Reserve draws, voucher freeze likely in DHA sequester response

Mar. 13, 2013 @ 11:25 PM

Durham Housing Authority officials plan to draw heavily on their agency’s financial reserves to blunt the impact of the budget cuts being handed down to them by the federal government’s “sequester” battle.

But the agency nonetheless will have to stop returning Section 8 rental vouchers to circulation after former clients turn theirs in. Given normal yearly turnover, the move could close the door to aid for about 187 families, DHA leaders said.

That translates into about a 7 percent reduction in the number of vouchers the agency intends to circulate. It has been serving some 2,734 families through the rental-assistance program

Chief Executive Officer Dallas Parks was quick to note that agency won’t be cutting back on payments to renters and landlords who are now in the program. Rather, it simply won’t be taking on new clients or giving vouchers to people on its waiting list.

“We don’t want to evoke a panic,” Parks told DHA’s finance subcommittee, which during a Wednesday afternoon meeting amounted to just Durham County Finance Director George Quick. “Those who have vouchers will be able to keep them, for the rest of this year.”

The sequester is an across-the-board, mid-year federal budget cut that all told is costing DHA about $3½ million.

That’s roughly $1 million more than the estimate Parks gave in an interview last week.

The difference comes in the Section 8 program and is attributable to wrinkles in the way the U.S. Department of Housing and Urban Development calculates each local housing agency’s eligibility for funding, DHA Chief Financial Officer Jeff Causey said.

The agency figures to absorb about $1 million of the Section 8 cut by drawing down an in-house reserve for the program that at last check contained about $1.5 million, Causey said.

Holding onto rather than reissuing vouchers that have been turned in will save the agency about $900,000.

A similar lean-on-the-reserve strategy will also shield DHA’s public housing complexes from major cuts, at least in 2013.

Section 8 and public housing are separate programs for both operational and accounting purposes.

The public housing side of DHA is losing nearly $1 million to the sequester. Causey and Parks said administrators had identified $170,000 to $180,000 in budget cuts and figure on using reserves to cushion the rest of the blow.

The cuts include items like landscaping, they said, explaining that lawns at DHA’s apartment complexes likely won’t be mowed as often this summer.

The one area where there’s still major uncertainty about strategy is in the budget for administration of the Section 8 program, which is separate from the accounts for vouchers in addition to those for public housing.

It’s taking a hit of about $223,000, a loss that appears likely to force furloughs, cuts in the work week of non-salaried workers and ban on using temporary employees.

“The last item is whether we’re going to have to do any staff reductions in the department and figuring out if we can just [freeze] vacant positions,” in lieu of actual layoffs, Causey said. “We haven’t figured that out yet.”

Section 8 administrators are responsible for verifying the eligibility of voucher recipients, seeing that landlords get paid and checking the condition of houses and apartments voucher recipients are living in.

Historically, those things have been problems for DHA, but HUD recently notified the agency that its Section 8 program had scored as a “high performer” in 2012.

Parks said the previous difficulties were largely the result of “chronic staff turnover” and credited program director Rhega Taylor with helping orchestrate a turnaround.

Ironically, because of the sequester DHA will “have to put on hold” Taylor’s request for additional auditing software, Causey said.

The agency will also take a hit in the form of reduced capital subsidies. That didn’t get much discussion on Wednesday, with Causey noting officials will just have to scale back maintenance in line with whatever cut comes down from HUD.

Parks also noted that cuts in capital aid are nothing new. The authority last year received $3.2 million in capital subsidies, versus $4 million in 2010.

Quick noted that the draw-on-reserves strategy will only work if the sequester cuts are a one-time thing. Causey and Parks acknowledged that there’s still a lot of uncertainty about the federal budget going forward.

“Really, it’s more than just the sequester we’re having an issue with,” Causey said, alluding to the continued uncertainty coming out of Washington.

“We’re in uncharted water,” Parks added.