SR-407-006 (12)
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CC/HA-l
APR 1 2 1988
t(07-00h
C/ED:HD:CA:jt
city Council
Housing Authority: 4/12/88
Santa Monica, California
TO:
City council
Housing Authority
FROM:
city staff
SUBJECT: Recommendation Regarding City Administration of the
Section 8 Housing Assistance Payments Program
INTRODUCTION
This report transmits information concerning the proposed direct
administration of the Section 8 Housing Assistance payments Pro-
gram by the City, which is currently administered by the Housing
Authority of the County of Los Angeles under contract. The re-
port recommends that the city council and the Housing Authority:
(1) approve in concept the plan to take over administration of
the section 8 Program; (2) authorize a loan of $l25,843 for the
initial costs for direct administration of the program~ and (3)
direct staff to proceed with the next steps necessary to imple-
ment this plan.
BACKGROUND
One of the Community and Economic Development Department Workplan
Objectives in Fiscal Year 1985-86 was to review the feasibility
of the City'S administration of the Section 8 Housing Assistance
Payments Program ("HAPpU), for the IIAssignment of Services" with
the Housing Authority of the County of Los Angeles (HACoLA). The
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APR 1 2 1.988
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Housing Commission of the City of Santa Monica and program par-
ticipants had expressed interest in exploring ways to improve the
Program operation, including the possibility of direct city ad-
ministration. During Fiscal Year 1985-86, staff commenced review
of the feasibility of the City's administration of the Section 8
HAPP and concluded that direct administration would be feasible.
staff postponed presenting the analysis to the city Council pend-
ing a determination regarding the availability of space in City
Hall to house program operations. It was subsequently deter-
mined that sufficient space would not be available within City
Hall but that office space was available off-site.
The following describes the findings and recommendations concern-
ing the Section 8 HAPP, including: (l) the existing contract
between the Housing Authority of the County of Los Angeles and
the Housing Authority of the City of Santa Monica (HACSM) for
operation; (2) the organizational requirements and projected
costs and revenues of City administration, and (3) the next steps
necessary to prepare and implement a comprehensive transition
plan for direct administration of the program by the city.
DISCUSSION
provisions of Existing Contract between HACSM and HACoLA
The section 8 HAPP, created by the Federal Housing and Community
Development Act of 1974, helps very low income households rent
housing in the private market by paying property-owners the dif-
ference between the market rent of a unit and thirty percent of
.
It
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the assisted household's income. The program is funded and regu-
lated by the United states Department of Housing and Urban
Development (HUD).
Under an Agreement for the Assignment of Services executed by and
between the Housing Authority of the County of Los Angeles (HACo-
LA) and the Housing Authority of the city of Santa Monica (HACSM)
in 19761 HACoLA has primary responsibility for program adminis-
tration. RACoLA receives all section 8 HAPP administrative fees
paid by HUD for program administration, which totaled approxi-
mately $231,547 in 1987. The city performs outreach and market-
ing activities and executes necessary contracts with HUD while
HACoLA performs all other program functions. The Agreement can
be terminated by either party with thirty days notice.
HACSM had less than one hundred Section 8 certificates at the
time the Agreement for Services was originally executed in 1976.
HACSM currently has an allocation of over six hundred certifi-
cates and is the only independent Housing Authority of its size
in the area that continues to subcontract its Section 8 HAPP out
to another Housing Authority.
The section 8 HAPP has experienced a number of problems that are
inherent in the administration of a local program by an outside
agency. Indirect administration of the program by HACoLA has
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inhibited coordination with other City housing efforts and re-
duced HACSM's control of operations and discretionary policy is-
sues. In addition, complaints have been received from par-
ticipants regarding the unresponsiveness of HACoLA staff to local
problems.
Direct Administration of the section 8 Program
Direct administration would provide policy discretion, flexibili-
ty and control over program operations by the city. Direct ad-
ministration by City staff would have the following benefits:
o Better Coordination of Housing Programs: Wi th the de-
cline in Federal and State housing programs the City has
been focusing on local resources to meet housing needs.
