Board Decides Not to Apply for RAD Program,
Potentially Missing Out on Higher Revenue Opportunities
Geauga Metropolitan Housing Authority (GMHA) - 11/6/2024
Meeting Info: Special Meeting on November 6, 2024 at 2:00 pm (EST) in the GMHA Conference Room at Murray Manor, 385 Center St., Chardon, OH, 44024. This meeting was in-person only.
Agenda: An agenda was provided at the meeting. It is not available online. The documented proceedings below follow the agenda and are presented sequentially.
Proceedings:
1. Special Meeting Call to Order - 2:10 pm
2. Attendance: Richard Depenbrok, Board Chair, and Board Members Walter Claypool, Susan Kemerrer and Michael Petruziello. Board member Jeff Markley was absent.
Staff Attendance: Dawn Farrell, Executive Director and Carrie Carlson, Chief Financial Officer. Todd Petersen, Legal Counsel, was absent.
Others Present: Michael Andrews, Housing and Urban Development (HUD) Representative, joined via Zoom. Observer Note: Mr. Andrews' Linked In profile (available here) states that he is the Principal/Founder of Structure Development Advisors. He is being compensated by HUD to provide consulting services to housing authorities regarding RAD. This observer and one other member of the public were in attendance.
3. OLD BUSINESS
-
Rental Assistance Demonstration (RAD) Application
At the end of the October 15, 2024 regular GMHA board meeting, a resolution had been passed to submit the GMHA application to RAD pending legal counsel review of the application to ensure there was no cost nor obligation imparted upon the GMHA. During this special session, this topic was again discussed in detail by the board.
During the meeting, it was confirmed that the board could withdraw from the application process at any time and that there were no financial or contractual penalties for withdrawing.
The board engaged in a discussion in an attempt to clearly differentiate the pros and cons of applying versus fully pursuing a RAD conversion. These were two distinct decisions that often became conflated during the conversation. Below, the key pros and cons are outlined pertaining to the decision to apply, which relates to the proposed resolution. This meeting was the final opportunity to lock in the current funding rates, which are widely expected to decrease next year.
Below were the key points discussed in the meeting concerning whether or not to submit the application.
Application Decision
|
Key Point
|
Pro
|
Con
|
Preserve Funding Rate
|
Submitting the application locks in a minimum rate, protecting against future decreases in HUD rental rates. If HUD rates increase in the future, the board can still benefit from the higher rate.
|
None Noted.
|
Exploration Opportunity
|
Enables detailed exploration of RAD benefits without full commitment.
|
Time and resources may be used on an application that could later be withdrawn.
|
Cost to Apply
|
HUD covers technical assistance and application costs.
|
None noted.
|
Timeline Advantage
|
Prepares the board to act quickly if RAD conversion is advantageous.
|
Risk of rushed decisions if funding or regulations change.
|
Decision Flexibility
|
Allows withdrawal if conversion proves unbeneficial.
|
Might lead to indecision if not enough information is gathered to fully understand RAD’s impact.
|
Mr. Depenbrock remarked, “I personally just don’t see any negatives to submitting the application…. But I do understand the concerns about entering into something without fully understanding its implications for us.”
A motion was made to submit the application; however, lacking a second, the resolution was ultimately dismissed.
RAD Conversion Discussion
While the decision to submit the application was the crux of the proposed resolution, the board interweaved a debate regarding a full conversion to RAD. This debate helped inform the board on their decision to present a motion to submit the application. Observer Note: As stated above, the motion to submit an application was ultimately dismissed for lack of a second.
Mr. Andrews put forward the following key points:
1. Tenant Rules Remain the Same: Tenants would still pay 30% of their income toward rent, so their rent calculations wouldn’t change under RAD.
2. Income Limits Differ: While public housing eligibility is up to 80% of Area Median Income (AMI), Section 8 eligibility under RAD generally has a lower threshold, around 50-60% of AMI. However, this would impact few current tenants, as most already fall below this level.
3. Fewer HUD Requirements: RAD reduces certain administrative responsibilities tied to HUD public housing requirements, such as the Admissions and Continued Occupancy Plan (ACOP). This change would allow staff to focus more on direct property management and tenant support.
4. Cash Flow Flexibility: Any excess cash flow from RAD properties is less restricted, allowing the authority to reinvest funds in a range of areas, such as resident services, operating reserves, or property improvements.
5. Minor Administrative Differences: While some HUD-specific requirements would be lifted, there are minor differences in reporting requirements under RAD, particularly related to Section 8 financial and property filings.
6. Reduction in HUD Oversight, Not Responsibilities: HUD’s oversight decreases under RAD, but the housing authority remains responsible for property upkeep and compliance with Section 8 standards. HUD would no longer oversee operations closely, but the authority still has to maintain property conditions.
7. Long-Term Financial Stability: RAD provides more stable funding based on Section 8 formulas, potentially offering more predictability than public housing appropriations, which can vary with federal budget changes.
8. Freedom to Address Capital Needs: RAD allows the authority to access private financing or borrow against future revenues to address major capital needs, providing more flexibility than HUD’s restricted public housing capital funds.
9. Control Over Staffing and Budgets: The board retains full control over staffing levels and budget allocations under RAD. While additional flexibility might support staffing decisions, RAD doesn’t impose any new staffing requirements.
