Orange County Has At Least $230 Million It Could Use to Address Homelessness

CITY OF SANTA ANA

A view of the homeless camp at the Plaza of the Flags next to Santa Ana City Hall and Orange County's main courthouse.

Orange County supervisors appear to have at least $230 million in unspent money they can use, in collaboration with other officials and community groups, to help address homelessness, a Voice of OC examination of county government finances has found.

Officials may prefer not to devote all of it to homelessness, given the county’s other responsibilities.

But even half of the money – roughly $115 million – would be enough, when combined with other sources, to build permanent supportive housing for more than 1,000 disabled, homeless people, including those with serious mental illnesses,  based on what county officials previously have said it cost.

Orange County has an estimated 1,500 chronically homeless people, defined as people with a disabling condition who have either been constantly homeless for at least a year, or have been homeless on the streets or emergency shelter during at least four “sustained” periods in the past three years.

The funds identified by Voice of OC are separate from the $700 million brought up in federal court last month by U.S. District Judge David O. Carter. County officials say the annual $700 million – which has grown to roughly $800 million this year – already is being fully spent on services each year, mostly for low-income people who are not homeless.

“All of that funding is spent,” said Susan Price, the county’s homeless services director who created the 2016 chart of $700 million that led to the questions, in an interview last week.

A more recent chart, which covers the current and prior fiscal year, breaks down the annual spending into 25 categories, like housing vouchers, shelters, and mental health services. It doesn’t list which contractors received the money.

Voice of OC conducted a detailed review to see how much other county-controlled money is available, examining county financial reports and data, and interviewing officials.

The review found at least $230 million in apparent leftover funds at the end of the last fiscal year that can be spent on homeless services and housing in programs that have been successful in Utah and the greater Orlando area.

Here’s a breakdown of the money, as of the end of the last fiscal year (June 30, 2017):

  • $186 million in unspent Mental Health Services Act money, separate from reserves, which can be used for housing and services for the estimated 10 to 20 percent of homeless people with serious mental illnesses. This amount is projected to decrease to $160 million at the end of this fiscal year.
  • $73 million to $136 million in apparent “unassigned” or non-obligated general fund dollars, which do not appear to be part of county reserves. It’s unclear what this amount is projected to be at the end of this fiscal year.

On Wednesday evening, county officials suggested the unassigned general fund total was different, but did not say how much it was.

County officials say permanent supportive housing previously has cost the county $100,000 to $110,000 per unit. At that rate, the $115 million could support at least 1,000 units of permanent supportive housing.

The most recent census of homeless people in Orange County, in January 2017, found 3,832 people on the streets or in emergency shelters. Based on an estimate by UC Irvine researchers that 39 percent of this population is chronically homeless, that leads to an estimated 1,495 chronically homeless people in Orange County, the population for which the researchers found the most significant cost savings when they’re provided permanent supportive housing.

Local officials and affordable housing advocates say each $1 million in funding can build about $3 million or more of housing, when the initial money is combined with state grants, federal tax credits, and a campaign to raise private-sector donations. Using land already owned by cities or the county also creates significant cost savings.

The county’s general fund money is unrestricted, and has already been used for homeless programs and services. The mental health money can be used for services and housing as well, but only for people with severe mental illnesses, which are estimated to be 10 to 15 percent of the overall homeless population in Orange County. Many mentally ill homeless people have been on the streets for years, if not decades.

County supervisors have already shown the state mental health money can be used for housing. Led by Supervisor Lisa Bartlett, the supervisors have designated $20 million of this funding toward permanent supportive housing for homeless people within the last year.

The supervisors recognize that mental health “money is left on the table,” Price said, adding that’s the case in counties across California.

“Hopefully we can spend more of that to meet the needs” in mental health and homelessness, she added.

Chipping in local funding for housing significantly boosts the strength of applications for state grants for homeless housing that are expected to open up this year, according to officials and advocates.

“We need to be in the position to compete for that [state grant] money,” said Cesar Covarrubias, an affordable housing expert and advocate.

“All these state programs are really modeled after how much leverage you can get from your local money. So you have to put some money into it,” said Covarrubias, who serves as executive director of the Kennedy Commission, a nonprofit advocacy group for low-income housing, and on the board of the nonprofit Jamboree Housing Corp., which develops affordable housing.

Covarrubias said he and others believe “the county really needs to put forth general fund money, [Mental Health Services Act] money, and even think about a local housing bond” at the county level, and put them all together to “leverage the state resources that are available.”

The county has an additional $62 million in general fund dollars set aside for “contingencies,” which is defined as unforeseen needs such as “major emergencies.” This is separate from the $588 million in general fund dollars set aside for future construction projects, maintenance, and other reserve purposes.

The county’s guiding document for reserves, its strategic financial plan, says the contingencies money is for “unanticipated and severe economic downturns, major emergencies, or catastrophes that cannot be covered with existing appropriations.”

County spokeswoman Jen Nentwig said the contingencies reserve “is only for catastrophic events such as a fire, flood, and earthquake, not for day-to-day operations.”

In an interview, the county government’s chief executive officer, Frank Kim, noted the county is putting ongoing general fund dollars to use, spending about $6 million a year in for two shelters, and using an estimated $20 million in general fund money for buying a building for a mental health crisis center on Anita Place in Orange.

Kim was was cautious about using a significant amount of the general fund balance for homelessness efforts. He said the amount of money designated for general fund reserves doesn’t meet the industry-standard recommendation for reserve levels, which is equivalent to two months of operating revenues or expenses.

