design on phase 1 projects in December 2018, and expects to start construction in 2019. The City estimates total phase 1 costs at $1.48 billion. The second two phases involve projects located in the central and southern parts of the City. Phase 2 and Phase 3 of the projects do not begin until after 2023.

The Pure Water San Diego Program has run into legal challenges that the City expects will delay projects. The dispute centers around the San Diego City Council’s November 2018, decision to require contractors to use union apprentices on major parts of the Program. A contractor can satisfy this commitment with a PLA, or other forms of written agreement, such as a collective bargaining agreement. The Associated General Contractors, which is a group of non-union and union contractors, argued that this requirement ran counter to Measure A that prohibited the City from requiring PLAs. The City countered that they could require a PLA because state law gives cities the discretion to require PLAs if one is necessary for the project to receive state funds. On June 24, 2019, the San Diego Superior Court issued an injunction preventing the city from using the language requiring union apprentices. The Court’s injunction did not find evidence that the state funds received included any condition requiring a PLA and existing law’s requirement to allow PLAs to receive state funds does not apply. The City contends that delays in opening bids and proceeding with contracts could cost the city approximately $4 million per month.

On June 18, 2019, the California State Water Resources Control Board, which approves the use of these funds, approved $646.6 million in loans for phase 1 of the program, 32% of the total allocated for fiscal year 2019-20. The Board and the City are currently negotiating the terms of these loans.

Comments

1. Purpose of the bill. According to the author, “Pure Water is a critically important project for the San Diego region. In the midst of climate change and seemingly endless droughts, Pure Water is critical to our water supply reliability and conservation goals. Right now, this major investment is in jeopardy with millions of taxpayer dollars at stake. This bill will save this project from almost certain failure and get it back on track. Since late June, Pure Water San Diego has been stalled due to frivolous litigation claiming that the project violates Proposition A – a 2012 ballot measure that prevents the City from mandating project labor agreements on construction except when required by state or federal law. AB 1290 would remedy the legal dispute of the Pure Water program, as a condition of receiving state funds, to permit a project labor agreement. According to the City of San Diego’s court filings, costs are projected to increase $4 million for each month of delay beyond August 2019. Additionally, without legal certainty, the City could lose $646.6 million from the State Water Resources Control Board and could receive significant fines if it does not meet key milestones set by regulators.”
2. Alternatives? In Proposition A (2012), San Diego voters decided to prohibit requiring PLAs as part of construction projects, unless required by state or federal law, or as a condition of receiving state or federal funding. After the Legislature intervened in 2014 by limiting state financial support for cities that banned PLAs, the City Council responded with an ordinance stating they have discretion to require PLAs if state funding depends on a PLA despite Proposition A’s requirement that voters approve changes to the measure. Now, the courts have weighed in on the dispute in favor of the 2012 measure. Under AB 1290, the Legislature seeks to settle the dispute as the legal process continues by requiring PLAs for Pure Water San Diego projects to receive state funding. Alternatively, San Diego voters could also decide to make changes to Proposition A. The Legislature has multiple options. It could condition state funding on requiring PLAs for these projects. Alternatively, it could let San Diego voters decide whether to change, or repeal, Proposition A. However, the soonest voters could weigh in would probably be in 2020, which could further delay resolving the conflict and lead to additional construction costs.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 9/11/19)

Biocom

California State Association of Electrical Workers

California State Pipe Trades Council

International Brotherhood of Electrical Workers Local Union 569

San Diego 350

San Diego Audubon Society

San Diego Coastkeeper

San Diego County Supervisor Nathan Fletcher

San Diego County Water Authority

Sierra Club

State Building and Construction Trades Council of California

United Association of Plumbers and Steamfitters Local Union #230

Western States Council Sheet Metal, Air, Rail and Transportation

OPPOSITION: (Verified 9/11/19)

Associated General Contractors of America – California Chapter

Associated General Contractors of America – San Diego Chapter

Independent Roofing Contractors of California, Inc.

Western Electrical Contractors Association

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

9/12/19 12:44:22

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Water projects: financial Assistance and construction financing: Pure Water San Diego Program

Requires contractors for the Pure Water San Diego program to enter into a project labor agreement as a condition of receiving specified state funds.

