2012 PHADA COMMISSIONERS CONFERENCE JANUARY 8-11, 2012

Coping with HCV Budget Cuts

Michael LaRiccia, Program Advisor, U.S. Dept. HUD Mike.LaRiccia@HUD.Gov

Revenue Reduction & Liquidity Squeeze

The Pie is getting smaller and HUD is handing out the slices on an as needed basis. Reduced Administrative Fees again in 2012 HUD Cash Disbursement Changes

Will pay PHAs the amount needed to pay landlords vs. 100% payout of funding as in the past 6 years.

HUD will recover and hold, for PHA use, the HAP Reserve (NRA)

Liquidity Impact This 1700 unit PHA received $7.9 million in 2011, and is on track to spend about $7.5 million. It began the year with a NRA $217,097 – about 2.7% of BA, and will end the year with about $655,000, an 8.6% NRA. (It will lease 98.6% of its units.)

In 2011, HUD will disburse all $7.9 million, and MMHA will retain a reserve of $655,000. They will also earn about $866,517 in admin fees. All tolled, $8.8 million will be disbursed. Had the 2012 admin fee levels and disbursement changes been applied to 2011, MMHA would have received $8.062 million, and would have no NRA funds in the bank at year end. Admin fees would have dropped from $866,517 to $782,997.

This 1700 unit PHA received $7.9 million in 2011, and is on track to spend about $7.5 million. It began the year with a NRA $217,097 – about 2.7% of BA, and will end the year with about $655,000, an 8.6% NRA. (It will lease 98.6% of its units.)

In 2011, HUD will disburse all $7.9 million, and MMHA will retain a reserve of $655,000. They will also earn about $866,517 in admin fees. All tolled, $8.8 million will be disbursed. Had the 2012 admin fee levels and disbursement changes been applied to 2011, MMHA would have received $8.062 million, and would have no NRA funds in the bank at year end. Admin fees would have dropped from $866,517 to $782,997.

Reduced Admin Fee

2010: 90% Proration of earned fees 2011: 83% Proration 2012 : 75% estimated proration

300 unit sample PHA at median fee rate of $61.54 pum. Leasing at 98.5%.

300 unit sample PHA at median fee rate of $61.54 pum. Leasing at 98.5%.

Admin Fee Calculation

Estimated Fee

Rate for 2012

Admin Fee Variation

Median: $61.01

Little Rock, Ar.

$179,306$143, 127 $316,932

A 300 unit fully leased program would have earned the above amounts in the three locations in 2011.

Number PHAs by Rate Level: 2011

528 HAs 528 HAs

Revenue vs. Exp: Breakeven Levels

Admin Reserve per Unit: Median by Size

Options to Address Lowered Admin Prorations

Increase/Maintain Revenue Maximize UMLs

2 Yr Projection Tool Scrutinize HAP Per Unit Cost HAP

Fraud Recovery Performance Reduce Expenses

Cost Analysis – Peer Norms Streamline functions/ Best Practices Policy Choices Alternative Management Approaches

Spend out of Admin Reserves –short term strategy

Subsidize from other Sources

In our 300 unit PHA Example: An underleasing

PHA can add $1,600 in revenue in 2012 with each additional UML Percentage

Point .

Revenue: Maximize Unit Months Leased Manage Issuance process to tap into

Unrealized Leasing Potential. Use Two Year Projection tool to model key variables and Year 2 Funding:

Per Unit Cost, Success rate, Turnover rate, length of time to lease.

Manage HAP Per Unit Cost. Deconstruct costs by location, bedroom size.

Analyze rent burdens. Ensure Rent Reasonableness is vigorous Maximize tenant income contribution

Revenue: Fraud Recovery Revenue to Admin

Median is $.31 per UML, but over one third of PHAs recover

zero fraud, while one-fifth recover over $1 per UML.

A $1.00 Fraud

Recovery rate earns a 300 unit HA about

$3,500

A $1.00 Fraud

Recovery rate earns a 300 unit HA about

$3,500

Reduce Expenses: Cost Analysis

Financial Statement compilation – All PHAs.

High Level National Information Some Nationwide Median Measures

256 Program Unit Size$60 Admin fee rate $27 Admin salaries per UML

$9 Employee Benefits per Uml$53 total admin per UML$58 total operating per UML$26 Admin Equity per UML

$0.31 Fraud Recovery to Admin per UML35.8% benefits as % of admin salaries$28.8 UNA per UML

Comparing Admin Salaries by Fee rates

Comparing Benefits costs per UML by Fee Rate

Organization and Staffing

See Chapter 21 of HUD’s HCV Guidebook

Reducing Expenses: Streamlining and Reducing Workload

Stabilize Leasing – Even pattern of issuance vs. boom and bust leasing effort. Use of Projection tool.

Minimize “bad turnover”: Better briefings, more forgiving policies will reduce need to issue vouchers

Increase Success Rate of leasing – fewer will have to be issued, inspected, etc. Better briefings, landlord outreach etc.

Reducing Expenses: Streamlining and Reducing Workload Reduce Inspections by:

Prevent HQS fails by preparing landlords and participants: Publicize “top 10 HQS Violations”.

Remote validation of fail corrections

2003 Ohio PHA Survey

Reducing Expenses: Streamlining and Reducing

Workload Reduce third Party verification by using UIV

and or accepting tenant originals Better workload and inspection location

scheduling by de-linking HQS Inspections and Reexaminations

Removing self-imposed requirements, e.g. yearly verification of birth certificates, and citizenship

Lessons from VASH Boot camps (process mapping): “Why are we still doing this…..?”

Reducing Expenses: Policy Choices

Limit Interim Reexams: balancing HAP PUC and Admin burdenFinding the judicious trade-off between cost to administer and PUC

cost savings. What are thresholds for triggering an Interim?

Finding the judicious trade-off between cost to administer and PUC cost savings.

What are thresholds for triggering an Interim?

Reducing Expenses: Policy Choices Limiting the number of moves to once

per year Closing the waiting list Absorb Port families rather than billing

other PHAs

Alternative Management Approaches Shared Executive Director, Finance Dept. Contracting out functions Consolidating with another HA Transfer of Program Consortium