Proposition 41

ANALYSIS BY THE LEGISLATIVE ANALYST

BACKGROUND

State Housing Programs. In most years, about 150,000 houses and apartments are built in California. Most of these housing units are built entirely with private dollars. Some, however, receive financial help from federal, state, or local governments. For example, the state provides local governments, nonprofits, and private developers with low-cost loans to fund a portion of the housing units' construction costs. Typically, housing built with these funds must be sold or rented to Californians with low incomes.

A portion of housing units built with state funds is set aside for homeless Californians. These include homeless shelters, short-term housing, and supportive housing. Supportive housing combines housing with certain services, including mental and physical health care, drug and alcohol abuse counseling, and job training programs. A January 2013 federal government survey identified 137,000 homeless Californians, including about 15,000 veterans. California veterans are more than twice as likely to be homeless than non-veterans.

Veterans' Home Loan Program. The state and federal governments provide home loan assistance to some of the 1.9 million veterans living in California. Under the state program, the state sells general obligation bonds to investors and uses the funds to buy homes on behalf of eligible veterans. Each participating veteran then makes monthly payments to the state, which allows the state to repay the investors. These payments have always covered the amount owed on the bonds, meaning the program has operated at no direct cost to taxpayers. Since 2000, the number of veterans receiving new home loans under this program each year has declined significantly. Many factors have contributed to this decline, including: (1) historically low mortgage interest rates, (2) the availability of federal home loan assistance, and (3) the recent housing crisis. When the Legislature placed this measure on the ballot, it also reduced the amount of bonds that could be used for the veterans' home loan program by $600 million. As a result, about $500 million of state bonds remain available for veterans home loans.

PROPOSAL

New General Obligation Bonds for Veterans' Housing. This measure allows the state to sell $600 million in new general obligation bonds to fund affordable multifamily housing for low-income veterans. The general obligation bonds authorized by this measure would be repaid using state tax revenue, meaning that taxpayers would pay for the new program. (For more information on the state's use of bonds, see “Overview of State Bond Debt” later in this guide.)

Housing for Low-Income Veterans. This measure funds construction, renovation, and acquisition of affordable multifamily housing, such as apartment complexes. The state would do this by providing local governments, nonprofit organizations, and private developers with financial assistance, such as low-interest loans, to fund part of a project's costs. Housing built with these funds would be rented to low-income veterans (and their families)—that is, those who earn less than 80 percent of average family income, as adjusted by family size and county. For example, the average statewide amount for a single person to be considered low-income for this program is about $38,000. State law requires these units to be affordable, meaning rent payments made by veterans cannot exceed 30 percent of the income limit for the program.

Housing for Homeless Veterans. State law gives funding priority in this program to projects that would house homeless veterans and veterans who are at risk of becoming homeless. In particular, at least one-half of the funds would be used to construct housing for extremely low-income veterans. These veterans earn less than 30 percent of the amount earned by the average family in the county where they live. (The average statewide amount for a single person to be considered extremely low-income is about $14,000.) A portion of the funding for extremely low-income veterans would be used to build supportive housing for homeless veterans.

Other Provisions. Under this measure, the Legislature could make changes in the future to improve the program and the state could use up to $30 million of the bond funds to cover the costs of administering the program. In addition, the state would be required to publish an annual evaluation of the program.

FISCAL EFFECTS

Bond Costs. This measure would allow the state to borrow up to $600 million by selling general obligation bonds to investors, who would be repaid using general tax revenues. The cost of these bonds would depend on their interest rates and the time period over which they are repaid. We assume that (1) the interest rate for these bonds would average 5 percent, (2) they would be sold over the course of five years, and (3) they would be repaid over a ten-year period. Based on these assumptions, the cost to taxpayers to repay the bonds would average about $50 million annually for 15 years . This amount is less than one-tenth of 1 percent of the state budget.

Visit http://cal-access.sos.ca.gov for details about financial contributions for this proposition.

Vote YES on Proposition 41, the Veterans Housing and Homeless Prevention Bond Act of 2014 to build affordable housing for California's veterans without raising taxes or adding to California's debt by redirecting $600 million of existing, unspent funds.

This is a fiscally responsible ballot measure that will help thousands of homeless veterans get a roof over their heads. This act doesn't create new taxes or add new debt to California. In fact, this act will save taxpayer dollars in healthcare and public safety by getting veterans off the streets and into safe, affordable housing.

California is home to more than one-quarter of all homeless veterans in the United States. We must take action to address this shocking situation, but we also know that California has had significant budget troubles over the past several years. That's why this measure doesn't add to California's debt ; instead, it takes previously approved but unspent bond funds and uses them to construct affordable housing for homeless and near-homeless veterans. We know we need to do more for our veterans, and we can take action without raising a dime in new taxes or adding a nickel to California's debt.

Every veteran has unique needs, and this act will help ensure that we approach homelessness among veterans comprehensively. This act will help build transitional housing for veterans who are trying to escape homelessness, while also constructing supportive housing for veterans who are dealing with physical injuries, mental health issues, or Post Traumatic Stress stemming from their service. Priority will go to nonprofits and local governments to construct new housing or renovate existing facilities to meet the needs of veterans locally.

