AGENDA #11
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Proposed 2005-2006 Operating Budget for the Public Housing Program
DATE: March 7, 2005
The purpose of this memorandum is to recommend the adoption of the proposed 2005-2006 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, 2005. The Council’s next regular meeting is scheduled for April 5, 2005. If the Council wishes to have further consideration of the Housing Department budget, it could schedule such consideration in advance of hearing items at the March 21st public hearing.
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 2005-2006.
· The proposed 2005-2006 budget totals $1,550,496, a $103,000 decrease from the 2004-2005 budget. The decrease results from significant budget reductions, including the proposed elimination of 1 resident services position.
· The proposed budget has been developed based on estimated rental income and subsidy from HUD.
· The proposed budget would maintain the basic operation of the public housing program at about the same level as in 2004-2005.
· Estimated fund balance would be $ 291,260, which is slightly above the recommended Federal guidelines. HUD guidelines recommend a minimum fund balance that is equal to 20% of total routine operating expenses, or $ 288,006.
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 2005-2006 fiscal year begins on July 1, 2005, therefore, the budget is due to HUD by April 1, 2005.
The proposed budget shows estimated revenues and expenditures for the management and maintenance of the Town’s 336 public housing apartments and the two transitional units. The second transitional unit was purchased in February 2005. 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 estimated revenues and costs.
We have not received official notification from HUD regarding the 2005-2006 funding level for public housing operating subsidy, however, we believe funding will be lower than in 2004-2005. Because we believe federal funding will decrease, we have developed a proposed budget based on receiving about 93% of the difference between estimated revenues and costs. In 2004-2005, we received 98% of the difference between revenues and costs.
The proposed 2005-2006 budget would continue the basic operations of the public housing program at about the same level as in 2004-2005. 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.
The proposed 2005-2006 budget totals $1,550,496, a $103,000 decrease from the current year’s budget of $1,653,685. The decrease is due primarily to reduction in costs, including the elimination of one resident services position. We are recommending eliminating the Resident Services Officer position to produce budget savings because the volume of work for this position is lower than anticipated. This position is primarily responsible for the administration of the ACHIEVE! Family Self-Sufficiency and Transitional Housing Programs. The ACHIEVE! Family Self-Sufficiency Program has five participants of which none are involved in formal program participation. The Transitional Housing Program currently has one participant and is not expected to exceed more than five participants in the next several years.
Provisions that would be made for the affected employee would include the following:
· Continued payment of employee-only health insurance coverage for a period of 12 months after employment ends, or until other employment which provides such coverage is obtained.
· A one-time severance payment of eight weeks salary in compliance with the Town policy which authorizes this based on the employee’s service time.
· Pay out of unused accrued vacation leave.
· Unemployment insurance benefit (up to 26 weeks).
The affected employee was notified of this possible program reduction in February. We will provide placement support, especially in seeking other Town employment.
In addition to eliminating the Resident Services Officer position, we also considered a temporary reduction in force and the reduction of another position to 20 hours weekly. However, in reviewing the core functions and priorities of the Department of Housing, we believe the retention of all positions that perform duties associated with maintenance, renovations, and initial and continued occupancy are critical to the operation of the public housing program and maintaining the 336 public housing apartments at the current standard. Based on the proposed budget, we would use $46,540 of fund balance to cover total proposed expenditures. The remaining fund balance would be $291,260, which is slightly above federal guidelines. In accordance with federal guidelines, the fund balance should not be less than 20% of the total routine operating expenditures, or $ 288,006. The use of fund balance is necessary to cover total estimated costs. Further reduction in operation costs may be necessary if the federal subsidy is further reduced in the future.
The proposed budget has been developed based on estimated rental income and subsidy from HUD (please see Attachment II). Under federal law, HUD subsidizes most of the difference between estimated income and costs. The amount of subsidy is determined as follows:
We have not received official notification from HUD regarding the funding level for 2005-2006. We believe notification of the actual funding level may not be received until the fall of 2005. The President has proposed a 2005-2006 budget that would reduce funding for the Department of Housing and Urban Development by 11.5 percent. Under the President’s proposal, operating subsidy would be affected more severely than other public housing programs. The funding level for public housing operating could be as low as 89 percent.
Revenues
Revenues include funding from HUD, rental payments from residents, payments from residents for repair services, and interest income. The estimated revenues for 2005-2006 are:
Subsidy from HUD $1,123,800
Rental Income $ 345,700
Other Income $ 34,400
Appropriation from Fund Balance $ 46,500
TOTAL $ 1,550,400
The estimated rental income is based on HUD rules, which requires us to use the amount reflected on the current rent roll for the public housing program.
