Policy & Legislation
PMIB Update: Meeting Clarifies HCD Will Receive $697 Million from April Bonds
May 20, 2009
A meeting spearheaded by Senator Christine Kehoe (D-San Diego) last week yielded good news for home developers anxiously awaiting payment on Proposition 46 and 1C contracts: the Department of Housing and Community Development (HCD) will receive close to $697 million from April bond sales.
After subtracting pass-throughs to the CA Housing Finance Agency (Cal-HFA) and CA Pollution Control Financing Authority, HCD will have approximately $645 million for developments and shelters with Prop. 46 and 1C contracts. Funds will disbursed on a first-come, first-served basis to projects once awardees have fully complied with the terms of their contract.
Of the $645 million available, $180 million can be used only for projects eligible for tax-exempt financing; this will cover approximately 36 months' worth of funding for Prop. 46 projects and 18 months for Prop. 1C projects.
The remaining $465 million can be spent on developments eligible for taxable financing. HCD estimates this will cover needs through December 2009 or January 2010.
To ensure that projects making draws throughout the construction process will have enough money to complete construction, HCD plans to set aside the full amount of its commitment upfront. This approach is raising some questions from developers of Multifamily Housing Program (MHP) projects; they wonder what will happen if HCD has no funds available when they need take-out financing early next year. The MHP contracts were signed before those for which HCD plans to set aside money.
According to the state treasurer's staff, the treasurer hopes to sell more general obligation bonds in the fall. These bonds would provide additional funds to meet Prop. 46 and 1C commitments next year.
The main limitation on the state's ability to sell bonds will be the status of the state's revenues. Yesterday's election, by adding almost $6 billion to the state's 2009-10 budget hole, will make it harder for legislators to balance the budget. However, sources tell us that the Democrats are close to a majority-vote agreement with the governor that likely will result in enough cuts and fee increases to bridge the gap.
Chris Westlake also said HCD will request authorization from the Department of Finance this week for the Loan and Grant Committee to make MHP, Self-Help, and Joe Serna awards that have been in limbo since the canceled January meeting. Additionally, HCD will release scores from recent Transit Oriented Development and Infill Infrastructure notices of funding availability in order to begin the appeals process.
The meeting did not solve one of the most vexing problems facing below-market-rate developers: most banks' unwillingness to make construction loans while state take-out financing is so precarious. The ad hoc PMIB Coalition will continue to work with elected officials to find solutions.
Contact Julie Snyder, 916.447.0503 x102 or .