By voting YES on Proposition 41, we can act to make sure homeless veterans have access to quality, affordable housing and give at-risk veterans the opportunity to find the job training, counseling, and rehabilitation services they need—and since this act uses money that has already been approved, but not spent, we can honor their service without adding to the debt or raising taxes.

As our conflicts overseas draw to a close, up to 45,000 young veterans will be returning home to California. They have sacrificed so much for our country, and some will be coming home with no jobs or homes waiting for them. We cannot allow these men and women who have served our country to be left on their own.

That is why organizations like the American Legion, Vietnam Veterans of California, Veterans Village of San Diego, U.S. VETS, and Swords to Plowshares support this act. They know that we must do right by our veterans and taxpayers alike.

Vote YES on Proposition 41 to build $600 million in quality affordable housing for California's veterans, without raising taxes or adding to California's debt. Honoring the sacrifices California's veterans have made isn't just our duty as voters—it's our basic obligation as citizens. For more information, please visit www.yesonprop41forvets.org .

Let's support our veterans for all their sacrifices—by voting YES!

JOHN A. PÉREZ, Speaker of the California Assembly

LEON E. PANETTA, Former United States Secretary of Defense

STEPHEN PECK, President U.S. VETS

In general, it is the responsibility of the federal government to care for military veterans; however, when the federal government falls short and no one else picks up the slack, it is appropriate for state governments to lend a hand to persons who have served—even if voluntarily—in the military.

Credit the California Legislature for proposing in Proposition 41 to shift $600 million in voter-authorized borrowing to programs that may better help veterans in need.

Keep in mind, though, that all money borrowed (by selling bonds) must be repaid with interest.

In the case of CalVet loans for the purchase of homes (and farms), the recipients have been required to pay back the loans with interest. In contrast, the programs proposed for homeless veterans would not be paid for by the veterans (as they cannot afford to pay).

Also, keep in mind that any program which involves expenditures not given directly to the intended beneficiaries is subject to possible mismanagement and waste.

In the future, the best way to avoid homelessness among veterans is to avoid the unnecessary commitment of ground troops into combat around the globe. Putting “ boots on the ground ” in foreign lands should be a last resort.

GARY WESLEY

In 2008, California voters approved a $900 million bond measure to further fund the CalVet Farm and Home Loan Program. The Program began in 1921. It has helped more than 400,000 California military veterans buy homes (and farms).

In this proposition, the State Legislature is proposing to authorize use of $600 million of the prior $900 million bond measure (two-thirds) for another program aimed at helping homeless veterans. According to the Legislature, there are approximately 19,000 homeless veterans in California—with more coming.

If approved by voters, this proposition would allow a new “ Housing for Veterans Finance Committee ” to borrow money by selling up to $600 million in general obligation bonds “ to provide the acquisition, construction, rehabilitation, and preservation of affordable multi-family supportive housing, affordable transitional housing, affordable rental housing, or related facilities for veterans and their families to access and maintain housing stability .”

According to the State Legislature, the $900 million in borrowing (by selling bonds) authorized by voters for the CalVet Loan Program in 2008 is not being fully used by veterans to buy homes or farms. Indeed, the Legislature reports that borrowing authority under the prior $500 million bond measure for the Loan Program has not been exhausted.

The chief questions raised by this proposition are:

• (1) Should $600 million in borrowing capacity be taken from the CalVet Farm and Home Loan Program?
• (2) Should $600 million be borrowed (by selling bonds) to support a new California veterans' program?

GARY WESLEY

Prop. 41, the Veterans Housing and Homeless Prevention Act of 2014 redirects existing, unspent bond funds that were previously approved by voters but that have not been used. Prop. 41 does not raise taxes or add to the overall state debt. Prop. 41 authorizes $600 million to be dedicated to constructing and renovating affordable housing for homeless and near-homeless veterans.

The existing program that these funds come from is badly underused. In fact, a Los Angeles Times editorial said that the original ballot measure that authorized this funding “missed the mark in terms of meeting the needs of the state's veterans.” That's why Prop. 41 is essential to veterans—it builds the kinds of housing California's veteran population needs, without raising taxes.

This act redirects previously approved, but unused bonds. That means that it doesn't add to California's overall authorized debt. Using these bonds will produce minor financing costs to the state, while leading to savings in social services and healthcare. As the L.A. Times noted, “By reducing the number of homeless veterans and connecting more of them to the rehabilitation and mental health services they need, the bonds could help the state avoid some of the healthcare and social service costs it faces today.” The Times also notes these bonds could assist more homeless veterans to rejoin the workforce.

This is the fiscally responsible way to do right by California's veterans. Vote YES on Prop. 41 to help California's veterans get the housing they need.

ED FORD, State Commander Veterans of Foreign Wars, California Department

PETER CAMERON, Executive Director Veterans Resource Center of America

JOSEPH GARCIA, State Commander American Legion, Department of California

Arguments printed on this page are the opinions of the authors and have not been checked for accuracy by any official agency.