HomeMy WebLinkAboutMINUTES - 05132014 - HA D.1RECOMMENDATIONS
ACCEPT a report on the current physical condition of the Housing Authority's (HACCC) public housing units and
the strategies that HACCC is pursuing to address the funding shortfalls needed to improve the physical condition of
those units.
BACKGROUND
HACCC has 1,177 units of public housing in 13 properties ranging from San Pablo through Martinez and out to
Oakley. HACCC's portfolio is aging; 132 units were developed in 1942 and 1943, 352 units in 1952, another 593
throughout the 1960s and 100 units in 1982. The outstanding physical needs of these properties reflect their age.
Based on a 2010/2011 physical needs assessment, HACCC's properties have current immediate capital needs of
$14.2 million. To address these needs, HACCC received only $1.7 million in capital funds from HUD this year. This
shortfall has been exacerbated in the past as nearly half of the money HACCC receives for capital improvements has
gone to pay for police and social services. In the current budget, $808,982 is set aside for these uses; $621,570 for
sheriff/police services and $187,412 for resident services.
However, HUD issued new regulations in late 2013 designed to improve the capital fund shortfall nationally. As a
result, police and social service costs will now be charged to public housing operations. While this will allow
HACCC to do more capital improvements every year, the overall funding level will still not be enough to either
eliminate the backlog of present needs or keep up with growing demand as the public housing properties continue to
age. Furthermore, by shifting these costs to operations, maintenance and grounds staff will be further
Action of Board On: 05/13/2014 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF COMMISSIONERS
AYE:John Gioia, Commissioner
Candace Andersen,
Commissioner
Mary N. Piepho,
Commissioner
Karen Mitchoff,
Commissioner
Federal D. Glover,
Commissioner
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: May 13, 2014
Joseph Villarreal, Executive Director
By: June McHuen, Deputy
cc:
D.1
To:Contra Costa County Housing Authority Board of Commissioners
From:Joseph Villarreal, Housing Authority
Date:May 13, 2014
Contra
Costa
County
Subject:Report on the Current Physical Condition of Public Housing Units and the Strategies Being Employed to Improve
Those Units
BACKGROUND (CONT'D)
reduced, which will lead to more deferred maintenance and, in turn, to accelerated decline of the properties. In
response, staff are working on two primary initiatives. The first is the disposition of Las Deltas in North
Richmond and the second is a complete portfolio assessment that began earlier this year.
Under HUD regulations, disposition is the sale of some or all of the real estate of a public housing project. In the
disposition application for Las Deltas that staff is preparing, HACCC will propose to sell the entire property, thus
removing Las Deltas from the public housing inventory. Existing tenants will either receive vouchers or transfers
to other public housing properties. HACCC will no longer receive operating subsidy or capital funds from HUD
for these units. This will help HACCC in several ways. Las Deltas is budgeted to lose about $220,000 this year
and has at least $4 million in immediate capital needs, probably much more. Las Deltas is by far the hardest
property to lease-up that HACCC owns. About 100 of the 210 total units are vacant. Almost all have been vacant
for over 2 years, some for 15-20 years. Almost no applicants want to live there and most public housing families
who do live there, do not want to remain. Selling Las Deltas will improve HACCC's budget and HUD
management scores and will also free up resources that can be redirected to other properties.
However, there are a couple of hurdles to disposition at Las Deltas under HUD's current rules and practices. First,
in response to the loss of 200,000+ public housing units around the country, HUD made it more difficult to
dispose of public housing. The two methods HACCC would normally pursue to dispose of Las Deltas,
"Insufficient Housing Funds" and "Obsolescence", were both blocked by HUD in 2012 (see attached PIH Notice
2012-7, paragraph 10). Therefore, HACCC is pursuing disposition of Las Deltas based on broad neighborhood
conditions. While it appears this strategy may end up being successful with HUD, it will not permit HACCC to
use any future funding in North Richmond. Since the agency's funding is likely to be key to any development in
North Richmond under current financing conditions, this would be a significant loss. The disposition will leave
blocks of abandoned lots behind if approved. It would be best for the community if someone was able to develop
these in the near future. HACCC is working with the Local Initiatives Support Corporation (LISC), the
Community Housing Development Corporation (CHDC), the North Richmond MAC, Hawkins Delafield & Wood
(a national law firm devoted primarily to public finance and public projects) and HUD to identify another possible
disposition avenue, one that would permit removal of Las Deltas from the public housing inventory but still allow
HACCC to invest in North Richmond in the future. If that does not prove viable, HACCC will work with these
same parties to see if HUD will grant a waiver that permits reinvestment by HACCC in North Richmond even if
the agency is successful in arguing that disposition should occur due to neighborhood conditions.
