Veterans Homes Bond Act of 2000.
	Analysis by the Legislative Analyst

Background

The state Department of Veterans Affairs operates two residential homes for veterans--one at Yountville, Napa County and the other at Barstow, San Bernardino County. The Yountville home has the capacity to house 1,421 veterans, and Barstow can house 400. These facilities provide residential services, nursing, and medical care primarily for elderly or disabled California veterans. The cost to construct new or renovate existing veterans' homes is generally shared between the state (35 percent) and the federal government (65 percent).

Existing law authorizes the use of $36 million of lease-payment bonds for the state's share of the cost to construct three new homes in Southern California. One of these homes is under construction at Chula Vista, San Diego County. This home, which is planned to open by April 2000, will be able to house 400 veterans. The two other homes are to be constructed at Lancaster, Los Angeles County, and Saticoy, Ventura County.

Proposal

This proposition authorizes the state to sell $50 million of general obligation bonds to pay the state's share of the cost for construction and renovation of new and existing veterans' homes. General obligation bonds are backed by the state, meaning that the state is required to pay the principal and interest costs on these bonds. General Fund revenues would be used to pay these costs. These revenues come primarily from state personal and corporate income taxes and the sales tax.

Uses of the Bonds.

The $50 million in bonds would be used for two purposes:

• First, $24 million would replace lease-payment bonds currently available for veterans' homes. Lease-payment bonds are similar to general obligation bonds in that General Fund revenues are used to pay off the bonds. Lease-payment bonds, however, are more costly because they have higher interest rates and selling costs.
• Second, the remaining $26 million in general obligation bonds would be available for (1) additional new veterans' homes (that is, beyond the three new homes in Southern California) and/or (2) renovation of existing homes.

Fiscal Effect

Bond Costs.

This proposition would affect the state's cost in two ways. Most significantly, it allows $26 million in additional bonds. The cost of repaying these bonds would be offset by some savings from the replacement of higher-cost lease-payment bonds with general obligation bonds. We estimate that the net impact would be costs of about $33 million over a 25-year period. The average cost would be around $1 million per year.

Operating Costs.

To the extent that the bond funds are used to add beds at new or existing veterans' homes, state operating costs for these homes would increase to care for additional veterans.

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