SEQUESTRATION IMPACT ON FISCAL YEAR 2014 BUDGET April 16, 2013 - PowerPoint PPT Presentation

SEQUESTRATION IMPACT ON FISCAL YEAR 2014 BUDGET April 16, 2013

What we’re facing… 4/16/2013 2

Operating Revenues Snapshot FY13 FORECAST % (amount in millions) Dwelling Rental $ 12.7 12% Non-dwelling Rental 1.3 1% HUD Subsidies -Housing Assistance (pass through) 65.8 60% HUD Subsidies - HCV administration 5.3 5% HUD Subsidies - Public Housing 8.8 8% HUD Grants 6.5 6% Development Fee Revenue, Net 1.0 1% State, Local & Other Grants 3.9 4% Other Revenue 4.8 4% Total Operating Revenues $ 110.1 100% Total Operating Revenues without pass through funds $ 44.3 N/A NOTE: These are draft figures and subject to change 4/16/2013 3

Sequestration As part of the 2011 Budget Control Act (BCA), Congress established a required $1.2 trillion in deficit reduction over the next 10 years. Absent an agreed solution to achieve this, sequestration (or automatic cuts to federal programs) was to begin on January 1, 2013. These cuts were to range up to 10% of federal programs. As part of the fiscal cliff negotiations in December 2012, Congress agreed to raise certain taxes and delay the sequestration to March 1, 2013. This deal reduced the amount of cuts down to 5.0% of federal programs for federal fiscal year 2013. 4/16/2013 4

Information from HUD On March 7 th , Home Forward received information from HUD that indicated the following: • The cuts appear to be retroactive to January 2013. In order to recapture funds, HUD will adjust program prorations starting April 1. • Public housing funding = 73% proration for April 2013 through December 2013 (for an effective proration of 77%) • Housing choice voucher funding = 94.1% proration* (*latest information from NAHRO indicates it could be as low as 92.4%) • Housing choice administration funding = 68.5% proration* (*latest information from NAHRO indicates it could be as low as 65.5%) 4/16/2013 5

Proration explained Proration is the percentage of funding appropriated divided by the maximum eligible funding for a program. Here is an example of the impact of pass through funding based on different proration levels: 100% Funding 99.6% Proration 94% Proration 88% Proration Authorized vouchers 8,000 8,000 8,000 8,000 Pre-proration funding per voucher $ 615 $ 615 $ 615 $ 615 Percent proration 100% 99% 94% 88% Number of months 12 12 12 12 Maximum eligibility $ 59,040,000 $ 58,449,600 $ 55,497,600 $ 51,955,200 Average actual funding per voucher $ 615 $ 609 $ 578 $ 541 Difference from 100% funding N/A $ (590,400) $ (2,952,000) $ (3,542,400) Note: This is a simplified illustration of how proration works. Administrative fees and public housing subsidy is prorated using a similar approach. Also, this example does not take into consideration any retroactive adjustment. 4/16/2013 6

Proration trends Subsidy Proration Trends (1,2) CY07 CY08 CY09 CY10 CY11 CY12 CY13(est) Section 8 Voucher Funding 105.0% 101.5% 99.1% 99.5% 98.8% 99.0% 94.0% Section 8 Admin Fees 101.5% 90.3% 90.2% 92.8% 83.6% 75.0% 69.0% Public Housing Op Subsidy 83.4% 89.0% 88.4% 103.0% 100.0% 82.0% 82.0% 1. Proration represents the percentage of full funding under HUD's program formula. Percentages below 100% represent inadequate federal budget appropriations based on HUD's program formulas. 2. Proration estimate for CY13 is based off of HUD's March 21, 2013 memo "Housing Choice Voucher (HCV) Program – April 2013 HAP Obligations and Disbursements and Suggested Methodology to Estimate PHAs’ 2013 Renewal Funding" and HUD's April 1, 2013 memo "Explanation of April Obligations under Operating Fund Program for Calendar Year (CY) 2013" 4/16/2013 7

Proration Trends (cont) 4/16/2013 8

Proration Trends (cont) “If enacted, this proration would be the lowest in the 38-year history of the Section 8 Voucher program” Source: NAHRO News 3/15/2013 FY2013 Appropriations updates 4/16/2013 9

Impact to Home Forward As of the March board meeting, we were worried that the potential funding loss was $6.3 million . To prevent a federal government shutdown scheduled for March 27th, the Senate and House passed a continuing resolution on March 21 st approving funding for the remainder of the federal fiscal year (through September 30, 2013). With this latest federal budget, we now believe the potential funding loss is $5.3 million. W e are hoping that it will be even better but we need to wait for final figures from HUD, and they have stated it could be another 45 – 60 days for their final figures. 4/16/2013 10

Guiding Principles and Options 4/16/2013 11

Guiding Principles • We will focus on preventing currently housed participants from losing their housing. This means prioritizing housing stability over affordability. • The burden of federal funding reductions will be shared between employees and participants • We will be prepared to roll out changes as early as April 1 but not all changes will necessarily start on April 1 • We will assess the long term impacts of our decisions • We will include stakeholders in the decision making process 4/16/2013 12

What we’ve done • Month of February – Management began planning for sequestration • February 27 & 28 – Introductory meetings with labor groups • March 6 – Board work session • March 12 – Audit and Finance committee meeting and Meeting with community stakeholders • March 13 – Meeting with Resident Advisory Committee (RAC) • March 19 – Public Hearing and March board meeting • March 25 – First joint bargaining sessions with labor groups Additionally, we have sent out communications to employees, community stakeholders and jurisdictional partners 4/16/2013 13

Administrative actions We are exploring the following further reductions to operating expenses: • Reduction in training and travel • Reduction in equipment upgrades • Personnel expense reductions including staff retirements, furlough days and layoffs • Delayed/deferred maintenance • Eliminating programs • Reductions in other expense categories 4/16/2013 14

Potential impact to residents To avoid having people lose their housing assistance, we are examining the following options: • Increasing the percentage of income used to calculate rents in public housing • Increasing the percentage of income used to calculate the tenant portion of payments to landlords, if part of a voucher program (NOTE: Originally, the increases could have been 5% higher than what households are currently charged. We believe it could now be approximately 2% higher.) • Delaying any increase in payment standards for the next year • Holding onto vouchers as they are turned back in 4/16/2013 15

Potential impact to residents example The percentage of a participant's income is used to calculate the tenant portion of rent. These examples provide the impact of potential increases to the percentage used in the rent calculation: Public Housing 2% increase Housing Choice Work focused households avg rent (27.5%) $ 161 $ 231 Work focused households avg rent (29.5%) 178 250 Average increase in monthly tenant portion $ 17 $ 19 11% 8% Public Housing 1% increase Housing Choice Senior/Disabled households avg rent (27.5%) $ 183 $ 212 Senior/Disabled households avg rent (28.5%) 191 221 Average increase in monthly tenant portion $ 8 $ 9 4% 4% 4/16/2013 16

Next Steps • April 1 – Home Forward’s fiscal year 2014 begins • April 7 – Public notice issued • April 16 – Public hearing will be held at April board meeting • May 9 – End of public comment period • May 21 – Board approval of MTW amendment • May 22 - Earliest the proposed program changes can be submitted to HUD for approval • May/June – Staff prepare interim certifications • July/Aug – Earliest effective date of rent changes 4/16/2013 17