Appendix A

Debt Limit Committee-Awarded Bond Resources

The Audit Committee directed the California State Auditor (State Auditor) to determine the amount of bond funds the Debt Limit Committee has allocated to affordable housing over the last five years. Table A presents the Debt Limit Committee's total bond resources awarded for multifamily affordable housing, single-family housing, and nonhousing projects from 2015 through 2019.

Table A

Debt Limit Committee-Awarded Bond Resources From 2015 Through 2019
(In Millions)

	Multifamily	Single-Family
Total Bond Awards	HOUSING		Nonhousing*
2015	$2,861	$1,711	$73
2016	4,821	1,335	220
2017	3,350	322	644
2018	4,067	286	185
2019	4,593	348	219

Source: 2015 to 2019 Debt Limit Committee Estimated Public Benefits summaries.

* Nonhousing includes bond resources that support other purposes such as recycling facilities, landfills, and wastewater treatment facilities.

Appendix B

Tax Committee Distribution of Tax Credits Awarded

The Audit Committee directed the State Auditor to determine the geographic distribution of tax credits awarded by the Tax Committee for affordable housing in the last five years. Table B presents the Tax Committee's tax credit awards—including federal and state tax credits—and units supported by those awards by county from 2015 through 2019.

Table B

Tax Committee-Awarded Tax Credits by County From 2015 Through 2019

County	Household Population	Tax Committee Supported Lower- Income Units	Tax Committee Tax Credits in Dollars—Federal	Tax Committee Tax Credits in Dollars—State	Tax Committee Tax Credits in Dollars—Total	Units Per 1,000 Household Population
Alameda	1,624,962	5,723	$113,385,054	$12,495,728	$125,880,782	3.5
Alpine	1,125	24	558,093	1,717,620	2,275,713	21.3
Amador	33,458	0	0	0	0	0.0
Butte	216,551	111	1,409,956	3,652,957	5,062,913	0.5
Calaveras	44,578	0	0	0	0	0.0
Colusa	21,739	97	2,644,709	1,983,518	4,628,227	4.5
Contra Costa	1,140,146	4,683	54,921,166	1,739,142	56,660,308	4.1
Del Norte	24,143	20	1,033,111	0	1,033,111	0.8
El Dorado	188,313	216	1,237,523	0	1,237,523	1.1
Fresno	997,567	3,187	39,410,114	47,831,024	87,241,138	3.2
Glenn	28,368	23	403,107	0	403,107	0.8
Humboldt	128,469	279	7,448,114	0	7,448,114	2.2
Imperial	180,208	812	10,394,856	12,593,638	22,988,494	4.5
Inyo	18,168	0	0	0	0	0.0
Kern	875,991	1,157	11,185,641	9,346,007	20,531,648	1.3
Kings	136,791	221	1,573,507	1,363,863	2,937,370	1.6
Lake	63,136	123	4,577,684	1,119,889	5,697,573	1.9
Lassen	21,577	53	216,302	0	216,302	2.5
Los Angeles	10,000,528	20,096	317,446,662	173,078,869	490,525,531	2.0
Madera	150,812	146	1,475,740	0	1,475,740	1.0
Marin	253,957	221	4,693,114	0	4,693,114	0.9
Mariposa	17,350	23	494,810	0	494,810	1.3
Mendocino	86,424	308	8,306,291	744,016	9,050,307	3.6
Merced	273,643	235	2,331,268	5,280,611	7,611,879	0.9
Modoc	9,287	0	0	0	0	0.0
Mono	13,181	0	0	0	0	0.0
Monterey	420,834	1,648	$20,934,277	$18,384,783	$39,319,060	3.9
Napa	135,109	635	9,779,758	0	9,779,758	4.7
Nevada	96,625	339	6,239,885	0	6,239,885	3.5
Orange	3,141,552	6,400	87,303,983	4,246,537	91,550,520	2.0
Placer	391,992	972	11,056,381	14,681,643	25,738,024	2.5
Plumas	17,945	94	1,272,795	2,085,783	3,358,578	5.2
Riverside	2,389,015	3,449	34,127,941	13,358,940	47,486,881	1.4
Sacramento	1,518,290	3,538	35,503,366	3,229,352	38,732,718	2.3
San Benito	61,077	238	4,140,466	10,219,740	14,360,206	3.9
San Bernardino	2,131,951	2,549	31,920,394	4,959,964	36,880,358	1.2
San Diego	3,230,523	9,826	128,299,978	18,688,621	146,988,599	3.0
San Francisco	865,218	8,505	203,958,957	2,077,872	206,036,829	9.8
San Joaquin	749,729	1,604	18,765,352	10,564,116	29,329,468	2.1
San Luis Obispo	262,169	897	15,282,547	24,617,853	39,900,400	3.4
San Mateo	764,823	1,361	28,926,679	6,141,804	35,068,483	1.8
Santa Barbara	430,553	1,256	18,012,458	3,912,219	21,924,677	2.9
Santa Clara	1,924,619	6,487	105,793,709	29,522,502	135,316,211	3.4
Santa Cruz	257,838	253	7,007,703	0	7,007,703	1.0
Shasta	175,002	397	5,381,554	0	5,381,554	2.3
Sierra	3,177	49	816,128	0	816,128	15.4
Siskiyou	43,988	29	874,302	3,409,157	4,283,459	0.7
Solano	427,370	1,052	9,345,077	0	9,345,077	2.5
Sonoma	486,798	1,386	22,474,990	7,934,925	30,409,915	2.8
Stanislaus	547,377	431	8,346,014	5,361,257	13,707,271	0.8
Sutter	102,154	215	3,706,376	9,578,815	13,285,191	2.1
Tehama	63,789	0	0	0	0	0.0
Trinity	13,246	0	0	0	0	0.0
Tulare	471,923	678	9,598,156	11,100,217	20,698,373	1.4
Tuolumne	51,044	96	1,574,513	0	1,574,513	1.9
Ventura	834,844	1,995	25,034,264	0	25,034,264	2.4
Yolo	207,693	769	9,715,635	15,771,525	25,487,160	3.7
Yuba	76,223	90	1,275,510	2,506,823	3,782,333	1.2
Totals	38,844,962	94,996	$1,451,615,970	$495,301,330	$1,946,917,300	2.4

