November 7, 2006 Ballot Prop. 1C

Proposition 1C, the Housing and Emergency Shelter Trust Fund Act, would authorize the state to sell $2.85 billion in general obligation bonds to fund new and existing housing and development programs. The programs would be aimed at increasing development in urban areas, transportation, homeless shelters, and construction and renovation of rental housing projects. The measure would also provide funds to low income home buyers. The measure allows the legislature to institute future changes to the programs to make them more effective. The funds generated would be allocated over a number of years with the state making payments on the bonds from the general fund over a 30 year period.

Background

As of the third quarter of 2005, according to data from the California Association of Realtors, California median-income households (those with a median household income of $54,140) were $73,810 short of the $127,950 qualifying income needed to purchase a median-priced home at $545,910. Housing units in California are built from a variety of financial sources. Most units are built by private industry. Some units however, are built with federal, state and local government assistance through state programs. These programs provide private developers, non profit and government agencies with low-interest loans to subsidize housing construction costs provided the housing is rented or sold to low income residents. City and county governments traditionally pay any infrastructure costs that might incur from new housing including water, sewers, and roads. The state government also supplies eligible first-time home buyers with assistance with their down payment on a new home.

The most recent funding increase for housing for low income residents came with the passage of Proposition 46 in 2002. The proposition provided $2.1 billion for a housing trust fund which has been the source for creation of new shelter beds, apartments for homeless and funds for low-income home buyers in the last 4 years. Low income housing supporters claim that Prop. 46 funds may be exhausted by the end of 2006.

Proposition 1C originated as SB 1689 which was introduced by Senate President Pro Tem Don Perata (D-Oakland). The legislature passed the bill on 4 May 2006. The proposition was part of a larger infrastructure development bond targeting education, flood protection and housing. Negotiations in the legislature led to cutting the bond into separate bills, each aimed at different parts of infrastructure development.

$1.35 million from the measure would fund new development projects in urban areas and public transportation targeting parks, water, sewage and housing. Loans and grants would be provided amongst private contractors.Proposition 1C would provide $2.85 billion in funds for 13 new and existing housing and development programs which would fund new battered women shelters, low-income senior housing, veterans housing and shelter for homeless families. The programs are divided into four categories, each targeting a separate area of housing development.

• $625 million from the measure would fund down payment assistance to low and medium-income home buyers. Eligibility for assistance would be based on household income, cost of the home and whether or not it is the home buyer's first home.
• $590 million from the measure would fund rental housing renovation projects aimed at constructing new housing for low-income families. Private developers, local government and nonprofit organizations would receive a 3% low-interest loan to fund the construction provided that a portion of housing would be reserved for poor households. Prop. 1C gives funding priority to projects located in developed areas and near existing public services.
• $285 million from the measure would provide loans and grants for the construction and renovation of homeless shelters and homes for farm workers. Additional funds would be used for projects aimed at providing affordable housing.

The state would make payments on the bond debt from the general fund over a period of 30 years. Unlike most bonds, some of the programs introduced by Prop. 1C are not eligible for federal tax exemption as they provide funds for private use. This would cause the interest rate to be higher. These bonds would generate approximately $3.3 billion along with the $2.85 billion cost of the principal. The total annual cost to the state would be around $204 million. In addition, the programs provided by Prop. 1C would cost the Department of Housing and Community Development and the California Housing Finance Agency some administrative costs. A portion of these costs would be paid by the programs' funds over time.

Arguments For and Against

Proponents claim that the measure will bring critically needed investment to California's transportation network. They respond to objections about the fiscal responsibility of the ballot measure by pointing out that the measure will not raise taxes and will be subject to annual audits and public reports to demonstrate that bond funds are being spent in a manner consistent with the voters' intent.

Opponents argue that Proposition 1B fails to achieve its goals in a fiscally responsible manner. While they agree that improved transportation is critical, they object that bond funding will saddle the state with $32 billion dollars in debt, including interest, and that the funding scheme that the initiative would establish would end the "pay as you go" system without putting anything equally fiscally responsible in its place.

While a number of environmentalists are critical of environmental aspects of the transportation bond, which they claim will lead to more urban sprawl, most activist and special interest groups have not chosen to actively oppose the measure.

Campaign Finance

Browse our updated webpage listing major contributors to all of the campaigns supporting and opposing the ballot measures here.

Arguments For and Against

Proponents of Proposition 1C say that it will provide much needed shelter for thousands of citizens who cannot afford housing. They cite statistics that find that there are hundreds of thousands of homeless people in the state that cannot access shelter each night. They also point to thousands of battered women and their children who were turned away from shelters last year. Proposition 1C, proponents argue, would provide new jobs to administer the programs and new housing for target risk groups. They claim that the costs would be paid from the general fund, money supplied from tax dollars already spent by California residents. Supporters of Proposition 1C come from members of the business community, homeless and battered women advocacy groups, and senior citizens and youth organizations.

Opponents of Proposition 1C claim that it will add debt and bureaucracy to California's already stumbling economy. They say that the Proposition will barely touch the housing crisis and will instead enable the state to help only a small minority. Critics claim that Californians will actually have to pay an additional $600 in taxes over the life of the bond. Furthermore, they contend that future generations will be saddled with years of debt. Opponents blame the housing affordability issue on government interference in the form of over regulation of the housing industry, environmental lawsuits and high fees on private industry. Opponents largely come from anti-tax groups and members of the business community.

Official Voter Information

Voter Information Guide
Includes title and summary, arguments for and against, and text of the initiative.

Housing and Emergency Shelter Bond
Analysis by California Legislative Analyst, 2006.

Individual Campaign Committees
Total Contributions and Expenditures (select "Nov. 2006 election" and "Prop. 1C " in dropdown boxes)

Public Opinion

Analyzing the Vote for Selected Propositions, Los Angeles Times Exit Poll, Nov. 9, 2006.

Exit poll: Complete poll data, Los Angeles Times Exit Poll, Nov. 9, 2006.

Majorities of voters appear ready to approve the state's infrastructure bonds (Props. 1B, 1C, 1D and 1E). Field Poll, Release 2219, Nov. 4, 2006. 

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, October 2006.

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, September 2006.

PPIC Statewide Survey: Californians and the Future, Public Policy Institute, August 2006.

Voters are supporting four of the five bond proposals on the November ballot, although not by overwhelming margins. Field Poll, Release 2206, July 28, 2006.

Continuing negative job appraisals of the Governor and the legislature, despite initial support for infrastructure bonds. Field Poll, Release 2201, June 5, 2006.

Reports and Studies

Propositions 1B, 1C, 1D, and 1E: The Public Works Bond Package. Oct. 2006, California Budget Project