This article is part of a series spotlighting The Bond Buyer’s ten 2020 Deal of the Year award winners, running from December 9 through 15. One of these honorees will be chosen as our national Deal of the Year at a virtual event taking place December 16. For more information on the Deal of the Year winners and how to obtain a complimentary pass for the virtual event, click
The California Health Facilities Financing Authority won the Bond Buyer’s Deal of the Year in the Far West category for its
The deal represented the first time the U.S. muni market had seen a large bonding program to support homeless housing secured directly by taxes on high-income residents, according to the nominators, who also said the structure could be replicated in other states contemplating passing a similar tax.
The bonds were issued under the No Place Like Home bond legislation signed by former Gov. Jerry Brown in 2016. The legislation gives the state $2 billion in bond authority backed by revenues from a 1% tax on personal income over $1 million approved by voters in 2004 to fund programs for mentally ill people. The bond proceeds can be used by cities and counties to develop permanent supportive housing.
“The Bond Buyer is the preeminent magazine in the industry. Our team is very excited about winning in the Far West category, and fingers crossed that we can win the overall Deal of the Year award,” said California Treasurer Fiona Ma. “It was a really creative financing, and we hope other states will be looking at this model.”
Ma, who has made providing funding for affordable housing as well as housing for the homeless a priority, considers the program significant.
“My mother suffered from mental illness all of her life; and my brother has been in a six-year battle with it,” Ma said. “I am familiar with how it impacts families. California also has the largest homeless population in the country.”
People who are homeless and experiencing mental illness need the kind of wrap-around mental health services this funding can provide, Ma said.
CHFFA, a treasurer’s conduit, issued the taxable revenue bonds. Bookrunners Raymond James and Citi led the banking syndicate that priced the deal. Montague De Rose & Associates was the financial adviser. Orrick was bond counsel.
The program had to overcome a legal challenge that suggested the revenue stream wasn’t intended to fund housing, but rather other programs to help people who are suffering from mental illness. The state won the legal battle, validated the bond program and priced $500 million in taxable senior revenue bonds Nov. 19, 2019.
The program combines a long-established tax and a novel service contract mechanism to create a strong, high-grade credit.
The bonds were rated Aa3/AA/AA-minus due to the strength of the security structure and data showing the breadth and depth of the subject tax base in California, which had grown 170% from 55,600 taxpayers in 2009 to 149,000 in 2018.
California sold its
