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Housing and Community Development Funding ParntershipMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Housing Assistance Payment Fund Balance DATE: March 14, 2013 Dubuque kital All- America City II 111! 2012 Beginning in 2005, The U.S. Department of Housing and Urban Development implemented budget -based funding which requires Public Housing Agencies to be responsible for maintaining any excess Housing Assistance Payments in their Net Restricted Assets account for use only for future Housing Assistance Payment needs. HUD does not allow Housing Assistance Payment funds to be used for administrative expenses. Whenever there are excess /unused Housing Assistance Payment funds, HUD offsets the Public Housing Agencies' payments to reflect that additional funds are available for Housing Assistance Payments, resulting in reduced City revenues. Each month, the City must report the cash /investments as of the last day of the month for the Housing Choice Voucher (HCV) program. At the end of the fiscal year, the City must submit an annual report through the Real Estate Assessment Center (REAC) by August 31 of each year. HUD reviews the report and either accepts the report or rejects it. By rejecting the report, HUD requests that any findings /problems are corrected. HUD has rejected the financial assessment report submitted through REAC for FY 2012. HUD has directed the City to verify that the City has $846,776.72 in cash for the Housing Choice Voucher Housing Assistance Payment fund. HUD has also advised the City that failure to make corrections will result in further action and could result in payments being discontinued. The City has been providing this report to HUD each year, believing the use of funds to pay administrative expense was appropriate, and HUD has not rejected a report until this year. Housing and Community Development Department Director Alvin Nash and Budget Director Jennifer Larson recommend that $499,181 be deposited into the Housing Assistance Program fund from identified savings in the general fund. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Jennifer Larson, Budget Director Alvin Nash, Housing & Community Development Department Director Ken TeKippe, Finance Director 2 Masterpiece on the Mississippi To: Michael Van Milligen, City Manager From: Alvin Nash, Housing & Community Development Director Subject: Housing Assistance Payment Fund Balance Date: March 13, 2013 Dubuque All- America City 1 2012 Beginning in 2005, HUD implemented budget -based funding which requires Public Housing Agencies (PHA) to be responsible for maintaining any excess Housing Assistance Payments (HAP) in their Net Restricted Assets (NRA) account for use only for future HAP needs. HUD does not allow HAP funds to be used for administrative expenses. Whenever there are excess /unused HAP funds, HUD offsets the PHA's payments to reflect that additional funds are available for Housing Assistance Payments, resulting in reduced City revenues. Each month, the City PHA must report the cash /investments as of the last day of the month for the Housing Choice Voucher (HCV) program. At the end of the fiscal year, the City must submit an annual report through the Real Estate Assessment Center (REAC) by August 31st. Once HUD receives the first submission (unaudited version), they review it and either accept the report or reject it. By rejecting the report, HUD requests that any findings /problems are corrected. In January 2013, HUD rejected the financial assessment report submitted for FY 2012. HUD has directed the City to verify that the City has $846,776.72 in cash in the Housing Choice Voucher Housing Assistance Payment fund. HUD has also advised the City that failure to make corrections will result in further action and could result in payments being discontinued. The City has been providing the report to HUD annually, and HUD has not rejected a report until this year. Assisted Housing Supervisor Janet Walker and Community Development Specialist Aggie Tauke have verified the City Section 8 fund balance by defining the HUD required administrative costs beginning in FY 2007 as shown below in Table 1: Table 1 FY 2012 Section 8 Cash Balance _une30, 2012 HUD FY 12 HUD FY11 HUD FY10 HUD FY09 HUD FY08 HUD FY07 HCVAdmin (499,181) (369,729) (250,968) (184,126) (34,586) 35,854 HCV HAP 846,777 1,383,855 398,630 767,945 978,721 1,048,306 Mod Rehab 174,443 172,696 171,101 163,814 183,584 229,020 HUD Subtotal 522,039 1,186,822 318,763 747,633 1,127,720 1,313,180 HCV FSS (Restricted Sec 8) 25,217 18,396 27,422 17,966 18,919 31,400 Total HUD Cash 547,256 1,205,218 346,185 765,599 1,146,639 1,344,580 City Cash Balance 547,255 1,205,217 346,185 765,599 1,146,639 1,344,579 The Section 8 cash balance has been tied to the City cash balance in the general ledger for each year. The Section 8 cash fund shows $846,777 in HAP funds as of June 30, 2012 but the Housing Choice Voucher administrative costs are negative ($499,181), reducing the HAP fund balance to $347,596. HUD is requiring that the City's balance reflect the true HAP fund balance. The $204,635 in general funds transferred to the Section 8 fund in FY11 and FY12 are reflected in the above balance. This budgeted transfer from the general fund to the Section 8 fund was based on the estimated loss of administrative fees from reducing vouchers. There are several reasons for shortfalls. 