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HomeMy WebLinkAboutMINUTES - 06052012 - HA C.04RECOMMENDATIONS RECEIVE attached articles regarding affordable housing issues for the Board’s information. BACKGROUND For the Board’s information only. FISCAL IMPACT This is for informational purposes only and has no fiscal impact. CONSEQUENCE OF NEGATIVE ACTION None. Action of Board On: 06/05/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF COMMISSIONERS AYE:John Gioia, District I Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor Federal D. Glover, District V Supervisor Geneva Green, Tenant Seat Contact: 925-957-8028 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: June 5, 2012 Joseph Villarreal, Executive Director By: June McHuen, Deputy cc: C. 4 To:Contra Costa County Housing Authority Board of Commissioners From:Joseph Villarreal, Executive Director Date:June 5, 2012 Contra Costa County Subject:Articles 6-5-12 ATTACHMENTS Articles 6-5-12 Overview of Articles 6-5-12 Moody's Downgrades 17 Public Housing Authority Capital Fund Bond Ratings; 1 Rating Confirmed – Housing authorities are able to issue bonds against their annual capital fund to finance rehabilitation or construction of units. Staff may bring this option to the Board as a partial solution to funding replacement/rehabilitated housing at Las Deltas, Bayo Vista and El Pueblo. This update from Moody’s discusses the effect of continued reduced federal funding on capital fund bonds. Integrating Rich and Poor Matters Most – Similar to the three articles last month on zoning and school results, this opinion piece discusses research in Montgomery County Maryland (bordering Washington D.C) in which public housing residents who attended low-poverty schools performed significantly better in school than public housing residents who attended high-poverty schools. MOODY'S DOWNGRADES 17 PUBLIC HOUSING AUTHORITY CAPITAL FUND BOND RATINGS; 1 RATING CONFIRMED Moody’s Global Credit Research - 02 May 2012 New York, May 02, 2012 -- Moody's Investors Service has published its new methodology for U.S public housing authority (PHA) capital fund bonds. In conjunction with this methodology, Moody's has downgraded 17 PHA capital fund bond ratings and confirmed one rating at A3, affecting an aggregate $1.04 billion of outstanding debt. The new ratings range from a high of A1 to a low of Baa3. The outlooks of all PHA capital fund bonds are revised to negative. The new methodology incorporates market feedback received from our Request for Comment on Proposed Change to Public Housing Authority Capital Fund Bonds Methodology, published on February 8, 2011. The methodology replaces the methodology Update on Moody's Approach to Rating Public Housing Authority Capital Grant Anticipation Bonds, published August 2001 and reflects the PHA capital fund bond's ability to withstand future declines in federal funding. RATING RATIONALE The current ratings are largely derived from the maximum annual debt service (MADS) coverage of the bonds provided by HUD's most recent allocation of the capital fund. The negative outlooks reflect these bonds' linkage to the rating of the US government, currently rated Aaa with a negative outlook, and the continued pressure on the federal budget which may result in further declines in capital fund appropriations. From 2001 through 2012, federal funding for the PHA capital fund declined substantially from $2.99 billion to $1.88 billion, a cumulative decrease of 37.4%. While the historical compound annual decline from 2001 through 2012 has been 4.2%, we have seen more severe declines in the past two years, when capital funding was reduced by 18.2% and 8.3%, in 2011 and 2012 respectively. The decrease in appropriation for the PHA capital fund has had a direct impact on the debt service coverage levels, and therefore the credit quality, of PHA capital fund bond programs. In 2011, all 18 rated bond programs experienced a significant decline in funding. The median MADS coverage ratio for rated programs has declined to 2.84x (most recent annual capital fund appropriations equals 284% of debt service), as compared to 3.37x when the bonds were issued. The lowest coverage level of 1.91x in 2011 declined 13.6% from 2.21x coverage in 2010 and 26.8% from 3.02x coverage at bond issuance. The current ratings are based on current and expected MADS coverage levels provided by the capital fund allocations received from HUD. Other credit factors particularly affect the credit risk of two bond programs, which are reflected in their ratings. The Industrial Development Board of the City of New Orleans, LA implemented an additional bonds test of 2.5x with the issuance of their Series A bonds, which allows the PHA to leverage a larger proportion of federal capital funds than other rated PHAs. Alabama Public Housing Authorities Capital Program Revenue Bonds, Series 2003-A was financed with a term of 10 years. WHAT COULD CHANGE THE RATING -- UP - A substantial and sustained increase in the capital fund allocation received by the respective PHA(s) WHAT COULD CHANGE THE RATING -- DOWN - A downgrade of the US government's rating - A decline in the capital fund allocation received by the respective PHA(s) - A significant decline in the number of units per PHA The principal methodology used in this rating was U.S Public Housing Authority Capital Bonds published in May 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. Integrating Rich and Poor Matters Most New York Times -- May 20, 2012 – ROOM FOR DEBATE – THE OPINION PAGES By Richard Kahlenberg Richard D. Kahlenberg, a senior fellow at The Century Foundation, is author of "All Together Now: Creating Middle-Class Schools through Public School Choice" and the editor of "The Future of School Integration: Socioeconomic Diversity as an Education Reform Strategy. Fifty-eight years after Brown v. Board of Education was decided, segregated schools – particularly those segregated by economic status – remain wholly unequal. While the news media routinely shower attention on high-poverty schools that work, research shows that middle-class schools are 22 times more likely to be high performing than high-poverty schools. Poor children can learn to high levels, but they are much more likely to do so if they are surrounded by peers with big dreams, a community of parents who are in a position to volunteer in class and know how to hold school officials accountable and talented teachers with high expectations. We need zoning that lets low- income families live in middle-class areas, money for magnet schools and incentives for middle-class schools to welcome low-income students. These conditions are much more likely to be found in middle-class schools. It also explains why low-income students, given the chance to attend more affluent schools, tested two years ahead of low-income students stuck in high-poverty schools, on the fourth grade National Assessment of Educational Progress in mathematics. Controlling for the issue of self-election, research in Montgomery County, Md., found that low-income students randomly assigned with their families to public housing units in low-poverty neighborhoods and schools performed much higher in math than comparable students assigned to higher-poverty neighborhoods and schools – even though the latter spent $2,000 more per pupil. Socioeconomic integration is being pursued in 80 school districts throughout the country, educating 4 million students, with very positive results. Well-designed plans don’t rely on compulsory-style busing like that used in the 1970s but instead on voluntary choice, and incentives like magnet schools. Socioeconomic integration policies avoid the legal problems associated with using race in student assignment. Ninety-five percent of education reform is trying to make “separate but equal” work, but far more effective are policies that return to 19th century educator Horace Mann’s very American idea of the “common school,” where rich and poor sit together and schools seek to provide genuinely equal opportunity. To reinvent the common school today, we need better zoning policies that allow low-income families to live in middle-class neighborhoods, more funding for magnet schools that voluntarily produce integration and financial incentives for middle-class schools to welcome low-income students who wish to attend.