Background

Project labor agreements. A project labor agreement (PLA) is an agreement that a construction project’s managers and its workers complete before a project starts. PLAs establish wage rates and benefits of all employees working on the project and prevent strikes, lockouts, or other work stoppages during the project. The terms of the agreement apply to all contractors and subcontractors, union or non-union, who successfully bid on the project, and supersede any existing collective bargaining agreements.

The Local Agency Public Construction Act generally requires local agencies to invite bids for construction projects and award contracts to the lowest responsible bidder. Some critics of PLAs want to ban their use for public construction projects, arguing that PLA requirements are inconsistent with the principle of awarding public contracts to the lowest bidder. In recent years, voter-approved initiatives have banned PLAs in San Diego County and in the Cities of Chula Vista, Oceanside, and San Diego. Ordinances adopted by the Fresno City Council, and Boards of Supervisors in Orange County, Placer County, and Stanislaus County have also banned PLAs.

In response to local bans on PLAs, the Legislature enacted SB 922 (Steinberg, 2011). SB 922 authorizes a local agency’s governing board to decide by majority vote whether to use, enter into, or require contractors to enter into a PLA that includes required taxpayer protection provisions for a specific project or projects that local agency awards. A local agency’s governing board can then decide whether to allocate funds to a specific project covered by such a PLA. SB 922 prohibits any charter provision, initiative, or ordinance that prevents the local agency’s governing board from exercising this authority on a project-specific basis, except in charter cities. When SB 922 took effect on January 1, 2012, it eliminated counties’ existing PLA bans. At the time, PLAs remained banned in three charter cities: Chula Vista, Oceanside, and El Cajon.

SB 922 also included provisions that apply exclusively to charter cities. The California Constitution allows charter cities to control their municipal affairs. The 121 charter cities must follow statewide laws only for issues of statewide concern. Since cities’ contracting processes are generally considered a municipal affair, state law cannot directly eliminate charter cities’ PLA bans. Instead, SB 922 took a different approach: if a charter provision, initiative, or ordinance prohibits a charter city’s city council from considering a PLA for a city-awarded project or allocating funds to a city-funded project covered by a PLA, SB 922 prohibits state funding or financial assistance from being used to support that project.

In 2012, as the City of San Diego considered adopting a charter amendment banning PLAs, the Legislature extended the prohibition on the use of state funds to all city construction projects where a charter provision, initiative, or ordinance precludes the use of PLAs for some or all of the construction projects the city awards (SB 829, Rubio, 2012). The provisions of SB 922 and SB 829 that apply to charter cities went into effect on January 1, 2015, for charter cities that adopted their ban prior to November 1, 2011. However, for cities that adopted their bans after that date, state funds ceased immediately.

In 2012, voters in the City of San Diego approved Proposition A, which made it illegal for city construction projects to require that contractors use PLAs. In 2014, the San Diego City Council adopted an ordinance in response to SB 922 and SB 829 that stated the City was not prohibited from adopting, requiring, or utilizing PLAs for city construction projects that include the taxpayer protection provisions the legislation requires.

Pure Water San Diego Program. The City of San Diego imports 85% of its water supply from the Colorado River and the Northern California Bay-Delta. The goal of the Pure Water San Diego Program is to provide one-third of the City of San Diego’s water supply locally by 2035. Because of the ambitious scope of the program, the City has divided it into three phases. Phase 1 includes various projects in the northern part of the city to clean recycled water starting in 2023, including a $398 million, 30-million-gallon-per-day water purification facility. The City completed initial project design on phase 1 projects in December 2018, and expects to start construction in 2019. The City estimates total phase 1 costs at $1.48 billion. The second two phases involve projects located in the central and southern parts of the City. Phase 2 and Phase 3 of the projects do not begin until after 2023.

The Pure Water San Diego Program has run into legal challenges that the City expects will delay projects. The dispute centers around the San Diego City Council’s November 2018, decision to require contractors to use union apprentices on major parts of the Program. A contractor can satisfy this commitment with a PLA, or other forms of written agreement, such as a collective bargaining agreement. The Associated General Contractors, which is a group of non-union and union contractors, argued that this requirement ran counter to Measure A that prohibited the City from requiring PLAs. The City countered that they could require a PLA because state law gives cities the discretion to require PLAs if one is necessary for the project to receive state funds. On June 24, 2019, the San Diego Superior Court issued an injunction preventing the city from using the language requiring union apprentices. The Court’s injunction did not find evidence that the state funds received included any condition requiring a PLA and SB 829’s requirement to allow PLAs to receive state funds does not apply. The City contends that delays in opening bids and proceeding with contracts could cost the city approximately $4 million per month.

