MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Report on Potential Reduction in Public Housing Operating Subsidy
DATE: January 27, 2003
The purpose of this report is to provide information on a potential reduction in the amount of subsidy that is expected to be received from the U. S. Department of Housing and Urban Development (HUD) in 2003-2004 for the Town’s public housing program.
Adoption of the attached resolution would authorize the Mayor to contact our Congressional representatives regarding the effect a reduction in funding would have on the Town’s public housing program.
On January 7, 2003, we received notification from HUD that the initial proration of operating subsidy for fiscal year 2003 would be at 70% (please see Attachment 1). Based on the initial information received from HUD, subsidy for the public housing program would be reduced by about $300,000.
The public housing program consists of 336 public housing apartments located in 13 neighborhoods. Twelve of the public housing neighborhoods are in Chapel Hill, one is in Carrboro.
DISCUSSION
Operating budgets for public housing programs are developed based on estimated rental income and subsidy from the U. S. Department of Housing and Urban Development. Under federal guidelines, HUD subsidizes most of the difference between public housing rental revenues and operating costs.
In 2002-2003 the operating costs for the public housing program will be about $1,614,000. Estimated rental income will be about $371,000; and the amount of subsidy expected from HUD this year will be about $1,103,900. This year’s subsidy is funded at 100% of eligible expenses.
If the 2003-2004 operating costs and rental income for the public housing program are about the same as in 2002-2003, and if the 2003-2004 proration of operating subsidy is at 70%, the reduction in the amount received from HUD would be about $300,000.
The public housing program currently has a fund balance of about $457,000. A $300,000 reduction in subsidy from HUD would result in a need for us to use a significant amount of the fund balance, or reduce services. If we use the fund balance to cover costs, 2003-2004 fund balance for public housing program would be well below HUD’s recommended guidelines. HUD recommends that the fund balance not be less than 20% of the total regular operating expenses.
Manager’s Recommendation: That the Council adopt the attached resolution authorizing the Mayor to contact our Congressional representatives about the effect a reduction in operating subsidy would have on the public housing program.
A RESOLUTION AUTHORIZING THE MAYOR TO CONTACT CHAPEL HILL’S CONGRESSIONAL REPRESENTATIVES REGARDING THE EFFECT A REDUCTION IN FUNDING WOULD HAVE ON THE TOWN’S PUBLIC HOUSING PROGRAM (2003-01-27/R-8)
WHEREAS, the U. S. Department of Housing and Urban Development has issued a preliminary notice that sets the initial operating subsidy for 2003-2004 at 70%; and
WHEREAS, a 70% operating subsidy would have a severe negative impact on the Town’s ability to operate the 336 public housing units that provide housing for 900 residents in Chapel Hill and Carrboro;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Mayor is hereby authorized to communicate the Council’s concerns to Senators John Edwards and Elizabeth Dole and Representative David Price.
This the 27th day of January, 2003.