However, the city's funds can be stretched further if
Section 8 rental subsidies are available in City-
assisted units. Because the City's program is just a
small part of the County's operation, it is very dif-
ficult for HACoLA to provide the City with the type of
flexibility needed to best coordinate the Section 8 Pro-
gram with other city housing programs. One of the major
advantages of direct administration would be the City's
ability to establish its own policies and procedures
that best utilize Section 8 resources as part of the
City's overall housing efforts.
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o Increase of section 8 program Use: Under County admin-
istration, only 76% of the section 8 certificates allo-
cated to Santa Monica are being used. This is much low-
er than HUD's performance standard of 95%. Part of this
problem appears to be due to local market conditions
such as the low vacancy rate or the reluctance of prop-
erty owners to participate in any government programs.
since City staff have a greater knowledge of the local
housing market and housing assistance needs, the city
would be better able to work with tenants and property
owners in utilizing Section 8 resources.
o
Reduction in Administrative Difficulties:
ci ty staff
have found that, even though HACoLA management staff
have been able and willing to be flexible and to resolve
issues, the communication problems inherent in HACoLA's
operation of the program have made it difficult to im-
plement agreed-upon changes. Direct administration by
City staff would significantly reduce the number of ad-
ministrative problems.
The following sections outline the organizational requirements of
the program, and the projected administrative costs and revenues.
Organizational Requirements of Program Administration
In order to operate the program directly, the Housing Authority
of the City of Santa Monica would have to hire additional staff,
designate office space, set up adequate computer services, and
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implement new administrative processes and coordinate of the pro-
gram with other city departments.
To administer the section 8 HAPP, staff would perform the follow-
ing functions:
maintain applicant waiting lists:
determine eligibility to ensure that applicants qualify
for assistance at the time of application and annually
thereafter:
inspect units to ensure compliance with HUD minimum
Housing Quality Standards at the time of initial occu-
pancy and annually thereafter:
determine assisted rent levels;
issue monthly Housing Assistance Payment checks to par-
ticipating landlords;
accounting to maintain the books and accounts of the
program and to track its revenues and expenditures.
In addition, staff would continue to handle the following:
outreach and marketing to low income applicants and par-
ticipating landlords;
applications to Hun for additional certificates and
vouchers;
internal monitoring of compliance with HUD regulations.
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Projected Costs and Revenues of Program Administration
In most localities, the section 8 HAPP is self-supporting. HUD
pays each Housing Authority an administrative fee based on the
number of units it subsidizes. The projected first year adminis-
trative fee for city operation of the program at the current
level of perform.ance is $277,596. The following staffing plan
and expense projections have been developed after consideration
of: (1) the current and projected program revenues; (2) a survey
of similarly-sized local Section 8 Programs (see Attachment 1);
and (3) HUD requirements for program administration. The follow-
ing is a direct cost analysis of expenditures based on the actual
costs of the personnel and services to be used by the program.
On-Going Expenses
In order to perform the various functions, it is projected that
five full-time staff positions would be required. These would
include a Housing Assistance Coordinator to supervise and direct
program operations, three Housing Specialists to handle tenant
and landlord casework, and a clerical position to respond to
public information requests, maintain the waiting list and pro-
vide clerical support to the other staff. The estimated cost of
this staff is detailed below:
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Position
salary and Benefits Costs
salary (Annual) Benefits (Annual)
Total
Housing Asst. $37,725
Coordinator
Housing
specialists (3) 3 x 24,895
Clerical 19,729
$11,317
$49,042
TOTAL
$132,139
$39,643
97,092
25,648
$171,782
3 x 7,469
5,919
A survey of other City Departments indicates the following addi-
tional personnel costs for program support services:
Finance Department
- 0.50 of a Fiscal Staff Asst. I
Information Systems
- 0.05 of a Programmer
- 0.05 of an Operator
The supplies and expenses for the program would be similar to
$13,697
$ 4,349
other City Departments. An annual cost of approximately $15,000
is projected for office supplies, printed forms, advertising,
mileage, periodicals, postage and duplication services.
