AGENDA #10
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Proposed 2003-2004 Budget for the Public Housing Program
DATE: March 3, 2003
The purpose of this memorandum is to recommend the adoption of the proposed 2003-2004 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, 2003.
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 2003-2004.
● The proposed 2003-2004 budget totals $1,659,460, a $45,390 increase from the 2002- 2003 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 $220,560, which is below recommended federal guidelines. HUD guidelines recommend a minimum operating reserve equal to 20% of total routine operating expenses, or $299,725. The reserve level is necessary because HUD has indicated that it will provide only 90% of the subsidy level that is actually necessary for operations.
● The initial indication from HUD was that it would only provide 70% of the subsidy level that is actually needed for operations. A 70% subsidy level would further reduce the reserve level, or require a significant reduction in expenditures (please see attachment 3).
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 2003-2004 fiscal year begins on July 1, 2003, therefore, the budget is due to HUD by April 1, 2003.
The proposed budget shows estimated revenues and expenditures for the management and maintenance of the Town’s 336 public housing apartments and the single transitional housing 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 2003-2004 budget would continue the basic operations of the public housing program as in 2002-2003. 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 2003-2004 budget totals $1,659,460, which is an increase of $45,390 from the current year’s budget of $1,614,070. The increase is due primarily to a small increase in operations and a reserve for potential salary adjustments.
Based on the proposed budget, we would use $236,700 of fund balance to cover total proposed expenditures. The remaining fund balance would be $220,565, which is below recommended federal guidelines. In accordance with federal guidelines, the fund balance should not be less than 20% of the total routine operating expenditures, or $299,725. However, the use of reserve funds is necessary because HUD has indicated that it will provide only 90% of the subsidy that is actually necessary for operations.
The proposed budget has been developed based on expected rental income and subsidy from HUD (please 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 90% of the difference between expected revenues and costs, or $972,070. However, there is a possibility that the level of funding from HUD may change.
Revenues
Revenues include funding from HUD, rent payments from residents, payments from residents for repair services and interest income. The estimated revenues for 2003-2004 are:
Subsidy from HUD $ 972,700
Rental Income $ 410,780
Other Income $ 39,280
Appropriation from Fund Balance $ 236,700
TOTAL $1,659,460
Expenditures
Expenditures include cost for personnel, operations, and capital items. The estimated expenditures for 2003-2004 are:
Administration $ 404,930
Resident Services $ 168,660
Maintenance $ 925,040
Capital Outlay $ 160,830
TOTAL $1,659,460
The proposed budget would provide funding at a level whereby the 336 public housing apartments and the single transitional housing unit 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 $50,400. We would continue to inspect all 336 apartments quarterly. Repairs needed to ensure safety 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 2003-2004 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 2003-2004 budget includes the following capital expenditures:
We propose to purchase a utility truck, and a van, to replace the oldest vehicles (over 10 years old) in the maintenance 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 quipment replacement fund because they are funded by HUD. The estimated cost is $39,000.
Grounds Maintenance
We propose to make $30,500 available to the Public Works Department for public housing grounds maintenance. Actual costs of this work are considerably higher. Grounds maintenance services provided by the Public Works Department include mowing grass, horticulture work, mulching, leaf collection, and miscellaneous grounds maintenance activities.
Computer Equipment, Technology, Communication
We propose to replace two computers and two printers. The purchase of computers is consistent with the Town’s computer replacement schedule. We also propose to provide funds for the maintenance of all computers and printers, and to provide for needed upgrades. Funds would also be provided for maintenance of the copier, fax machine, and typewriters. The estimated cost is $19,000.
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, 2004. We propose to use funds appropriated under the Community Development Block Grant Program to help pay for the refurbishing work. About $79,500 of Community Development Funds would be used to purchase materials for the refurbishing work.
The objective of the refurbishing program is to ensure that all public housing units have been refurbished within the past 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 met on February 25, 2003 to review the proposed 2003-2004 budget for the public housing program. Members of the Board who attended the meeting were Tracy Dudley, Henry Clark and Marywinne Sherwood. Carol Siebert, Elizabeth Welsby, Evonne Bradford and Richard Loeber were absent. The Board members in attendance agreed to recommend that the Council approve the 2003-2004 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. 7)
2. Summary of Proposed Public Housing Operating Budget. (p. 10)
3. January 27, 2003 Report on Potential Reduction in Public Housing Operating Subsidy (p. 11).
SUMMARY OF PROPOSED 2003-2004 PUBLIC HOUSING OPERATION BUDGET
REVENUES |
2002-2003 |
2003-2004 |
|
Dwelling Rents |
329,858 |
410,780 |
|
Other Income |
40,529 |
39,280 |
|
Fund Balance Used |
163,031 |
253,053 |
|
HUD Contrib. Conv. |
1,080,654 |
929,655 |
|
Dept. Total Revenues |
1,614,072 |
1,659,462 |
EXPENDITURES |
|
|
|
Administration |
|
|
|
Personnel |
185,053 |
212,406 |
|
Operations |
157,870 |
177,492 |
|
Capital |
35,985 |
- |
|
Reserve for Potential Salary Adjustments |
32,382 |
15,030 |
|
Total |
411,290 |
404,928 |
|
Resident Services |
|
|
|
Personnel |
130,700 |
143,725 |
|
Operation |
14,870 |
16,550 |
|
Reserve for Potential Salary Adjustments |
7,996 |
8,383 |
|
Total |
153,566 |
168,658 |
Maintenance |
|
|
|
Personnel |
522,837 |
573,523 |
|
Operations |
336,092 |
340,140 |
|
Capital |
139,600 |
160,836 |
Reserve for Potential Salary Adjustments |
50,687 |
11,377 |
Total |
1,049,216 |
1,085,876 |
|
Grand Total |
1,614,072 |
1,659,462 |