“Our reserves are not at a prudent level, as set by the [Government Finance Officers Association]. And it’s important for us to get there, because I suspect that in the next five years we can anticipate” another economic recession, said Kim, who oversaw county finances for years before he was appointed CEO. He said county officials should prepare for that so they don’t have to underfund services.

The $73 million-plus million in unassigned general fund money identified by Voice of OC appears to be separate from the reserves. That’s according to a comparison of the total general fund balance ($750.9 million) in the county’s annual audited financial statement, known as a Comprehensive Annual Financial Report (CAFR), and the amount the county says was in reserves ($614.6 million) on the same day.

On Wednesday afternoon, county officials cautioned against comparing these two numbers.

“Budget and CAFR numbers are not comparable. The reserves are not categorized in the same manner, so cannot be easily compared,” said Nentwig, the county spokeswoman, in an emailed response to questions.

Asked what the actual un-obligated or unassigned general fund amount is, Nentwig said she was looking into it. An answer wasn’t available by Wednesday night.

Additional county funding will be freed up on an ongoing basis starting in July 2019. Beginning that fiscal year, the county will no longer have to reimburse the state government for what’s known as the “VLFAA” payments, short for “Vehicle License Fee Adjustment Amount.” Those payments, which come out of general fund money, are $50 million this fiscal year and $55 million next fiscal year, the final year.

As for the unspent mental health money, people close to the county say all of it could be spent on housing and services for homeless people with serious mental illnesses, if a majority of county supervisors authorize it.

Price, the county official who oversees homeless services, said Friday she didn’t know how much of the unspent mental health funds could be used for homeless housing and services. A county spokeswoman said Friday she would get back with an answer, which wasn’t available as of Wednesday night.

With so much mental health money in the bank, millions of dollars in income is generated from the county investing it in financial markets. County officials say that income is restricted to the same uses as the money that’s generating it.

Last fiscal year, the roughly $250 million in unspent mental health money generated $2.4 million in interest income, according to county data. And over the last decade, the county has generated $13.4 million in interest from the large mental health fund balance.

County officials say any money generated from funds – like the mental health fund – is assigned back to the mental health fund and is restricted to that fund’s purposes.

Meanwhile, collaboration between county and city officials has been growing in recent weeks, according to court proceedings and officials close to the situation.

Kim said the county is supportive of a cities-level plan to build 2,700 units of permanent supportive housing for homeless people across the entire county over the next three years.

“We are [on board],” Kim said. “We think that’s an ambitious goal and we applaud them for setting a target that is as difficult as it sounds. It’s not going to be easy. But they’ve shown a lot of courage, and they ought to be encouraged. It’s awesome.”

Kim said county officials are working with the cities on a “business plan,” so the county is prepared with the “strongest application” for potential state grants later this year. In addition to cities and the county working together, nonprofits and businesses also are working together on the effort, he said.

County officials recognize they need a “cohesive, collaborative plan for how to get that [housing goal] done, so that what we’re all working on together.”

County officials have not published a comprehensive accounting of potential county funds or properties that could be used to address homelessness. That analysis currently is being conducted, Kim said.

During the court hearing last month, Carter repeatedly showed video of Supervisor Todd Spitzer saying “the county has hundreds of millions of dollars to spend to assist the homeless and it has not spent those monies,” which Spitzer describes in the video as “shameful.”

During the hearing, the judge brought up and questioned county officials about unspent money. Carter then got county officials and attorneys for homeless people – who were suing the county – to work together on relocating over 730 people from a massive encampment along Santa Ana River Trail, which Carter insisted be done “humanely.”

The homeless people were moved into motels for at least 30 days while county health officials assess each person and where they should go next. Carter said he would continue to follow the situation closely, calling the riverbed relocation “a baby step” and suggesting the federal court serve as an “umbrella” to get local officials to work together on addressing homelessness.

On Wednesday, the judge was spotted visiting what is likely the largest remaining homeless camp in Orange County: the Plaza of the Flags encampment at the Santa Ana Civic Center.

Price said the broad engagement that happened at the riverbed shows what leaders across the county, including cities and the private sector, should be working toward.

“There’s just a lot of momentum in the county right now,” Price said.

Carter also expressed interest in county properties that could be used for homeless services, shelter, or housing. County Supervisor Andrew Do mentioned a few vacant pieces of land the county could use for temporary shelter in Anaheim, Orange, and Santa Ana.

One of the main plots of land homeless advocates point to is 100 acres the county owns in Irvine at the former Marine Corps Air Station El Toro.

Last year, Supervisor Shawn Nelson proposed using that land for temporary homeless housing, noting the land already is zoned by the city to allow homeless shelters, and is neighbored by a public bus storage area and the Second Harvest Food Bank.

Irvine officials pushed back, and the proposal was shelved, with Nelson and his Board of Supervisors colleagues voting to instead build a large commercial development that includes a hotel, office space, and market-rate housing. Irvine is suing to challenge that development.

As for temporary shelter solutions, county officials offered in court last month to place short-term shelter, such as tents, on empty county-owned land along the Santa Ana River and next to the county Registrar of Voters office in Santa Ana.

In response to a request from Voice of OC, county officials also provided an inventory of all county-owned properties, including their location and size, in an Excel spreadsheet.

(Click here to download the county’s list of all properties it owns, as of February 2018.)

Kim, the county CEO, emphasized the county stands ready to work with cities and other community leaders on solutions.

“Judge Carter’s giving us an opportunity to address this population in a way that’s productive. And it’s an incredible opportunity for all of us to step forward and put resources on the table.”

Nick Gerda covers county government and Santa Ana for Voice of OC. You can contact him at ngerda@voiceofoc.org.