State financing for Pure Water San Diego. The state finances local water infrastructure programs through a variety of programs. The Drinking Water State Revolving Fund assists public water systems in financing drinking water infrastructure projects needed to comply with state and federal law. The Legislature created the State Water Pollution Control Revolving Fund to manage funds for a state and federal match program to construct wastewater treatment facilities and associated projects. On June 18, 2019, the California State Water Resources Control Board, which approves the use of these funds, approved $646.6 million in loans for phase 1 of the program, 32% of the total allocated for fiscal year 2020-21. The Board and the City are currently negotiating the terms of these loans.

The author wants to condition the receipt of state financing for Pure Water San Diego projects on requiring contractors to enter into PLAs.

Proposed Law

Assembly Bill 1290 requires, as a condition of receiving construction financing from the Safe Drinking Water State Revolving Fund or the State Water Pollution Control Revolving Fund, the contractor of any construction project associated with the Pure Water San Diego Program awarded on or after January 1, 2020, to enter into a PLA that conforms to existing law. Under AB 1290, the condition on receiving construction financing remains in effect until completion of all phases of the program.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Pure Water is a critically important project for the San Diego region. In the midst of climate change and seemingly endless droughts, Pure Water is critical to our water supply reliability and conservation goals. Right now, this major investment is in jeopardy with millions of taxpayer dollars at stake. This bill will save this project from almost certain failure and get it back on track. Since late June, Pure Water San Diego has been stalled due to frivolous litigation claiming that the project violates Proposition A – a 2012 ballot measure that prevents the City from mandating project labor agreements on construction except when required by state or federal law. AB 1290 would remedy the legal dispute of the Pure Water program, as a condition of receiving state funds, to permit a project labor agreement. According to the City of San Diego’s court filings, costs are projected to increase $4 million for each month of delay beyond August 2019. Additionally, without legal certainty, the City could lose $646.6 million from the State Water Resources Control Board and could receive significant fines if it does not meet key milestones set by regulators.”

2. Who decides? In Measure A (2012), San Diego voters decided to prohibit requiring PLAs as part of construction projects, which included language that any changes to the measure require voter approval. After the Legislature intervened in 2014 by limiting state financial support for cities that banned PLAs, the City Council responded with an ordinance stating they have discretion to require PLAs if state funding depends on a PLA despite Measure A’s requirement to submit changes to the measure to voters. Now, the courts have weighed in on the dispute in favor of the 2012 measure. Under AB 1290, the Legislature seeks to settle the dispute as the legal process continues. The Committee may wish to consider whether San Diego voters should have the final say given their previous opposition to requiring PLAs. However, the soonest voters could weigh in would probably in 2020, which could further delay resolving the conflict and lead to additional construction costs.

3. Important job protections. PLAs are valuable tools for creating local jobs, encouraging open and fair competition, and ensuring the efficient use of public funds. They benefit both project proponents and workers: they promote the efficient and timely completion of construction projects by establishing common work rules, schedules, and dispute resolution processes before construction starts and by barring strikes, lockouts, and other disruptions. At the same time, PLAs protect workers by preventing the use of substandard labor and the payment of bottom-dollar wages. These benefits show up in workers’ paychecks and flow back into local economies. When the Legislature passed SB 922 and SB 829, it recognized the value that PLAs provide to communities and taxpayers in the form of high quality local jobs, risk management on capital projects, and high-quality work. AB 1290 continues this trend: even though San Diego Pure Water projects did not require a PLA to receive state funding, their successful completion is of enough significance to warrant further legislative input on how they should proceed.

4. Urgency. According to the author, the bill is necessary to avoid further construction delays that could result from changing how the City structures its project proposals. However, the provisions of the bill do not go into effect until January 1, 2020. It is unclear whether the bill resolves legal conflicts for current projects that are at the greatest risk for project delays before the bill goes into effect. The bill could include an urgency clause so that its provisions would go into effect immediately and resolve any conflicts as expeditiously as possible, but that would require a 2/3 vote of the Legislature. The Committee may wish to consider whether an urgency clause is necessary to resolve these conflicts a few months before January 1, 2020.

5. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Section 16 of Article IV). AB 1290 contains findings and declarations explaining the need for legislation that applies only to the Pure Water San Diego Program.

6. Gut and amend. As introduced and passed by the Assembly, AB 1290 contained provisions relating to the California Housing Finance Agency. The Senate Governance & Finance Committee never heard that version of the bill. The September 6, 2019, amendments deleted AB 1290’s contents and inserted the current language relating to the Pure Water San Diego Program.

Assembly Actions

Not relevant to the August 27, 2019 version of the bill.

Support and Opposition

(9/10/19)

Support: California State Association of Electrical Workers; California State Pipe Trades Council; International Brotherhood of Electrical Workers Local Union 569; Plumbers & Steamfitters Local Union #230; San Diego 350; San Diego Audubon Society; San Diego Coastkeeper; San Diego County Supervisor Nathan Fletcher; San Diego County Water Authority; Sierra Club; State Building and Construction Trades Council of California.

Opposition: Independent Roofing Contractors of California, Inc.; Western Electrical Contractors Association.

-- END --

 THIRD READING  

Bill No: AB 1290

Author: Gloria (D)

: in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 11-0, 6/18/19

AYES: Wiener, Morrell, Bates, Caballero, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 74-0, 5/16/19 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST:

This bill requires the California Housing Finance Agency (CalHFA), in collaboration with the State Treasurer’s Office (STO), to convene a stakeholder group that includes developers to identify actions that can be taken to streamline the application process for certain housing finance programs.

Senate Floor Amendments of 8/27/19 remove language restricting the type of developers that must be included in the stakeholder group.

ANALYSIS:

Existing law:

1. Establishes CalHFA within the Business, Consumer Services and Housing Agency, with a role of making financing opportunities available for the construction, rehabilitation and purchase of housing for persons and families of low to moderate income.
2. Designates the California Debt Limit Allocation Committee (CDLAC) in the STO to administer and allocate tax-exempt, private activity bonds, which include revenue bonds for housing.
3. Requires the Tax Credit Allocation Committee (TCAC) in the STO to administer the state and federal Low Income Housing Tax Credit program (LIHTC) based upon qualifications of the applicant and proposed project.

This bill:

1. Requires CalHFA, in collaboration with the STO, to convene a stakeholder group that includes developers to identify actions that can be taken to streamline the application process for the following:
   1. Tax-exempt bonds issued by CDLAC.
   2. State or federal low income housing tax credits issued by TCAC.
   3. Funding for mixed-income multifamily housing for lower- to moderate-income households administered by CalHFA.
2. Requires that the stakeholder process be completed by January 1, 2021 and the actions identified be reported to the Legislature by June 30, 2021.

Background

The state offers funding for affordable housing through different programs, including programs administered by CalHFA, CDLAC, and TCAC. CDLAC and TCAC are both a part of the STO. CDLAC administers the state’s tax-exempt bond program, which provides funding for affordable housing developments for low-income Californians. TCAC allocates the federal and state LIHTC program to aid developers of affordable rental housing. CalHFA is an independent state agency that provides funding for the development of housing for people of low to moderate-income. The housing programs administered by these bodies are outlined in the table below.

Certain housing programs under one agency may be coupled with funding from programs in another. For example, CalHFA’s MIP, which is funded through SB 2 (2017, Atkins), requires applicants to acquire a tax-exempt bond through CDLAC as well as a 4% tax credit through TCAC’s LIHTC program. Developers looking to apply for MIP must also coordinate to meet application deadlines for CDLAC and TCAC. Coordination between CalHFA, TCAC, and CDLAC is also required in the application process for programs that are interdependent on each other for funding.