10. Local Control and Flexibility: RAD conversion allows more tailored, locally-driven decisions without HUD’s one-size-fits-all restrictions, enabling the board to prioritize funding based on community needs.
11. Application Flexibility and No Immediate Obligation: Submitting a RAD application would secure the current, higher rent rates as a baseline without obligating the authority to proceed with the RAD conversion. This locks in favorable rates, offering a financial safeguard in case rates decline due to future federal funding changes. If rates increase later, the authority can take advantage of the higher rates when converting to RAD.
Mr. Claypool indicated, “We should have had a packet laid in front of us that showed why we were doing this.” This reflected the uncertainty that the board had with the details. While Mr. Andrews was able to answer the board’s questions, the board seemed to have a lack of comfort and/or confidence in the answers provided. Mr. Claypool expressed the following concern: “When I see an additional million dollars coming into this organization, there’s got to be strings. Too good to be true.”
Ms. Farrell stated, “Our capital fund dollars are just not going to meet [our needs].… We’re really trying to stretch some of our capital fund dollars.… We have properties hitting that age where there’s going to be a lot more very expensive renovations that need to be done.” Mr. Claypool followed, “I want to see it in black and white. You say, ‘Well, we’re going to have trouble going forward keeping it financially.’ Well, show me some charts, show me some graphs, show me where we are financially today, where we’re going financially, what the projections are.”
Mr. Andrews also wanted to ensure the following was clearly communicated since many of the board members were searching for how the increased funding might be offset by liabilities: “The notion that HUD somehow has more responsibility for the property now than the housing authority does, and that that would shift the risk to you, that’s not accurate. You own the real estate. You own the land. You own the buildings… HUD doesn’t have any risk with the buildings. Any housing authority in the country has the risk for the buildings.”
The table below summarizes pros and cons of converting to RAD as discussed in the meeting:
|
Key Point
|
Pro
|
Con
|
|
Increase in Funding
|
$1 million annual funding increase for maintenance and improvements (which is about 50% of the current budget).
|
The Housing authority will assume more responsibility for managing maintenance, capital improvements, and administrative expenses.
|
|
Local Control
|
Greater budgeting and decision-making flexibility
|
Higher administrative responsibility without HUD oversight.
|
|
Administrative Burden
|
Fewer HUD reporting requirements.
|
Increased need for managing property accounts individually.
|
|
Capital Funding Flexibility
|
More flexible use of funds for capital improvements.
|
Loss of guaranteed HUD capital funding.
|
|
Tenant Stability
|
Same rent formula. Increased funding may afford better quality and safety of housing.
|
Conversion would occur under 'Section 8' housing, which carries local stigma and may affect perceptions of both residents and the surrounding community
|
|
Maintenance Responsibility
|
Supports property viability with more readily available increased funds.
|
Increased liability for managing capital needs.
|
|
HUD Regulations
|
Fewer Restrictions, allowing local policy control.
|
Community “negative perception of section 8 housing” as stated by Mr. Claypool.
|
Observer Note: The discussion indicated that they have left open the possibility of revisiting RAD in the future. However, at this point in time, they decided not to file the application.
4. NEW BUSINESS
-
Housing Authority Plan - Public Hearing
Review Period and Public Comments: The regular five-year plan and capital fund plan had been available for public review for over the required 45 days, during which no public comments were received. Observer Note: This lack of feedback seemed to indicate that there were no community objections or suggestions for changes.
B. Housing Authority Plan Submission
Ms. Farrell brought forward the following resolution: “A resolution to execute the PHA (Public Housing Authority) certification, civil rights certificate, and any other forms if needed; to authorize the director to submit the five-year PHA plan, the five-year capital fund plan, and any necessary forms and certifications to HUD; and to authorize the board chair to sign forms as needed to complete the submissions." The motion was approved unanimously with little discussion, allowing the plans to be formally submitted to HUD by the director. Observer Note: This is the standard plan required to be submitted to HUD.
C. Health Insurance
The board reviewed the health insurance renewal, noting that the rate increase was under 9%, significantly lower than the initially anticipated 20%. They decided to continue with the existing PPO Silver 5500 HSA plan, with which employees were already familiar. A resolution was passed to renew the insurance under the same terms as the previous year.
5. Hearing of the Public
There were no questions asked from the public audience.
6. Executive Session
Mr. Claypool requested the meeting go into executive session in order to “consider the appointment, employment, dismissal, discipline, promotion, demotion, or compensation of a public employee.” The motion was seconded and the board entered into executive session. Observer Note: The Board did not indicate if they would act on any personnel decisions and it was stated that no other further business would be conducted.
7. Further Business - None
Observer Note: More information regarding RAD can be found here on the Housing and Urban Development (HUD) government website.
Next Meeting: The next meeting will be on November 19, 2024 at 4:00 pm at Murray Manor. This will be a regular board meeting
More information about the Geauga Metropolitan Housing Authority can be found here.
Observer Note: The Executive Director indicated they were recording the audio of the meeting.
Observer: David Lewis
Editor: Sarah McGlone
Reviewer: Gail Roussey
Date Submitted: 11/10/2024
The League of Women Voters of Geauga is a 501(c)(3) nonpartisan political organization that encourages informed and active participation in government, works to increase understanding of major public policy issues, and influences public policy through education and advocacy. They do not support or oppose individual candidates or parties. Learn more about the LWVG at www.lwvgeauga.org.