Statewide, 50,071 Affordable Rental and For-Sale Homes and 93,400 Jobs at-Risk
The fate of hundreds of affordable home developments and units in Southern California rest in the hands of the state's Pooled Money Investment Board (PMIB). The three-person PMIB, comprised of state Controller John Chiang, Treasurer Bill Lockyer, and Director of Finance Michael Genest control California's stalled bond funds. Affordable home builders need immediate relief from bond proceeds to help fulfill the commitments made to them by the State so that they would be able to pay the unpaid bills and loans to contractors and banks.
Without that relief, the projects that they have built or plan to build, serving primarily the homeless, working poor, and low income communities could be threatened by legal actions, payments on interest to their lenders that they can hardly afford, or delays in construction leaving hundreds of construction workers in limbo.
For example, Communidad Cesar Chavez, a project by the nonprofit LA Family Housing which provides 146 in a homeless shelter, is being threatened by lawsuits by it's general contractor and subcontractors. Payment of the state's commitment to the project was due December 31 and the bills are now more than 60 days late. In their demand for payment, they cite California Prompt Payment Statutes which require payment of legal fees and 2% per month.
In another example, Project Home by the Downtown Women's Center which is hoping to break ground on 71 new units for homeless women and Vendome Palms Apartments hoping to break ground on 35 new units for formerly homeless adults -all hoping to provide new jobs to the community, cannot start until the State fulfills their commitments to the projects.
Foster programs are also impacted, as a project intended to serve 25 youth who are homeless or at-risk of homelesness by Little Tokyo Service Center CDC and the Coalition for Responsible Community Development are at-risk.
Finally, many nonprofits, already strained by cuts to the state budget, will be facing the additional costs of financing the unpaid State commitments while trying to keep up with an increasing demand for services to the community. Step Up on Fifth Apartments unpaid State committment will force the nonprofit to pay $11,000 a month in interest payments until their loans are paid.
Statewide, the broad and specific impacts of the stalled bond funds, include:
¥ A halt in construction on 50,071 affordable rental and for-sale homes in 792 developments throughout the state.
¥ 93,400 lost jobs once construction is halted or delayed.
¥ High monetary penalties for developers (and potentially, the state) for failure to repay bank loans on time.
¥ Millions of additional expenditures for developers (and potentially the state) in the form of high interest rates on temporary bank loans.
¥ In the worse case, foreclosure of the affordable homes by banks who provided construction loans. In a foreclosure situation, millions of local and state money already invested in homes will be lost and the affordable rents or sales prices will convert to market rates. Additionally, the state may be held liable for millions of dollars in private capital already invested in the development.
At today's PMIB hearing in Sacramento, developers, lenders, contractors, and tenants urged the board to make affordable-home developments a top priority for funding when bonds are sold later this month. Treasurer Lockyer plans to seek buyers for up to $4 billion in general obligation bonds on March 25, 2009.
The Southern California Association of Non-Profit Housing (SCANPH) represents over 450 affordable home organizations and advocates.