Comments

1. Purpose of the bill. According to the author, “Currently, affordable housing developers are chasing funding sources and spend a huge amount of time securing different layers of financing; this drives up the cost of housing. Similarly, many of these pots of money are in different places across different state agencies. For example, grants and loans from federal and state programs are often housed at HCD, tax credits are housed within the STO with the Tax Credit Allocation Committee, and Affordable Housing and Sustainable Communities funds are within the Strategic Growth Council’s purview. This bill begins to streamline the application process for tax-exempt bonds issued by CDLAC, low-income housing tax credits administered by TCAC, and programs administered by CalHFA, including the mixed income housing program.”
2. Streamlining Efforts. There have been efforts to coordinate and streamline the application process for the interdependent programs under CDLAC, TCAC and CalHFA. There is currently a joint application for developers wishing to apply to both the 4% LIHTC program under TCAC and the QRRP program under CDLAC. Some programs also provide a general timeline of their application process on their website that includes deadlines for programs that provide funding that can be coordinated.
3. Funding for Low Income Housing Units. Developers of affordable housing must obtain funding from multiple sources to make their projects financially feasible; oftentimes developers will combine federal, state, local, and private funds. In addition to navigating different program applications, developers must balance each program’s particular requirements to remain eligible for funding. The construction of affordable housing projects can face delays while waiting to secure funding. For example, since funding typically comes from a variety of sources, a developer may experience delays due to waiting for the approval of funding from one or more sources. Since affordable housing developers must simultaneously utilize funding from certain programs under CalHFA, TCAC, and CDLAC, a workgroup familiar with the application process under these three bodies could provide valuable input into streamlining the application process, which will help accelerate funding for construction of affordable housing for low income Californians.

Related/Prior Legislation

AB 434 (Daly, 2019) requires HCD to develop a single, universal application for various housing programs under HCD. This bill is currently in the Senate Housing Committee.

SB 1121 (Alarcon, Chapter 637, Statutes of 1999) consolidated multiple programs at HCD into the Multifamily Housing Program (MHP) and created a standard set of rules applicable to all rental housing programs operated by HCD.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/28/19)

None received

OPPOSITION: (Verified 8/28/19)

None received

ASSEMBLY FLOOR: 74-0, 5/16/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

Prepared by:

8/29/19 14:34:48

**** END ****

 THIRD READING 

Bill No: AB 1290

Author: Gloria (D)

Amended: 6/25/19 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 11-0, 6/18/19

AYES: Wiener, Morrell, Bates, Caballero, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg, Wieckowski

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 74-0, 5/16/19 (Consent) - See last page for vote

SUBJECT: California Housing Finance Agency: stakeholder group: housing

SOURCE: Author

DIGEST:

This bill requires the California Housing Finance Agency (CalHFA), in collaboration with the State Treasurer’s Office (STO), to convene a stakeholder group that includes nonprofit developers to identify actions that can be taken to streamline the application process for certain housing finance programs.

ANALYSIS:

Existing law:

1. Establishes CalHFA within the Business, Consumer Services and Housing Agency, with a role of making financing opportunities available for the construction, rehabilitation and purchase of housing for persons and families of low to moderate income.
2. Designates the California Debt Limit Allocation Committee (CDLAC) in the STO to administer and allocate tax-exempt, private activity bonds, which include revenue bonds for housing.
3. Requires the Tax Credit Allocation Committee (TCAC) in the STO to administer the state and federal Low Income Housing Tax Credit program (LIHTC) based upon qualifications of the applicant and proposed project.

This bill:

1. Requires CalHFA, in collaboration with the STO, to convene a stakeholder group that includes nonprofit developers to identify actions that can be taken to streamline the application process for the following:
   1. Tax-exempt bonds issued by CDLAC.
   2. State or federal low income housing tax credits issued by TCAC.
   3. Funding for mixed-income multifamily housing for lower- to moderate-income households administered by CalHFA.
2. Requires that the stakeholder process be completed by January 1, 2021 and the actions identified be reported to the Legislature by June 30, 2021.

Background

The state offers funding for affordable housing through different programs, including programs administered by CalHFA, CDLAC, and TCAC. CDLAC and TCAC are both a part of the STO. CDLAC administers the state’s tax-exempt bond program, which provides funding for affordable housing developments for low-income Californians. TCAC allocates the federal and state LIHTC program to aid developers of affordable rental housing. CalHFA is an independent state agency that provides funding for the development of housing for people of low to moderate-income. The housing programs administered by these bodies are outlined in the table below.

Certain housing programs under one agency may be coupled with funding from programs in another. For example, CalHFA’s Mixed Income Program (MIP), which is funded through SB 2 (Atkins, Chapter 364, Statutes of 2017), requires applicants to acquire a tax-exempt bond through CDLAC as well as a 4% tax credit through TCAC’s LIHTC program. Developers looking to apply for MIP must also coordinate to meet application deadlines for CDLAC and TCAC. Coordination between CalHFA, TCAC, and CDLAC is also required in the application process for programs that are interdependent on each other for funding.