1. In June 2007 HUD required reporting to reflect Housing Assistance Payments (HAP) separate from the HCV administrative fees, beginning in FY2007. 2. HUD pro -rates the administrative fees the City earns, so we receive less than the full costs for delivering services. The FY13 per unit administrative cost of $58.51 is pro -rated to $46.81 per unit, which is 80% of the allocated administrative fees. See Table 2. 3. The City began reducing the number of available vouchers in January 2010, resulting in decreased administrative fees beginning in FY 2011. See Table 2. 4. Revenue for special fees is no longer being paid by HUD. Special fees cover hard to house families and dust wipes being performed. This resulted in decreased revenues of about $20,000 per year beginning in FY 2009. 5. The police investigator position was funded with $279,600 in Section 8 funds from FY2008 to FY2011. The position is now being funded with general funds. 6. Coding of HAP and the administrative costs were coded to the same activity, resulting in difficulty in identifying them in the City finance system. This has been corrected by establishing a separate activity code for Section 8 administration costs. 7. Issuance of Vouchers on a one -to -one basis has hindered lease up goals since only about 65% of vouchers issued actually result in a leased unit. Table 2: Loss in Administrative Revenue FY12 Average Annual Vouchers Average HUD Admin Fee /mon th /unit Total Fee Earned HUD Prorati on Rate Admin Fees Received Amount Toss due to Proration Total Annual Admin Fees Loss Actual 860 58 610,611 82% 435,754 HUD Units 1,063 58 748,008 Loss (203) (137,397) (174,857) (312,254) FY11 Actual 828 57 578,377 88% 574,651 HUD Units 1,063 57 734,787 Loss (235) (156,410) (3,726) (160,136) FY10 Actual 1,086 55 720,403 91% 688,014 HUD Units 1,063 55 Loss 23 720,403 (32,389) (32,389) FY09 Actual 971 53 619,801 91% 555,867 HUD Units 1,063 53 675,708 Loss (92) (55,907) (63,934) (119,841) FY08 Actual 1,005 52 586,462 91% 608,704 HUD Units 1,063 52 608,704 Loss (58) (22,242) 22,242 Until we can reach the maximum 1,063 housing choice vouchers, there will be administrative funding shortfalls. However, we have put measures in place that will allow us to track the funding process so we can reconcile the balances earlier and we are researching ways to reduce our costs. I recommend that the City deposit $499,181 in the Housing Assistance Payments account, thereby balancing the FY12 HAP fund. Cc: Janet Walker Aggie Tauke F:IUSERSVATAUKE \Section 8 Balance\Section 8 Final Balance\Section 8 Deficit Memo MVM.doc Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: Jennifer Larson, Budget Director SUBJECT: Housing Section 8 Administrative Fund Deficit DATE: March 13, 2013 Dubuque kital All- America City II 111! 2012 INTRODUCTION The purpose of this memorandum is to provide information on proposed funding for the Housing Department's Section 8 Administrative Fund deficit of $499,181. DISCUSSION Due to the issues outlined by Housing & Community Development Director Alvin Nash's memo dated March 13, 2013, the Section 8 Administrative Fund has a deficit balance of $499,181 which HUD is requiring to be rectified before the Real Estate Assessment Center (REAC) financial submission for FY 2012 will be accepted. In the Fiscal Year 2013 budget there is an improvement package in the Transit Division for the Nightrider and Midtown Loop. This improvement package included $456,611 in additional maintenance cost which was already included in the maintenance budget. The grant request to ICAAP for these routes used an hourly rate for bus operations which included all transit operating expenses. The ICAAP grant is reimbursing expenses that Transit would have regardless if the Nightrider and Midtown Loop existed. Therefore, motor vehicle maintenance in the Transit Division is over budgeted by $456,611 in Fiscal Year 2013. The City will set aside $82,016 of the additional maintenance budgeted in case the ICAAP grant for the Shopping Circulator grant is not funded in Fiscal Year 2014 so that the route will be able to continue. The City also received a refund from Iowa Communities Assurance Pool (ICAP) that was not budgeted in FY 2013 in the amount of $52,241. The Police Department has $10,556 more revenue from vehicle sales