Addi-
tiona1 annual expenditures of $9,970 and $10,000 would be re-
quired for ongoing computer services and outside legal services,
respectively.
Approximately one thousand (1,000) square feet of space is re-
quired to accommodate five staff members, provide for monthly
briefing sessions for approximately 20 program participants,
eligibility interviews, and a reception area for walk-in appli-
cants. Rent for program office space is estimated at $l.25 per
square foot, or $15,000 annually. Space for the program may be
available in the City-owned property 602-620 Colorado Avenue.
Alternatively, space for the program could be secured within the
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Downtown in proximity to city Hall to facilitate coordination of
administrative services and communication.
One-time start-Up Costs
One-time purchase of office furniture and equipment is projected
at $2,000 per staff position. This results in an additional cost
of $10,000 in the first year.
Comprehensive computer and data processing services would be
necessary to ensure the speed and efficiency of program opera-
tions. one-time hardware and system development costs, as esti-
mated by the Information systems, would be approximately $67,122.
A section 8 HAPP consultant would be hired for six months to as-
sist in program design and implementation. The estimated cost
for this consultant is $20,000.
The Housing Assistance Coordinator would be hired six months
prior to the transfer of Section 8 operations to the City to
coordinate the design and implementation of the program with the
consultant, including finalizing procedures and assisting in the
hiring of staff. Salary and benefits for this positions for six
months would cost approximately $24,521 and is more fully an-
alyzed in a later section.
It is anticipated that improvements to the space secured for the
program would be required to adapt it to program use at a proj-
ected cost of $4,200.
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Total Cost of Program Administration
Based on the proposed staffing level and budget, the total esti-
mated cost of program start-up and operation during the first
year of administration is estimated to be $365/641, as shown
below:
Estimated start-up and Projected Annual Operating Budget
start-up (FY87-88)
- Program Staff
- Computer System Development
- Capital Equipment
- Office Space
- Consultant
$ 24,521
$ 67,122
$ 10,000
$ 4,200
$ 20,000
$125,843
TOTAL:
projected Annual operating Budget
Salaries:
- Program Staff
- Direct cost of
Other City Staff:
Finance Department
Data processing Department
$171,782
$13,697
$4,349
Supplies and Expenses:
- Program Expenses
- Rent
- computer Costs
- outside Legal Services
$15,000
$15,000
$9,970
$10,000
$239,798
$365,641
TOTAL:
TOTAL START-UP AND FIRST-YEAR COSTS:
As described earlier, BUD pays each Housing Authority a fee of
$50.18 a month (per household receiving rental subsidies) to
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cover these costs. Based on the current number of households
receiving rental subsidies, the City is proj ected to receive
$277,596 annually for administering the City's Section 8 program.
This amount will be paid directly to the city's Housing Authority
upon termination of the Agreement with HACoLA. In order to make
the transition feasible the Housing Authority must borrow the
start-up costs of $125,843 from the City. This amount would be a
loan to be repaid from program revenues. The terms of this loan
would be comparable to other loans that have been made between
funds; the principal plus interest at the rate the City would
earn on deposits would be repaid over a period of three to five
years as program revenues allow.
The amount of administrative revenue received depends on the
"lease-up rate," i.e. the percentage of available subsidies actu-
ally being used by assisted households in private units. Under
County administration, the City'S Section 8 HAPP has a lease-up
rate of only about 76%. This is below the 95% rate HUD considers
acceptable and reasonable. At the 95% level, administrative
revenue would be increased by more than $69,000 annually.
A realistic goal for improvement of the Section 8 Program's
lease-up rate under city administration would be an annual in-
crease of 3% until a lease-up rate of 95% was reached. This im-
provement would result from more intensive marketing efforts by
the City, better coordination of the program with other City
housing programs, increased local policy discretion and improve-
ment in administrative processes. At this rate, the City'S ini-
tial loan of $125,843 could be repaid within five years of direct
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administration. After the start-up loan was repaid, the Housing
Authority could use the increased income to cover additional pro-
gram operations and to cover costs of other housing administra-
tive activities that have previously been supported by the city's
General Fund.