Comments

1. Purpose of the bill. According to the author, “Currently, affordable housing developers are chasing funding sources and spend a huge amount of time securing different layers of financing; this drives up the cost of housing. Similarly, many of these pots of money are in different places across different state agencies. For example, grants and loans from federal and state programs are often housed at HCD, tax credits are housed within the STO with the Tax Credit Allocation Committee, and Affordable Housing and Sustainable Communities funds are within the Strategic Growth Council’s purview. This bill begins to streamline the application process for tax-exempt bonds issued by CDLAC, low-income housing tax credits administered by TCAC, and programs administered by CalHFA, including the mixed income housing program.”
2. Streamlining Efforts. There have been efforts to coordinate and streamline the application process for the interdependent programs under CDLAC, TCAC and CalHFA. There is currently a joint application for developers wishing to apply to both the 4% LIHTC program under TCAC and the QRRP program under CDLAC. Some programs also provide a general timeline of their application process on their website that includes deadlines for programs that provide funding that can be coordinated.
3. Funding for Low Income Housing Units. Developers of affordable housing must obtain funding from multiple sources to make their projects financially feasible; oftentimes developers will combine federal, state, local, and private funds. In addition to navigating different program applications, developers must balance each program’s particular requirements to remain eligible for funding. The construction of affordable housing projects can face delays while waiting to secure funding. For example, since funding typically comes from a variety of sources, a developer may experience delays due to waiting for the approval of funding from one or more sources. Since affordable housing developers must simultaneously utilize funding from certain programs under CalHFA, TCAC, and CDLAC, a workgroup familiar with the application process under these three bodies could provide valuable input into streamlining the application process, which will help accelerate funding for construction of affordable housing for low income Californians.

Related/Prior Legislation

AB 434 (Daly, 2019) requires HCD to develop a single, universal application for various housing programs under HCD. This bill is currently in the Senate Housing Committee.

SB 1121 (Alarcon, Chapter 637, Statutes of 1999) consolidated multiple programs at HCD into the Multifamily Housing Program (MHP) and created a standard set of rules applicable to all rental housing programs operated by HCD.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/9/19)

None received

OPPOSITION: (Verified 7/9/19)

None received

ASSEMBLY FLOOR: 74-0, 5/16/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

Prepared by: Lizeth Perez / HOUSING / (916) 651-4124

8/8/19 14:52:02

**** END ****

SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: AB 1290 Hearing Date: 6/18/2019

SUBJECT: California Housing Finance Agency: stakeholder group: housing

DIGEST: This bill requires the California Housing Finance Agency (CalHFA), in collaboration with the State Treasurer’s Office (STO), to convene a stakeholder group that includes nonprofit developers to identify actions that can be taken to streamline the application process for certain housing finance programs.

ANALYSIS:

Existing law:

1. Establishes CalHFA within the Business, Consumer Services and Housing Agency, with a role of making financing opportunities available for the construction, rehabilitation and purchase of housing for persons and families of low to moderate income.
2. Designates the California Debt Limit Allocation Committee (CDLAC) in the STO to administer and allocate tax-exempt, private activity bonds, which include revenue bonds for housing.
3. Requires the Tax Credit Allocation Committee (TCAC) in the STO to administer the state and federal Low Income Housing Tax Credit program (LIHTC) based upon qualifications of the applicant and proposed project.

This bill:

1. Requires CalHFA, in collaboration with the STO, to convene a stakeholder group that includes nonprofit developers to identify actions that can be taken to streamline the application process for the following:
   1. Tax-exempt bonds issued by CDLAC.
   2. State or federal low income housing tax credits issued by TCAC.
   3. Funding for mixed-income multifamily housing for lower- to moderate-income households administered by CalHFA.
2. Requires that the stakeholder process be completed by January 1, 2021.

