There are many other potential revenue sources which might fund regional Bay Area homeless programs in addition to the five sources discussed in detail above. Additional revenue sources are identified in Appendix D and a 1997 study of potential revenue sources for a Santa Clara county housing trust fund by Hausrath Economics Group.^[63] Following is a description of five of these other potential revenue sources.

Federal (and State) Funding

While local governments and nonprofit organizations administer  homeless programs the federal government is the major source of homeless funding. Most homeless funding, including the innovative initiatives grant which launched BARI, comes from the U.S. Department of Housing and Urban Development (HUD).

Currently there is no source of HUD funding for regional homeless activities. HUD’s program and funding priorities are constantly changing and HUD’s $25+ billion annual budget is a large funding source. Future opportunities may or may not arise.

All of the recipients of the 1995 HUD Innovative Initiative Awards, including BARI, have unsuccessfully requested additional HUD funding to continue their regional projects. HUD has decided not to provide additional funding to any of the recipients as a general policy regardless of the merits of their programs. HomeBase’s efforts to secure additional federal funding for BARI have been directed towards HUD Economic Development Initiative (EDI) funds. A $11.5 million BARI EDI proposal is pending.

The McKinney Act is the most direct source of HUD homeless funding. HUD has moved forward with a SuperNOFA application process in which counties and cities submit one large joint grant application for this funding. McKinney funds are one logical source to pick up successful BARI projects on a county-by-county basis. The other regional HUD homeless innovative grant recipients-Denver, Los Angeles, and Dade-Miami County-all now oversee preparation of a single SuperNOFA for their region. This is much easier for Miami-Dade County and Los Angeles where collaboration involves a single county and the cities within the county and for the small Denver region.^[64]

Another potential source of funds for regional homeless activities is the federal Community Development Block Grant (CDBG) progam. Fifteen percent of CDBG funds may be spent on public services, which may include social services for homeless people. CDBG funds beyond the 15% public services cap can be used in support of homeless housing and physical community development improvements to benefit homeless people. Competition for CDBG funds is fierce. Homeless organizations could definitely compete for this funding on a jurisdiction-by-jurisdiction basis. BARI could also look to this source to continue BARI collaborative projects on a jurisdiction-by-jurisdiction basis. HUD might permit some CDBG funds to be used directly for BARI projects.

The federal Departments of Labor, Commerce, Education, and the Bureau of Veterans Affairs also have programs that serve homeless people. One immediate possible source of federal funding is a large unexpended balance in federal funds to help people with multiple barriers to work enter the workforce.

Compared to federal intergovernmental transfers California State homeless programs are much more modest. The principal state program is the Emergency Housing Assistance Program administered by the California State Department of Housing and Community Development that currently provides approximately $2 million in homeless assistance Statewide.^[65] As with the federal government a number of State agencies have programs that benefit homeless people. As part of their regional policy and education program, BARI should continuously monitor State programs for opportunities to obtain homeless funding for BARI projects or homeless programs by others in the region.

Private Philanthropy

In April, 1989 nineteen Northern California grantmakers formed a Northern California Grantmakers Task Force on Homelessness. By 1995 the number of participating foundations had grown to 49. A six-year retrospective on the activities of this group reported that Northern California foundations had pooled $6,468,993 for homeless activities over the six-year period 1989 - 1995.^[66] Many of the organizations that form the BARI collaborative were created or nurtured by this initial funding.

Independent of this study of long-term homeless funding alternatives, BARI has an active development campaign: The Campaign to Turn Bay Area Homelessness Around. Philanthropic contributions will continue to be an important funding source for regional Bay Area homeless  programs. The Campaign to Turn Bay Area Homelessness Around had raised $300,000 in philanthropic support to continue BARI projects as of June, 1999. While this is a laudable supplement it falls far short of the funds BARI has had and is seeking. Prospects for Bay Area foundations alone to provide resources to "take BARI projects to scale" or even maintain them at recent levels do not look encouraging.

Transient Lodging Tax

Many jurisdictions impose transient lodging taxes (hotel taxes) on occupancy of hotel and motel rooms. This is particularly true in cities with many tourist or business visitors. Transient occupancy taxes are typically a percentage of the daily room charge.

The amount of revenue transient occupancy taxes generate depends upon the number of rooms covered, the tax rate, room costs, and occupancy rates. Funding fluctuates over time as any of these factors change.

There are no legal barriers to using transient occupancy funds for homeless programs. The decision to do so is made by the governing body of a local jurisdiction imposing the tax.