The second hurdle is that under disposition, housing authorities can apply to HUD for replacement vouchers for
any units removed from the public housing inventory. However, replacement vouchers are only given out for
occupied units. HACCC would permanently lose funding for the 100 or so vacant units at Las Deltas. Staff's plan
is to convert all replacement vouchers received for Las Deltas into project-based vouchers (PBV) that would be
issued competitively to affordable housing developers. PBVs are awarded with a 15-year contract and a second
15-year renewal option. Given this, the loss of 100 vouchers would mean the loss of about $22 million in direct
funding that HACCC would provide over the initial 15-year contract and approximately $51 million in total direct
funding if the 15-year renewal option is exercised. This funding is also used by developers to leverage much of the
construction financing they need. Without HACCC's PBVs, many proposed affordable housing projects will be
difficult, if not impossible, to build in today's funding climate.
In an effort to retain funding for the empty units at Las Deltas, HACCC submitted a Rental Assistance
Demonstration (RAD) application to HUD in December, 2013. If this application is approved, HACCC will
receive funding for at least 90 vacant units as this was the number vacant at the time of the application. As the
name implies, RAD is a limited, demonstration program. HUD was given permission by Congress to approve
60,000 units. At the time of HACCC's application HUD had already received applications from other agencies for
60,000 units. However, approval to expand the RAD program to 150,000 units was included in the appropriations
bill for HUD's budget that was under consideration at the time. The expansion to 150,000 units was pulled as the
bill was signed, so HUD is still limited to 60,000 units and HACCC remains on a waiting list for RAD approval.
HUD has received RAD applications for over 200,000 units and new ones are still being submitted. HUD is
currently working with Congress in an attempt to expand RAD with no cap on the number of units. (see attached
letter from Secretary Donovan) If HUD is successful, the cap will likely be lifted via the appropriations bill for the
next federal budget. This will become effective October 1, 2014. HACCC is targeting submission of its
disposition application for Las Deltas pending the outcome of HUD's request for more RAD authority. This is
because if the Las Deltas disposition is approved prior to RAD approval, then HACCC will lose funding for the
vacant units as RAD will not be awarded retroactively.
All of HACCC's other properties are the focus of a detailed portfolio analysis by CSG Advisors, an independent
financial advisor to state and local governments, public agencies, non-profit corporations, financial institutions and
development firms. CSG specializes in bond financing, development negotiations and financial strategies and
programs. CSG has extensive experience in repositioning public housing projects and is a national leader in
linking public finance and real estate development for affordable housing, major development, and public-private
partnerships. The purpose of CSG's study is to determine for each property whether a financing option(s) exists
that would permit HACCC to fully fund all needed capital repairs at each property and, if so, if that property will
be able to generate enough revenue afterwards, to operate in such a manner that it will remain in good repair. If
not, the purpose of the analysis will be to begin developing the information needed to seek disposition. The initial
report is expected by August or September. This report will be brought to the Board for further consideration.
In addition to CSG's study, HACCC has been exploring the possibility of expanding its current energy
performance contract (EPC) with HUD. The EPC can be used to fund capital projects that improve energy use. As
an incentive to pursue EPCs, once the improvements are made and energy savings commence, the EPC will
generate additional operating subsidies for 12 years to HACCC based on these savings. Under the agency's
current EPC, HACCC receives approximately $250,000 in additional operating subsidy every year. The current
EPC will expire on March 31, 2016 and this additional operating subsidy will cease at that time. The decision will
be made on other forms of financing prior to consideration of expanding HACCC's EPC since the EPC will have
to be paid off if disposition is sought or some other forms of capital financing are pursued.
Over the past five years, HACCC has spent over $7 million (including ARRA) in capital projects focused on
improving the occupancy rate at all properties (see attached Capital Fund Hard-Cost Expenditures). Money was
spent largely on modernization, long-term vacancy reduction and emergencies. Apart from North Richmond, this
effort paid off as occupancy rates everywhere else climbed from as low as 80% to rates that are consistently near
or above 98%. HACCC will continue to focus first on emergencies, then modernization projects needed to keep
occupancy rates high. It should be kept in mind that the money that will be used to pay the financial and legal
consultants, architects, project management staff, etc. needed to move the long-term repositioning projects
forward will come from the capital fund. It is likely there will be significant tension over the next several years
balancing the immediate needs of the properties with the expenditures necessary to successfully reposition
HACCC's public housing portfolio.
FISCAL IMPACT
None. For reporting purposes only.
CONSEQUENCE OF NEGATIVE ACTION
None. Information item only.
CLERK'S ADDENDUM
ATTACHMENTS
PIH Notice 2012-7
Letter from Secretary Donovan
Capital Fund Hard-Cost Expenditures