BASIS OF CALCULATION OF PAYMENTS REQUIREMENTS Requirements for the "Housing Payments" account are computed on the basis of contractual commitments to make payments rather than on the amount of disbursements. In the first housing subsidy program--the Public Housing program--the debt service on bonds becomes due at the anniversary date of the bond, and is included in the Housing Payments appropriation for that year. The actual payment, however, is made in two installments so that the second installment may fall in a subsequent fiscal year. For the interest reduction programs enacted in the Housing and Urban Development Act of 1968, the full amount due for a year is also included in the appropriation, but there will be only a small disbursement lag, usually at the end of the year since payments are made monthly. Thus, In the case of the Section 8 program, the full amount of the cash payment requirement is computed based upon review and approval of the annual budget of the administering public housing agency. In the case of existing housing, where payments will begin almost immediately, the full amount of liquidating cash is needed to provide for contractual payments through the end of the agency's first full fiscal year following the signing of the contract. Public Housing Agencies have fiscal years beginning at quarterly intervals throughout the Federal fiscal year. a contract signed in January with a PHA whose fiscal year starts in July would call for payments for the six months remaining in the first year and the twelve months of the first full fiscal year--a total of eighteen months for the first payment. requirement. Subsequent to that, the operating budgets are approved annually and twelve months of payments approved. The purpose of this procedure is to assure the housing owner that sufficient liquidation cash will be available to meet the full contractual obligation on a timely basis. "PAYMENTS FOR OPERATION OF LOW INCOME HOUSING PROJECTS" "For an additional amount for "Payments for Operations of Low Income Housing Projects", $20,000,000." SUMMARY OF BUDGET REQUEST A 1977 supplemental appropriation of $20 million is requested to fund the estimated impact of increased utility consumption in Public Housing Agency (PHA)-owned low income housing projects due to the recent severe weather conditions. Under the Performance Funding System, the amount provided to PHAS for utility expenses can include an adjustment for increased consumption among which is energy used for heating. Program regulations permit the Department to fund 75 percent of excess utility consumption experienced. The remaining 25 percent would be funded by rental and other income of the PHAS. EXPLANATION OF SUPPLEMENTAL REQUEST The proposed 1977 supplemental appropriation is required to fund the higher utility consumption experienced this winter to heat PHA-owned units. The distribution of the $20 million to Public Housing Agencies, which have experienced higher utility consumption costs, is related directly to the annual funding cycles in effect for each of the agencies. Federal obligations are incurred prior to the beginning of the PHA fiscal year with PHA fiscal years beginning at quarterly intervals throughout the Federal fiscal year. Thus, the $20 million supplemental will go to meet the estimated 31 percent increase in utility consumption this winter for PHAs with fiscal years (1) beginning on January 1, 1976, and ending on December 31, 1976; (2) beginning on April 1, 1976, and ending on March 31, 1977; and (3) beginning on July 1, 1976, and ending on June 30, 1977. The original subsidy estimates for these PHA fiscal years were funded from the 1976 appropriation. In addition, 1978 appropriations would be used to fund PHAS faced with increased utility costs this winter which have fiscal years beginning on October 1, 1976, and ending on September 30, 1977, and beginning on January 1, 1977, and ending on December 31, 1977. Without the supplemental funds, PHAs would have to meet these unanticipated costs entirely from their own limited resources. This would be an unfair financial burden both to the PHA management and to tenants who would likely suffer from a curtailment of services such as maintenance which would lead to other problems as deterioration of the physical plant and demoralization of the tenants as well as the PHA staff. Also, it is quite possible that some PHAs will not have sufficient funds to pay their utility bills. PROGRAM DESCRIPTIONS Operating subsidies for Public Housing are provided to PHAS to assist in financing the operation of PHA-owned projects in accordance with Section 9 of the United States Housing Act of 1937, as amended. These operating subsidies are required to augment PHA income to permit PHAs to maintain adequate operating and maintenance services. The Performance Funding System (PFS) is used to calculate the operating subsidies provided to each PHA to operate its owned units. Each PHA receives no more subsidy than would be required to effectively operate a well-managed PHA of comparable size, location, and characteristics. The Performance Funding System provides for computing the amount of operating subsidies required for utilities based upon utility rates and past average consumption based on the prior three year period. This method places a financial control on increases in consumption of utilities and thereby provides an incentive for PHAS to conserve energy. The actual subsidy provided to the PHA is adjusted to reflect actual increased or decreased utility rates experienced by the PHA during its fiscal year. If utility consumption decreased compared with the average consumption during the past three years, 25 percent of the savings due to decreased consumption are retained by the PHA and 75 percent of the savings are credited against subsequent payments of operating subsidies. If utility consumption increases, as is the case this winter due to the extremely cold weather, 75 percent is required to be funded from the appropriation for operating subsidies and the remaining 25 percent is funded by the PHA. The following table compares actual program activity for 1976 and the transition quarter with estimated activity for 1977. The table also shows the changes between the original 1977 estimate and the 1977 revised estimate based on the proposed supplemental. a/ Operating subsidies funded from the "Housing Payments" account DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING Justification of Supplemental Estimates (Excerpt from the Budget of the United States Government, "FEDERAL HOUSING ADMINISTRATION FUND" (Supplemental now requested, additional authorizing legislation required) "For an additional amount for Federal Housing Administration Fund, $1,801,344,000, to remain available until expended: Provided, That $15,000,000 shall be available for reimbursement to the Federal Housing Administration for losses incurred under the urban homesteading program (12 U.S.C. 1706e): Provided further, That $10,000,000 shall be made available only upon enactment into law of authorizing legislation." "This supplemental would reimburse the Federal Housing Administration fund for losses sustained by the Special Risk Insurance fund and the General Insurance fund, and for losses on properties to be transferred to local governments under the Urban Homesteading demonstration." SUMMARY OF BUDGET REQUEST A 1977 supplemental appropriation of $1,801,344 thousand is requested to fund losses to the General Insurance fund and the Special Risk Insurance fund ($1,786.3 million) and to reimburse the Federal Housing Administration fund for losses on HUD-owned properties to be transferred to local governments under the Urban Homesteading Demonstration ($15 million). The justification for that portion of the supplemental request pertaining to the restoration of losses--$1,786.3 million--is presented in this section. The Urban Homesteading portion of the request is being treated separately in an accompanying justification. EXPLANATION OF SUPPLEMENTAL REQUEST FOR RESTORATION OF LOSSES The 1977 supplemental appropriation request of $1,801,344 thousand includes $1,786,344 thousand to restore losses to the Federal Housing Administration (FHA) fund incurred through September 30, 1976, in connection with mortgage claims and the acquisition and sale of properties which were insured originally under the General and Special Risk Insurance funds. The proposed appropriation will reduce cumulative Treasury borrowings in 1977 thereby reducing the interest due to the Treasury on such borrowings. The following table summarizes the cumulative losses incurred by the General Insurance and Special Risk Insurance funds, the 1976 and 1977 appropriations enacted and the supplemental appropriation now requested for 1977. 84-206 77 pt. 45 |