Source: Tax Committee tax credit award data from 2015 through 2019 and 2019 household population data from the Department of Finance.

Appendix C

Scope and Methodology

The Audit Committee directed the State Auditor to conduct an audit of the Tax Committee and the Debt Limit Committee to assess their efforts to provide tax credits and financing for affordable housing projects throughout California. Table C below lists the objectives that the Audit Committee approved and the methods we used to address them.

Table C

Audit Objectives and the Methods Used to Address Them

AUDIT OBJECTIVE		METHOD
1	Review and evaluate the laws, rules, and regulations significant to the audit objectives.	Reviewed and evaluated relevant federal and state laws, rules, regulations, and other relevant information related to affordable housing development.
2	Identify and evaluate the following: The Tax Committee's and Debt Limit Committee's efforts to fulfill their missions related to increasing the supply of affordable housing for low-income Californians. Any challenges they face in fulfilling their missions, leveraging local and private investments, and ensuring that the State serves its most vulnerable populations, such as people experiencing homelessness. Any opportunities for the Legislature to assist the Tax Committee and the Debt Limit Committee in fulfilling their missions.	Analyzed the missions, responsibilities, and efforts of the State's four housing agencies—the Tax Committee, the Debt Limit Committee, HCD, and CalHFA—to increase the supply of affordable housing. Using information from HCD and other housing experts, quantified the State's current and future needs for affordable housing units. Obtained data from the Tax Committee and Debt Limit Committee and determined the amount of financial resources each awarded and the number of affordable housing units those funds supported over the last five years (2015 to 2019). Interviewed key staff and reviewed funding processes from the four housing agencies to identify challenges with fulfilling their missions and leveraging local and private investments. Evaluated the State's plan for ensuring that the State is serving its most vulnerable populations, such as people experiencing homelessness, seniors, individuals with disabilities, and farmworkers. Identified recommendations for the Legislature to assist state agencies in fulfilling their missions.
3	Review the Tax Committee's and the Debt Limit Committee's management and operation practices, management structure, and internal controls to ensure that they are operating effectively and efficiently.	Interviewed relevant staff at the Tax Committee and the Debt Limit Committee. Evaluated the management structure and practices of each committee by reviewing their organizational charts, regulations, regulation-setting processes, and other documents. Reviewed each committee's internal controls for its processes to award tax credits and bond resources and identified any inefficiencies.
4	Analyze the transparency of the Tax Committee's and Debt Limit Committee's processes and governance, such as whether the rules and processes are sufficiently clear for developers, and whether topics discussed at meetings are properly placed on the agenda.	Determined whether the committees' processes and governance were transparent by reviewing the committees' public meeting agendas and minutes from 2015 through 2020. We found that topics discussed at meetings were generally present on the agenda. Assessed the clarity of the committees' information for developers by interviewing a selection of 10 developers and reviewing state agencies' processes.
5	Determine and analyze the geographical distribution of funds awarded by the Tax Committee for affordable housing in the last five years, including the following: Where additional affordable housing is needed most. Whether rural and infill projects are adequately represented. Whether farmworker projects are adequately represented.	Obtained data from the Tax Committee for all active projects to which it awarded funds from 1987 through October 2019 and determined the number of housing units that received funding in each local jurisdiction. Analyzed HCD's housing needs and building permit data for each local jurisdiction to determine the extent to which local jurisdictions were meeting housing needs. Using data from the Tax Committee, the Department of Finance, and the U.S. Census Bureau, created a map that displays each local jurisdiction's Tax Committee-funded units per 1,000 population and indicators of housing needs. Performed additional analysis of Tax Committee awards at the county level from 2015 through 2019 to determine whether it distributed funds equitably, such as to those areas of high need. Evaluated HCD's process for overseeing local jurisdictions' housing development by reviewing state law and HCD documents and by interviewing HCD staff. Selected eight cities—based on information such as their locations, demographics, housing needs, and housing development—and analyzed publicly available documents, such as their municipal codes and housing elements (local housing plans) to determine potential causes for their different levels of affordable housing development. Reviewed HCD's 2018 state housing plan to determine whether housing for people experiencing homelessness, seniors, individuals with disabilities, and farmworkers were adequately represented. Identified that infill projects are supported by HCD's infill infrastructure grant program, which recently made nearly $280 million in total awards for fiscal year 2019–20; amounts were awarded for both large and small jurisdictions. The State had invested lower amounts in previous years—HCD awarded $42 million in fiscal year 2014–15 and $50 million in fiscal year 2017–18, according to HCD's award lists.
