To: Board of Supervisors
From: John Kopchik, Director, Conservation and Development
Report Title: APPROVE Establishment of Separate Interest-Bearing Account for the Permanent Local Housing Allocation Program (PLHA)
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
AUTHORIZE the establishment of a separate interest-bearing account for revenue derived from the State of California Permanent Local Housing Allocation (PLHA) Program.
FISCAL IMPACT:
No General Fund impact. PLHA Program funds are from the State of California provided to the County through an entitlement formula. Approval of this recommendation would provide that interest earned on this loan revenue would be accrued into a separate, dedicated account rather than to the General Fund.
BACKGROUND:
PLHA is an entitlement formula grant program available to local governments in California to help them address unmet housing needs in their local communities. PLHA is a newer State program with entitlement and competitive components intended to fund more affordable housing. The State designated Contra Costa County as the administrator of the entitlement grant award for Contra Costa's “Urban County,” which is defined as the unincorporated communities of the County and all the incorporated cities except for the cities of Antioch, Concord, Pittsburg, and Walnut Creek, which are eligible to receive their own entitlements.
The PLHA program runs in five-year cycles, and after submitting its Five-Year PLHA Plan to the State, Contra Costa County was allocated up to an estimated $13,000,000 in PLHA grant funds. Contra Costa County’s Five-Year PLHA Plan calls for the predevelopment, development, acquisition, rehabilitation, and preservation of multifamily, residential live-work rental housing affordable to extremely low-, very low-, low-, or moderate-income households, including necessary operating subsidies.
As part of the Five-Year PLHA Plan, the State required Contra Costa County to implement and enforce a Re-Use Plan to address the PLHA loans and the income received from loan payments/repayments (typically referred to as “program income”), including interest earnings, for future reuse in accordance with State policies.
Interest Accrued or Earned on PLHA Revenue
The County distributes interest earnings consistent with California Government Code Section 53844, which states that interest accrued on funds in the County Treasury shall be credited to the County General Fund unless otherwise required. Accordingly, the County does not routinely establish separate interest-bearing accounts. The establishment of separate interest-bearing accounts must be approved by the Board of Supervisors.
The below-described circumstances, unique to State PLHA funding, provide adequate substantiation for the County to begin treating this as an exception that warrants the establishment of a separate interest-bearing account:
Due to the PLHA Re-Use Plan submitted to the State and approved by the Board of Supervisors on September 21, 2021, Contra Costa County committed to maintaining policies and procedures that separate PLHA program income for future reuse in accordance with the following PLHA policies:
1. All repayments of PLHA loan principal and interest shall be received by the County Department of Conservation and Development and deposited into a separate reuse account maintained by the Department’s Finance staff. The County’s PLHA loan documentation will track information such as borrower name and address, loan/reference number, grant year, principal, and interest.
2. The reuse account shall be an interest-bearing account into which all earned interest shall be deposited. Interest earned shall be considered reuse funds and used in the same manner and with the same restrictions as principal and interest payments.
3. All funds deposited into the reuse account shall be the property of the County.
4. All PLHA reuse funds shall be expended in accordance with PLHA regulations. This includes, but is not limited to, income levels, homebuyer education requirements, and coordinated entry requirements.
5. Reused funds in the following category may be used for PLHA-eligible activities but must align with the state-approved PLHA plan.
a. The predevelopment, development, acquisition, rehabilitation, and preservation of multifamily, residential live-work rental housing affordable to extremely low-, very low-, or moderate-income households, including necessary operating subsidies.
6. Reuse funds may be used within the boundaries of the Urban County of Contra Costa County.
7. The County shall allow HCD full access to the reuse account records to determine compliance with PLHA regulations.
CONSEQUENCE OF NEGATIVE ACTION:
If not approved, the interest the County earns on revenue derived from the PLHA loans will not be deposited into a separate interest-bearing account, violating our agreement with the State and jeopardizing up to $13,000,000 in funding for affordable housing in Contra Costa County.