Competition for transient lodging tax funding is intense. Jurisdictions may commit transient lodging tax funding to a particular activity based on local politics and history. Well-organized and politically powerful hotel and tourist interests make first claim on the funds. In San Francisco the hotel tax fund has been a major source of support for the arts. In Marin county transient lodging taxes pay for services in West Marin county.

Transient occupancy taxes are politically popular among most local interest groups other than hotel and motel owners because the incidence of the tax falls on transients who do not vote locally.

Table 6 below provides information on transient lodging taxes in selected Bay Area Cities.
 

San Francisco is particularly notable. San Francisco’s tourist and convention-oriented economy permits it to charge a hefty hotel tax on a large number of rooms. In addition to funding arts programs and tourism-related infrastructure, San Francisco’s hotel tax revenue has been used to fund affordable housing for nearly three decades. This occurred as a result of a lawsuit between very low income single room occupancy (SRO) hotel tenants and small business owners in the Yerba Buena redevelopment project area versus the San Francisco Redevelopment Agency. Transient lodging taxes have provided much of the funding for Wolfe House, Mendelsohn House, and other projects built and operated by the Tenants and Owners Development Corporation (TODCO) near Moscone Center. These projects house predominantly very-low-income elderly seniors, many of whom would be homeless without this housing.

The nexus between transient lodging taxes and homelessness is weak. Tourism and business lodging do not exacerbate homelessness. However an argument might be made that funds spent to reduce homelessness will benefit tourism. The TOOR case in San  Francisco was decided before the constitutional nexus requirement was established, but in that case judge Stanley Weigel gave his blessing to use of hotel tax revenue for very low income housing.

Legal barriers are lower for securing transient lodging tax revenue than for property taxes and development fees. Transient occupancy taxes are not property taxes governed by Article XIII of the California constitution. They are not subject to the federal constitutional nexus requirement.

Securing transient lodging tax revenue for homeless activities would require jurisdiction-by-jurisdiction advocacy. Most of the revenue base is concentrated in a few large cities with substantial transient tourist accommodations-particularly San Francisco.  Convention and tourism groups including hotel and convention associations compete for transient lodging tax revenue. They argue that the money should be used to enhance tourism or support convention facilities because transient occupants and conventioneers provide the revenue. Since transient occupancy tax funds are dedicated to specific activities in different cities, special interests now receiving the funding will oppose any effort to shift these funds to supporting homeless programs. The arts community in San Francisco and residents of West Marin county, for example, would oppose diversion of transient lodging taxes in their jurisdictions because currently transient occupancy tax revenue benefits them.

Development and Conversion Fees

Many jurisdictions impose impact fees or exactions as a condition for approval of new developments. The terms are often used interchangeably. Another term for some impact fees is linkage fees.

Impact fees are intended to compensate the jurisdiction for the costs of mitigating impacts of a development such as more cars, students, park users, and households requiring police and fire protection.

Exactions are requirements placed on developers to provide public facilities, either by dedicating land, constructing public improvements, or making in-lieu payments to the jurisdiction to be used to provide the facility. For example, as a condition precedent for a new residential subdivision an inclusionary zoning ordinance might require a developer to set aside 15% of the units for low and moderate income households or to contribute $2.50 per square foot of housing to a housing trust fund.

In addition to impact fees and exactions for new development, some jurisdictions also charge fees in connection with other changes in real property such as condominium conversions and demolitions. The fees may be intended both to financially discourage the activity and to provide a revenue source to help mitigate the impact of conversions and demolitions when they do occur.

Cities and counties often favor using exactions or impact fees because this shifts land acquisition and infrastructure costs from them to developers. Developers, particularly non-resident developers, need to garner political support for their projects and are willing to contribute to public programs if the project still pencils out after the contribution.

Carefully drafted exactions, impact, condominium conversion, and demolition fees are distinguishable from property taxes and should not be subject to the substantive and procedural restrictions of Article XIII of the State constitution. But careful legal review is important.

The U.S. Supreme court has held that a "nexus" or connection between the fee and impacts of the development must be established.^[67] San Francisco’s Office Affordable Housing Program (OAHP) charges developers of specified new office buildings a fee for each square foot of new office space for affordable housing. This linkage fee was upheld in court on the theory that new office construction brings new residents to the city and drives up residential rents. The court held that there is a nexus between the fee and the use of the funds to mitigate the negative impacts of development on housing supply and cost by subsidizing affordable housing.

California State law requires jurisdictions to conduct a study and demonstrate the nexus and the reasonableness of the exaction before adopting exactions or impact fees. This means that if homeless organizations pursue a strategy involving impact fees or exactions they would have to be confident that a study would demonstrate the nexus between and impact and the fee or exaction imposed. They would also have to be prepared to pay the costs of a professional study by one of the Bay Area urban economics firms that undertakes this kind of study.