6	Review the Tax Committee's and Debt Limit Committee's competitive and noncompetitive processes for deciding which projects to fund.	Interviewed key staff at the Tax Committee and Debt Limit Committee and reviewed regulations and other documents to obtain an overview of the committees' processes for awarding competitive and noncompetitive funding. Selected 14 applications for tax credits and bond resources and evaluated the two committees' processes for making competitive and noncompetitive awards. Compared the Tax Committee's and Debt Limit Committee's program requirements and deadlines to other housing agencies.
7	Review the Tax Committee's efforts to recruit applicants that would provide affordable housing throughout the entire State, including the San Joaquin Valley and rural areas.	Interviewed Tax Committee staff and reviewed conference and workshop documentation to evaluate Tax Committee developer recruitment efforts between 2015 and 2019.
8	Determine the amount of bond funds the Debt Limit Committee has allocated to affordable housing over the last five years. Evaluate the Debt Limit Committee's methodology for allocating tax-exempt debt to housing and other purposes.	Using the Debt Limit Committee's awards information, determined the number of bond resources it allocated for affordable housing and other purposes from 2015 to 2019. Evaluated the Debt Limit Committee's methodology for allocating bond resources to housing and other purposes to determine whether the allocations aligned with past use, demand, and legislative priorities. Interviewed Debt Limit Committee staff and reviewed existing data and documentation to determine—to the extent possible—the amount of bond resources that expired from 2015 to 2019 and the reasons they expired.
9	Review the Tax Committee's process for ensuring that developers have met all program requirements and continue the affordability and habitability of their developments into the future.	Established an overview of the Tax Committee's monitoring process by interviewing staff and by reviewing its Compliance Monitoring Manual and other documentation. Using lists of projects the Tax Committee monitored between 2015 and 2019—which we determined were sufficiently reliable for our purposes—selected 10 projects and evaluated whether the Tax Committee followed its monitoring process to ensure that developers have met all program requirements and that projects remain affordable and habitable. Identified 10 projects that the Tax Committee reported to the IRS for noncompliance both in 2016 and 2019—and obtained all available inspections for those projects—to evaluate the Tax Committee's disciplinary actions against projects that show patterns of noncompliance.
10	Analyze the Debt Limit Committee's and Tax Committee's efforts to work together to prioritize projects to ensure that there is enough private equity bond funding for projects approved by the Tax Committee. Further, analyze the Debt Limit Committee and Tax Committee housing priorities, how they may conflict, and how this conflict is resolved.	Interviewed staff at the Tax Committee and the Debt Limit Committee and reviewed documentation of their processes—including regulations that establish housing priorities—to identify conflicts.
11	Identify the sources and amount of funds developers typically used on a selection of Tax Committee projects, including ways to incentivize non-state resources.	Using the Tax Committee and Debt Limit Committee applications selected for Objective 6, identified the sources and amounts of funds used for those projects. Reviewed housing studies and other reports to identify types of sources developers typically used for financing affordable housing projects. Reviewed housing studies and local organizations' practices, such as incentives to increase housing development, to identify strategies for leveraging non‑state resources.
12	Identify any best practices that encourage the creation of additional affordable housing throughout the State, including balancing the needs of high-cost and rural areas.	Interviewed a selection of stakeholders—including a housing advocate, building association, and local government association—and reviewed an existing survey of local governments to understand statewide affordable housing problems and best practices. Reviewed existing affordable housing research from governmental and academic sources to compile a list of the main barriers to and solutions for increasing affordable housing development. Reviewed recent housing-related legislation to identify remaining gaps in state law that, if amended, could provide for more affordable housing development.
13	Review and assess any other issues that are significant to the audit.	We did not identify any additional issues that are significant to the audit.