COMMENTS

1. Purpose of the bill. According to the author, “Currently, affordable housing developers are chasing funding sources and spend a huge amount of time securing different layers of financing; this drives up the cost of housing. Similarly, many of these pots of money are in different places across different state agencies. For example, grants and loans from federal and state programs are often housed at HCD, tax credits are housed within the STO with the Tax Credit Allocation Committee, and Affordable Housing and Sustainable Communities funds are within the Strategic Growth Council’s purview. This bill begins to streamline the application process for tax-exempt bonds issued by CDLAC, low-income housing tax credits administered by TCAC, and programs administered by CalHFA, including the mixed income housing program.”
2. Background. The state offers funding for affordable housing through different programs, including programs administered by CalHFA, CDLAC, and TCAC. CDLAC and TCAC are both a part of the STO. CDLAC administers the state’s tax-exempt bond program, which provides funding for affordable housing developments for low-income Californians. TCAC allocates the federal and state LIHTC program to aid developers of affordable rental housing. CalHFA is an independent state agency that provides funding for the development of housing for people of low to moderate-income. The housing programs administered by these bodies are outlined in the table below.

Certain housing programs under one agency may be coupled with funding from programs in another. For example, CalHFA’s MIP, which is funded through SB 2 (2017, Atkins), requires applicants to acquire a tax-exempt bond through CDLAC as well as a 4% tax credit through TCAC’s LIHTC program. Developers looking to apply for MIP must also coordinate to meet application deadlines for CDLAC and TCAC. Coordination between CalHFA, TCAC, and CDLAC is also required in the application process for programs that are interdependent on each other for funding.

1. Streamlining Efforts. There have been efforts to coordinate and streamline the application process for the interdependent programs under CDLAC, TCAC and CalHFA. There is currently a joint application for developers wishing to apply to both the 4% LIHTC program under TCAC and the QRRP program under CDLAC. Some programs also provide a general timeline of their application process on their website that includes deadlines for programs that provide funding that can be coordinated.
2. Funding for Low Income Housing Units. Developers of affordable housing must obtain funding from multiple sources to make their projects financially feasible; oftentimes developers will combine federal, state, local, and private funds. In addition to navigating different program applications, developers must balance each program’s particular requirements to remain eligible for funding. The construction of affordable housing projects can face delays while waiting to secure funding. For example, since funding typically comes from a variety of sources, a developer may experience delays due to waiting for the approval of funding from one or more sources. Since affordable housing developers must simultaneously utilize funding from certain programs under CalHFA, TCAC, and CDLAC, a workgroup familiar with the application process under these three bodies could provide valuable input into streamlining the application process, which will help accelerate funding for construction of affordable housing for low income Californians.
3. Amendments. This bill requires CalHFA and the STO to convene a stakeholder group to identify actions to streamline the application process for housing programs under CalHFA, TCAC, and CDLAC by January 1, 2021, but does not require a report on the stakeholder group’s findings. The author will accept amendments to specify that the findings of the stakeholder group must be reported to the Legislature by June 30, 2021.

Related Legislation:

AB 434 (Daly, 2019) — requires HCD to develop a single, universal application for various housing programs under HCD. This bill is currently in this committee.

SB 1121 (Alarcon, Chapter 637, Statutes of 1999) — consolidated multiple programs at HCD into the Multifamily Housing Program (MHP) and created a standard set of rules applicable to all rental housing programs operated by HCD.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday, June 12, 2019.)

SUPPORT:

None received.

OPPOSITION:

None received.

-- END --

Date of Hearing: May 8, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1290

Author:(Gloria) – As Amended Ver:April 29, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires, by January 1, 2021, the California Housing Finance Agency (CalHFA) to collaborate with the California’s Treasurer’s Office to convene a stakeholder group that includes nonprofit developers, to identify ways to streamline the application process for tax-exempt bonds issued by California Debt Limit Allocation Committee (CDLAC), low-income housing tax credits administered by Tax Credit Allocation Committee (TCAC) and programs administered by CalHFA, including the mixed-income housing program.

FISCAL EFFECT:

Minor and absorbable costs to CalHFA.

COMMENTS:

1. Purpose. This bill seeks to streamline the funding application process for housing programs administered by CalHFA and the Treasurer’s Office.
2. Background. CalHFA and the Treasurer's Office provide resources for the construction, rehabilitation and acquisition of affordable rental housing units through a variety of programs. Often the developer of affordable housing units must access funds from more than one program to make the project financially feasible.
3. Related Legislation. AB 434 (Daly), of this legislative session, requires the Department of Housing and Community Development (HCD) to develop a universal application for state housing programs administered by HCD.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1290 (

Author:Gloria) – As Amended Ver:March 19, 2019

SUBJECT: The California Housing Finance Agency

SUMMARY: Requires the California Housing Finance Agency (CalHFA) to collaborate with the Strategic Growth Council (SGC), the Department of Housing and Community Development (HCD), and the California’s Treasurer’s Office to determine a consolidated process for various housing projects to apply for bond money, tax credits, and Affordable Housing and Sustainable Communities Program grants and loans.