Next steps
Transition of program administration will be a complex and dif-
ficult process. During the first month of operations, the City
will have to issue more than 400 Housing Assistance Payment
checks, perform approximately forty annual eligibility recer-
tifications and unit inspections, and qualify ten to twenty new
tenants and units. In order to successfully take over the pro-
gram, City staff will need the assistance and cooperation of
HACoLA. HACoLA has indicated that it would be willing to work
with the City on the transfer of program administration, and has
offered to begin working directly with a City staff person on the
transition. It is anticipated that city administration could
commence as early as January I, 1989 if authorization is
received.
It is therefore recommended that the City Council approve in con-
cept the proposal to take over direct administration of the Sec-
tion 8 program, and authorize staff to take the necessary steps
to transfer program administration, including: (1) hiring a con-
sultant; (2) recruit and hire staff as detailed herein within the
Housing Division of the Department of Community and Economic
Development; and (3) prepare space to house program staff. The
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consultant and Housing Assistance Coordinator would work with
HACoLA and City staff to prepare and implement the transition
plan with the goal of commencing program administration by
January 1, 1989.
A potion of the start-up costs of $125,843
would be appropriated in FY87-88 and the remainder in FY88-89.
The proj ected revenues and costs of on-going program operation
would be included in the Housing Division's 1988-89 budget
request.
FINANCIAL/BUDGETARY IMPACT
The approval of the staff recommendations concerning the Section
8 program would require City Council authorization of a loan of
$125,843 from the General Fund to the Housing Authority Fund for
start-up costs, wi th terms and conditions as described in this
report.
Currently appropriated housing capital accounts would be reduced
to provide a portion of the loan funds. Account number 01-720-
264-000-946 would be reduced by $46,578, and Account number 01-
5
720-264-000-9\8 would be reduced by $43,000.
The Housing Authority would need to appropriate $20,000 of the
loan proceeds for the program consultant to account 12-200-264-
000-506.
The remaining loan proceeds would be appropriated in Fiscal Year
88-89 for start-up costs to the following accounts:
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12-200-264-000-322
12-200-264-000-803
$24,521
$ 4,200
$67,l22
$10,000
Housing Coordinator
(6 months)
Rehab to space
Computer programming/
Hardware
Equipment
12-200-264-000-322
12-200-264-000-804
$105,843 TOTAL
RECOMMENDATION
It is recommended that the City Council:
(1) Authorize a loan of $125,843, to the Housing Authority for
the initial costs of Section 8 Housing Assistance Payments
Program administration under the terms and conditions as set
forth in the report.
It is recommended that the Housing Authority of the City of Santa
Monica:
(1) Approve the direct administration of the Section 8 Program
and the termination of the Agreement for the Assignment of
Services with the Housing Authority of the County of Los
Angeles;
(2) Appropriate $20,000 in loan proceeds from the City of Santa
Monica to the Housing Authority for the program consultant
to account 12-200-264-000-506;
(3) Direct staff to recruit and select a section 8 Program con-
suI tant and execute a contract in an amount not to exceed
$20,000; and
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(4) Direct staff to finalize job descriptions for the positions
detailed in this report and commence recruitment process for
Housing Assistance Coordinator position.
prepared by:
Carol Anderson, Housing Analyst
Candy Rupp, Housing Program Manager
Department of Community & Economic Development
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ATTACHMENT 1:
Survey of Similarly-Sized Local Section 8 Proqrams
City
City and
Program Baldwin Culver Garden
statistics Park City Grove Torrance santa Monica
Population^ 59,884 40,017 130,319 137,207 94,060
certificates 589 261 1,043 548 607
# of Staff 5.5 2.8 10.0 6.1 5.0
Certs &
Vouchers
Staff 107 93 104 90 ll6
Lease-up
rate 98% 95% 97% 98% 76%
Approx.
Program
Expenses ($) 283,014 97,026 409,235 266,165 239,798*
Approx.
Program
Revenue ($) 281,657 145,467 409,235 264,764 277,596*
Surplus
(Deficit) (1,357) 48,441 0 1,401 37,798
^ California Department of Finance estimate
*Projected
:surveyl