and the Public Works Department has $16,907 more street sign sales than budgeted in Fiscal Year 2013. In addition, the Engineering department has $11,351 more revenue from excavation permits, $4,110 more in sidewalk permits and $33,233 more in subdivision inspection fees than budgeted in Fiscal Year 2013. ACTION I respectfully recommend amending the Fiscal Year 2013 budget to fund the Housing Department's Section 8 Administrative Fund deficit of $499,181 with the following sources: • $374,595 in Transit motor vehicle maintenance related to the Nightrider and Midtown Loop funded by an ICAAP grant and was over budgeted in FY13; • $52,241 from the Iowa Communities Assurance Pool (ICAP) refund that was not budgeted in FY13; • $10,556 in Police Department vehicle sales received over budget; • $16,907 in Public Works street sign sales received over budget; • $33,233 in Engineering Department subdivision inspection fees received over budget; • $11,351 in Engineering Department excavation permit fees received over budget; and • $298 in Engineering Department sidewalk permits received over budget. JML 2 THE CITY OF Dui Masterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager Dubuque kital All- America City II 111! 2012 SUBJECT: Funding Partnership between Community Housing Initiatives (CHI), Dubuque Bank and Trust (DB &T) and the City of Dubuque's Housing Department DATE: March 12, 2013 Housing and Community Development Department Director Alvin Nash is providing information on a proposed partnership to restore about 18 units in the Washington Neighborhood. This is a partnership between the Community Housing Initiatives (CHI), Dubuque Bank and Trust (DB &T) and the City Housing Department. In order to fund the project, each partner proposes to commit the following funds to address the impact planned to be made on the neighborhood. Community Housing Initiative Dubuque Bank and Trust City of Dubuque $ 800,000 $ 500,000 $ 500, 000 $1, 800,000 CHI and DB &T have confirmed their funds and are ready to sign a memorandum of understanding and proceed. Alvin Nash recommends using $250,000 of the Washington Neighborhood Incentive funds and $250,000 of the Residential Rehab Program funds for the City's $500,000 commitment to this project. I concur with the recommendation and respectfully request Mayor and City Council approval. hrit44 Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Alvin Nash, Housing and Community Development Department Director 2 THE CITY OF Dui Masterpiece on the Mississippi To: Mike Van Milligen, City Manager From: Alvin Nash, Housing and Community Development Director Dubuque All- America city 1111' 2012 Subject: Funding Partnership between Community Housing Initiatives (CHI), Dubuque Bank and Trust (DB &T) and the City of Dubuque's Housing Department Date: March 11, 2013 This is a proposed partnership to restore about 18 units in the Washington Neighborhood; this partnership is between the Community Housing Initiatives (CHI), Dubuque Bank and Trust (DB &T) and the City Housing Department. In order to fund the project each partner needs to commit an amount of funds to address the impact we want to make on the neighborhood. Community Housing Initiative Dubuque Bank and Trust City of Dubuque $ 800,000 $ 500,000 $ 500,000 $1,800,000 CHI and DB &T have confirmed their funds and are ready to sign a memorandum of understanding and proceed. Recommendation of funds to cover the City's contribution: 1. General fund Washington Neighborhood Incentives: 1011595 -62675 $257,357 DRA General fund 1011595 - 62764, $ 3,000 DRA General fund 1021595 - 62765, $ 70,000 General fund targeted $330,357 Funds are for persons over 80% of medium Income, use for rehab loans and down payment assistance. 2. Residential Rehab Program (RRP) income funds from a HUD program that has closed out. 2701065 -73210 $392,140 Fund must be used for Community Development Block Grant (CDBG) eligible activities. Target projects: 10 Vacant residential houses 2 Vacant commercial units 4 Owner occupied residential units 2 Rental units that are in need of repair Use of funds: Bank Funds: Purchase of properties (bank gets 3.5% interest on their investment on each unit) CHI Funds: loss purchase fund, marketing, rehab costs, title search, legal, development fees, Lead and asbestos abatement. City Funds: rehab costs, loss sale fund We have confirmed that the funds are in the City budget and amounts are correct. I recommend using $250,000 of the Washington Neighborhood Incentive funds and $250,000 of the RRP funds to secure the City's $500,000 to the project. If you concur with the recommendation, we will proceed immediately to finish developing the partnership proposal with DB &T and CHI. cc: Jenny Larson, Budget Director Kris Neyen, Rehabilitation Programs Supervisor Aggie Tauke, Community Development Specialist Ken TeKippe, Finance Director