AGENDA #7
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Proposed 2004-2005 Budget for the Public Housing Program
DATE: March 1, 2004
The purpose of this memorandum is to recommend the adoption of the proposed 2004-2005 operating budget for the public housing program. A proposed budget must be submitted to the U.S. Department of Housing and Urban Development (HUD) by April 1, 2004.
The attached resolution, provided in a required HUD format, would approve the calculation of the amount of operating subsidy we expect to receive from HUD in 2004-2005.
· The proposed 2004-2005 budget totals $1,651,898, about a $7,500 decrease from the 2003-2004 budget.
· The proposed budget has been developed based on expected rental income and subsidy from HUD.
· The proposed budget would maintain current services, continue present maintenance programs, and provide for needed capital items.
· Estimated operating reserve would be $300,044, which is above recommended federal guidelines. HUD guidelines recommend a minimum operating reserve equal to 20% of total routine operating expenses, or $298,416.
BACKGROUND
The U.S. Department of Housing and Urban Development requires that public housing operating budgets be submitted 90 days before the beginning of the Town’s fiscal year. The 2004-2005 fiscal year begins on July 1, 2004, therefore, the budget is due to HUD by April 1, 2004.
The proposed budget shows estimated revenues and expenditures for the management and maintenance of the Town’s 336 public housing apartments and the one transitional unit. The estimated revenues include rental income and operating subsidy we expect to receive from HUD under the Federal Performance Funding System. Under the Performance Funding System, HUD subsidizes most of the difference between rental income and operating costs.
The proposed 2004-2005 budget would continue the basic operations of the public housing program as in 2003-2004. We propose to continue the current level of maintenance services including: responding to residents’ requests for routine repairs, carrying out preventive maintenance and safety inspections, and making weekend and after-hour emergency repairs. We also propose to continue programs and services that are intended to help the residents who participate achieve economic independence and make the transition to private housing.
The proposed 2004-2005 budget totals $1,651,898, about a $7,500 decrease from the current year’s budget of $1,659,460. The decrease is due primarily to a reduction in operating costs.
Based on the proposed budget, we would use $132,318 of fund balance to cover total proposed expenditures. The remaining fund balance would be $300,044, which is above recommended federal guidelines. In accordance with federal guidelines, the fund balance should not be less than 20% of the total routine operating expenditures, or $ 298,416. However, the use of reserve funds is necessary because HUD has indicated that it will provide only 91% of the subsidy that is actually necessary for operations. We will attempt to control costs in a manner that will reduce or eliminate the need to use fund balance, as we have done in prior years.
The proposed budget has been developed based on expected rental income and subsidy from HUD (see Attachment 1). Under federal law, HUD subsidizes most of the difference between public housing rental revenues and operating costs. The annual subsidy amount is determined by totaling the amount of eligible operating costs and subtracting the amount of rental income and other revenues. If revenues are greater than costs, the subsidy is zero. If revenues are less than the costs, the difference is funded primarily by subsidy from HUD.
We have been informed by representatives from HUD that the amount of federal subsidy will be about 91% of the difference between expected revenues and costs, or $1,158,208. However, there is a possibility that the level of funding from HUD may increase.
Revenues
Revenues include funding from HUD, rent payments from residents, payments from residents for repair services and interest income. The estimated revenues for 2004-2005 are:
Subsidy from HUD $1,158,208
Rental Income $ 338,436
Other Income $ 22,936
Appropriation from Fund Balance $ 132,318
TOTAL $ 1,651,898
Expenditures
Expenditures include cost for personnel, operations, and capital items. The estimated expenditures for 2004-2005 are:
Personnel $1,001,177
Operations $ 490,901
Capital $ 159,820
TOTAL $1,651,898
The proposed budget would provide funding at a level whereby the 336 public housing apartments would be maintained as decent and safe places to live. Proposed maintenance and related services are discussed below.
Preventive Maintenance and Safety Program
The proposed budget would continue the preventive maintenance and safety program at an estimated cost of $48,700. We would continue our policy of scheduling inspections to inspect all 336 apartments quarterly. Repairs needed for safety related reasons are made immediately; regular preventive maintenance repairs are carried out on a scheduled basis.