EXISTING LAW:

1. Establishes CalHFA and requires the agency to be administered by a board of directors consisting of 13 voting members, including a chairperson selected by the Governor from among his or her appointees; the Treasurer; the Secretary of Business, Consumer Services, and Housing; the Director of HCD; and the Secretary of Veterans Affairs, or their designees; seven members appointed by the Governor; one member appointed by the Speaker of the Assembly; and one member appointed by the Senate Committee on Rules. The Director of Finance, the Director of Planning and Research, and the executive director of the agency shall serve as nonvoting ex officio members of the board.
2. Allows a state tax credit for costs related to construction, rehabilitation, or acquisition of low-income housing. This credit, which mirrors a federal low-income housing tax credit (LIHTC), may be used by taxpayers to offset the tax under the Personal Income Tax, the Corporation Tax, and the Insurance Tax laws.
3. Requires the Tax Credit Allocation Committee (TCAC) in the Treasurer’s Office to administer the state and federal LIHTC based upon qualifications of the applicant and proposed project.
4. Establishes the SGC, whose membership shall consist of the Director of State Planning and Research; the Secretary of the Natural Resources Agency; the Secretary for Environmental Protection; the Secretary of Transportation; the Secretary of California Health and Human Services; the Secretary of Business, Consumer Services, and Housing; the Secretary of Food and Agriculture; one member of the public appointed by the Speaker of the Assembly; one member of the public appointed by the Senate Committee on Rules; and one member of the public to be appointed by the Governor. Requires that the public members all have a background in land use planning, local government, resource protection and management, or community development or revitalization and provides that they shall serve at the pleasure of the appointing authority.

FISCAL EFFECT: Unknown.

COMMENTS:

Background: The Department of Housing and Community Development (HCD), the California Housing Finance Agency (CalHFA), the Treasurer's Office, Strategic Growth Council (SGC), and California Department of Veterans Affairs provide resources for the construction, rehabilitation, and acquisition of affordable rental housing units through a variety of programs. Often, the developer of affordable housing units must access funds from more than one program to make the project financially feasible.

AB 1121 (Alarcon) Chapter 637, Statues of 1999, consolidated multiple programs at HCD into the Multifamily Housing Program (MHP) and created a standard set of rules applicable to all rental housing programs operated by the Department. Since 1999, new housing programs have been created, including the Affordable Housing and Sustainable Communities Program, the Veterans Housing and Homeless Prevention Program, and the Transit-oriented Development Program (TOD). These programs all provide funding to construct, rehabilitate, and acquire affordable housing units or for infrastructure necessary for the development of housing. Most housing developers also apply for 4% and/or 9% federal low-income housing tax credits administered by the Treasurer’s office. In addition, 4% credits must be coupled with tax-exempt bonds, which are administered by the California Debt Limit Allocation Committee (CDLAC).

Related legislation: This committee is hearing AB 434 (Daly) to require a universal application for state housing programs. This bill is similar to that proposal. The committee may wish to consider revising this bill to focus on programs or sources of funding that are not voter-approved and administered by HCD and instead to require CalHFA to convene a stakeholder process to determine actions to streamline the tax-exempt bonds issued by CDLAC, low-income housing tax credits administered by TCAC, and programs administered by CalHFA, including the mixed income housing program.

Committee amendments:

1. Require the California Housing Finance Agency, in collaboration with the California Treasurer’s Office, to convene a stakeholder group, including, but not limited to, non-profit developers, to identify actions that can be taken to streamline the application process for the following programs:
2. Tax-exempt bonds issued by the California Debt Limit Allocation Committee;
3. State or federal low-income housing tax credits issued by the California Tax Credit Allocation Committee; and,
4. Mixed-income housing program and other programs administered by CalHFA.
5. Require CalHFA to report back with the results of the stakeholder process by January 1, 2021.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085