Sequester effects begin to surface at city, DHA

Officials in two local agencies say they’re beginning to see fallout from the federal government’s budget “sequester” as the country’s leading political parties remain deadlocked on fiscal policy.

Durham Housing Authority chief Dallas Park said his agencies will “have to make some hard choices” because it’s in line to lose about $2.5 million in funding.

Parks and his staff are still assessing the situation and likely will report to the DHA board’s finance committee, which is scheduled to meet late Wednesday afternoon.

But, tentatively, it’s looking like the agency will lose about $1 million of the subsidies that support its public housing complex, another $1 million or so that underwrites Section 8 rental vouchers, about $230,000 that supports the administration of the Section 8 program and some money that goes into maintenance.

There’s little question that operational cutbacks will result.

“Obviously, we have to align our expenses to our revenues,” said Parks, adding that DHA was figuring on spending about $35 million in 2013. “It’s not going to be fun. It’s a very difficult task.”

Meanwhile, at City Hall, Finance Director David Boyd relayed word to his bosses Tuesday that the city was losing about $60,000 in federal subsidies for interest payments on some of its borrowing.

He passed along an explanation that noted the U.S. Internal Revenue Service was cutting back on support for “direct-pay” instruments like the Build America bonds the city used in 2010.

The Build America bonds, authorized by the 2009 federal economic-stimulus bill, generate for bond holders income that’s taxable, unlike the normal tax-exempt bonds the city normally relies on.

The feds offered interest subsidies to help make up the difference in interest rates between taxable and tax-exempt bonds.

Nationally, critics of the stimulus bill and the Build America bonds warned there was a long-term risk that Congress would renege on the subsidies.

Boyd in 2010 played down that possibility, contending that legislators over the long pull had avoided doing anything that might undermine the market for local-government debt.

Now, there’s “no word on if they will go back and make us whole if [and] when the mess gets sorted out in Washington,” he grumped in an email to City Manager Tom Bonfield and Deputy City Manager Wanda Page.

He added that the city could cover the $60,000 from its own reserves.