We propose to continue contracting out vacant unit repairs at a cost of about $55,000. Vacant unit preparation is refurbishment work that includes interior painting and basic repair work, and the replacement of items that cannot be repaired. Based on our experience in past years, we estimate that 50 vacant apartments will be refurbished in 2004-2005 at a cost of about $1,100 per unit.
The contracting out of vacant unit repair work allows the maintenance staff to concentrate on the on-going refurbishing program and maintaining the occupied units.
The proposed 2004-2005 budgets includes the following capital expenditures:
We propose to purchase one car and two trucks, to replace the oldest vehicles (over 10 years old) in the vehicle pool. These vehicles are being replaced in accordance with the Town’s vehicle replacement schedule. However, these vehicles are not included in the Town’s equipment replacement fund because they are funded by HUD. The estimated cost is $61,000.
Grounds Maintenance
We propose to make $30,500 available to the Public Works Department to partially defray the cost of public housing grounds maintenance. Actual costs of this work are about $100,000. Grounds maintenance services provided by the Public Works Department include mowing grass,
horticulture work, mulching, leaf collection, and miscellaneous grounds maintenance activities.
Five-Year Refurbishing Program
We propose to continue the five-year refurbishing program. Refurbishment work includes interior painting and basic repair work, and replacement of items that cannot be repaired. We estimate that Housing staff will complete refurbishing work in a minimum of 38 apartments by June 30, 2005. We propose to use funds appropriated under the Community Development Block Grant Program to help pay for the refurbishing work. About $75,600 of Community Development Funds would be used to purchase materials for the refurbishing work.
The objective of the refurbishing program is to refurbish all public housing units every five years, measured at the end of each fiscal year.
RECOMMENDATIONS
The Housing and Community Development Advisory Board’s Recommendation: The Housing and Community Development Advisory Board reviewed the proposed 2004-2005 budget for the public housing program on February 24, 2004. Members of the Board who attended the meeting were Tracy Dudley, Carol Siebert, Daniel Brisson, Richard Loeber, and Evangelee Shuler. Sarah Donahue and Elizabeth Welsby were absent. The Board members in attendance voted 5 to 0 to recommend that the Council approve the 2004-2005 budget for the public housing program as proposed.
Manager’s Recommendation: That the Council adopt the attached resolution approving the Calculation of Performance Funding System Operating Subsidy for the public housing program.
ATTACHMENTS
1. Calculation of Operating Subsidy (p. 5).
2. Summary of Proposed Public Housing Operating Budget. (p. 8).
SUMMARY OF PROPOSED 2004-2005 PUBLIC HOUSING OPERATION BUDGET
REVENUES |
2003-2004 |
2004-2005 |
|
Dwelling Rents |
410,780 |
338,436 |
|
Other Income |
39,280 |
22,936 |
|
Fund Balance Used |
236,698 |
132,318 |
|
HUD Contrib. |
972,704 |
1,158,208 |
|
Dept. Total Revenues |
1,659,642 |
1,651,898 |
EXPENDITURES |
|
|
|
Administration |
|
|
|
Personnel |
315,733 |
333,658 |
|
Operations |
177,492 |
164,319 |
|
Capital |
- |
- |
|
Reserve for Potential Salary Adjustments |
14,209 |
8,873 |
|
Total |
507,434 |
506,850 |
|
Resident Services |
|
|
|
Personnel |
47,617 |
47,617 |
|
Operation |
16,550 |
7,900 |
|
Reserve for Potential Salary Adjustments |
1,985 |
1,466 |
|
Total |
66,152 |
56,983 |
Maintenance |
|
|
|
Personnel |
573,523 |
595,129 |
|
Operations |
340,140 |
318,682 |
|
Capital |
160,836 |
159,820 |
Reserve for Potential Salary Adjustments |
11,377 |
14,434 |
Total |
1,085,876 |
1,088,065 |
|
Grand Total |
1,659,462 |
1,651,898 |