Source: Analysis of the Audit Committee's audit request number 2020-108, as well as information and documentation identified in the column titled Method.

Assessment of Data Reliability

The U.S. Government Accountability Office, whose standards we are statutorily obligated to follow, requires us to assess the sufficiency and appropriateness of computer-processed information we use to support our findings, conclusions, or recommendations. In performing this audit, we obtained electronic data from the Tax Committee and Debt Limit Committee related to awarded tax credits and bond allocations. To evaluate the Tax Committee's data, we reviewed existing information about the data; interviewed staff knowledgeable about the data; and performed electronic, completeness, and accuracy testing. We found these data to be sufficiently reliable for our purposes. Further, the State lacks a single source of data to show all affordable housing units created with state financial resources. Because the four housing agencies indicated that most affordable housing projects receive tax credits and our analysis verified that the Tax Committee's data contained many of the projects from the other housing agencies, we determined that the Tax Committee's data were reasonable to represent state-supported housing. To evaluate the Debt Limit Committee's data, we reviewed existing information about the data, interviewed staff knowledgeable about the data, and performed electronic and completeness testing. We found them to be sufficiently reliable for our purposes.

Moreover, we obtained publicly available federal data related to cost burden, overcrowding, and vacancy rates to identify cities and counties with indications of affordable housing need. We performed general completeness testing of the data and found them to be sufficiently reliable for our purposes. We also obtained a list of HCD's enforcement actions and performed electronic testing and interviewed key staff knowledgeable about the data. We found these data to be sufficiently reliable for our purposes.

Lastly, we obtained annual progress report data from HCD to help identify local jurisdictions that were not meeting their affordable housing goals. We performed limited testing of the data and found them to be of undetermined reliability because they are self‑reported data from local jurisdictions. Although this determination may affect the precision of the numbers we present, there is sufficient evidence in total to support our findings, conclusions, and recommendations.