There is little or no nexus between many impact fees and exactions and homelessness. They are most commonly used to fund parks, infrastructure improvements, and education on the theory that new development congests existing parks, overburdens infrastructure such as sewers, and crowds classrooms. Some development projects do directly affect homeless people. Hastings Law School’s demolition of single room occupancy (SRO) hotels to build campus buildings and the proposed closure of a homeless shelter to build parking for the new San Francisco Ballpark are examples. In these cases there is a clear nexus between the development and negative impacts on homeless people. Exactions or impact fees to mitigate the impact would be legal and appropriate.

BARI should consider jurisdiction-by-jurisdiction campaigns to get development fees and exactions dedicated to homeless programs. Efforts should focus on projects where there is a clear nexus between the development and homeless people.

Sales Tax

Sales taxes are imposed on the sale of goods in California and many other states. In California they are collected by vendors at the point of sale and passed on to the State. The State keeps the bulk of sales tax revenue, but returns a portion to local government. A base sales tax rate is set by the State (currently 7.75%). Counties may enact a supplemental sales tax. For example the Bay Area counties where BART runs have imposed a supplemental sales tax to help fund BART. Because there is a large volume of sales activity and the Bay Area economy is booming a small increase in the sales tax would generate a significant amount of revenue. A 1997 study by Hausrath Economics Group for Santa Clara County identified the sales tax as their top-ranked source for funding a county Housing Trust Fund.^[68] They estimated that a 0.25% increase in Santa Clara County’s sales tax rate would generate $49,080,000 a year.^[69]

A sales tax increase for homeless programs would require a majority vote of each county board of supervisors and 2/3 voter approval. Getting such majorities would be virtually impossible. In 1997 The Hausrath Economic Group ranked a sales tax increase as the most favored  potential revenue source to fund the Santa Clara county housing trust fund. The Silicon Valley Manufacturers group undertook a survey of Santa Clara county voters to determine the level of support for a sales tax increase and other sources to support affordable housing. While the results of this survey are not available, the county chose not to proceed with a campaign to secure voter approval for a sales tax increase to fund affordable housing in the county. Securing sales tax funds for each jurisdiction in the region would almost certainly have to be bundled with concerns of other quality of life groups in order to succeed politically. ABAG and the Bay Area Council’s support would be critical.

Mainstreaming Homeless and Human Service Funding Streams

Funding for homeless programs and homeless people comes both from sources identified as "homeless funding" and other mainstream sources. The amount of mainstream funding is probably much larger than the amount of "homeless funding," though existing accounting systems and definitional problems make it impossible to determine how much of what kind of mainstream funding reaches homeless people.  Most of the mainstream funding that can benefit homeless people is county funding, though some is city funding.

Table 7 below identifies total county revenue in 1997 and the amount Bay Area counties devote to public health, mental health, welfare, social services and general relief. Table 7 shows that Bay Area counties spend a large amount of money on social services-over $2.6 billion in 1997. While homeless people and programs undoubtedly receive only a small part of this funding, even a very small part of so large a total represents a very substantial revenue source.
 

The Corporation for Supportive Housing has pioneered strategies to link mainstream health, housing, and other services to benefit formerly homeless people.^[70] They are experimenting with alternative service delivery systems based on county health departments and other safety net providers contracting with managed care, programs to blend locally administered categorical grant funds, and establishment of "new" flexible fund(s) dedicated to supportive housing services. HHISN is seeking to develop pathways between the health care system and housing for people with chronic illnesses, pooled housing and health care system funds, and new forms of place-based service provision. HHISN is has created inter-agency partnerships that link health care, housing, mental health, and substance abuse treatment and social services and the state or local government agencies that fund them. The are identifying and feeding back "best practices" in this kind of service provision to mainstream funders. Homeless service providers in the Bay Area should learn from the CSH/HHISN experience.

Local governments are protective of their limited revenue and it is unlikely that county boards of supervisors or city councils can be convinced to contribute revenue to regional programs that do not directly serve just their own residents. County/city continuum-of-care boards should look to mainstream county funding. Nonprofits should look to mainstream funding sources in the cities in which they are located. Mainstream county agencies may pick up funding for BARI innovations and regularly fund them within their jurisdiction. They might also pay for services provided by the BARI collaboratives on a fee-for-service basis. For example counties with limited benefits advocacy activity might purchase staff time from the BARI-funded Bay Area Benefits Access Collaborative (BAYBAC) to help set up programs, train staff, establish satellite local offices or otherwise conduct advocacy work within their jurisdiction.