Expenditures
Because we believe federal funding will be lower than in 2004-2005, and budget cuts are necessary, we are recommending the elimination of one resident services position as explained above. Other budget cuts include the following:
· Elimination of the replacement of one vehicle
· Elimination of gutter and roof cleaning by contract
· Reduction in training
· Reduction in maintenance materials
· Reduction of maintenance equipment replacement
· Reduction of office equipment replacement
Expenditures include cost for personnel, operations, and capital items. The estimated expenditures for 2005-2006 are:
Personnel $ 948,900
Operations $ 586,500
Capital $ 15,000
TOTAL $1,550,400
The proposed budget would provide funding at a level whereby the 336 public housing apartments and two transition units would be maintained as decent and safe places to live. Proposed maintenance programs and capital requests are discussed below.
New Costs
In January, 2005, we submitted a report to the Council on a revised operating budget for the public housing program. The revised budget included new public housing program costs totaling $32,000.
The new costs include the Town’s Storm Water Management Assessment of $14,000 for 12 of the 13 public housing neighborhoods. The new cost also includes the County’s Recycling Assessment of $18,000 for the Town’s public housing apartments.
On February 22, 2005, the Housing and Community Development Advisory Board reviewed the proposed 2005-2006 public housing operating budget and recommended that these new costs be moved from the public housing operating budget to the general fund (please see Attachment 4). The members of the Board expressed concern of these costs along with future reductions would result in future elimination of more staff positions in the Housing Department.
We believe that public housing costs should be paid for from public housing funds to the maximum extent possible, and recommend no change.
Preventive Maintenance and Safety Program
The proposed budget would continue the preventive maintenance and safety program at an estimated cost of $40,200. We would continue our policy of making inspections of all apartments quarterly. Repairs needed for safety related reasons would be made immediately; regular preventive maintenance repairs would be carried out on a scheduled basis.
We propose to continue contracting out vacant unit repairs at a total 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 2005-2006 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.
We propose to purchase one car to replace the oldest vehicle (over 10 years old) in the vehicle pool. This vehicle is being replaced in accordance with the Town’s vehicle replacement schedule. This vehicle is not included in the Town’s equipment replacement fund because it is funded by HUD. The estimated cost is $15,000.
Grounds Maintenance
We propose to pay $30,000 to the Public Works Department to partially defray the cost of public housing grounds maintenance. Actual cost is estimated to be about $140,000. Grounds maintenance services provided by the Public Works Department include mowing grass, mulching, leaf collection, and miscellaneous grounds maintenance activities.
Utilities
The proposed budget includes $112,190 for the estimated cost of utilities. The estimated utilities cost have been determined based on an average usage schedule as required by HUD. Cost adjustments are allowed at the end of the year if the amount included in the budget is less than actual costs.
We propose to continue the refurbishing program. Refurbishing work includes interior painting and basic repair work, and replacement of items that cannot be repaired. We estimate that refurbishing will be completed in about 90 apartments by June 30, 2006. We propose to use funds appropriated under the Community Development Block Grant Program to help pay for the refurbishing work. About $79,600 of Community Development Funds would be used to purchase materials for the refurbishing work.
The objective of the program is to refurbish all public housing units every five years, measured at the end of each fiscal year. Currently, 10 units are not within the five-year goal. These are vacant units in the Airport Gardens neighborhood and will undergo comprehensive renovation work this spring.
RECOMMENDATIONS
The Housing and Community Development Advisory Board’s recommendation is attached (please see Attachment 4).
Town 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. Summary of Proposed Public Housing Operating Budget (p. 7).
2. PHA/IHA Board Resolution (p. 8).
3. Calculation of Operating Subsidy (p. 9).
4. Housing and Community Development Advisory Board’s Recommendations (p. 12).
SUMMARY OF PROPOSED 2005-2006 PUBLIC HOUSING OPERATING BUDGET
REVENUES |
2004-2005 |
2005-2006 |
|
Dwelling Rents |
363,846 |
345,720 |
|
Other Income |
22,936 |
34,436 |
|
Fund Balance Used |
131,818 |
46,540 |
|
HUD Contribution |
1,135,085 |
1,123,800 |
|
Total Revenues |
1,653,685 |
1,550,496 |
|
|
|
|
EXPENDITURES |
|
|
|
Administration |
|
|
|
Personnel |
395,691 |
339,201 |
|
Operations |
170,864 |
159,936 |
|
Capital |
- |
- |
|
Total |
566,555 |
499,137 |
Maintenance |
|
|
|
Personnel |
616,128 |
609,718 |
|
Operations |
395,702 |
426,641 |
|
Capital |
75,300 |
15,000 |
Total |
1,087,130 |
1,051,359 |
|
Grand Total |
1,653,685 |
1,550,496 |